Empirical Austrians — is that an oxymoron? Mario Rizzo has an interesting post over at ThinkMarkets about the role Austrians may play in shaping the post-financial crisis world. However, he feels that Austrian economist have not done enough empirical work to convince others that Austrians have something to offer. In his words:
Austrians failed to carry the debate within the economics profession and among the public intellectuals and economic historians after the Great Depression. Will they once again?
I venture the prediction that they will fare much better this time – especially if we close ranks with those of a similar mindset. There are many more Austrian economists now. In the thirties and forties the profession had become depleted of Austrians. The Keynesian Religion had triumphed (by the way, it was to a certain extent a religion – witness the statements of Paul Samuelson, Joan Robinson, Austin Robinson and others). It is true that today Austrians do not occupy the highest positions in the profession. But we are still here reminding everyone, constantly, of our ideas.
Yet there is a critical deficiency. We continue to lack empirical work, on a large enough scale, to convince other economists that we have something relevant to say. The macro-economic framework has created a demand and supply for certain kinds of aggregated data at the expense of data that might be more useful to Austrians. (But I am reminded that George Stigler used to say, “It is no excuse to say the data are not available – you just must be clever.”)
This is where, perhaps, those non-Austrians with a similar mindset may be very important. We need good empirical researchers. I am, quite frankly, not interested in reviewing all of the qualms about certain kinds of econometric work. No single econometric result is definitive but little by little a case for taking a theory seriously can be built.
I agree with his assessment that Austrians must become more empirical. There is an old saying in public policy that “if you can’t quantify it . . . then it isn’t important.” I see that effect everyday where important public policy issues are simply overlooked for lack of good empirical data–take cost-of-living for example.
However, I think focusing on econometrics is putting the cart before the horse. Before Austrians can undertake econometric analysis, they must first have good data to work with. Many comments on Rizzo’s post point to the same distrust of much of our statistical system that I have. In fact, much of our commonly used data sources are a loaded gun–a Keynesian data-series regressed against a Keynesian data-series does not yield an Austrian conclusion.
Instead, Austrians first need to get under the hood and start replacing the data engine. Fortunately, as computers have become less expensive and more powerful, the ability to collect new forms of data grows. One such data source that would be ripe for Austrians is the National Establishment Time-Series (NETS) (pdf) database.
NETS is a true business census and provides unprecedented details into the inner-working of the economy. To get a better look at this data, see the excellent YourEconomy.org website. Imagine finding ways to give life to the Austrian Business Cycle Theory through the NETS database?