Easterly vs Wolfers on Hayek's Influence

|Peter Boettke|

Bill Easterly straightens out Justin Wolfers on Hayek's influence and more importantly Hayek's ideas.

Wolfers would also benefit from considering this short note by David Skarbek on Hayek's influence on other Nobel Prize winners.

Comments

[Daniel Kuehn]

This has been an interesting debate to follow. I don't know - I think I agree with Freakonomics on the impact issue (not that the citations is the best measure... I don't even think Wolfers claimed that it was the best measure, just a good measure to turn to). I'm not sure what Hayek really adds that hasn't been stated before. He strikes me more as a popularizer and a restater of good ideas, but not really a creator of new ideas. He also didn't really shape economic history in the way that Smith, Marx, Keynes, or Friedman did. He took a stand against and critiqued socialism, and that's to be admired, but so did lots of people. Marx contributed something new that really impacted history. Keynes said something new that impacted history. Friedman said something new that impacted history. I'm not really sure what Hayek said that's comparable, although he certainly said a lot of great things. I think Easterly is too rough on Wolfers, though. He claims that Wolfers suggested Hayek was "just intellectually unworthy in general". I didn't read that at all in Wolfers. In fact, I read Wolfers as praising Hayek, simply disagreeing that he deserved to be in the curriculum.

We all have particular people whose ideas we are attracted to - I think we need to be careful not to get too irate when other people admire those people, but aren't singularly impressed in the same way.

Russ had a post on this in the last couple months about why he is attracted to Hayek that I liked (maybe it could be reposted?). He acknowledged that Hayek isn't the only one to draw the conclusions that he drew, but the point was Hayek was the one that introduced and elaborated those positions for Russ. And that's ultimately what is important. We have no shortage of praise for and insight into the free market. A lot of people appreciate Hayek's praise and insight best - and that's really great. But I'm not sure that alone merits a textbook mention.
This has been an interesting debate to follow. I don't know - I think I agree with Freakonomics on the impact issue (not that the citations is the best measure... I don't even think Wolfers claimed that it was the best measure, just a good measure to turn to). I'm not sure what Hayek really adds that hasn't been stated before. He strikes me more as a popularizer and a restater of good ideas, but not really a creator of new ideas. He also didn't really shape economic history in the way that Smith, Marx, Keynes, or Friedman did. He took a stand against and critiqued socialism, and that's to be admired, but so did lots of people. Marx contributed something new that really impacted history. Keynes said something new that impacted history. Friedman said something new that impacted history. I'm not really sure what Hayek said that's comparable, although he certainly said a lot of great things. I think Easterly is too rough on Wolfers, though. He claims that Wolfers suggested Hayek was "just intellectually unworthy in general". I didn't read that at all in Wolfers. In fact, I read Wolfers as praising Hayek, simply disagreeing that he deserved to be in the curriculum.

We all have particular people whose ideas we are attracted to - I think we need to be careful not to get too irate when other people admire those people, but aren't singularly impressed in the same way.

Russ Roberts had a post on this in the last couple months on Cafe Hayek about why he is attracted to Hayek that I liked. He acknowledged that Hayek isn't the only one to draw the conclusions that he drew, but the point was Hayek was the one that introduced and elaborated those positions for Russ. And that's ultimately what is important. We have no shortage of praise for and insight into the free market. A lot of people appreciate Hayek's praise and insight best - and that's really great. But I'm not sure that alone merits a textbook mention.

[Daniel Kuehn]

Sorry - not sure why that double posted. If the moderaters want to trim that, feel free to.

[Alexandre Padilla]

Some economists really should learn how to be a little bit more humble and Justin Wolfers really enters in this category. He probably never read Price & Production, Hayek's work on the Socialist Calculation debate and I doubt he read the Use of Knowledge in Society. Stigler might have been right that economists should not do history of economic thought until they are 50 but that does not mean you should not know it. However, one cannot blame young economists for not knowing the history of their science given that PhD programs not longer require graduate students to learn History. After all, some have argued, who needs Smith after Samuelson? Overall I find that very unfortunate.

[Jerry O'Driscoll]

The record speaks for itself. The Nobel Committtee cited Myrdal and Hayek "for their pioneering work in the theory of money and economic fluctuations and their penetrating analysis of the interdependence of economic, social and institutional phenomena."

The prize is swarded for originality and advancing economic science. The record speaks for itself. And Alexandre is correct that Prices & Production is key.

[Greg Ransom]

Hayek's role in the development of economic thought is suggested by the quotes found here:

http://hayekcenter.org/?page_id=5

The Summers quote comes from that collection.

Note that Hayek was at the center of changing the thinking and economic research program of Hicks, Keynes, Lerner, and dozens of others. Friedman taught Hayek to his graduate students in his graduate seminar and Hayek's picture of the market process is right at the heart of Friedman's massively influential _Free to Choose_ book and video broadcast.

What survey after survey tells us is that professional economists are sadly incompetent when it comes to the history of the development of scientific thought in the domain of economic science.

Wolfers in search of "F. _H._ Hayek is an illustration of this.

[Barkley Rosser]

I would put Hayek ahead of Friedman now, even though Friedman is more cited and continues to be the only economist of any who is cited in every single extant principles of economics textbook. But, I would argue that Hayek is on the rise while Friedman is on the fall.

Hayek's most important original contribution is in the area of the economics of information, and this is highlighted in the interesting paper by David Skarbek. Most of those 13 Nobel lecture citations that put Hayek in second place after Arrow and slightly ahead of Samuelson, were to his work on information. That continues to increase in influence, as does his work on complex spontaneous orders.

What is Friedman's original work that is worthy of being remembered for a long time to come (aside from being an exceptionally articulate tub thumper for free markets, which is hardly original with him)? Well, there was the fixed money growth rule, heavily cited for decades, but out the window for the past quarter century with all central banks since the velocity of money went blooey. The permanent income hypothesis of the consumption function for which he was officially awarded the Nobel Prize? Well, Modigliani's version was more sophisticated, and is this idea really all that important?

Probably Friedman's still most influential idea is the natural rate of unemployment, although Phelps did it better than him from the start. This still pollutes much of the macro literature, even though it has been clear since at least the mid-1990s that the darned thing, to the extent it even exists at all, is seriously endogenous to the actual rate of unemployment, a point recognized by Phelps, which basically abnegates its supposed import for policy purposes. The continued popularity of the idea is an ongoing scandal and joke about current macroeconomics.

[Josh]

Jacob Levy's blog finds some different results:

"Proceeding from the other direction: a search just on Hayek restricted to business, economics, finance, law, linguistics, philosophy, political science, psychology, public policy, and sociology eliminated all the false positives I could find. 9385 . Searching for "milton friedman" in those same disciplines (and as far as I know there's no ambiguity in how to refer to him): 8088."

Here is the link:

http://jacobtlevy.blogspot.com/2010/03/fun-and-games-with-citation-counts.html

[Greg Ransom]

If Wolfers is interested in data, let him compute this -- there are already over 5,000 blog posts on Hayek / Texas curriculum controversy ...

[Greg Ransom]

A bit of push back on Wolfers and "Hayek's Influence" here:

http://hayekcenter.org/?p=2088

[Barkley Rosser]

Greg,

While Hayek did it in a parallel manner, I think that Irving Fisher did get intertemporal equilibrium ahead of, or at least independently of, Hayek.

Also, I think that Fisher, following Pareto, had indifference curves before Hayek did. indeed used them in his intertemporal analysis.

It might be noted that in his later years and work in the 1960s and 1970s, Hicks reverted to a more openly Austrian-Hayekian approach, despite his being one of the co-inventors of the core "neo-Keynesian model," the "Hicks-Hansen ISLM synthesis." Also, quite a few Post Keynesians have liked Hicks's later work, particular his introduction of the concept of the "traverse," which is essentially a sequence of short-term equilibria.

[Greg Ransom]

Barkley -- of course you are mostly right about these things. The history of science & ideas unfolds in unusual ways. The work of David Hull & Darwin encourages me to look at actual causal pathways rather than hypothetical ones.

Species and scientific projects are historical individuals -- the take on a life of their own and do not have necessary and sufficient essential characters. The fact that Hayek (at different points in his life) would see a sound "economics of information (for example) as something different from what Lerner or Stiglitz or Hurwicz see it as (as an example) doesn't take away from the landmark role of Hayek's work in this domain of science.

Which takes us to an issue which cannot be decided by counting citation references in JSTOR -- whose explanatory strategy and understanding of things actually provides a sound causal explanation of the world. This issue is essentially contested, and that fact that a mature understanding of Hayek's picture of the explanatory problem and causal solution in economics is different than the "mainstream" doesn't alter the fact that the "dominant" picture (if there is such a thing shattered thing which is contemporary "economic science") is an historical product displaying to a not inconsiderable degree the imprint of Hayek's contribution.

[Greg Ransom]

Pete sometimes emphasizes the "informal" background understanding which economists in the classroom bring with them to the chalk board and to the math exercises of the textbook.

An example of this sort of "informal" background understanding of the market process which economists bring with them to the chalk board can be found in the first 20 pages of Friedman's _Free to Choose_. Not well that Friedman's picture is basically Hayek on the signaling and communication and coordination function of prices.

This informal picture doesn't often make an appearance in much of Friedman's "scientific" work.

Much of the economic profession has adopted over the decades an ever more closely "informal" Hayekian background understanding standing behind their blackboard work.

And -- in part under Hayek's influence -- more of them have appreciated the difference between their blackboard math exercises .. and the real world.

[Greg Ransom]

In reply to Barkley, let me add one further thought.

There is a tendency looking at things from where we are in 2010 to identify as "Hayek's influence" that part of Hayek's contribution to science which contemporary formal work _fails_ to handle or incorporate or appreciate -- even when much of the stuff which contemporary formal work has become has its origin in problems raised by aspects of ... Hayek's work.

[Barkley Rosser]

Greg,

I will only add that I think most people do view the economics of information as being Hayek's supremely most innovative and influential idea. What has happened and that I think is contributing to his "star rising" now, is that for quite some time a lot of people in the area did not know of his contributions to it, with many thinking that Akerlof's lemons paper of 1970 was the beginning of the universe. Of course there were others who preceded Akerlof besides Hayek, notably Vickrey, Mirrless, and George Stigler, whom I just dumped on over at marginal revolution. However, Hayek was unequivocally the first, and now everybody involved in this subject, which itself is increasing in importance for many reasons, recognizes Hayek's primary and seminal role in it.

[Greg Ransom]

Barkley, a caveat:

1. Arguable Hayek's largest contribution is his picture of the problem to be explained -- the problem of social coordination in context of limited and divided knowledge.

Here's the puzzle / complexity.

A. Hayek sits at the center of the origin of the "economics of information".

B. Arguably, the stuff that produces unending publications for the journals and math equations for the chalk board is stuff that fails to come to grips with a larger understanding of Hayek's casting of the problem of social coordination in the context of limited and divided "knowledge".

Hence the paradox: Hayek is unrivaled as the original "influencer" catalyzing the economics of information; at the same time, Hayek's larger understanding exists only hit or miss in the "informal" background economics of the profession -- and this deeper (and sounder) understanding is often no influence at all on the "official" understanding of economics science sworn to by the leading generators of journal publications and textbook math problems.

[Greg Ransom]

Wolfers now identifies Hayek as "a serious influence" on his own work ...

http://hayekcenter.org/?p=2094

[Barkley Rosser]

Greg,

I should have added Edgeworth as a co-inventor of indifference curves, possibly even ahead of Pareto with his Box and all.

Regarding the matter of Hayek providing "background," I think that is right. However, that argument cuts several ways. Thus, Skarbek's piece puts Hayek as second after Arrow, with Samuelson just behind him. But I would say that the "background" argument applies even more forcefully to Samuelson. One can criticize what he did or even him personally all one wants, but he was the creator more than any other 20th century economist of the "background" of standard neoclassical economics, for all its faults and woes.

[Greg Ransom]

Right. And I think the verdict of history -- and many Nobel winners -- is that Hayek is right and Samuelson is wrong about how to understand the "background understanding.

But most PhD trained economists don't have any competent tools for grappling with the issue at hand here

[Doc Merlin]

Because what Hayek spoke of is very difficult to quantify. Without quantification and algebraic manipulation few economists are going to grok it.

[Greg Ransom]

Doc, well put.

One of Hayek's central conclusions is that the central causal explanatory "variable" in economics -- learning in the context of changing relative prices and local conditions -- is outside of the domain of the intersubjectively quantifiable / or of the domain of quantifiably causally interrelated.

Try to get a union member in "academic economics" to "grok" that ..

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