UPDATE: Tom “There’s an Anti-Rothbard Cult”* Woods claims to have refuted my criticism here. Judge for yourself.

I was at a conference a few years ago on Austrian vs. Chicago-school economics. Here’s a conversation I had with an Austrian economist, whom I won’t name here. I’ll just call my interlocutor “Austrian Dude”.

Brennan: “What do you think of behavioral economics that purports to show people often act irrationally in the market?”

Austrian Dude: “That doesn’t pose a problem for economics. Economics is a priori.”

Brennan: “But doesn’t it show that people don’t often act in the way your theory describes?”

Austrian Dude: “No. You see, there’s a difference between behavior and action. Action is defined as….[insert a summary of Mises’s Human Action here]. But what Frank and others are describing is behavior, not action. Economics tells us how human beings act, but behavioral economics is just describing behavior.”

Brennan: “That creates a big problem for you. You intend to defend markets in the real world, with real human beings. You can decide to distinguish action from behavior, and say that action by definition is rational, etc. But this doesn’t save you from behavioral econ. Instead, it leaves open, as an empirical question, whether actual human beings in the real world are better described by your a priori theory of human action or by behavioral economics. If your theory doesn’t account for actual human behavior very well, then it’s impotent to defend real life markets, and you shouldn’t advocate libertarianism in the real world on the basis of your Austrian economics.”

In short, extreme apriorism ends up being a version of the No True Scotsman Fallacy.

Not all Austrian economists make this mistake. In particular, the ones who publish in real journals know better, but the ones who are confined to publishing in fake journals (i.e., journals that, say, Georgetown wouldn’t count towards tenure) do make this mistake.

P.S.: N.B., I’m not here defending behavioral economics, nor am I taking a stance on what follows from behavioral economics. (In fact, I think behavioral economists tend to jump to policy implications in an intellectually lazy way. See Frank’s embarrassingly bad book The Darwin Economy for a collection of non sequiturs.)

*For what it’s worth, I think Rothbard was more or less a hack. But no one indoctrinated me into that. I came to that conclusion by reading his work, as much as I could stomach, after it was recommended to me. So, my joining the cult came not through brainwashing but through Satanic inspiration.