Posts filed under ‘Austrian Economics’
Volleyball and Equilibrium
| Lasse Lien |
What exactly is the role of equilibrium in the competitive process? Believe it or not, I have found the answer. It plays the same role as gravity does in a volleyball match.
Think about it! The ball is continuously bounced in ways that direct it towards new states of rest (new equilibriums), but it hardly ever settles down in any of these, because it is subject to new bounces, sending it towards yet another equilibrium. Moreover, about half the time the ball is moving opposite of what gravity would dictate, i.e. it is moving upwards, but unless it is bounced again it will start falling downwards and settle in the position gravity dictates (operating on the last bounce). Of course, this never occurs because the ball is continuously bounced. So a theory of gravity alone would not provide a good prediction of where the ball is, nor where it is headed, or even how the game got started. But mind you, think about how absurd it would be to try to understand a game of volleyball without any notion of gravity!
Pomo Periscope IV: A Rothbard Classic
| Nicolai Foss |
Pomo had no greater enemy than the late Murray Rothbard. Here is a hilarious comment on “the hermeneutical invasion of philosophy and economics,” which was originally published in 1989 in the Review of Austrian Economics (and published a bit later in Danish translation by yours truly in the rather short-lived Danish Austrian economics journal, Praxeologica). (more…)
Bleg: Parsons, Popper, and the Austrians
| Peter Klein |
From Rafe Champion:
I am working up a paper on the way Talcott Parsons rediscovered the Austrian wheel of methodological individualism and the “action frame of reference” during the 1930s when he wrote “The Structure of Social Action” (1937). Karl Popper also picked up some elements of the Austrian approach (not surprisingly) including methodological individualism and “situational analysis” which is essentially the action frame of reference including subjectivism.
Can people help out with any cross references and citations between those three lines of work? The volume of literature in each of the three is immense, and in my reading of the principals there is next to no cross referencing.
I am not aware that Parsons ever cited Mises or Popper and their associates. Popper in personal communication described Parsons as a contributor to verbalism in the social sciences but did not cite him in print. Jarvie (of the Popper school) referred briefly to Parsons in the course of a protracted debate by sociologists and anthropologists over MI involving associates of Popper (mostly Watkins) and others. In that context Hayek was cited as an exponent of MI but there was no reference to Mises or the Austrian tradition generally. This appears to indicate a high degree of fragmentation in the field or at least a lack of collegiate spirit in recognizing the contribution of scholars in other schools of thought who are fellow travelers in some respects.
Any Parsons scholars out there who can help him out? If so, please write Rafe or, even better, post a comment below.
Schmoller Revisited
| Peter Klein |
The Jahrbuch für Gesetzgebung, Verwaltung, und Volkswirtschaft, edited by Gusav Schmoller — commonly known as Schmollers Jahrbuch — was one of the most important and influential economics journals of the nineteenth century. Schmoller was the leader of the younger German Historical School and the main opponent of Carl Menger in the Methodenstreit, or battle over methods, that raged between the German historicists and the fledgling Austrian School. (It was Schmoller and his followers who coined the phrase “Austrian School,” the word Austrian being synonymous, among German-speaking intellectuals, for provincial and second-rate). Schmoller and his school are little known to contemporary social scientists, suffering the same fate that befell their American disciples, the Institutionalists Thorstein Veblen, John R. Commons, and Wesley Clair Mitchell. (As Coase once remarked: “Without a theory they had nothing to pass on except a mass of descriptive material waiting for a theory, or a fire.”)
To my surprise I received an email today announcing a new issue of Schmollers Jahrbuch. I had no idea the journal was still being published. The announcement was for a special issue, “Schmoller’s Legacy for the 21st Century.” Papers include “Schmoller’s Impact on the Anglophone Literature in Economics” by Geoffrey Hodgson, “Schmoller and Modern Sociology” by Yuichi Shionoya, “Gustav Schmoller, His Heirs and the Foundation of Today´s Social Policy” by Gerold Blümle and Nils Goldschmidt, and “Gustav Schmoller and Globalisation” by Heinz Rieter and Joachim Zweynert.
Incidentally, Murray Rothbard used to tell the story that during an intense (but friendly) disagreement between himself and Mises at Mises’s New York seminar Mises teasingly called him a “Schmollerite” — the ultimate insult to an Austrian economist!
New Issue of the QJAE Out
| Nicolai Foss |
The Quarterly Journal of Austrian Economics is one of three existing periodicals that are 100% devoted to promoting Austrian economics. The other two are the Review of Austrian Economics and Advances in Austrian Economics. QJAE differs by having more of an emphasis on the hardcore Misesian stream of Austrianism. There is, therefore, a focus on the work of a single scholar (Mises) that is rather unusual for an economics journal (this is the one dimension in which the Journal of Post-Keynesian Economics is like the QJAE).
I have read the QJAE since its start nine years ago, and served on its editorial board since the founding of the journal. The most recent issue is, at least to this reader, the best so far. (more…)
Happy Mises Day
| Peter Klein |
We neglected to wish our readers yesterday a Happy Mises Day. Ludwig von Mises was born 125 years ago on 29 September 1881. Guido Hülsmann, whose full-length biography of Mises will appear in 2007, shares some tributes that were published on (or just before) Mises’s death in 1973. Among the accolades: “Recognized as a brilliant contributor to economic thought not only by his disciples but also by many who disagreed radically with his political and social philosophy” (International Herald-Tribune). “The world’s liberal economists [have lost] their most prolific pen” (Daily Telegraph). “He held that a free society and a free market are inseparable. He gloried in the potential of reason and man. In sum, he stood for principle in the finest tradition of Western Civilization” (Wall Street Journal). “The de Tocqueville of modern economics” (CBS television). Murray Rothbard wrote in Human Events:
Readers of Mises’ majestic, formidable and uncompromising works must have often been surprised to meet him in person. Perhaps they had formed the image of Ludwig Mises as cold, severe, austere, the logical scholar repelled by lesser mortals, bitter at the follies around him and at the long trail of wrongs and insults that he had suffered. They couldn’t have been more wrong; for what they met was a mind of genius blended harmoniously with a personality of great sweetness and benevolence. Not once has any of us heard a harsh or bitter word escape from Mises’ lips. Unfailingly gentle and courteous, Ludwig Mises was always there to encourage even the slightest signs of productivity or intelligence in his friends and students.
(For some reason, I never forget Hayek’s birthday.)
Lachmann Paper
| Nicolai Foss |
Giampaolo Garzarelli (University of Witwatersrand) and I have just had our paper on Ludwig Lachmann, “Institutions as Knowledge Capital: Ludwig M. Lachmann’s Interpretive Institutionalism,” accepted by the Cambridge Journal of Economics. Mail me at njf.smg@cbs.dk if you want a copy. Here is the abstract:
This paper revisits the socioeconomic theory of the Austrian School economist Ludwig M. Lachmann. By showing that the common claim that Lachmann’s idiosyncratic (read: eclectic and multidisciplinary) approach to economics entails nihilism is unfounded, it reaches the following conclusions. (1) Lachmann held a sophisticated institutional position to economics that anticipated developments in contemporary new institutional economics. (2) Lachmann’s sociological and economic reading of institutions offers insights for the problem of coordination. (3) Lachmann indirectly extends contemporary new institutional theory without simultaneously denying the policy approach of comparative institutional analysis.
Friedman-Stigler Correspondence
| Peter Klein |
Historians of economic thought, social-science methodologists, and Chicago School junkies may enjoy J. Daniel Hammond and Claire H. Hammond’s edited volume Making Chicago Price Theory: Friedman-Stigler Correspondence, 1945-1957 (Routledge, 2006). (Friedman, of course, is respected, though not universally admired, here at O&M.) Reviewer Craig Freedman says the Friedman-Stigler correspondence
reflects the way in which the two attempted to transform economics. In particular, we can discern their attempts to reshape economic methodology, as well as their changing views on such issues as equality and income distribution. As we read these letters, the outline of what would form the bedrock of the Chicago School, a distinctive take on price theory, becomes progressively clearer.
Freedman also notes that while Friedman’s influence on monetary theory and policy and economic methodology is well known, Stigler’s defense of Marshallian partial-equilibrium analysis over Walrasian general-equilibrium theory is not as widely appreciated. (more…)
Mises’s “Intolerance”
| Peter Klein |
Rafe Champion points out that Ludwig von Mises and Karl Popper, despite a shared commitment to classical liberalism and joint membership in the Mont Pelerin society, then the premier scholarly association of free-market intellectuals, didn’t get along. Mises and Popper were miles apart, epistemologically, and neither was enamored of the other’s work. Still, their relationship is interesting and worthy of further study. (Hayek of course was deeply influenced by both men.)
Unfortunately, in the comments to Rafe’s post the subject of Mises’s alleged “intolerance” rares its ugly head. A commentator refers to the story, repeated ad nauseam by Milton Friedman, that Mises once stormed out of a session of the Mont Pelerin society, shouting “You’re all a bunch of socialists!” The inference is that anyone making such a statement in a room full of distinguished non-socialists (Friedman, Stigler, Robbins, Knight) must be an extremist, a crank, or both. (more…)
Kuhn and Scientific Realism
| David Gordon |
As Peter noted, Thomas Kuhn made an important point about the history of science. Established scientists often reject revolutionary theories, and these theories become dominant only when a new generation of scientists replaces the old guard. The new theories, Kuhn also thought, were not necessarily better in all respects than the ones they replaced; rather, they asked different questions.
Kuhn’s views influenced Murray Rothbard’s An Austrian Perspective on the History of Economic Thought. (Incidentally, this is my favorite of Rothbard’s books — it’s enormously learned and insightful.) Like Kuhn, Rothbard rejected the Whig view of science as continually progressing by small advances. Rather, he thought that knowledge could be lost. In his view, this is exactly what happened in the nineteenth century when Ricardian economics eclipsed the discoveries of the Spanish Scholastics and other subjectivists. (more…)
Infotopia
| Peter Klein |
From Knowledge Problem I learn of Cass Sunstein’s new book Infotopia: How Many Minds Produce Knowledge. Mike Giberson reflects on the obvious Hayekian parallels. And see these thoughtful remarks by Lynne Kiesling. (Here are some less insightful comments on Wikis and Digg.)
More on Leijonhufvud
| Nicolai Foss |
The great economist Axel Leijonhufvud has been the subject of earlier posts here on O&M (here and here). A recent issue of the Cambridge Journal of Economics features an article by Elisabetta de Antoni (a colleague of Leijonhufvud at the University of Trento) on “The Auctioneerless Economics of Axel Leijonhufvud: The “Dark Forces of Time and Ignorance” and the Coordination of Economic Activity.”
The article contains some strange claims — e.g., it claims that “Leijonhufvud has the unquestionable merit of having devised the metaphor of the auctioneer” (p. 2) and this auctioneer is the “personification of the (equally occult) ‘invisible hand’ of the market” (p.3) — but there are many interesting observations and points. Thus, it doesn’t over-concentrate on the 1968 book, and nicely tells the story of how Leijonhufvud became increasingly heterodox, as the econ profession since about the mid-1970s moved towards the intertemporal optimization approach that still holds sway. On the whole, the paper is a reliable and informative guide to the thinking of one of the most fascinating contemporary economists.
More on Methodological Individualism and Subjectivism
| Nicolai Foss |
In an earlier post, I argued that methodological individualism involves “… almost with necessity some kind of subjectivist methodology.” David Gordon made the comment that methodological individualism does not have “… to involve a commitment to a subjectivist methodology. The sociologist George Caspar Homans combined methodological individualism with behaviorism.” I didn’t have the time to respond to Gordon then, so the following is a somewhat belated response of sorts (or perhaps just some further reflections prompted by Gordon’s comment). (more…)
Judgment versus Alertness
| Peter Klein |
Nicolai and I have written several papers on the Knightian concept of entrepreneurship as judgment (e.g., here, here, and here). We contrast the judgment view of entrepreneurship with several other approaches, including Israel Kirzner’s idea of entrepreneurship as “discovery” or alertness to profit opportunities.
Readers and seminar participants are often confused by the distinction between judgment and alertness. We describe the judgment approach as “Austrian,” associating it not only with Knight but also with Austrian and proto-Austrian economists Richard Cantillon, Frank Fetter, Ludwig von Mises, and Murray Rothbard. But, we are asked, isn’t Kirzner an Austrian? Isn’t Kirzner’s entrepreneurial-discovery approach “the” Austrian view?
Not necessarily. Here’s why. (more…)
Is Austrian Economics Premature?
| Peter Klein |
Rafe Champion on “prematurity” in science:
This when a useful or even important discovery takes a long time to be picked up by the field at large. Mendel’s work on genetics is an example. And so is the Austrian approach to economics and social thought.
Here is Rafe’s review of Ernest B. Hook, ed., Prematurity in Scientific Discovery: On Resistance and Neglect (University of California Press, 2002), which explains it all. Personally, I prefer the moniker “ahead of my time,” but what the heck, I’ll take premature.
Who Killed the History of Economics?
| Peter Klein |
As discussed here before, economists are not generally familiar with the history of economic thought. Roy Weintraub offers this explanation: Heterodox economists often specialize in the history of economic thought, so mainstream economists come to associate doctrinal history with heterodoxy, thus turning them off to the history of economics itself. (Thanks to Mark Thornton for the cite.)
This explanation strikes me as misguided, for two reasons. First, many heterodox economists publish in history-of-thought journals, attend history-of-thought conferences, and the like not by choice, but because they cannot get their work published in mainstream journals. The perceived link between heterodoxy and the history of economic thought is thus endogenous, begging the question of why mainstream economists are willing to tolerate heterodoxy as history but not otherwise.
Second, and more important, mainstream economists’ lack of interest in doctrinal history is more likely due to the general Whiggishness pervading modern social science. (more…)
Oskar Morgenstern on Economic Data
| Peter Klein |
Philipp Bagus rehabilitates Oskar Morgenstern’s great, and underappreciated, book On the Accuracy of Economic Observations, first published in 1950. Morgenstern’s target was national income statistics and macro-econometric forecasting, but many of the same issues apply to business forecasting as well.
Firms, Strategies, and Economic Change
| Peter Klein |
My review of Tony Yu’s Firms, Strategies, and Economic Change: Explorations in Austrian Economics (Edward Elgar, 2005), written for the Quarterly Journal of Austrian Economics, is available for preview here.
News on Socialism
| Nicolai Foss |
Here is an interesting site — a must-read for any Austrian — which proves that “the labour theory of value is a scientific theory in the strongest sense of the empirical sciences”, “labor values are closely correlated with prices” (i.e., competition works!), etc. An author-less paper (“Against Mises“) posted on the same site demonstrates that Mises was wrong: It is perfectly possible to calculate using labor values.
Mises University
| Peter Klein |
For the past several years I have had the pleasure of lecturing at the Mises University, a week-long instructional seminar on Austrian economics and related disciplines. I never expected to see a favorable write-up in the Wall Street Journal, but here it is:
Sweet Home Alabama
By KYLE WINGFIELD
August 4, 2006Auburn, Alabama
Growing up, I never thought of Alabama as a beacon of academia. Living in its capital city of Montgomery for two years didn’t exactly change my mind. It wasn’t until I moved to Europe that I realized the Heart of Dixie was a wellspring of sensible economic thinking.
One by one, I met young, capitalist Continentals who had studied in Auburn. Not at Auburn University, mind you, which is Alabama’s largest college but is associated more with physical specimens like Bo Jackson than with free-market philosophers. Rather, they had flocked to the Ludwig von Mises Institute, a think tank located just off campus that preaches the works of Hayek, Rothbard and other economists from the Austrian School — including, of course, the institute’s namesake.
Organizations and Markets 
Recent Comments