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Thought experiments, counterfactuals and comparative analysis

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This article discusses the problem of “thought experiments” in Austrian economics and takes as a starting point Lawrence Moss’ argument on the divide between the older Austrian economists—for whom thought experiments were crucial—and the new generation that, in Moss’ view, has “abandoned” such methods. The article is an attempt not only to bridge this alleged divide but also to contribute to the development of the Austrian methodology. It is argued that what may be perceived as “abandonment” bolsters rather than precludes the role of thought experiments in the Austrian paradigm. The article identifies an entire family of comparative and counterfactual analysis research strategies available to the Austrians, all enjoying a solid epistemological and methodological grounding. The “comparative-counterfactual analytics” pattern threads together the conjectural histories, spontaneous orders and empirical case studies of the contemporary Austrians, with the classic tradition of older works. Consequently, the recent evolution of Austrian scholarship should not be seen as an aberration or abandonment but as a deliberate, natural and commendable development.

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  1. This affinity is amplified if the role of knowledge is taken seriously, as the Austrians insist. One of the first implications is that it is hard to measure or assess “knowledge” outside of specific contexts and configurations, and therefore, analysis of social change in the light of knowledge processes is a fundamental challenge to quantitative approaches. The comparison of variables that have become disconnected from their context and relationship with human action present a mechanical view of the economy and a mechanical view of theory. If knowledge is treated as being locally generated, and dispersed, the picture portrayed via quantitative data and variable thinking will be incomplete. In short, a variable approach may be in many cases methodologically misguided, and also in most cases, its results will fail to capture in a constructive way the phenomena of interest.

  2. “We can avoid counterfactuals only if we eschew all causal inference and limit ourselves to strictly noncausal narratives of what actually happened (no smuggling in causal claims under the guise of verbs such as “influenced”, “responded”, “triggered”, “precipitated” and the like). Putting to the side whether any coherent and compelling narrative can be “noncausal”, this prohibition would prevent us from drawing the sorts of “lessons from history” that scholars and policy makers regularly draw on such topical topics as the best ways to encourage economic growth, to preserve peace and to cultivate democracy. Without counterfactual reasoning, how could we know whether state intervention accelerated growth in country x, whether deterrence prevented an attack on country y, or whether the courage of a young king saved country z from sliding back into dictatorship? Counterfactual reasoning is a prerequisite for any form of learning from history” (Tetlock and Belkin 1996).


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Correspondence to Paul Dragos Aligica.

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Aligica, P.D., Evans, A.J. Thought experiments, counterfactuals and comparative analysis. Rev Austrian Econ 22, 225–239 (2009).

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