When is a disagreement a paradigm war…

…And when is it just a family feud?

Robert Hall coined “freshwater” and “saltwater” in 1976 to describe a split in macroeconomics: the freshwater camp—Chicago, Minnesota, the University of Rochester—building models where markets clear quickly and government intervention mostly just gets in the way; the saltwater camp—MIT, Harvard, Berkeley—building models with sticky prices and wages, where markets take time to adjust and policy can smooth the ride. For roughly thirty years this was the live fault line in macroeconomics, and the 2008 financial crisis briefly reopened it in public, with each side blaming the other’s models for missing what was coming.

But the dichotomy itself has largely dissolved. Greg Mankiw’s 2006 overview of the field describes a “new synthesis” that emerged as an older, more combative generation retired and a younger one converged on a shared framework blending price stickiness with the optimization-based microfoundations the freshwater camp had insisted on. It reads, on its face, like a straightforward progress story: two rival camps, reconciled into something better than either started with.

Meanwhile, an economist working in a different tradition, such as the Austrian school, among others, faces a different and more durable problem: not being part of the debate at all, synthesis or no synthesis. Austrian economics gets waved off by much of the mainstream as unscientific, too a priori, not the kind of thing serious economists do.

The difference between a within-paradigm dispute and one across paradigms is significant.

The idea is powerful, and it explains something everyone who has sat through an academic seminar has felt: two economists can look at the same recession and walk away with entirely different explanations, not because one of them is careless with the data, but because they’re not asking the same question in the same terms. Paradigms, in Kuhn’s sense, are somewhat incommensurable—they don’t fully translate into each other.

A problem is that “paradigm” is a somewhat loose concept. Kuhn’s work doesn’t provide a clear or precise account of what actually anchors one, which makes it hard to tell when two economists are working within the same paradigm and disagreeing, versus when they are working in different paradigms and talking past each other.

We can find the missing anchor in Imre Lakatos. In his account, a research programme has a hard core—a small set of assumptions the scientists working in it treat as beyond question, at least for the purposes of doing normal science. Surrounding the hard core is a protective belt of auxiliary hypotheses, which are exactly what they sound like: assumptions that can be revised, replaced, or abandoned when they run into trouble with the evidence, so the hard core doesn’t have to be. This distinction is doing a lot of quiet work. When an anomaly shows up, scientists don’t reject the hard core first—they revise an auxiliary hypothesis and see if that fixes things. Only when the protective belt runs out of room does the hard core itself come under real pressure.

This is a more useful anchor than Kuhn’s paradigm on its own. It lets us ask a deeper question: do they differ in hard core, or only in the auxiliary hypotheses built around a shared hard core? That question turns out to organize a surprising amount of the discipline.

Do the insights of Kuhn and Lakatos apply to economics? Well, economics, as it happens, got a version of this structure before Lakatos formalized it. Fritz Machlup’s 1955 paper “The Problem of Verification in Economics” argued that economic theories are never verified in any strict sense—they are, at best, illustrated. Because the fundamental assumptions of a theory are intertwined, no single assumption can be tested in isolation; an apparent contradiction between theory and evidence tells us something has gone wrong somewhere in the system, not which piece. That is a Lakatosian hard core and protective belt, arrived at independently, more than a decade before Lakatos wrote his own account. With the anchor in place, the next question is what it lets us compare.

Hard cores have “Distance,” not just identity

The first refinement worth making to this picture is that hard cores are not simply the same or different. They can be closer or farther apart, depending on how many foundational commitments they share.

Consider three broad traditions in economics: the neoclassical mainstream, the Austrian school, and Marxist economics. Neoclassical and Austrian economics differ in their hard core—the former builds on constrained optimization and (typically) some notion of equilibrium as an organizing device; the latter on purposeful human action without the calculus apparatus, with equilibrium treated as a tendency rather than a state the model assumes into existence. But both share methodological individualism, treat value as subjective rather than embedded in objects, and understand markets as coordinating mechanisms for dispersed information and preferences.

Marxist economics rejects methodological individualism at its core. Classes, not individuals, do the analytical work; value is tied to labor rather than to subjective preference; markets are described as an arena for conflict over surplus rather than a coordinating mechanism to be explained on its own terms. That is a deeper break. Neoclassical and Austrian economics can at least argue with each other in a shared vocabulary about individuals, preferences, and exchange. A conversation with a Marxist hard core has to start further back, at the level of what the basic unit of analysis even is.

None of this should be read as a claim that hard-core distance can be measured with any precision—there’s no metric here, no way to put a number on how far apart two research programmes sit. It’s a conceptual ordering, not a formal one. But the ordering itself does useful work: it explains why some disagreements in economics feel like arguments between cousins, and others feel like arguments between strangers.

Return to freshwater and saltwater macroeconomics. Both camps optimize. Both take methodological individualism for granted. Both treat some notion of equilibrium—even a constantly shifting one—as the benchmark against which deviations get explained. Where they part ways is on auxiliary assumptions: how sticky are prices and wages, how quickly do markets clear, how much weight should nominal frictions carry in explaining short-run fluctuations. These are the kind of assumptions Lakatos’s framework predicts will absorb the pressure of new evidence—revised, debated, occasionally discarded—while the hard core underneath stays fixed.

That makes freshwater versus saltwater a family feud, not a paradigm war. It can, in principle, be settled or at least narrowed by evidence, because both sides agree on what would count as evidence in the first place—they share enough of a hard core to recognize the same data as relevant to the same questions. The dispute felt enormous from inside the field for thirty years, and the stakes for macroeconomic policy were real. But structurally, it was a disagreement about auxiliary hypotheses within a single paradigm, dressed up as something more fundamental—which is why the new synthesis Mankiw describes was possible at all. A genuine hard-core split is not resolved by a younger generation adopting better manners; an auxiliary-hypothesis dispute can be resolved once enough evidence has accumulated, and enough of the old guard has retired.

Austrian economics offers a comparable internal split, though not one heading toward any synthesis of its own. Anarcho-capitalists and classical liberals within the Austrian tradition share the same hard core—purposeful action, subjective value, radical uncertainty about the future—and disagree over an auxiliary question: whether a stateless society is possible.

The natural reading of the new synthesis is progress: two competing camps, reconciled into a framework stronger than either. That reading isn’t wrong, but it’s incomplete in a way that is now more visible. The synthesis merged two sub-paradigms that already shared a hard core. It did not open the mainstream’s hard core to outside challenge; if anything, a settled consensus is more confident in its own completeness than an unresolved fight ever was. An active rivalry at least advertises that a live disagreement exists somewhere in the field. A resolved one can look, from the inside, like the disagreement has been fully mapped—freshwater, saltwater, and now the synthesis of both—when in fact only the space within one hard core has been explored end to end. The door that was ajar during the fight quietly closes once the fight is over.

If “the mainstream” comes to mean, in practice, “the new synthesis,” then an approach like Austrian economics gets evaluated against a standard it was never built to meet. Rejecting Austrian economics because it doesn’t model sticky prices the way a New Keynesian model does is a bit like rejecting non-Euclidean geometry because it doesn’t assume a flat surface. The complaint is really just a restatement of the auxiliary assumption being used as the test, not a discovery that the other framework has failed some genuinely fundamental criterion.

This is a symmetric risk, not a partisan one. An Austrian economist who treats every disagreement with the mainstream as evidence that mainstream economics has abandoned rigor is making the same category error in reverse—mistaking commitment to a different hard core for a lack of scientific seriousness on the other side.

Untangling this further requires identifying where the a priori sits in each tradition, because both sides tend to misdescribe it—usually to their own advantage.

The Austrian school is routinely accused of being anti-empirical and of insulating itself from data by fiat. Mises’s own writing doesn’t support that reading. In Human Action, he is explicit that the “end of science is to know reality,” and that praxeology restricts its inquiries “to the study of acting under those conditions and presuppositions which are given in reality.” Experience, he wrote, “directs our curiosity toward certain problems and diverts it from other problems.” What Austrians reject is not empirical work—they do plenty of it—but the idea that empirical work can test the hard core itself, the axiom of purposeful action, in the way a controlled experiment tests a specific hypothesis. Empirical evidence illustrates the theory’s application to particular historical episodes; it doesn’t verify or falsify the categorical starting point.

Now turn the same question on the mainstream. Nobody runs an experiment to check whether demand curves slope downward. If a dataset seemed to show an upward-sloping demand curve, the standard response would be to look for a Giffen good, a measurement problem, an omitted variable—anything before concluding that the law of demand itself had failed. That is not a criticism of mainstream economics; it is how a hard core is supposed to function under Lakatos’s framework, in any research programme. But it means the a priori is not an Austrian peculiarity. It is a feature of having a hard core at all, and mainstream economics has one too, even when its practitioners describe their own method as empirical through and through.

Both traditions are empirical in their auxiliary hypotheses and a priori in their hard core. The difference is that Austrians say so explicitly, and the mainstream, more often than not, does not.

That sociology explains the mechanism directly. An economist trained entirely within one sub-paradigm—having never had serious professional reason to engage with the other side of a “freshwater–saltwater” divide, let alone with a genuinely different hard core—loses the outside vantage point needed to recognize their own sub-paradigm as one option among several within a larger paradigm. From inside, the sub-paradigm doesn’t look like a set of auxiliary assumptions; it looks like economics itself, full stop. That’s precisely the vantage point from which an entirely different paradigm looks less like a rival theory and more like a category error.

None of this settles which hard core—Austrian, neoclassical, Marxist, or some paradigm not yet written down—offers the better account of economic reality. What it does settle is that dominance in journals and hiring committees is not, in itself, evidence of epistemic superiority. Since every paradigm rests on an a priori core not open to direct empirical test, no paradigm can claim the mantle of “the empirical one” over all the rest.

Treating a family feud as a paradigm war makes the stakes feel higher than they are. Treating a paradigm war as if it should be settled the way a family feud gets settled—by pointing to data both sides already agree on how to interpret, or by waiting for a synthesis to emerge—guarantees that the conversation goes nowhere. The useful move is not picking a side. It’s asking, before the argument even starts, whether the two people arguing actually share a hard core—and being honest about the fact that the answer is often not obvious even to the people doing the arguing, and no less obvious after a synthesis has made one side feel like the whole of economics.

I use Claude (Anthropic) to assist with drafting and editing. All analysis and conclusions are my own and reviewed before publication.