Austrian Economics + Anthropology = Understanding of the Social World

I came to study Austrian economics at GMU in 1984 because of Don Lavoie.  I read Don's work on the problems with socialism in the Journal of Libertarian Studies and I wanted to study the debate between socialism and capitalism in depth and he seemed to be the guy to work with.  I also was familiar with Tom DiLorenzo's articles in The Freeman on public policy and economic freedom and I had read Karen Vaughn's  John Locke: Economist and Social Scientist (Chicago, 1982). And, of course, as I was making my decision on the one hand between graduate schools (Auburn, NYU, Rutgers and GMU) and on the other between law school, graduate school, or stay working as a tennis pro, two major factors pushed in favor of GMU.  First, Rosemary and I visited NY, and though both of us had been all over Manhattan as kids from NJ, the idea of living in the city was intimidating.  Second, the Center for Study of Public Choice was moving from VPI to GMU and with that GMU's place as THE place to study Austrian economics (at the Center for the Study of Market Processes with Lavoie) and free market economics in general was solidified.

This didn't prevent my first impression of GMU being somewhat negative due to the physical plant at the time and the seemingly vanilla aspects of Fairfax.  But we all must make sacrifices for our science.

So I showed up in 1984 to start graduate studies and what throws me completely for a loop is that I don't understand a single thing the faculty and students are talking about with respect to Austrian economics.  The same names were being talked about that Dr. Sennholz stressed, but the topics were far removed from the GCC conversation --- even among the "graduate" students from Latin America and France that populated Sennholz's Wednesday evening seminar.  I should say some new names were introduced to me as well by the Austrians at GMU, especially those of Shackle, Loasby, Richardson, etc.  Thankfully Richard Ebeling came to campus the 3rd week I was there to discuss Mises and the Gold Standard, and about that same time Roy Cordato and Karen Palasek started a reading group among the students on the Ed Dolan, ed., Foundations of Modern Austrian Economics.  After that my adjustment to GMU went very smoothly and I started to feel quite at home in the conversations -- even about the extreme subjectivism of Shackle or the equilibrium/disequilibrium debate between Kirzner and Lachmann.

But those conversations moved quickly from Mises, Hayek, Rothbard, Kirzner to Lachmann, Shackle, Loasby, Richardson, and then to Schutz, Berger and Luckman, McCloskey, Rorty, etc.  I was still interested in apriori status of economics, and Lavoie and others were asking about the phenomenology of the social world, the rhetorical turn in economics, and post-modernist versions of post-positivism.  How was I to square all these things with my interest in the pure logic of human action and the case for laissez-faire?

One of the things Lavoie insisted was that an economist who only thought about economics was going to be a poor economist, so workshops and readings were set up to read history (we read everything that revisionsit historians such as Gabriel Kolko and James Weinstein had to offer), philosophy (tons of Hayek, but also methodologists like Bruce Caldwell, contemporary philosophers of economics like Dan Hausman, and continential philosophers like Hans-Georg Gadamer [who we all got to meet as well]), and politics (not only everything in libertarianism, but also democratic theorists (David Held) as well and most of the Frankfrut school writings to understand the contemporary left [Martin Jay on Marxism and Totality]).  Graduate education for me and my fellow students with Lavoie was a 24/7 experience.  These intellectual adventures far beyond economics did not trade-off our economic education it was in addition to it. All those readings and discussion gropus were outside of the classroom readings and offical discussions in the economics curriculum -- our standard courses involved mastering Varian and Silverberg, our Austrian courses required mastering Mises, Hayek and Kirzner, our public choice courses required mastering Buchanan and Tullock and Mueller.  My fields were IO and comparative, but I also took multiple courses in history of thought, as well as the sequences in Austrian and public choice.  It was a great educational experience.

But Lavoie was always pushing us to learn more about "interpretive" social science.  The subjectivist perspective as described in the classic thought experiment from Hayek or Kirzner about the martian, or Mises about Grand Central Station, stresses the importance of the economists being able to attribute "meaning" to human action, and not just predict patterns of "behavior".  So Lavoie turned to the anthropologist Clifford Geertz.  The promotion of the writing of economic ethnographies was Lavoie's mission in the 1986-1990 time frame.  I was already working on the earlier project (1980-1986) of developing the Austrian argument on socialist calculation and market process and using the theoretical framework to write 'better' economic history.  I augmented the Austrian framework with the contributions of public choice and new institutional economics in my work on the history of the Soviet Union, and later the transition problems and then problems of development economics in general.

I respected Lavoie's redirection toward the intersection of economics and anthropology, but I wasn't prepared to go there.  Economics and law, economics and politics, economics and philosophy, economics and sociology, economics and history --- I was there --- but economics and anthropology?!  I certainly understood why, but didn't understand where to start.  In the winter of 1993 I was a guest of the Russian Academy of Sciences in Moscow and I conducted over 25 structured interviews with the leading policy makers and took very detailed notes.  But when I returned home I never knew what to do with the information.  I learned a lot, but didn't know what if anything I should do with the material I collected.  In addition, I learned a great lot just walking the streets and observing economic life.  I became convinced in a way that Lavoie's words never did convince me, that the intersection of the logic of economics, and the empirical techniques of anthropology could unlock the social world in a way that  more traditional empirical methods in economics never could.  The political economy of everyday life is what I called it and it was informed intellectually by Don Lavoie, but practically by a recognition of the reality of a vast underbelly of economic life that existed in former communist countries (e.g., black and other colored markets).

When I moved to GMU in 1998, I was still engaged in a fairly conventional research program of economics, political economy, and economic history.  At least conventional for an Austrian economist!  But after Don passed away in 2001, and my studies of transition economies and development economics became increasingly my primary focus in research and teaching I started to try to get graduate students to engage in field studies that would triangulate "data" with interviews and participant observation, statistical analysis, and historical and journalistic accounts all playing a role.   In 2002, we sent our first teams out into the field.  In 2001, Ed Stringham and I had already started to gather some information in the Czech Republic, but as an organized effort 2002 is a more accurate start date.  Other Lavoie students such as Emily Chamlee Wright and Virgil Storr had pursued Don's research project along these lines earlier than my efforts.  But at GMU we have had students do field research in East and Central Europe (primarily Romania and Czech Republic), Latin America (Argentina, Costa Rica, Dominican Republic, and Mexico), Africa, and Asia (China and the Philippines).  Case study histories have been written up as well on Ireland, Japan, New Zealand and the Middle East ---utilizing field work in some instances and more traditional empirical techniques in others.  And these studies as a whole have inspired in a large part our work on Katrina and the study of the rebuilding of the Gulf Coast.

A five year stock-taking will reveal mixed results.  Some of the ethnographically inspired work has been published in journals and books.  But the most successful papers in terms of placement and citation have been those that departed from strict ethnography and engaged in the more "traditional" style of economic argument.  But that result can also be explained by the fact that there are strong biases in academic economic journals toward a certain style of research.  However, the burden of proof always lies with the one who is bucking accepted ways of doing things.  The mixing of the logic of economics (thin description) with the ethnographic empirical techniques of anthropology (dirty empirics) does not make for easy intellectual bed-fellows.  Instead, we usually see "thin-clean" or "thick-dirty", and we know that only nonsense is produced when we see "thick-clean" social science (e.g., political-sociology with regression analysis where the right hand side is made up of variables that go over a page to list).  But I am still convinced that the "thin-dirty" type of social science (e.g., analytic narrative) has a chance to revolutionize our enterprise as economists and political economists and move us closer to the vision of social theory that Don Lavoie thought would enhance our understanding of the social world.  I think Don will be proven to have been right in his assessment, but it is still a hunch more than a settled opinion at this point in time.

In the meantime, there is a blog devoted to the intersection of economics and anthropology that provides a lot of useful information.

Comments

[Steve Miller]

"Instead, we usually see 'thin-clean' or 'thick-dirty', and we know that only nonsense is produced when we see 'thick-clean' social science (e.g., political-sociology with regression analysis where the right hand side is made up of variables that go over a page to list)"

Hey, I resemble that remark!

[matthew mueller]

Great post. It is only at the Austrian economists blog that one get to enjoy posts like these.

I have also come to see the importance of anthropology. But how do we incorporate the study of anthropology into economics while being careful not to lose our way as economists? It is perfectly clear that neoclassical economics can in no way accommodate the observations of anthropologists. Perfect information, stable preferences, absolutely correct models, etc. etc. are not at all compatible with the study of anthropology.

I think it is time to significantly modify the assumptions economists make in constructing models about the real world in which humans live. And unfortunately, I think Austrian economics has little to offer us in this area. Austrian economics is very similar to neoclassical economics in many important respects. For example, absent government regulation, markets will clear. If not immediately, entrepreneurs will eventually make it so. Now no matter how persuasive people like Kirzner are (and damn is he persuasive!), I still cannot convince myself that these inisights are any different from the neoclassical paradigm. Information is imperfect, expectations and interpretation is subjective, models (becuase they are subjective) are incorrect and incomplete, and preferences change as time elapses. Now while most Austrians will agree with all of these assumptions, they nevertheless will continue to insist that free markets are efficient. Anthropology has no place in Austrian economics.

New Institutional economics, however, has much to offer us in this respect. I just finished reading Douglass North's "Institutions, Institutional Change, and Economic Performance" and I am convinced that this style of economics is perfectly compatible with the development of anthropology. The distinction between institutions and organizations, the importance of formal rules and informal constraints, the fallibility of human choice, the unpredictability of human behavior, etc. etc. can all be integrated effortlessly with anthropology. I think economics must extend their scope of analysis beyond the "maximaztion principle" if they truly want to understand human behavior. Douglass North does this. I think it is important to include transaction costs in the transformation process (land, labor, capital). Douglass North does this. And I think economists should study the way property comes to be not only specified, but also enforced and measured as well. Again, Douglass North does this.

[Daniel J. D'Amico]

Pete,

I really like thinking about the intersection of anthropology and economics. I was sold on your "out the window" approach to applied research since the first time I heard it, and it similarly got me jazzed to come to GMU. I admit that I'm less familiar with the anthropologists and sociologists that you listed, and have sometimes felt lost, similar to Mueller's comment, about how to actually get started with these sorts of projects.

Aside from a few pieces by Storr and Chamlee-Wright there aren't many examples of scholarly articles that can be used as guide posts to produce similar work. The few that we have are often so driven by their unique theoretical topics (social capital, etc.) that their methodological uniqueness is hidden. How does one create a similar method to handle different theoretical topics? This also seems to be the case with economic history, very few papers are out there that one could pick up and say, "I'm going to do this but with a different subject matter." Possibly because good economic history requires longer treatments than what journal articles allow for.

What I have found most useful, that you did not mention, and I'd be eager to hear your thoughts on is Mises' description of Thymology as a method of history. To me it seems that the ethnographic / "just do it approach" gives insight and evidence for what the ends of motivated actors are in particular social settings. With real source material gathered through anthropological methods, social scientists can easily set up means and ends frameworks and evaluate choice from there. This seems implicitly recognized by economic historians in the Austrian camp, but much less understood when Austrians begin to ask questions about the contemporary world around them. Any thoughts?

--Dan

[Brian Pitt]

Dan and Matthew,

You guys should take a look at the works cited pages of Storr's work. Frequently, Storr makes reference to the scholar who laid the methodological ballast for "Human Action" and "Theory and History:" MAX WEBER.

Max Weber made known that an "ideal type" implies a proposition relating to valuing and acting. The "ideal type," methinks, is THE PREMIER METHOD in order to analyze history, and, for lack of a better term, make theoretical predictions. When the "ideal type" refers to people, it implies that in some respect these people are valuing and acting in a similar way. See, e.g., Storr's "Enterprising Slaves and Master Pirates." When the "ideal type" refers to institutions, it implies that these institutions are products of similar ways of valuing and acting. See, e.g., Oppenheimer's "The State," Betrand de Joevenel's, "On Power," Nock's, "Our Enemy the State."

Another "economic" look at how the "ideal type" can be combined with "thick description," read Thomas Doerflinger's "A Vigorous Spirit of Enterprise," where he discusses ideal-typical Philadelphia merchants in the middle-to-late 18th century.

I will also mention that Weber spent his intellectual career describing why "capitalism" "failed to launch" outside of what we call Western Civilization. His readings are the "Protestant Ethic," "The Religion in China," "The Religion in India," etc. While Mises (1985) is correct in claiming that Weber was, a bit too hamstrung by historicism, he cannot deny - nor did he - that the ideal-type is a wonderful tool for doing "thin-thick" social science with a humanitarian concern.

[Rafe Champion]

Stanislav Andreski would be a good man to add to your reading list, a professor of sociology in England and associated with the libertarian liberal movement he wrote a book on South American mercantilism and his book on Africa has case studies in the pathological impact of western aid. These were pioneering works on a par with Bauer though less informed by economic analysis. http://en.wikipedia.org/wiki/Stanislav_Andreski

He wrote "Social Science as Sorcery", one of the great debunking books on rubbish in the social sciences, read with delight by sociologists who enjoy the crit of other schools but ignore the crit of themselves.

That goes well on the shelf alongside Barzun (100 yesterday) "The House of Intellect" http://www.amazon.com/review/R12006IDQUDCT6/ref=cm_cr_rdp_perm

and C Wright Mills "The Sociological Imagination" http://www.amazon.com/review/R17CAPGSQLDA68/ref=cm_cr_rdp_perm

[ryan m. daza]

How about a start with the mainstream? We do not need anthropologist or sociologists to motivate an economics of culture ("anthropology" is actually archaeology, linguistics, physiology of hominoids, and social anthropology). The economic focus should be on culture. It should begin with a rational choice-functionalist perspective with the necessary models: CULTURE FUNCTIONS AS A TECHNOLOGY. In the social context, there can be an economy of culture (entrepreneurs are necessary). This core is necessary to motivate studies and secure an endowment conducive to those we wish to motivate (language). From there (possibly NIE and fieldwork) we make skeletons walk...

Ryan Daza

[Brian Pitt]

Ryan,

I believe that Weber does just that. In fact, one of his ideal-typical action types is the pleonastic "rational action." Moreover, many (e.g., Lachmann) have made known their frustration with Weber's research into the link between Religion and Capistalism; averring that Weber sounds much like a "structural-functionalist."

To assume that culture functions as a technology does not take culture seriously. While I agree that rational models will assist in getting a core understanding of purposive behavior off of the ground, it certainly does not assist in ascertaining the ontological considerations involved in human decision-making.