Austrian Economists and Empiricism

Since its emergence in 1871, the Austrian school of economics has provided systematic opposition to empiricism in the development of economics. The Methodenstreit persists, even with different players. Several papers and publications have criticized the concept of economics based on empirical evidence. Positivism, and its different currents of thought, are consistently criticized by Austrian economists.

But the roots of attempts to make research objective are much older. In the Renaissance, the development of natural sciences neglected essentialism. Essentialism was seen as part of the Middle Ages and so was attacked by Renaissance thinkers.

We can also remember Francis Bacon, an English philosopher. Bacon advocated for the mathematization and quantification of every human experience as well as the use of the natural science’s method to research social phenomena.

The first round of the Methodenstreit involved Carl Menger and the German historical school. It must be considered more than a battle of methods. Ludwig von Mises explains in his essay “The Historical Setting of the Austrian School of Economics” that Austrians have been involved in a battle about science itself and further clarifies why empiricism became the ruling trend in economics.

Mises presented a strong link between scientists and the Prussian elite and how their research justified the elite’s pretensions. That scenario envisioned a strong and centralized state. This state would coordinate economic growth and take Germany to prominence.

Contemporarily the scenario is quite different. Mainstream economists are apostles of “scientific rigor.” For them, science is promoted through the proper use of econometric procedures. Moreover, they consider that facts are facts, which are set and cannot be distorted. But their method results in the same flaws that always accompany empiricism.

Social facts are, naturally, complex phenomena. They involve an uncountable number of variables. These variables cannot even be fully perceived and comprehended by the researchers nor can they be isolated as a physical or chemical experiment. Moreover, the problem is deeper. Social facts are not facts of nature but the result of human meaning. There is no money in nature; money is a social convention. In the same way, we cannot find corporations in nature as they are abstract entities.

Social scientists’ goals do not involve the quantification and measurement of each element of the facts. Their goal is not to extract knowledge from these procedures. They cannot establish rules from experience as each experience is complex and unique. As explained above, social facts are not directly observable. These facts can be interpreted using the signification given by individuals. Thus, scientists must develop an adequate theory to analyze facts.

Why does empiricism persist in ruling the economics discipline? It is a convenient method. Research confirms the aimed-at conclusions.

Mises’s comprehension of the German historical school also defines contemporary social science. It is convenient for the ones who are in power. Benjamin Disraeli said, “There are three kinds of veracity: lies, damned lies, and statistics.”

Econometric investigations, although claimed to be rigorous, are inappropriate to research social phenomena. Is not by chance that research generally confirms ideological trends. Statistics can be manipulated and made convenient. Econometric models are used to justify more intervention and control.

Empirical research has its relevance as an illustration of economic theory and history, but it is not from empirical data that theory is built. The theory comes from the logical enchainment of theoretical laws. These laws come from main axioms. And it is this theory that allows the interpretation of complex social reality. Furthermore, theoretical strictness prevents the manipulation of reality according to interest groups.