Posts filed under ‘Austrian Economics’
Things That Make You Go Hmmm . . . .
| Steve Phelan |
I had an interesting encounter with two economists in my college last week. The first was during a presentation I was giving to the MBA Association on buying opportunities in Las Vegas following the subprime debacle. I assured the audience that buying opportunities existed but you needed to to be very knowledgeable about the area of town in which you intended to buy. The professor of economics who preceded me in the presentation immediately retorted, “if so many opportunities exist then why isn’t everybody buying?” (more…)
Hoselitz Bleg
| Peter Klein |
Can anyone point me to biographical or bibliographical resources on Bert F. Hoselitz? He is known to Austrian economists as the translator (with James Dingwall) of Menger’s Principles of Economics, but he was also an accomplished Chicago development economist who founded the journal Economic Development and Cultural Change. He was trained in Vienna (according to this brief note) but did not apparently have much contact with the Austrian school. I’m particularly interested in Hoselitz’s contributions to entrepreneurship theory.
Hayek and Entrepreneurship
| Peter Klein |
At the Kauffman data symposium participants were given little notebooks with the Kauffman logo and a quote from Hayek — “Society’s course will be changed only by a change in ideas” — on the cover. It’s a nice line and certainly in the spirit of Hayek’s views on social change as expressed in The Road to Serfdom, “The Intellectuals and Socialism,” and other works, though the exact quotation does not seem to appear in Hayek’s writings. (The line is attributed to Hayek by John Blundell, recounting a conversation between Hayek and IEA founder Antony Fisher. In “The Rediscovery of Freedom,” written in 1983, Hayek puts it this way: “A young English pilot who had returned from the war and had made a great deal of money in a few years as an entrepreneur came to me [around 1947] and asked me what he could do to thwart the ominous growth of socialism. I had considerable trouble persuading him that mass propaganda was futile and that the task consisted rather of convincing intellectuals.”)
The Kauffman Foundation focuses on entrepreneurship, not opposition to socialism, so I started thinking about the influence of Hayek on entrepreneurship research. Kirzner’s theory of entrepreneurial discovery builds directly on Hayek’s notion of an economy characterized by dispersed, tacit knowledge, an economy in which “competition” is a process of coordination and equilibration, rather than a set of conditions (as in Walrasian competitive general equilibrium). However, Hayek did not develop a theory of the entrepreneur per se. (more…)
Terence Hutchison (1912-2007)
| Peter Klein |
Terence W. Hutchison, the iconoclastic British methodologist and historian of economic thought, died today. Hutchison’s Significance and Basic Postulates of Economic Theory (1938) was an early and influential attempt to incorporate logical positivism into economic method. Frank Knight’s excellent 1940 article, “What is ‘Truth’ in Economics?” is framed as a reply to Hutchison. Hutchison later sparred with Fritz Machlup on Mises’s methodology; Murray Rothbard sided with Hutchison. I enjoyed parts of Hutchison’s The Politics and Philosophy of Economics: Marxians, Keynesians and Austrians (1981). And who can forget his distinction between “Hayek I” and “Hayek II”?
NB: In an otherwise favorable review of my edited volume, The Fortunes of Liberalism, vol. 4 of The Collected Works of F. A. Hayek, Mark Blaug took me to task for consistently misspelling Hutchison as “Hutchinson.” Good thing I left in that error to distract reviewers from the other errors!
Me and Yu
| Peter Klein |
My review of Tony Yu’s Firms, Strategies, and Economic Change (Elgar, 2005) for the QJAE (volume 10, number 1, Spring 2007) is now online.
Mises and Mises (and Knight and Hoppe) on Probability
| Nicolai Foss |
O&M has featured a number of posts on uncertainty as a phenomenon that, in some sense, goes beyond risk. Contributors to these kind of discussions often delight in employing notions such as “Knightian uncertainty,” “genuine, real, true . . . uncertainty,” “the unlistability problem,” “surprise functions,” etc., and they debate whether so-called Knightian uncertainty really is inconsistent with a Bayesian perspective, whether Shackle’s notion of uncertainty is in some sense deeper than Knight’s, etc.
Much of the debate is, if perhaps not a quagmire, then certainly an area where conceptual clarification and some serious formal work would seem to be much needed (with respect to the latter, see this). Conceptual clarification may occasionally involve going back to important figures in the debates and consider what they (really) said. (more…)
Menger the Empiricist
| Peter Klein |
Austrian economists eschew empirical analysis in favor of deductive, a priori reasoning. They don’t believe in prediction. Neoclassical economists, by contrast, endorse the “scientific method” of rigorous empirical testing. You know that, right?
Then you might be surprised to learn that Carl Menger (1840-1921), founder of the Austrian school, called his approach the “empirical method,” as distinguished from Léon Walras’s “rational method.” Menger was a prominent economic journalist before turning to scientific work and his primary interest, as a scholar, was to explain the actual pricing processes he observed in the marketplace, processes that did not at all resemble those described in contemporary textbooks. Menger’s purpose, writes Guido Hülsmann in Mises: Last Knight of Liberalism, was
to demonstrate that the properties and laws of economic phenomena result from these empirically ascertainable “elements of the human economy” such as individual human needs, individual human knowledge, ownership and acquisition of individual quantities of goods, time, and individual error. Menger’s great achievement in [Principles of Economics, 1871] consisted in identifying these elements for analysis and explaining how they cause more-complex market phenomena such as prices. He called this the “empirical method,” emphasizing that it was the same method that worked so well in the natural sciences. (more…)
The Best Business Book I’ve Read This Year
| Peter Klein |
It’s Phil Rosenzweig’s The Halo Effect (mentioned previously here). Rosenzweig systematically, but politely, demolishes the pretensions of best-selling management books and projects such as In Search of Excellence, Built to Last, Good to Great, and the Evergreen Project. These studies, Rosenzweig patiently explains, engage not in serious research — despite their pseudo-scientific pretensions (what Rosenzweig calls “The Delusion of Rigorous Research”) — but in storytelling.
The most common problems are sampling on the dependent variable (i.e., choosing a sample of high-performing companies and explaining what their managers did, ignoring selection bias) and using independent variables based purely on respondents’ ex post subjective assessments of strategy, corporate culture, leadership, and other “soft” characteristics. The latter is the “Halo Effect” of the book’s title. When a company’s financial or operating performance is strong, managers, consultants, journalists, and management professors tend to rate strategy, culture, and leadership highly, while rating the same strategies, cultures, and leadership poorly when a company’s performance is weak. It’s as if the authors of “guru” books have never taken a first-year graduate course on empirical research design. Or, as Rosenzweig puts it (p. 128): “None of these studies is likely to win a blue ribbon at your local high school science fair.” Ouch. (more…)
New Mises Biography
| Peter Klein |
Congratulations to Guido Hülsmann for the release of his 1,200-page biography of Ludwig von Mises, titled Mises: The Last Knight of Liberalism. Buy a copy here or read the whole thing online here. I’ve just started and the early chapters are terrific, placing Mises’s scientific ideas in their turn-of-the-century Viennese context and emphasizing the Jewish roots of Mises’s liberal Weltanschauung. I can’t wait to read the rest.
“What Does Austrian Economics Predict?”
| Nicolai Foss |
At the professional development workshop on “The Austrian School of Economics: Applications to Organization, Strategy and Entrepreneurship,” arranged by my co-blogger for this year’s Academy of Management Meetings, the first question raised from the audience after the presentations was the one in the heading to this post. (Fabio at orgtheory.net has also made related, ehhh, provocations, which we will deal with later here at O&M).
It wasn’t entirely clear what the person who asked the question meant, the acoustics in the room were terrible (he had to repeat the question twice), and I am sure that complex issues like the symmetry thesis were popping up in the minds of my co-panelists, so there was some hesitation in the panel to address the question. (Afterwards I learned that unfortunately this was taken by some audience members as an implicit admission that AE isn’t predictive).
The question was unclear because it could mean any of this: (more…)
SDAE Sessions
| Peter Klein |
Sessions from the SDAE section of the upcoming Southern Economic Association annual meeting (New Orleans, 18-20 2007) that may interest our readers:
- Peter Lewin (University of Texas at Dallas) and Howard Baetjer Jr. (Towson University),“Can Ideas be Capital? Can Capital Be Anything Else?”
- Per-Olof Bjuggren and Johanna Palmberg (Jönköpings International Business School), “Swedish Listed Family Firms and Entrepreneurial Spirit”
- Joseph T. Salerno (Pace University), “The Entrepreneur: Real and Imagined” (more…)
Summary of Kirzner’s Contributions
| Peter Klein |
Israel Kirzner received the 2006 International Award for Entrepreneurship and Small Business Research. Here is an article by Robin Douhan, Gunnar Eliasson, and Magnus Henrekson from the current issue of Small Business Economics summarizing Kirzner’s contributions to entrepreneurship theory.
More Podcasts: Gordon, Weingast, Salerno-Klein
| Peter Klein |
- The History of Political Philosophy: From Plato to Rothbard by former O&M guest blogger David Gordon. A ten-lecture series delivered in June 2007 covering Plato, Aristotle, Aquinas, Hobbes, Locke, Rousseau, Kant, Hegel, Mill, Spooner, Spencer, Rawls, Nozick, Rothbard, and more. Only David Gordon could be an expert on all of these.
- Russ Roberts’s interview with Barry Weingast about the new book by North, Wallis, and Weingast, A Conceptual Framework for Interpreting Recorded Human History (what a title!). Weingast has become so prominent in political science it is easy to forget that he has an economics PhD (from Cal Tech) and started his career as an economics professor at Washington University in St. Louis. (His critics have not forgotten.)
- Fundamentals of Economic Analysis: A Causal-Realist Approach. Economics in the tradition of Carl Menger, starting with the basics of scarcity, choice, value, and exchange then moving to pricing, entrepreneurship, capital, competition, money, banking, and the business cycle. Joe Salerno and I give the lectures. You can also get these as videos in a handsome DVD set.
Machlup-Klein Day
| Peter Klein |
You all know about Hayek-Klein day. Did you know today is Machlup-Klein day? Economist Fritz Machlup, student and friend of Ludwig von Mises, contemporary of F. A. Hayek, and mentor to Edith Penrose, was born 15 August 1902. My dad’s birthday is also today, August 15! What is it about Kleins and great Austrian economists?
Economists and the Economy
| Peter Klein |
Chris Dillow, channeling yours truly, writes:
Economists are everywhere. Steve Levitt, Tim Harford and Steven Landsburg use newspaper columns and best-selling books to show how economics can account for why drug dealers live with their mums, why you can’t find space to park, why school teachers cheat, why people share umbrellas and why sexually transmitted diseases are so rife. Simple economics, it seems, can explain everything.
Everything, that is, except the economy. Although orthodox economics can do a good job of explaining why people get a divorce or the clap, it does a much worse job of accounting for what people think it should explain.
Dillow’s essay in the Times goes on to focus on the prediction problem. (more…)
Austrian Economics at the AoM
| Peter Klein |
Last week’s Academy of Management meeting featured a pre-conference workshop, “The Austrian School of Economics: Applications to Organization, Strategy, and Entrepreneurship,” organized by Nicolai and myself. I began with an overview of the Austrian approach and reviewed some of the key figures in its development. Panelists Joe Mahoney, Yasemin Kor, Dick Langlois, Nicolai, and Elaine Mosakowski each gave some prepared remarks about aspects of the Austrian tradition that apply to their work, followed by general discussion among the panelists and the audience. Here are copies of the prepared remarks and here are some photos (courtesy of Peter Hofherr).
We weren’t sure what to expect — a dozen or so participants, perhaps? — and were delighted when over 100 people showed up, leaving standing room only. This and other indicators suggest growing interest in Austrian economics among management scholars. Of course, a belief in the relevance of the Austrian approach to business administration is a core value here at O&M.
How Austrian Can Mark Blaug Get?
| Nicolai Foss |
In Austrian circles, Mark Blaug isn’t a popular figure. Many Austrians remember his characterization in his 1980 book, The Methodology of Economics, of Mises’s methodological writings as “so cranky and idiosyncratic that they have to be read to be believed.” In Economic Theory in Retrospect Blaug has tough things to say of Böhm-Bawerk’s capital theory.
And yet, Professor Blaug seems to become very Austrian in his later writings. Here is a smashing from 2003 of the “formalist revolution” in economics that Pete Boettke would find little to disagree with. Here is a thoroughly Austrian defence of “dynamic competition” from 2001. He also has a series of conference papers on “ugly” or “disturbing” currents in modern economics which are all attacks on modern formalist economics, often with substantial Austrian content.
Pomo Periscope XII: Was Hayek a Pomo?
| Nicolai Foss |
It is well known that some Austro-libertarians have had a love-hate relation with the Left. The late Murray Rothbard quite actively flirted with the rather extreme Left for a substantial period in the 1960s (for an amusing historical account, see this). From the 1980s one manifestation of this perhaps latent Austrian tendency has been a flirtation with post-modernist currents that usually have a strong leaning to the left (for Rothbard’s hilarious take on this, see here). (more…)
Klein-Mahoney Smackdown
| Peter Klein |
Those of you in the Pacific Northwest may wish to drop by the annual meeting of the American Agricultural Economics Association, 29 July to August 1 in Portland, Oregon, for this session organized by Randy Westgren:
Economic Theories of Entrepreneurship
Monday, July 30, 10:30am – 12:00pmThis session will offer the chance to explore the economic foundations for the study of entrepreneurship. Joseph Mahoney and Peter Klein will engage in a “Point-Counterpoint” discussion on the theory of entrepreneurial behavior using the lenses of classical, neoclassical, Austrian, institutional, and Carnegie School economics. The discussion will explicitly evoke audience participation in an open and informal design. The various lenses will be used to highlight where the (usually) amorphous study of entrepreneurship can benefit from theoretical foundations.
Last man standing wins.
More on the Austrian Firm Conference
| Peter Klein |
Anthony Evans offers further reflections on the “Austrian Market-Based Approaches to the Theory and Operation of the Business Firm” conference, including the epic Klein-Sautet showdown.
Organizations and Markets 
Recent Comments