Whether or not it is true, as they say, that they first ignore you, then ridicule you, then attack you, and then you win, the financial crisis as well as Ron Paul’s candidacy for becoming the republican party’s presidential nominee have made Austrian economics somewhat of a household name. So it is no longer ignored, but it is certainly is both ridiculed and attacked (more of the latter more recently). So if Gandhi was right, then we’re transitioning from ridicule to attack.

An example of such an attack is a (rather unbelievably ignorant and disturbingly dishonest) hit piece by Noah Smith, a professor of Stony brook university who’s dedicated to his career as an internet troll (as “Noahpinion”). I took a previous piece of his apart over at the Mises Institute blog a couple of months ago, to which he responded on Twitter as a true troll (in stark contrast to a true scholar) saying he would not even read my rebuttal because the post’s title wasn’t sufficiently original or witty. (He later deleted his tweet, but my initial and response tweets still exist…)

Apparently the attention only made Smith more dedicated to trolling. His hit piece on Austrian economics as “brain worms” (linked above) is much, much worse than previous articles and shows even less knowledge of the subject matter while being much nastier in its attacks. Of course, the higher pitch attracts other critics who can free ride on the nastiness without having to cross those lines themselves. Interestingly enough, Smith’s article was called a “must-read” by Berkeley’s Brad DeLong (which, one would think, should be quite embarrassing for any scholar of DeLong’s stature).

While rather late to the party, Paul Krugman cannot help also noting Smith’s “contribution” to the discussion. True to his double standard ideal, Krugman – who has done nothing on his blog if not making predictive claims so ambiguous that he can always call them true in retrospect – uses Smith’s blog post on the aforementioned article to show how Austrians aren’t scientific. Writes Krugman:

Noah Smith has a funny piece on the hermetic system that is Austrian economics, with its multilayered defenses against any kind of criticism. What gets me in particular, because I’ve noticed it a lot lately, is this:

3. “Inflation” doesn’t mean “a rise in the general level of consumer prices,” it means “an increase in the monetary base”, so QE is inflation by definition.

So when Austrians were predicting runaway inflation, they didn’t actually mean consumer prices?

Krugman should know better than this, but as he controls the content of his blog and therefore won’t ever need to respond to critics or people showing that he is being untruthful there’s no point in sticking to what one knows. And, frankly, one can always – should the criticism become too forceful – claim that “it is only a blog.” And, after all, Krugman is a Nobel laureate, of sorts, so he’s infallible by default.

But let’s look at what Krugman does here, which is a point that has been elaborated on over and over again on this blog (the methodology issue). What Krugman refers to in the quote above is Smith’s claim that the Austrians have used a fallback position:

The Austrians’ next defense was to redefine reality. Inflation doesn’t mean a rise in prices, they said — it means an increase in the monetary base. QE wasn’t causing inflation, it was inflation itself.

I suppose this is funny, except for the fact that inflation was originally defined by economists the way Austrians currently define it. And that Austrians have consistently stuck to this definition. Bob Murphy notes, in an attempt to respond to Smith’s attack, about the inflation comment that “Noah is just making stuff up.” This is exactly the case, and this is what Krugman feels compelled to note on his blog too – saying he too has “noticed it a lot lately.”

The problem, of course, is that Smith and Krugman (and DeLong, though not in the recommendation linked above) are so narrow-minded in their thinking about economics that they cannot think outside the mainstream box. To them, there is no other definition of inflation possible, so when Austrians talk about inflation – even if it is stated as “monetary inflation” versus the mainstream “price inflation” – they just don’t see it. They’re blinded by their paradigm. And then, when they finally notice that Austrians say something different, they conclude (without checking, obviously) that the Austrians have changed their view to save face.

For whatever reason, Krugman’s argument that a huge stimulus package is necessary to solve any economic crisis but that he refuses to say how large it needs to be so that he can always come back later saying it wasn’t large enough (if it fails) is just “science.”

It is true, however, that the critics have one data point that speaks in their favor: Bob Murphy did bet on price inflation with David Henderson, a bet Murphy lost. In retrospect, this bet may not have been a pedagogic move on Bob’s part since he’s a vocal Austrian. But the fact remains: Austrians do not deal with predictions. This point has been iterated on this blog, and it is a rather simple (but to mainstreamers like DeLong, Krugman, and Smith “unheard of”) Weberian point about the nature of social science. A follower or researcher in the Austrian tradition can make whatever predictions he or she sees fit, but it will necessarily be outside the scope of praxeology (the science of human action, to which economics is a sub category).

This is not, as the mainstreamers (ignorantly) love to claim, some sort of fallback position or attempt to avoid criticism. Or, in Krugman’s words, “multi-layered defenses.” Unfortunately, for Krugman, he keeps slipping in his argumentation. Truth doesn’t seem to be an important concept for this blogger-who-was-previously-an-economist. Says Krugman about the Austrians:

Were they predicting a banana [runaway inflation]? Of course they were. And they were wrong.

Is Krugman using the “royal we” to describe Murphy’s bet? I suppose one must think so, since Austrians certainly didn’t make any such predictions. Austrians’ methodology does not in any way support making predictions. It would be a valid criticism of Austrians to say that “they” (if there is more to it than Murphy’s bet, and especially if it is a common occurrence) seem to have deviated from their methodology. This is much more devastating critique and, in my view, much more interesting. But Smith is certainly not able to make such arguments, and for what we can tell from their blog comments neither are the much more successful economists DeLong and Krugman.