I was reading the Market Financial today and came across this post from last month:
Written by Jeff HardingAlerts, Expert Opinions, US MarketsJan 26, 2011
Recently Cafe Hayek’s Don Boudreaux put up a list of his top ten economists. There was one glaring omission: Ludwig von Mises. I was absolutely bowled over by this. He mentions a lot of fine economists, with Friedrich von Hayek his number one choice. When asked about Mises he says:
Don: Mises has just never done it for me. I love his 1922 book Socialism, and his book Liberalism. He was a damn good economist, no doubt. Reader: Have you read “Human Action?” Don: Yep. Snooze.
Don: Mises has just never done it for me. I love his 1922 book Socialism, and his book Liberalism. He was a damn good economist, no doubt.
Reader: Have you read “Human Action?”
Don: Yep. Snooze.
I don’t know what to say other than that Boudreaux just slipped about 10 notches down on my list of respected economists. I hate to do that because he is one of the most prominent economists and figures in Austrian theory economics. I am a big fan of his “letters from Don,” his constant stream of letters to editors and his defense of free trade. Other than that I haven’t read any of his major works.
Here is my comment on the subject from Cafe Hayek:
Mises contributions to the intellectual foundations of social sciences and economics, as pointed out above were without peer. Think of his writings on epistemology as kind of a unified field theory of human action. But the problem with Mises was, well, Mises. He was known to be uncompromising, rigid, and one not to suffer fools lightly. Friedman commented on Mises in a deprecating way: at a Mont Pelerin Society meeting, Mises called many of his fellow attendees “socialists.” Also, Friedman said to effect that he (Mises) said you could know things just from theory. Imagine that. Well, Milton was wrong, his monetary theory was wrong, and he no understanding of epistemology. I greatly admire his defense of free markets and his role in the popular media, but, let’s face it, he was a monetary interventionist, the equivalent of economic central planning through the Fed. If you read Hulsmann’s bio of Mises, a great intellectual achievement in itself, you will get a sense of the man: fierce dedication to intellectual rigor and a desire to achieve truth above all else in his life. I don’t mean this to sound like a Mises hagiography, but I think his intellectual achievements were far superior to Hayek, and I agree with the commentators who say without Mises, there would have been no Hayek or Rothbard. I think Don and the others who think Mises is boring have just missed the point. That is, Mises is difficult, Old School, and hard to get into. Hayek is far more approachable. A great economist to be sure, but, as pointed out above, what did he contribute in economics that wasn’t founded on Mises?
It made me wonder: why do so many 'Austrians' stick to the inferior Hayekian analysis when they have to be aware of Mises? It is not even that they seem to disagree with Mises, it is more like they have never even read him. They typically have no interest in substantive analysis of methodology or epistemology in economics even though this is key to the difference between Austrian and mainstream economics. Instead they seem to practice 'economics' solely from the angle of technocratic policy recomenndations.
Is the divide caused by intellectual laziness or a simple aversion to radicalism which causes them to take up the sometimes social-democratic views of Hayek as against Mises?
Ricky James Moore II: Calculation is about the possibility of making forecasts as to profitability. It is not conceptually possible to do so without money and a capital market. It has nothing to do with knowledge, or the dispersion of knowledge, or Kirznerian 'seeing opportunities'. In fact, Kirzner is wrong in his formulation of the entrepreneur in general...Peter Klein is far superior. Joseph T. Salerno makes exactly my point in many articles.
Calculation is about the possibility of making forecasts as to profitability. It is not conceptually possible to do so without money and a capital market. It has nothing to do with knowledge, or the dispersion of knowledge, or Kirznerian 'seeing opportunities'. In fact, Kirzner is wrong in his formulation of the entrepreneur in general...Peter Klein is far superior.
Joseph T. Salerno makes exactly my point in many articles.
Actually, the concept of 'appraisement' is 'the possibility of making forecasts as to profitability'. The process of calculation is to ex post calculate - based on prices - wether or not a business venture was successful. Or, at least, that's how I got it.
In any case; I didn't ask you to restate the straw man that the 'Hayeians' believe that Salerno makes. I'm asking you to _proof_ - based on the writings and/or lectures - of the 'Hayekians' you criticize that they, in fact, conflate these two.
I remember Chris Coyne - of those 'damn' Hayekians - saying to my explanation that some believe that the knowledge argument talks about 'dispersed knowledge' as in dispersed knowledge of physical and technological circumstances that he 'didn't even knew what that would mean', expressing his 'omfg, this is so irrelevant'. The knowledge argument doesn't talk about that (only). It also talks about the fact that the knowledge about subjective valuation is private knowledge and becomes accessible _through_ (and only through) the process of prices, which causes ordinal value expressions to have some cardinal comparison, that allows for calculation and coordination.
Doesn't seem all that different to me. And this is how 'those Hayekians' explain it. Not some mystical straw man that keeps popping up without any proof of what they 'would' say, in stead of what they actually say.
The way they explain it; there is no real dichotomy. They are two sides of the same coin. It's like explaining interest as caused by time preference (which is true) and as a subjective price expressing a valuation in a way that makes it available for cardinal comparison (which is also true). It's like saying: 'what is more true? The first or the second one?' They both are true; both are two sides of the same coin.
The state is not the enemy. The idea of the state is.
Initially, Hayek's foray into "knowledge" was his attempt to derive what kind of knowledge prices made available on the market. If you think of his knowledge problem in this context then you see how it fits within Mises's calculation problem. The "knowledge problem" is, in fact, only an earlier concept of his in his writing on socialism. What I've interpreted it as basically comes down to: you can have one man knowledgeable on all aspects of the physical world, and he still cannot accurately plan an economy, because he doesn't hold the subjective knowledge (i.e. consumer preferences) necessary to plan production.
Mises, for all intents and purposes, had won the calculation debate. His opponents simply shifted goal posts and then began to argue about a conceptual socialist world with prices (basically, what amounts to our mixed market economy). Hayek's writings on socialism belong to this era of the socialist calculation debate, by which time Mises had become less relevant (Human Action was his contribution, but I'm not sure just how much credence non-free market economists were paying it). The way I read Hayek is as if he is trying to drive home a Misesian point, but in a more abstract, Hayekian way.
EDIT:
This is what I wrote in a past article,
The question of how millions of individuals are able to coordinate and create the "harmony of interests" the capitalist system affords society through the division of labor (coordinated by the price mechanism) was beyond the economics profession until the 1930s and 1940s. While a debate had long existed over the viability of central planning, intensifying during the 1920s with Ludwig von Mises's publication of "Economic Calculation in the Socialist Commonwealth"[2] and Socialism,[3] economics lacked a precise and tenable explanation of the mechanism behind the price system.[4]
This task fell to Ludwig von Mises and Friedrich Hayek. Human Action represents Mises's synthesis of his criticism of socialist "calculation" and his explanation of the working of the capitalist price mechanism.[5] For Mises, the price system was a product of individual persons acting within a division of labor, coordinating their individual valuations.[6] It was upon this idea that Hayek wrote "The Use of Knowledge in Society" in late 1945.[7]
In that essay, Hayek explained how a being that held all scientific knowledge would still be incapable of efficiently distributing resources in lieu of a decentralized price mechanism. In surprisingly Misesian fashion, Hayek underscored the all-important notion that resource economization is not a product of objective fact but the result of individuals subjectively and rationally evaluating their choices of actions within a division of labor. Most important, while acting individuals hold only partial knowledge, that knowledge is derived in such a way that only the individual himself can interpret it. Thus, economic knowledge is far more than the sum of all objective facts; it is also the sum of all subjective valuation.
You get it wrong, a perfect example of the error of Hayekian 'knowledge' theoretics misapplied to calculation. I suggest you re-read Mises. Past prices are nothing but data, of no more necessary relevance to business plans than the specific gravity of iron atoms. All entrepreneurial action is forward-looking, and thus to be of any use to the entrepreneur so must calculation. Whether a firm or product sold at a profit or loss in the past tells him nothing about whether it 'will' in the future (necessarily). What the existence of money an capital ownership allows is for the entrepreneur to look forward and by use of the concept of money articulate whether his expected returns will offset his expected costs, and whether such a venture is worthwhile compared to the expected returns of other alternatives. Neither of this is conceptually possible without money or the control of capital.
Past prices and profits are the province of accountants, not entrepreneurs. Entrepreneurial calculation would continue even if all knowledge of past prices were wiped out.
>he is trying to drive home a Misesian point, but in a more abstract, Hayekian way
I don't understand what this means. Isn't the straightforward way best?
I'm pretty ill-informed about Hayek. Is there a synopsis of Hayek's contributions to praxeology or catallactics?
I think Mises and he were trying to fill the same lacuna in the original socialist calculation problem, which was describing the pricing process, and I do think that Mises ultimately does the better job. I just think that Hayek's writings were wider read at the time. It would also be fair to note that Mises and Hayek seem to stress the point from different directions, and it's equally as fair to argue that Mises was probably more complete.
I don't think Hayek ever considered himself a praxeologist. Bruce Caldwell's biography of Hayek is probably something you'd be interested in reading, though.
I don't think Hayek ever considered himself a praxeologist.
I agree here, Hayek was deeply influenced by the Lockean and British logical empiricist schools; whereas Mises was strongly influenced by Bergson and Husserl (earlier terminology aside, Mises was more a realist-phenomonologist than a Kantian, and he moves away from Kantian terminology in his later work).
Ricky James Moore II: Actually, the concept of 'appraisement' is 'the possibility of making forecasts as to profitability'. The process of calculation is to ex post calculate - based on prices - wether or not a business venture was successful. Or, at least, that's how I got it. You get it wrong, a perfect example of the error of Hayekian 'knowledge' theoretics misapplied to calculation. I suggest you re-read Mises. Past prices are nothing but data, of no more necessary relevance to business plans than the specific gravity of iron atoms. All entrepreneurial action is forward-looking, and thus to be of any use to the entrepreneur so must calculation. Whether a firm or product sold at a profit or loss in the past tells him nothing about whether it 'will' in the future (necessarily). What the existence of money an capital ownership allows is for the entrepreneur to look forward and by use of the concept of money articulate whether his expected returns will offset his expected costs, and whether such a venture is worthwhile compared to the expected returns of other alternatives. Neither of this is conceptually possible without money or the control of capital. Past prices and profits are the province of accountants, not entrepreneurs. Entrepreneurial calculation would continue even if all knowledge of past prices were wiped out.
So what part of this tirade says something different than I said, i.e. where do you proof that I was wrong? What you explain, is the idea of appraissement - as re-emphasized by Salerno.
The only thing that's different in you denying that past prices are completely irrelevant. Which is true in one sense; entrepreneurial decision making is forward looking.
But how, without prices, can an entrepreneur know wether or not his venture was profitable ex post? It's true that an entrepreneur doesn't really care - history is history. In a world where all past data is erradicated, it's impossible to check wether or not past ventures were profitable. This isn't all that important - entrepreneurship is forward looking. But that doesn't mean it's nonsensical.
And can you proof that this is 'an example of the error of Hayekian knowledge theoretics', or is that just a meaningless assertion you're adding in there?
The process of calculation is to ex post calculate - based on prices - wether or not a business venture was successful.
This right here. Which would indicate that knowledge of past prices is what is important. It is not. It is the conceptual possibility of profit within the framework of enterpreneurial for casting - ex ante - that defines economic calculation.
Ricky James Moore II: The process of calculation is to ex post calculate - based on prices - wether or not a business venture was successful. This right here. Which would indicate that knowledge of past prices is what is important. It is not. It is the conceptual possibility of profit within the framework of enterpreneurial for casting - ex ante - that defines economic calculation.
I'm sorry. You are reading things into that statement that weren't said. I must ask you to stop doing that.
The concept of entrepreneurial for casting of the possible price spread is called appraisement.
Edit: after rereading it, it seems that they technical terminology is different as I'm using it here. The idea of appraisement is part of, our the solution to, the concept of calculation. It's clear that I wasn't using it in this sense. Since I'm must abide by the terminology usually used, I was wrong in expressing it like that.
I don't think, however, that I made any mistakes in what I tried to convey, though.
Salerno:
" Rather, it is concerned with the lack of a genuinely competitive and social market process in which each and every kind of scarce resource receives an objective and quantitative price appraisement in terms of a common denominator reflecting consumer preferences. This social appraisement process of the marketits sumer preferences. This social appraisement process of the market Inator reflecting its relative importance in serving (anticipated)con-
transforms the substantially qualitative knowledge about economic conditions acquired individually and independently by competing including their estimates of the incommensurable of individual consumers for the whole array of system of objective exchange ratios for the myriads of original and intermediate factors of production. It is the elements of this coordinated structure of monetary price appraise- ments for resources in conjunction with appraised future prices of consumer goods which serve as the data in the entrepreneurial profit
a rational allocation of resources."
Ah, fuck thi shit. The quote is from 'Reply to Leland B. Yeager'. Notice how he keeps calling it 'appraisement'?
Perhaps if your statements were more articulate this wouldn't crop up.
And forecasting of the profitability of appraised prices for future entrepreneurial action is economic calculation. Economic calculation is not backward looking. Mises states repeatedly that past prices are of no use to an entrepreneur for future forecasting, and it is only wherein one has a monetary standard and private ownership of capital that one can make calculate the economy of possible alternative investments. Economic calculation is not about figuring whether one has made a profit or loss in the past, it is about figuring whether one expects a profit or loss in various lines of future investment.
I notice your frustration that the apologetics for your untenable position are falling apart.
Ricky James Moore II: I'm sorry. You are reading things into that statement that weren't said. I must ask you to stop doing that. Perhaps if your statements were more articulate this wouldn't crop up. The concept of entrepreneurial for casting of the possible price spread is called appraisement. And forecasting of the profitability of appraised prices for future entrepreneurial action is economic calculation. Economic calculation is not backward looking. Mises states repeatedly that past prices are of no use to an entrepreneur for future forecasting, and it is only wherein one has a monetary standard and private ownership of capital that one can make calculate the economy of possible alternative investments. Economic calculation is not about figuring whether one has made a profit or loss in the past, it is about figuring whether one expects a profit or loss in various lines of future investment.
Yes, you are right. The terminology 'calculation' is used for something where appraisement is a part of, or the solution to.
I will, however, emphasize, again that I never said that entrepreneurial decision making was back ward looking. I used another - wrong - definition of caclulation. Shit happens.
Ricky James Moore II:I notice your frustration that the apologetics for your untenable position are falling apart.
Not really; I feel really comfortable regarding my knowledge of the issue at hand, thank you very much.
I got frustrated because copy/pasting from a pdf file sucks.
Now we have settled this issue; could you respond to some previous questions, where you made some accusations without substantiating them?
Thanks.
This thread sucks.
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."
Admittedly Mises can be very dry, which is why many people prefer Rothbard whose writings generally had quite a bit more wit sprinkled in. I forgive people who can't get through Human Action. Lord knows I can't.