I wrote:
> > that familiar assertion is what's what's called an Austrian critique
> > of the mainstream/neoclassical approach. The mainstream is into
> > imperfect info these days, by the way. But it (unlike the Austrians)
> > has not dropped the fatal marriage to equilibrium.
Michael Nuwer wrote:
> The Austrians have not dropped the equilibrium concept. They are critical of
> the
> type of equilibrium analysis found in Walrasian models, that is, drawing
> policy
> conclusion from equilibrium states. Modern welfare economics investigates
> alternative policy scenarios by using equilibrium prices as a proxy for a
> measure
> of utility (i.e. a demand curve is a marginal utility curve). The Austrians
> challenge this.
Thanks for this entire message. I've never found that the benefits of
studying the Austrian school exceeded the costs, so I've stayed pretty
ignorant of their views. I did start reading Rothbard's book on the
Great Depression (because it's one of my topics) but was discouraged
by accumulation silliness... such assertions as that entrepreneurs
would never allow a depression to happen, as if they were omniscient
and omnipotent (if not omnipresent).
> 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.
my impression, however, is that the Austrians are idealist in their
overall perspective. They focus on the ideal entrepreneur, for
example, not the actually-existing one. (sort of like the way the old
defenders of Stalin's USSR would defend its ideals over its reality?)
> 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."
that's a bit like Marx's (and others') idea of equilibrium as
determining a center of gravity.
> And of course,
> Hayek's concept of "spontaneous order" is an equilibrium concept.
I don't think that's true, but I'm willing to be convinced otherwise.
> In the 1980s there was a significant debate within the Austrian camp on this
> subject, with Kirzner arguing in favor equilibrium tendencies and Lachmann
> arguing
> against them. The debate was never resolved (and this fact, I believe,
> reveals a
> fundamental contradiction in their paradigm; or at least their view of
> uncertainty)...
Me:
> > (The Austrian and Schumpeterian conceptions of market competition
> > seems very similar to that of Marx. Some say they learned it from him,
> > via Böhm-Bawerk.)
Michael:
> There are some similarities, but there are some important differences. For
> Marx
> "the bourgeoisie cannot exist without constantly revolutionising the
> instruments
> of production." For Mises and Kirzner the market process tends "continually
> towards equilibrium, as the consequence of continually-stimulated
> entrepreneurial
> discoveries. These discoveries are discoveries of earlier errors made in the
> course of market exchanges."
entrepreneurial activity encourages equilibration? that's a new one.
> Kirzner's idea of entrepreneurial discovery is illuminating. After all,
> discovery
> is about learning; about finding what is already out there. Mountains are
> discovered; but I'm not convinced that capital accumulation is discovered.
> (Joan
> Robinson remarked in the 1968 introduction to The Economics of Imperfect
> Competition that her use of "trial and error" for the discovery of demand
> was a
> "shameful fudge" because it assumed the continuity of future with the past.)
of course there's continuity, it just goes only one way: people act on
past experience which affects the future (though not as they please).
> Anyway, my point is that the Austrians hold a natural law view of the
> economy;
> they are essentially Panglossian.
that fits my experience.
> > Another non-price solution ...
> This is an important issue when in the company of a libertarian. They see the
> world (or the economy) only in terms of markets and governments. This is why
> they
> have no "theory of the firm." (Those who don't ignore it altogether rely on
> some
> variation of the "nexus of contracts" crap.)
that fits my experience.
> > GMU types love the value judgment implicit in the phrase "creative
> > destruction," the _a priori_ presumption that the benefits of creation
> > exceed the costs of destruction. Why don't they call it "destructive
> > creation"? Because that sounds bad, not fitting with their hidden
> > value judgments.
> Although these guys like to write blog postings about creative destruction,
> it is
> not a central part of their theory. "Schumpeter's entrepreneur, I [Israel
> Kirzner]
> pointed out, was essentially disruptive, destroying the pre-existing state of
> equilibrium. My entrepreneur, on the other hand, was responsible for the
> tendency
> through which initial conditions of disequilibrium come systematically to be
> displaced by equilibrative market competition."
he assumes that equilibrium is something good?
I knew that despite his ethnicity, Schumpeter was no "Austrian"
economist. It's useful to see the contrast more clearly.
--
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.
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