From Smith to Hayek and Back Again

Dan Klein has always been one of the most insightful and thoughtful intellectuals in my cohort.  We all met through the libertarian movement in the early 1980s --- IHS, CATO, CSMP, CSE, etc.  I have always listened closely to Dan --- probably more than he would realize because I don't follow his lead as much as I probably should.

Dan has a wonderful essay on the "Smith-Hayek" character and identity in economics.  In recent essays I have been pushing a distinction between "mainline" and "mainstream" in economics and I argue that the terminology of Austrian school makes sense when one is talking about modern 20th century and early 21st century discussions of the debates with "mainstream" economics over the character of economics.

However, if we are talking about the longer-term discussion of the "mainline" of economic thinking through the ages then the discussion of a "unique" Austrian school is probably counter-productive and most certainly inaccurate.  A point, I should add that both Mises and Hayek understood when it came to theory development.

Dan and I have been discussing for the better part of a decade whether or not the name Austrian economics sholud be retired.  As he characteristically points out in straightforward terms --- the last time a significant figure in "Austrian" economics was born in Austria it was the 19th century, so what does it mean to use the term Austrian?

There is something valuable, I would argue, in the contributions from Menger to Mises and Hayek in the further development of the "mainline" of economic thought that I would like to honor, but I agree with Dan that the vital issue for the further development of that line of thought is not the school name but the content of the argument.  "Austrian" may actually deter advancement not promote it.  I try to focus on Austrian economics as a progressive research program in political economy, but what I really care about is a progressive research program in political economy, and sound teaching of economics in written and spoken word to students and the public.

So Klein refers to this as the "Smith-Hayek" economist and I completely agree. That is the sort of economics I want to practice and it is the sort of economics I want my students to learn.  How to advance that in a profession that has to some extent abandoned its "mainline" in favor of "mainstream" fads and fashions?  That is our challenge.  Dan suggests that we need to transform the character of a Smith-Hayek economist into an identity and in order to do that we need a name.  The existing names are not doing the job according to Dan, and on this, he is of course correct.

I don't know what the right answer is to Klein's challenge.

Comments

[John Reed]

The time to change a descriptive title is when it is being co-opted by the “enemy.” A reason the title “libertarian” had to be adopted was that the title “liberal” was being assumed by narrow-minded advocates of coercion. Austrian economics does not appear to be in current danger of having its title co-opted. Until it is in such danger, retaining a title that identifies its roots strikes me as a reasonable practice.

[Rafe]

What John Reed said. Interesting to note Dan's comments on the role of model building in the mainstream and recall a piece by Roger Backhouse on the most striking difference for him between Austrians and others.
http://www.mises.org/journals/qjae/pdf/qjae3_2_3.pdf

[Kirk]

Notwithstanding John Reed and Rafe's suggestion that we wait until the name "Austrian economics" is being co-opted by the other side, I believe it is plausible to accept that Klein could be arguing for a Smith-Hayek tradition that combines two key Public Choice and Austrian tenets, yet today leaves PCT and AE methodologically separate.

As Boettke pointed out in his 2002 RAE paper "Austrian Economics and Public Choice," the Public Choice school challenges the benovolence assumption for officialdom while the Austrian school challenges the omniscience assumption of standard public-interest economics. He goes on to suggest that Hayek challenged both, just as Smith had. "This hybrid market process and public choice paradigm for political economy analysis was, in fact, championed by Hayek, and it was argued by him that this approach was indeed a crucial aspect of the great contribution which Hume and Smith made to human knowledge in the 18th century" (pp 112).

So might the Smith-Hayek tradition Klein is arguing for relax both assumptions, and therfore be a school (with a character and an identity) that would pursue scholarship of both varieties?