The annual meeting of the Society for the Development of Austrian Economics will be held during the Southern Economics Association meetings in Washington, DC at the JW Marriott Washington, November 19-21, 2016 (Saturday to Monday).
Members interested in presenting papers, serving as chairs/discussants, or proposing entire panels should submit proposals by Friday, April 1, 2016.
With all paper submissions, please include the paper title, two JEL-Codes, an abstract of no more than 100 words (700 characters), as well as the following information for each co-author:
Please also submit a .pdf, .doc, or .docs file containing the same information (paper title, abstract, author information, co-author information).
If you are proposing a paper for presentation, we assume that you will serve as a chair or discussant (if needed) for at least one other conference session. If you wish only to serve as a chair or discussant, please indicate so in your submission. Note that each session during the SEA meetings lasts one hour and forty-five minutes and typically has four or more participants. Finally, please also note that the conference organizers have to be free to place your paper or panel on any of the conference days.
The online form for panels will ask for your information, a panel title, a brief description of the panel (for discussion panels), as well as information for each panelist/author. In addition, please attach a document that contains the same information plus abstracts and coauthor information for panels with papers.
SDAE members who are current in their annual membership dues are given priority for SDAE panels.
Diana W. Thomas
President Elect, Society for the Development of Austrian Economics and Associate Professor of Economics at Creighton University
Many folks inside and outside of academic life believe that Adam Smith "invisible hand" theorem required a strong-version of the rationality and/or self-interest postulate. Strong rationality assumption is necessary condition for the derivation of a strong version of the invisible hand. Thus, any demonstration of the deviation from strong rationality indicates that at best only a weak version of the invisible hand could be derived. Instead, as Joe Stiglitz likes to say we have a "palsied hand" that requires the helping or guiding hand of state. Such examples of deviations from the strong rationality assumption would be asymmetric information, but also various weaknesses of will that produce myopia in decision making.
But, of course, Adam Smith did not hold any such position no matter how elegant the mid-20th century efforts to rationally reconstruct his system of thought to be consistent with the research program of general competitive equilibrium theory. Yes, formal equilibrium theory was an elegant way to demonstrate the interconnectedness of economic activity, but NO, it was not an accurate portrayal of Smith's depiction of the coordination of economic activities without any central command. Smith wants to attract his readers with a mystery -- the mystery of cooperation and coordination in anonymity -- as he sets up the puzzle in the beginning pages of An Inquiry into the Nature and Causes of the Wealth of Nations* by capturing our imaginations with two thought experiments -- scarce he argues in our lifetime do we have the opportunity to make but a few close personal friends, yet our daily survival requires the cooperation and coordination of hundreds perhaps thousands of individuals we will never know, let alone meet even in passing; and he asks us to think deeper about this puzzle by demonstrating the numerous number of exchange relationships often at great geographic and social distance that must be realized in order for the day laborer to be able to wear his common-woolen coat. It is in this context that he make his famous "not from the benevolence of the butcher, baker, brewer" point. In this context, he is also making a fundamental point about the division of labor, the benefits of specialization, and the mutual advantages brought about through exchange. The greatest increases in the well-being of mankind are due to increases in real-income, those increases in real-income only result from increases in real-productivity, and the greatest increases in the improvement in real-productivity are due to the division of labor -- its expansion and its refinement. The division of labor, however, is limited by the extent of the market. So the questions that any inquiry on development must raise is how does one move from an order defined by subsistence to an order defined by exchange. And Smith's inquiry, like Hayek's, had little to do with the cognitive capacities of the economic actors being studies, but everything to do with the institutional infrastructure within which these very imperfect beings were attempting to live their lives and perhaps improve their situation, or the situation of their children. Here is the important point to always stress -- absent that institutional infrastructure even strong rationality can go astray in generating the common-good. The Smithian inquiry IS an inquiry into institutions and how those institutions impact human well-being.
Hayek understood this and sought to stress at various points. In his essays "Notes on the Evolution of Systems of Rules of Conduct" footnote 10 (p 72 in his book Studies in Philosophy, Politics and Economics) Hayek points to what he calls "the unprofitable discussions about the degree of 'rationlity' which economic theory is alleged to assume." And he explains further in his essay "The Results of Human Action but not of Human Design" (p. 100, ibid):
There was perhaps some excuse for the revulsion against Smith's formula because he may have seemed to treat it as too obvious that the order which formed itself spontaneously was also the best order possible. His implied assumption, however, that the extensive division of labor of a complex society from which we all profited could only have been brought about by spontaneous ordering forces and not by design was largely justified. At any rate, neither Smith nor any other reputable author I know has ever maintained that there existed some original harmony of interests irrespective of those grown institutions. What they did maintain, and what one of Smith's contemporaries, indeed, expressed much more clearly than Smith himself ever did, was that institutions had developed by a process of the elimination of the less effective which did bring about a reconciliation of the divergent interests. (emphasis added)
The devil is always in the institutional details. It is those institutions that determine whether our Hobbesian nature (rape, pillage, plunder) or our Smithian nature (truck, barter, exchange) come to characterize human interaction. Weak rationality, in fact, very weak rationality, within the right institutional infrastructure will be filtered in a way that leads human beings from subsistence and a life that is nasty, brutish and short, to the extended exchange order that delivers human beings from the bondage of nature and frees them from the oppression of others. This is why the theory of social cooperation under the division of labor is foundational for understanding economic development, and why the focus on the appropriate institutional infrastructure that enables that social cooperation to be realized is the critical step in the analysis.
Exchange and the institutions within which we engage in exchange, and not the individual decision calculus provides the microfoundations of our inquiry. Buchanan brilliantly argued this position in "What Should Economists Do?"; Hayek stressed this in various ways throughout his long career; and Adam Smith and David Hume laid the foundation for our understanding of this core insight into the human condition. We are dealing as social theorists with very imperfect human beings interacting in very imperfect institutional environments, we need to get our methodological and analytical perspective right in order to engage our studies.
*I use the full title because I want to emphasize the word inquiry, Smith's work, like that of Hayek, is an invitation to inquiry, not a catechism on settled doctrine. Awe and wonder, not fear and punishment are the driving attractors.
In my lifetime there have been several great victories for freedom from oppression, Nelson Mandela's release from prison and the ending of Apartheid in South Africa is among them. We should celebrate these victories.
Mandela began his speech as follows:
I greet you all in the name of peace, democracy and freedom for all.
I stand here before you not as a prophet but as a humble servant of you, the people. Your tireless and heroic sacrifices have made it possible for me to be here today. I therefore place the remaining years of my life in your hands.
And, he concluded his speech with these words:
I have fought against white domination and I have fought against black domination. I have cherished the ideal of a democratic and free society in which all persons live together in harmony and with equal opportunities. It is an ideal which I hope to live for and to achieve. But if needs be, it is an ideal for which I am prepared to die.
Before I had ever published anything on the Soviet economic system, I published an article on the Apartheid system (co-authored with Steve Horwitz and Dave Prychitko) in the very first issue of Critical Review in 1986 entitled -- "The Roots of Apartheid". Our teacher Walter E. Williams would publish his South Africa's War Against Capitalism in 1989. Williams demonstrates how the noxious racial policies pursued in South Africa were not due to free market capitalism, but instead to interest group politics and centralized political power. As Milton and Rose Friedman wrote in Free to Choose, the contrast is between the power of the market to expand choice and empower individuals or the tyranny of political control which restricts our freedom and makes us subjects to domination by whatever group has control of the apparatus of coercion. This is one of the most basic lessons of comparative political economy that there is to learn. The entire ugly history of South Africa is a clear illustration of this lesson. And we should never forget.
Paul Romer is obviously one of the most interesting economic minds of his generation. Listen to this discussion of how changes in rules and changes in technology can result in peaceful yet revolutionary transformation.
At the end of WWI, the spirit of true liberalism was all but dead. Hayek argued that there were 3 men responsible for the resurrection true liberalism -- Frank Knight in the US, Ludwig von Mises in Continental Europe, and Edwin Cannan in the UK. Hayek stated that: "The oldest, and perhaps the least known outside his own country, was the Englishman, Edwin Cannan," and that his writings in economic theory and policy analysis were exemplars of clarity and common-sense and thus provided a model to his students on how to tackle economic problems. These students of Cannan gathered at the London School of Economics, which in the interwar years became the perhaps the leading center in the English speaking world for economic liberalism.
Richard Ebeling, BB&T Distinguished Professor at the Citadel, writes this about Edwin Cannan on his birthday.
Today is British economist, Edwin Cannan’s, birthday. Born on February 3, 1861, Cannan died on April 8, 1935. A professor at the London School of Economics from 1895 to 1926, he influenced an entire generation of British economists to be critical of any unreflective advocacy of socialism, nationalism and interventionism. While not an advocate of laissez-faire, he strongly emphasized the importance and superiority of the competitive, free market, and drew attention to the power of markets to bring about a global system of peace and prosperity.
Cannan was a master of the history of economic thought. His two major works, “A History of the Theories of Production and Distribution in English Political Economy from 1776 to 1848” (1898) and “A Review of Economic Theory” (1929) have long been considered penetrating critical studies of, especially, the “classical” labor theory of value and its conclusions, from Adam Smith through John Stuart Mill.
His 1904 edition of Adam Smith’s “Wealth of Nations” has long been considered to be an outstanding version of that work for the interested and scholarly reader.
What stands out in Edwin Cannan’s writings is a simplicity and clarity in explaining the “miracle” of the market in a global encompassing division of labor that connects multitudes of people for mutual improvement and peaceful cultural gains. His style, therefore, makes his volume, “Wealth” (1914; third ed. 1928) an entertaining pleasure to read as his takes the reader through the various facets of the working and elements of the market order.
He also was an early contributor to applying the logic of marginal analysis to the theory of money, in his book on “Money” (1918; eighth edition, 1935) and in “Modern Currency and the Regulation of Its Value” (1931), and especially in his article, ‘The Application of the Theoretical Apparatus of Supply and Demand to Units of Currency’ in the “Economic Journal” (1921).
He was an insightful and often biting critic of the collectivist fads and fashions of his day. Some of his best articles on these themes are to be found in his volume, “The Economic Outlook” (1912), especially in my opinion, ‘Economics and Socialism,’ ‘The Economic Ideal and Its Application to Countries or Nations,’ and ‘The Incompatibility of Socialism and Nationalism.’ And he could be a devastatingly sarcastic reviewer, as is seen in his highly amusing book review of Georg Friedrich Knapp’s “The State Theory of Money,” in “Economica” (June 1925).
A truly superb essay in “The Economic Outlook” is his 1902 presidential address before the British Association on, ‘The Practical Utility of Economic Science.’ He demonstrates how the basic and commonsense insights of economics easily can be applied to challenge and refute many of the most absurd economic policy proposals in the context of appreciating the wondrous workings of a market order that integrates and coordinates the actions of millions of people without central direction or command.
We find the same emphasis on the power of economic ideas, but one, Cannan argues, that can get lost with an over-development and excessive reliance on narrow technical tools of economic analysis that obscure the real-world application of economic reasoning in his presidential address before the Royal Economic Society, ‘The Need for Simpler Economics,’ published in the “Economic Journal” (September 1933).
Cannan explained the essential nature of the market order and its superiority over socialism and central planning: “Modern civilization, nearly all civilization, is based on the principle of making things pleasant for those who please the market and unpleasant for those who fail to do so, and whatever defects this principle may have, it is better than none,” and all without the use of governmental force or its threat. (Preface to his 1927 collection of essays “An Economist’s Protest.”)
Finally, he was a strong and articulate defender of Say’s Law of Markets, and that if idle resources and unemployed workers widely exist in society it is not due to a deficiency in “aggregate demand,” but is due to wrong (or disequilibrium) pricing of goods and factors of production. His analysis of the problem of economy-wide unemployment may be found in his 1932 presidential address, ‘The Demand for Labor,’ before the Royal Economic Society, published in the “Economic Journal” (September 1932), and reprinted in his collection of essays, “Economic Scares” (1933) under the changed title of ‘Not Enough Work for All’ (which he proves is never the case for labor and all other factors of production when they are rightly priced in the market).
Cannan also pointed out the perverse effects from unemployment insurance in creating disincentives for the unemployed to search for new and gainful employments; and the need for flexible labor markets in terms of both wage adjustments and worker mobility to shift into employments consistent with changing market demand patterns to assure full employment. He argued all this his article, ‘The Post-War Unemployment Problem,’ in the “Economic Journal” (March 1930).
At the London School of Economics, Edwin Cannan inspired an entire generation of economists in the immediate post-World War I era, many of whom became prominent figures in the economics profession and often strong proponents of the market order. This included, Allen G. B. Fisher, W. H. Hutt, Arnold Plant, and Lionel Robbins, among others.
One of his students and later colleagues at the London School of Economics, the monetary theorist, Theodore E. Gregory, recalled Cannan the man and teacher in his recollection shortly after Cannan’s death, in his article, ‘Edwin Cannan: A Personal Impression’ in “Economica” (Nov. 1935):
“I first heard Edwin Cannan lecture in the Autumn term of 1910 . . . Cannan was then already nearly fifty . . . My main recollection, since I have lost what must have been exceedingly bad notes, is that of a small stocky man with a black beard, a habit of propping up a leg upon the large chair which stood upon the platform, a very difficult delivery and a habit of looking over our heads into a distant corner of the room, so that much of what he said was altogether missed by us, in both senses of the word . . .
“However that may be, by the end of the two years we were all – specialists and non-specialists alike – sworn disciples . . . I doubt if any teacher of the last few decades has performed a greater service than did Cannan in all the years that he was the [London] School [of Economics] in ‘debunking’ vague language and vaguer ideas by his use of the Socratic method. The question was put without the slightest arrogance of voice or manner: we felt we were being ‘put through it’ because were young and ignorant: indeed, I doubt whether any great scholar has ever shown himself more willing and eager to encourage the slightest sign of originality on the part of his students.
“But the originality had to be genuine: Cannan had throughout the whole of the twenty-five years that I knew him a contempt for displays of cleverness for its own sake, which in itself was a healthy discipline for those brought into intimate contact with him. No use trying to impress him by intellectual fireworks! There would be a pause, the black beard would shoot up at an angle, and then came the inevitable query that would bring the whole house of cards tumbling down.
“The process of getting to know Cannan was made very much easier by the fact that the discussion classes of those days were very much smaller than they are at present, so that one simply had to say something. Cannan was never afraid of silences, and the whole atmosphere was absolutely free of hero-worship – it was all very simple and informal.”
In my opinion, even 80 years after his death, many, if not almost all, of Edwin Cannan’s writings remain timely and valuable for anyone wishing to make themselves a better economist and general thinker about the nature of economics and the workings of the market order.
The Center for the History of Political Economy at Duke University will be hosting another Summer Institute on the History of Economics this summer, May 29-June 17. The three week program is sponsored by the National Endowment for the Humanities and is designed primarily for faculty members in economics, other social sciences, and the humanities, though three of the twenty-five slots are reserved for graduate students. Participants will be competitively selected and successful applicants will receive a $2700 stipend for attending, out of which they will pay for their own room and board. Our line-up of discussion leaders is quite impressive, and includes Maria Pia Paganelli, Nicholas Phillipson (author of Adam Smith: An Enlightened Life), Bart Wilson, Duncan Foley, Tim Leonard, Angus Burgin, Eddie Nik-Khah, and Steve Medema. The deadline for applying is March 1. A special bonus for those who attend: the History of Economics Society meetings will be held at Duke from June 17-20. Attendees who wish to do so can stay over for the HES meetings.