Michael Nuwer wrote:
> When Samuelson describes a perfect market by comparing it to a frictionless
> pendulum or when Friedman compares market equilibrium to the acceleration of a
> body dropped in a vacuum, they are, according to the Austrians, employing the
> method of idealized abstraction. Rothbard, and his followers, pride
> themselves as
> being Aristotelean. They employ the method of simplifying abstraction rather
> than
> idealized abstraction. On this point they are not alone. Critical realists,
> Post-Keynesians, Old institutionalist and many Marxists (and I believe Marx)
> employ assumptions to simplify rather than to define ideal types.
This is interesting.
I wonder though whether, at a more fundamental level, this contrast
between "idealization" and "simplification" is substantive or merely
formal. I think it's the latter. IMHO, Hegel exposed how artificial
the Kantian split between rationalism and empiricism was. He showed
how they effectively are each other, become each other, depend on each
other, struggle with each other, etc.
To put it in my simplified/idealized terms, deep down, pure
"deductive" math turns out to be as "empirical" as the "inductive"
natural and historical sciences are "rational." Except that, opposite
to his own belief, Hegel's description of this turbulent process ("The
Logic") was a reflection of a real world evolving on its own terms
rather than of some primal ideal substance unfolding, conforming, and
driving the real world.
We need to see through the cloak on which the epistemological clash
between the Teutonic/Continental and the Anglo-Saxon traditions
appears to those trapped in it. Just like a translator needs to break
through the semiotics of the languages and map their semantics. The
result is never entirely fair to both languages, but it does the job
of allowing communication.
> Yet this difference does not mean that the Austrians reject equilibrium. For
> example, Peter Lewin writes: "For Hayek equilibrium was never understood as a
> state that could ever actually be said to exist, although its logical
> existence is
> clearly implied. He was more concerned with the question of whether or not it
> could be shown or argued that a tendency toward equilibrium ('a greater
> degree of
> plan coordination') characterized the actual market process." And of course,
> Hayek's concept of "spontaneous order" is an equilibrium concept.
Does equilibrium exist as a constitutive element of real economies or
is "only" an idealized abstraction conceived for the convenience or
caprice of the thinker? Both! Theoretical fixed points are
formidable instruments of cognition *because* they capture key
elements in all real processes, elements enmeshed in the stream of
reality. Theoretical fixed points don't live in a Platonic world
shadowing this world. They are aspects of this, actually-existing
world.
On a more specific note, I wonder whether a big reason why some people
feel queasy about the concept of equilibrium is that they fix it to a
static interpretation. If one interprets equilibria as steady states
in a dynamic system (i.e. as fixed points in the complex
transformation or mapping of sets representing a succession of points
in time), many of the deficiencies attributed here to the concept of
equilibrium vanish. In spite of the etymology of the term, in
dynamics, a state is not stasis. Instead, it's ("simplified" or
"idealized") motion.
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