Preparing my notes for my talk on the socialist calculation debate at FEE next week (I'll be doing my best Pete imitation), I decided to include this quote from Mises from his 1920 article on economic calculation (pp. 120-1):
“A popular slogan affirms that if we think less bureaucratically and more commercially in communal enterprises, they will work just as well as private enterprises. The leading positions must be occupied by merchants, then income will grow. Unfortunately ‘commercial-mindedness’ is not something external, which can be arbitrarily transferred. A merchant’s qualities are not the property of a person depending on inborn aptitude…The entrepreneur’s commercial attitude and activity rises from his position in the economic process and is lost with its disappearance….It is…his characteristic position in the production process which allows of the identification of the firm’s and his own interests.”
What is most interesting about that quote is that Mises is clearly claiming that our ability to engage in economic calculation, or to be "commercial-minded" or "economically rational," is not a product of our innate skills or training or anything "inside" of us, but instead the institutional context we find ourselves in. Some institutions will better coordinate the entrepreneur's and the firm's own interest and lead to efficient resource use, some will not. This is why, of course, Lange suggested in a footnote in the 1936 paper that Mises was making a quasi-institutionalist argument.
It also tracks Vernon Smith's work on "ecological rationality," which sees rationality as the product of the context, not the individual. I would add both Mises and Smith are making Weberian arguments here. The opportunity and need for Austrians to reconnect with Weber and create a truly Austrian sociology has never been greater (right Brian?).
I also hesitate to note that this does bear out Pete's claim over the years, made half-seriously, that all that's good in modern economics can be found in Mises.
Hayek elaborates on these issues in his _Law, Legislation & Liberty", see, e.g. were Hayek discusses the issue of "rationality".
Mises writes:
"A merchant’s qualities are not the property of a person depending on inborn aptitude…The entrepreneur’s commercial attitude and activity rises from his position in the economic process and is loss with its disappearance."
Posted by: Greg Ransom | July 30, 2009 at 03:28 PM
"that all that's good in modern economics can be found in Mises."
1- But much of the "good in modern economics" will be found in a more crude form. Like the fact that in some way, much of modern economics can be seen in Smith's work.
2- Also, it appears that the ecological rationality concept is related to the knowledge problem: Without the intellectual division of labor that is manifested in the price system, decision makers with limited knowledge cannot act in a rational way from the point of view of an omniscient observer.
Posted by: Rafael Guthmann | July 30, 2009 at 03:55 PM
"... is not a product of our innate skills or training or anything "inside" of us, but instead the institutional context we find ourselves in."
If I recall correctly Scott Beaulier and I discuss this view of Mises in our piece on the evolution and emergence of property rights, published a few years ago in RAE. Calculative rationality cannot exist without private property rights and their relative prices. Prior to their emergence, there was no economic rationality as we know it. Destroy private property rights, and economic rationality as we know it is also destroyed.
Posted by: Dave Prychitko | July 30, 2009 at 07:20 PM
... if it wasn't published there, then it might have been the paper on Habermas that Virgil and I published in the Cambridge Journal of Economics.
Or maybe I simply dreamt about this a few years ago. It really doesn't matter anyway.
Posted by: Dave Prychitko | July 30, 2009 at 07:23 PM
The pope should read Mises.
Posted by: Mario Rizzo | July 30, 2009 at 08:00 PM
I'd be thrilled if the pope read Schillebeckx.
Posted by: Dave Prychitko | July 30, 2009 at 08:09 PM
... that is, re-read Schillebeeckx.
Posted by: Dave Prychitko | July 30, 2009 at 08:11 PM
My favorite heretical Catholic theologian is Pierre
Teilhard de Chardin. He sounds just like Henri Bergson.
Posted by: Mario Rizzo | July 30, 2009 at 08:44 PM
Chardin is fascinating. But he has this sense that time's arrow is heading toward a telos out there.
Posted by: Dave Prychitko | July 30, 2009 at 09:21 PM
One of my teachers was interested to hear that I enjoyed "The Phenomenom of Man" and the next day he lent me Peter Medawar's collection of essays "The Art of the Soluble" including a scintillating critque of the "The Phenomenono".
Still, I liked the idea of the "thinking envelope", the "noosphere" and was pleased when a more scientifically respectable form of the idea turned up as the "third world" of objective knowledge when Popper chanelled Brentano, Frege and Meinong.
A very interesting piece of intellectual history http://www.the-rathouse.com/EvenMoreAustrianProgram/EMAThreeAustrianStrands.html
Posted by: Rafe Champion | July 30, 2009 at 10:20 PM
Boulding tried to further develop Teilhard's notion of the noosphere in The Image and elsewhere. One can read that in a Hayekian manner.
Also, I agree that Popper's Third World notion is a nice contribution.
Posted by: Dave Prychitko | July 31, 2009 at 09:27 AM