This article by Mark Skousen makes the preposterous claim that Mises and Hayek “refused to do empirical work” whereas Milton Friedman did do empirical work, which accounts for his influence and their marginalization.
Austrians grow tired of saying this but, once again, the point is not that empirical shouldn’t be undertaken. After all, that is the whole point of Mises’s history books on World War I and II, as well as his close examination of banking and money before and after the Great Depression (Causes of the Economic Crisis). But facts, data, and history cannot and should not be used as a “test” for theory, else the essential causal story is missed, precisely as Friedman and others have missed the actual cause of the 1929 crash.
This point was a frustration in particular for the Austrians in the early 1930s. Everyone was screaming to find a reason for the economic downturn, and looking in all the wrong places. The Austrians pointed out that a robust theory of the business cycle was necessary before one can truly understand the events taking place around them. Whereas their colleagues were all trying to find causation in statistics--a method that turns post hoc ergo propter hoc from a fallacy into a principle--the Austrians pointed to the underlying theory of the discoordinated capital structure, as caused by monetary expansion, and then pointed to evidence of prior monetary expansion.
The irony for Skousen and Friedman is that it was the Austrians who actually warned of the coming depression, whereas the pre-Friedmanites had predicted increases in stock prices as far as the eye could see. And, actually, Thornton recently uploaded an entire paper documenting this. The “data” led the monetarists astray; theory led the Austrians to see precisely what was coming.
For Mises on the errors of positivism, see The Ultimate Foundation of Economic Science. Maybe someone can send Skousen a copy?
