So a book could be labeled a cat, car, or cloud. Why not? There's no inherent nature.
1. Is this understanding of the criticism correct?
2. What is the Prasangika refutation?
No, it's not a valid criticism, but I can see how the criticism would arise.
The refutation would be that everything is a dependent arising, lacking inherent existence, and because
of that, the causes and conditions that come together to produce cat and the causes and conditions that come together to produce car are quite different, and therefore their effects are quite different. They perform different functions and therefore, because the mere appearance of cat does not perform the function of the mere appearance of car and vice-versa, it is not suitable to label a cat as a car or a car as a cat.
Dependent arising and its implication, emptiness, are the very reason why it's not suitable to label anything as anything. Things are different because of emptiness
, not because they are inherently existent.