Mises on econometricians

2 May 2006 at 9:10 pm 2 comments

| Peter Klein |

Nicolai and I share a great admiration for the Austrian economist Ludwig von Mises, whom we consider one of the towering intellects of the twentieth century. A vast collection of Mises’s published and unpublished writings is already available online. The newest addition to this collection is a set of brief notes on research topics suggested by Mises to participants in his graduate seminar at New York University during the 1950s and 1960s. The notes were carefully recorded by his students Percy and Bettina Bien Greaves.

I haven’t had a chance to read through the set carefully, but a few gems stand out, such as this one from 1956: “We need a book to stop the econometricians or we will have more econometricians than those in useful occupations.”

Update: the notes are now available in plain text.

Entry filed under: - Klein -, Austrian Economics.

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2 Comments Add your own

  • 1. Juan  |  3 May 2006 at 6:56 pm

    I have written my dissertation on the pitfalls of mathematical economics in part because my director told me about this thought of Mises. I agree with Mises but it might be useful to distinguish between “risk” and “uncertainty” as Frank Knight has done. Econometrics can be very useful to predict cash flows “provided one assumes that the past conditions will maintain in the future”. In this case we can “measure” the risk within a certain range. Econometric can add a good deal of info to make decisions if one assumes that the future will be much as the past and in many markets this might be the case. Econometrics, however, cannot make “entrepreneurial” forecasts because these kinds of predictions are not measurable. They depend on the “alertness” (in Israel Kirzner words) of the entrepreneur. He has to anticipate market situations that nobody is anticipating. Nevertheless at the moment of evaluating the return of the capital invested the figures of the forecast will have to come from somewhere.
    Finally I will also agree that econometrics is a wrong tool to test hypothesis. We can read many econometric papers and to feel that the author has gone fishing, i.e. they try different functions until they find the “best fit”.

  • 2. Nicolai Foss  |  4 May 2006 at 6:59 am

    These Mises notes are very interesting to study, and not just for the die-hard Misesian or the doctrinal historian. It is striking how Mises emphasizes the extremely broad applicability of economics, such as inquiry into whether "each civilization" may have "its special character. Its special world view, mental and spiritual soul," and also how much applied research he really called for (research into the economic history of "shoes and stockings). This is very far from the abstract, ahistorical Mises charicature that we are sometimes presented with.

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