Bayesianism and austrian apriorism

Abstract

In the last published round of his debate with Walter Block on economic methodology,1 Bryan Caplan introduces Bayes’ Rule as ‘a cure for methodological schizofrenia’. Block had raised the question ‘Why do economists react so violently to empirical evidence against the conventional view of the minimum wage’s effect?’ and answered it with the suggestion that economists do so because they are covert praxeologists. This means that they base most of their economic arguments on conclusions derived from their a priori understanding of human action, although, as methodologists, they prefer to maintain that their arguments are merely appropriately qualified generalisations of empirical observations. Against this, Caplan maintained that neoclassical economists are Bayesians with some strong prior beliefs, which lead them to ascribe low probability to any statement that goes against the strongly held consensus. Presumably, there is such a strongly held consensus with respect to the minimum wage effect. Caplan concluded that ‘[t]he Bayesian position stakes out a compelling middle ground between atheoretical positivism and praxeology. On the one hand, the Bayesian view emphasizes that few propositions are known with certainty, and that we should adjust our probabilities as new information comes in. On the other hand, the Bayesian view recognizes that the rational view is not an average of past empirical findings, much less a naïve faith in the last prominent study.’ Caplan’s references to Bayes should be considered carefully before we accept that Bayesianism makes for a middle ground—let alone a compelling one— between positivism and praxeology. The image of a middle ground may be soothing, but it is no more than a metaphor. Whether it makes sense in this context, is an altogether different matter.

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