Do Austrian Economists Get Sufficient Credit?

10 May 2006 at 5:21 am Nicolai Foss 4 comments

| Nicolai Foss |

Apart from the occasional ritualistic mention of Hayek's work in the context of information economics or Mises and Hayek's work in business cycle theory, Austrians as a rule get very little credit from their mainstream colleagues. It is arguable that they get too little credit.

Here is a case in point. In "Information Structures with Unawareness," Jing Li points out that the standard approach to modeling information — the state space approach — cannot accomodate unawareness (the paper is one example of a small literature on how to model unawareness in game theory terms). An agent is "unaware" (a nicer word for "ignorant") of something when he does not know it and does not know that he does not know it.

Li says that there is "little research on these obviously important issues" and goes on to treat unawareness in terms of modeling information as a pair, consisting of factual information and "awareness information."

It is, of course, true that unawareness/ignorance is under-researched relative to its importance. But why then not mention the literature that does deal with it? Such as Austrian economics, in particular Israel Kirzner's work. For example, in his 1997 paper in the Journal of Economic Literature, "Entrepreneurial Discovery and the Competitive Market Process," Kirzner explains in great detail why unawareness/ignorance is not compatible with the standard paradigm.

Entry filed under: - Foss -, Austrian Economics, Recommended Reading.

Emergence of Modern Business Enterprise in France J. Bruce Bullock (1940-2006)

4 Comments Add your own

1. brayden | 10 May 2006 at 8:58 am

This is evidence that whenever scholars use the words “important issue” and “understudied” or “little research” in the same statement, the statement is usually incorrect.
2. Gabriel Mihalache | 10 May 2006 at 10:03 am

Let’s be honest and admit it… they do it to themselves. They are so aggressive and dismissive towards the mainstream that only few mainstreamers care to take the time and read through the original stuff of the Austrian school simply because all too often the text digresses into pedantic and mostly misguided critique of mainstream theory.

There might be something there, and some of the times it really it. Far from me the desire to dismiss authentic achievement… But until they don’t learn to “play nice with the other children”, by maybe worrying more about their own theory and predictions and less about weirdo philosophical-methodological issue, them maybe they won’t get ignored as much.
3. Nicolai Foss | 10 May 2006 at 1:38 pm

Gabriel, You do have a point. But I would say that in the case of Israel Kirzner, it just doesn’t apply. Kirzner is a true gentleman, knows neoclassical economics well (perhaps in contrast to some other Austrians), doesn’t really stray that far from the mainstream, is actually known by many mainstream scholars (from personal conversation I know that e.g., Oliver Williamson respects him), doesn’t blast the mainstream — and is perhaps the most prominent economist to argue that economics must include ignorance/unawareness.
4. Tom | 10 May 2006 at 2:05 pm

One cannot ignore the possibly that Li was simply unaware of other research–rather ironic I suppose. Usually people at workshops and conferences are able to suggest additional literature; however, if the mainstream largely ignores Austrian economists (which I think the mainstream agrees) then other economists may be unaware of such studies.

Nevertheless, Nicolai makes a valid point, Kirzner published an non-inflamatory article in a widely-read journal.