Economics Questions

Re: Friedrick Hayek and Austrian economics

laminustacitus — Fri, 15 May 2009 16:22:11 GMT

Jon Irenicus:
Laminustacitus has been reading Prices and Production so maybe he can comment.

If I am of the correct understanding, Prices, and Production is the work that for the first time elucidates a couple of sentances from Mises' Theory of Money, and Credit, along with the tradition of capital theory from Jevons, Bohm-Bawerk, and Wicksell, into the framework we now know as the Austrian Theory of the Business Cycle; if there was an earlier pubished work, I do not know of it. To reject Hayek from the line of Austrian economists would be utterly moronic in light of works like Prices, and Production, which is a important work in the tradition of Austrian economics, not Hayekian neoclassical economics.

Re: Friedrick Hayek and Austrian economics

hayekianxyz — Fri, 15 May 2009 13:21:10 GMT

I've been wanting to read Prices and Production for some time, perhaps Salerno mentions something in the introduction too, since he is originally responsible for the dehomogenization.

Re: Friedrick Hayek and Austrian economics

Jon Irenicus — Fri, 15 May 2009 13:17:51 GMT

I need to read Hayek's work on capital to assess where he falls, but he is often lauded by other Austrians on the topic so I am going to hazard a guess and assume he does maintain a consistently subjectivist stance. Laminustacitus has been reading Prices and Production so maybe he can comment.

Re: Friedrick Hayek and Austrian economics

hayekianxyz — Fri, 15 May 2009 12:53:26 GMT

Jon Irenicus:
Well if Caplan's point is that Hayek is not as Austrian as Mises or Rothbard (or any bunch of other Austrians) I'd agree, but I am not convinced neoclassicals can simply adopt the Austrian view of capital and leave their theoretical framework wholly unchanged, because the Austrian theory of what a capital good is &c. is highly rooted in its subjectivist approach

It depends, I do think they could simply relax the aggregating of "capital" involved and include some Hayekian insights by simply adding some arbitrarily defined stages or production into their macroeconomic analysis whilst leaving their theoretical framework relatively untouched. On the other hand, I don't think they can correctly reconcile the microeconomic foundations of Austrian capital theory with their analysis, since that would involve (as you pointed out) correctly applying subjectivism.

But I think Caplan's point was the first of the two.

Re: Friedrick Hayek and Austrian economics

Jon Irenicus — Fri, 15 May 2009 12:40:55 GMT

Well if Caplan's point is that Hayek is not as Austrian as Mises or Rothbard (or any bunch of other Austrians) I'd agree, but I am not convinced neoclassicals can simply adopt the Austrian view of capital and leave their theoretical framework wholly unchanged, because the Austrian theory of what a capital good is &c. is highly rooted in its subjectivist approach. I am not sure to what extent Hayek's work reflects this but if it does it would entail many more changes than a mere shift of focus. All the more so if Hayek accepts the doctrine of the subjectivity of costs (i.e. treats all costs as opportunity costs.)

Re: Friedrick Hayek and Austrian economics

hayekianxyz — Fri, 15 May 2009 12:29:09 GMT

Jon Irenicus:
The sole remaining step would be for neoclassicals to accept disequilibrium analysis as opposed to their static (or "comparative statics") models

Sure, but presumably because of Wieser's influence, Hayek often didn't embrace disequilibrium analysis himself. In which case, Caplan's point still stands.

Jon Irenicus:
which they do but fail to apply properly

You wouldn't know it from my text book, which mentions "utils".

Re: Friedrick Hayek and Austrian economics

Jon Irenicus — Fri, 15 May 2009 12:15:49 GMT

The sole remaining step would be for neoclassicals to accept disequilibrium analysis as opposed to their static (or "comparative statics") models, and realise utility is purely ordinal (as far as measurement goes) and subjective, which they do but fail to apply properly.

Re: Friedrick Hayek and Austrian economics

hayekianxyz — Fri, 15 May 2009 10:11:31 GMT

Jon Irenicus:
Taking in Hayek's view of capital would be tantamount to conceding most of the case to Austrian economics (as it would cut away entire swathes of mainstream theorising, e.g. the possibility of overproduction/underconsumption on a free market, sharp division between credit and capital and so on),

I agree, nonetheless, with Hayek's later methodology in mind this could be done without undermining the entirety of neoclassical mainstream economics. On the other hand, if one were to eschew the entire use of equilibrium theorizing as the Misesian line of Austrianism does then the neoclassicals would cease to be that and would become Austrians. I think that was largely Caplan's point.

Keep in mind, I say this as somebody with a great deal of respect for Hayek and a large dislike for Caplan. I just think that whilst a lot of the conclusions would be different, mainstream economics would not be undermined entirely with the inclusion of Hayekian insights.

Re: Friedrick Hayek and Austrian economics

Jon Irenicus — Fri, 15 May 2009 10:03:06 GMT

No, I am referring to the nonsense they believe insofar as perfect competition is concerned, as well as their treatment of utility - actually I wonder if they'd find any support in Hayek even there, certainly not with regard to the former, and I have not read much by him on utility but I am sure he did not view it as neoclassicals do. Taking in Hayek's view of capital would be tantamount to conceding most of the case to Austrian economics (as it would cut away entire swathes of mainstream theorising, e.g. the possibility of overproduction/underconsumption on a free market, sharp division between credit and capital and so on), regardless of how they perceive (their flawed) methodology to be. The later Hayek is more neoclassical on methodology, i.e. more wrong.

Re: Friedrick Hayek and Austrian economics

hayekianxyz — Fri, 15 May 2009 09:59:15 GMT

Jon Irenicus:

I wouldn't say so, there's definately some extent of truth in that statement, not enough to deny him of being an Austrian though, but Caplan never said that.

Hayek's views on capital (and his earlier ones on methodology) are so utterly at odds with those embraced by mainstream economics that I cannot understand how that statement could be anything but nonsense. If mainstream econ "adjusted its focus" that way it'd be morphing into Austrian econ, with merely a few more steps needed to render it consistent with subjectivism (and purge it of any remaining scientistic garbage.)

I was thinking about later Hayek when I wrote that post. As for capital, it could be included into mainstream macroeconomic theorizing just by relaxing some of the aggregation, granted, it still wouldn't be consistent Austrian subjectivism, but that was sort of Caplan's point.

Re: Friedrick Hayek and Austrian economics

Jon Irenicus — Fri, 15 May 2009 09:49:37 GMT

I wouldn't say so, there's definately some extent of truth in that statement, not enough to deny him of being an Austrian though, but Caplan never said that.

Hayek's views on capital (and his earlier ones on methodology) are so utterly at odds with those embraced by mainstream economics that I cannot understand how that statement could be anything but nonsense. If mainstream econ "adjusted its focus" that way it'd be morphing into Austrian econ, with merely a few more steps needed to render it consistent with subjectivism (and purge it of any remaining scientistic garbage.)

Re: Friedrick Hayek and Austrian economics

hayekianxyz — Fri, 15 May 2009 09:41:34 GMT

liberty student:
I'm sure Hayek thought what he was doing was right, but the fact that the ABCT is promoted by LvMI and not GMU or Cato, that it is Tom Woods from LvMI with a NYT bestseller explaining ABCT, and only Ron Paul who will speak on the political trail about his theory, that should speak for itself.

The ABCT was more Hayek's doing than Mises's, granted the latter came up with it (although, not intentionally) but Hayek elaborated upon it and integrated Austrian capital theory.

Re: Friedrick Hayek and Austrian economics

hayekianxyz — Fri, 15 May 2009 09:39:05 GMT

Jon Irenicus:

What about this?: "If Mises and Rothbard are right, then modern neoclassical economics is wrong; but if Hayek is right, then mainstream economics merely needs to adjust its focus."

There's a word for statements like this. It's "nonsense".

I wouldn't say so, there's definately some extent of truth in that statement, not enough to deny him of being an Austrian though, but Caplan never said that.

Re: Friedrick Hayek and Austrian economics

hayekianxyz — Fri, 15 May 2009 09:36:59 GMT

Individualist:

What about this?: "If Mises and Rothbard are right, then modern neoclassical economics is wrong; but if Hayek is right, then mainstream economics merely needs to adjust its focus."

Didn't Hayek win the Nobel prize for promoting the Austrian theory of the business cycle? How far is ABCT from mainstream economics?

Hayek was an equilibrium theorist after his teacher, Wieser, he also considered maths to be allowable in economics. Whereas the Misesian line of Austrianism rejects equilibrium theorizing and mathematics.

It's said that it's easiest to read Hayek as a neoclassical with a background in Austrianism. His best work is by far with ABCT work, which is quite a distance from the mainstream. Nonetheless, he is considerably closer to the mainstream than Rothbard and Mises were.

Re: Friedrick Hayek and Austrian economics

Jon Irenicus — Fri, 15 May 2009 09:26:57 GMT

What about this?: "If Mises and Rothbard are right, then modern neoclassical economics is wrong; but if Hayek is right, then mainstream economics merely needs to adjust its focus."

There's a word for statements like this. It's "nonsense".