Disastrous?
Economists from the Austrian school pointed out the impending recession years before it happened. Bernanke denied it was possible up until it was too late to really do anything about it. How on earth could anyone be less successful?
WIKI: Critics have concluded that modern Austrian economics generally lacks scientific rigor,[5][60] which forms the basis of the most prominent criticism of the school. Austrian theories are not formulated in formal mathematical form,[61] but by using mainly verbal logic and what proponents claim are self-evident axioms. Mainstream economists believe that this makes Austrian theories too imprecisely defined to be clearly used to explain or predict real world events. Economist Bryan Caplan noted that, "what prevents Austrian economists from getting more publications in mainstream journals is that their papers rarely use mathematics or econometrics."
A related criticism[62][63] is applied to Austrian School leaders; these leaders reject methods which involve deriving falsifiable theories from empirical evidence --- the empirical basis which is fundamental to the scientific method. In particular, Austrian School leader, Ludwig von Mises, says of his economic methodology that "its statements and propositions are not derived from experience... They are not subject to verification or falsification on the ground of experience and facts."[64] Also, Murray Rothbard was an adherent of Mises's methodology; though Rothbard assigned a sort of empirical description to it, he comments that "it should be obvious that this type of 'empiricism' is so out of step with modern empiricism that I may just as well continue to call it a priori for present purposes."[65] Additionally, the prominent Austrian, F. A. Hayek, stated his belief that social science theories can "never be verified or falsified by reference to facts."[66] Such rejections of using empirical evidence have led to the Austrian School being dismissed within the mainstream.[62]
Another general criticism of the School is that although it claims to highlight shortcomings in traditional methodology, it fails to provide viable alternatives for making positive contributions to economic theory.[67] In his critique of Austrian economics, Caplan stated that Austrian economists have often misunderstood modern economics, causing them to overstate their differences with it. He argued that several of the most important Austrian claims are false or overstated. For example, Austrian economists object to the use of cardinal utility in microeconomic theory; however, microeconomic theorists go to great pains to show that their results hold for all monotonic transformations of utility, and so are true for purely ordinal preferences.[5] (McCulloch, however, has formally shown that there are economically rational preferences to which none of these weak quantifications can be fit.[68]) He has also criticized the school for rejecting on principle the use of mathematics or econometrics. In response, Austrians argue that neoclassical economists fail to recognize hidden (and not necessarily true) assumptions they make to arrive to tractable mathematical models.[69] Austrians also claim that econometrics is fundamentally based on mathematically and logically invalid summation and averaging of demonstrably non-additive personal utility functions, and therefore is subjective.[70]
There are also criticisms of specific Austrian theories. For example, Nobel laureate and neo-Keynesian economist Paul Krugman argued that Austrian business cycle theory implies that consumption would increase during downturns, and cannot explain the empirical observation that spending in all sectors of the economy fall during a recession.[71] Austrian theorists argue a recession can result from a monetary contraction or a "credit crunch" that causes the investment boom not to shift but simply to disappear.[72] Nobel laureate Milton Friedman, after examining the history of business cycles in the US, concluded that "The Hayek-Mises explanation of the business cycle is contradicted by the evidence. It is, I believe, false."[73][74]
Economist Jeffrey Sachs states that when comparing developed free-market economies, those that have high rates of taxation and high social welfare spending perform better on most measures of economic performance compared to countries with low rates of taxation and low social outlays. He asserts that poverty rates are lower, median income is higher, the budget has larger surpluses, and the trade balance is stronger (although unemployment tends to be higher). He concludes that Friedrich Hayek was wrong when he said that high taxation would be a threat to freedom; but rather, a generous social-welfare state leads to fairness, economic equality, international competitiveness, and strong vibrant democracies.[75] In response to Sachs' article, William Easterly states that Hayek, writing in 1944, correctly recognized the dangers of large-scale state economic planning. He also questions the validity of comparing poverty levels in the Nordic countries and the United States, when the former have been moving away from social planning toward a more market-based economy, and the latter has historically taken in impoverished immigrants. Easterly also argues that laissez-faire countries were the leaders of "the ongoing global industrial revolution" which is responsible for abolishing much of the world's poverty
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