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I suspect new economic thinking will take precedence over good economic thinking.

In any case, I wonder what other science would have a think tank, associated with such prestigious members, called "New Thinking."

That last statement is supposed to read:

"In any case, I wonder what other science would have a think tank, associated with such prestigious members, called "New >insertsubjecthere< Thinking."

George Soros advocating the Open Society is like Hitler advocating brotherhood.

The real tragedy is that Charles Koch would not think of doing something like this for "our" side.

Shocked he didn't pick any contributors to

I wish I could get rejected by the establishment so that I could get a job at Berkeley and a Nobel Prize. Actually, I would settle for the Prize; I like living in Fredericksburg.

I wonder if Mr. Soros realizes that in a socialist command economy he probably wouldn't have $50 million dollars to use as he pleases nor the ability to freely state his opinion through various media outlets?

I enjoy watching people who consistently tell everyone that the system is broken ignore the fact that they used the (broken) system in order to gain their position in the world.

Many years ago, in his book on "The Social Crisis of Our Time" (1942), Wilhelm Roepke distinguished between "the market economy and historical capitalism."

Historical capitalism has developed in various perverse ways with both market-based relationships and numerous forms of political intervention and regulatory favoritism. Governments have fostered monopolies, supplied subsidies, created central banks, and manipulated the patterns of international trade through tariffs and other forms of trade restrictions.

Numerous businesses and other special interests have gained from these interventionist privileges and favors at the expense of others in society.

Roepke argued that in the historically unique evolution of market and political interactive processes, the distinction has become blurred between what is the outcome of "the market" and what has been the result of political elements continuing to intrude themselves in the nexus of market exchange.

As a result, the "market economy" is blamed for what are the outcomes of historical capitalism in which the market and political arenas have blended together.

Hence, the products of the regulatory state and monetary central planning are considered as the results of the "capitalist system." And, thus, it has been the "market economy" that has failed in the eyes of many in society.

Roepke argued that it is imperative for those who are concerned about the drift toward political and economic collectivism to do all in their power to explain that a truly free market economy is not what we have been or are living under.

The "market economy" is not responsible the failures of government-influenced "historical capitalism."

It is not an easy task to make and persuasively articulate the difference, Roepke said, but if the free economy is to be preserved and restored, this distinction must be made.

Otherwise, the failures of the interventionist state (historical capitalism) will be blamed on the market economy, when in fact the free market economy has generated none of the social and economic problems from which the society is suffering.

Richard Ebeling


No one hates capitalism more than capitalists. It makes it possible for competition to dethrone them.

Who wants to stay alert, competing fiercely, and facing potentially devastating risk and uncertainty - when you can get gov. guaranteed certainty by blocking off the path behind you, preventing would-be entrepreneurs from ever reaching or surpassing yourself.

Think about large firms, it's entirely rational at the individual level for them to lobby government to create barriers of entry to their market and make it difficult for others to compete.

That various businessmen and and business groups utilize the state for benefits, favors and privileges at the expense of consumers and existing and potential supply-side rivals are, of course, inseparable from the workings of the interventionist state.

But that "capitalists" use the government to limit or retard the development of free market forces is not a case against the logic and idea of the institutions of the free market economy.

That some men steal and defraud is not an argument against the institution of private property. And it would be perverse if one argued that theft was an integral part of the private property system.

And, unfortunately, in the develop of "historical capitalism," some businessmen have continued to use the state to use the legal system to "plunder" others (to use Bastiat's notion). But such plundering behavior is distinct from a private property, free market order.

Richard Ebeling

There's no chance the conclusions by the think tank will be a new spin on Keynesian economics, will there? I mean, it would be awfully silly to refer to solving all perceived issues with the market with deficit spending, right? Their advanced scientific methods will instead empirically identify subtle new models of human behavior the dogmatists of the free market are blind to. And these models will in no way first assume that what we need is more government spending. Otherwise, how could they be scientific?

"He earned it", noone earns that much money. You huckster it. Don't insult people who "work" for a living.

Blogs are so informative where we get lots of information on any topic. Nice job keep it up!!

Alex Snow: "'He earned it', noone earns that much money. You huckster it. Don't insult people who 'work' for a living. "

Ah now, read "Profit and Loss" by Mises.

This Institute has to potential of preventing the emmergence of a free market oriented generation of economists in the region. As the instictive rejection of communism and planning among young scholars in the region fades away, the new generations will be very receptive to these ideas; in fact, most of them are already marked by various social democratic schools of ideas, sometimes out of confusion with the classical liberal tradition.

Soros and his gang will not, I predict, create any new economic thinking, I will bet $50 million on it.

The complete list of the board of advisers at , and it includes Axel Leijonhufvud and Roman Frydman. Frydman's "Imperfect Knowledge Economics" draws directly on Hayek to emphasize...well, "Imperfect Knowledge Economics" pretty much explains itself.

Taking the group of advisers as a whole, wouldn't you say it is an honest attempt to stimulate new thinking about the very things--imperfect knowledge among them--that Austrians used to emphasize regarding the flaws in perfect-competition models?


I'm all for science for the science's sake and obviously, the individuals you point to have lot to teach everyone, but I'm affraid the ideological biases of the most visible public intellectuals associated with this Institute will overwhelmingly define its social role and its public message and not its academic output, whatever that will be. That has been the case with the Soros Foundation, although in its case I appreciate many of the things it did and promoted.

Duncan Foley is also cool.

Maybe the Austrian school could get Soros on their side if they pointed out that Soros's pet theory - his theory of reflexivity - was enunciated by an Austrian some 80 years ago.


I take Soros at his word: "Soros said: "The entire edifice of global financial markets has been erected on the false premise that markets can be left to their own devices, we must find a new paradigm and rebuild from the ground up. I decided to sponsor INET to facilitate the process. I hope others will join me.""

He says the efficacy of free markets is a false premise (note he calls it a premise, not a conclusion, which it is). He doesn't say anything about information economics or anything like that. We must rebuild economics from the ground up and not on the "premise" that free markets work (not the EMH or the like).

Taking him at his word, I'll now engage my inner Tyler Cowen: are you game for a bet?

I'm willing to bet that when the 5 years is up, this think tank will have produced studies and arguments that argue for greater government regulation that show no evidence of taking ignorance of politicians seriously, and very little evidence of thinking about how markets overcome the ignorance of individuals. We'll have lots of material from bad behavioral econ about how irrational we all are and not one bit about the greater irrationality of political actors, nor about the role of institutions in overcoming irrationality.

They'll bitch and moan about the over-mathematization of economics but not pay one iota of attention to Austrian arguments that reject said mathematics for reasons they might agree with but come to radically different conclusions about how markets work.

I'll make this bet in a heartbeat. Just taking Soros at his word.

And if you think Jeff Sachs is an expert on imperfect knowledge economics, I have some securitized mortgages to sell to you.

Rich Carpenter,

Whatever one thinks of his motives, his current views, the pronouncements about the goal of the institute, its list of advisers, or whatever, Soros did live in a command socialist economy once upon a time, or, to be more precise, a socialist economy that labeled itself as being "market socialist" while retaining significant elements of covert command.

Anyway, that is my perspective after taking Levsic's advice and moving to North Korea, :-).


You might like to know that I am using Frydman's book in my PhD class this term ... so somewhere Imperfect Knowledge Economics is being taught.

But I actually think that Steve Horwitz is probably right on the bet about the products of the Institute. On the day that we teach political ignorance and how market institutions mollify the consequences of our ignorance, we can call sign on with you that would indeed be interesting. Lets hope that is what they will talk about at the INET in Hungary.


And yet Charles Koch won't play in the big leagues. We can complain all we want but voices are better heard when money is behind them.

Barkley Rosser,

Looking at his biography, I'll agree that he experienced socialism (Nazism and a brief bit of Soviet communism), but the majority of his years of life were enjoyed in countries that ascribed to capitalism (the UK and the US).

There is no need to emigrate to North Korea. They'd only jail you as a spy. You could move to Vietnam or China, and while you'd experience some suspicion, you could still be successful and avoid the gulag. :)

Soros is very much a buffoon when it comes to this stuff -- a buffoon whose life ambition is to be taken seriously as a philosopher. Here's Soros yesterday in the FT:

"But by far the most impressive attempt has been mounted by economic theory. It started out by assuming perfect knowledge and when that assumption turned out to be untenable it went through ever increasing contortions to maintain the fiction of rational behavior. Economics ended up with the theory of rational expectations which maintains that there is a single optimum view of the future, that which corresponds to it, and eventually all the market participants will converge around that view. This postulate is absurd but it is needed in order to allow economic theory to model itself on Newtonian physics.

Interestingly, both Karl Popper and Friedrich Hayek recognized, in their famous exchange in the pages of Economica, that the social sciences cannot produce results comparable to physics. Hayek inveighed against the mechanical and uncritical application of the quantitative methods of natural science. He called it scientism. And Karl Popper wrote about “The Poverty of Historicism” where he argued that history is not determined by universally valid scientific laws.

Nevertheless, Popper proclaimed what he called the “doctrine of the unity of method” by which he meant that both natural and social sciences should be judged by the same criteria. And Hayek, of course, became the apostle of the Chicago school of economics where market fundamentalism originated. But as I see it, the implication of the human uncertainty principle is that the subject matter of the natural and social sciences is fundamentally different; therefore they need to develop different methods and they have to be held to different standards. Economic theory should not be expected to produce universally valid laws that can be used reversibly to explain and predict historic events. I contend that the slavish imitation of natural science inevitably leads to the distortion of human and social phenomena. What is attainable in social science falls short of what is attainable in physics."

How did Soros get such a radically false understanding of Hayek's work.

Most of Soros's writing seem founded on this false understanding of Hayek.

Steve, one reason I won't take your bet is that you changed the subject to politics. Ignorance and ideology in politics is what (some) political scientists study, not economists. (And when they try, as Caplan did, they make a burlesque of it.) Naturally a group of economists is not going to study this and do a good job.

As for "imperfect-knowledge economics" rather than "imperfect-knowledge politics," though, your bet will pan out only to the extent that talented Austrians are not interested in that general subject any more and therefore don't submit proposals to Soros's institute. So do we blame Soros for that?


Well, it is of course inaccurate on several counts to identify Hayek as "an apostle of the Chicago school," even though Hayek spent some time at that university (but not in the economics department). However, beyond that goof, and the overly simplistic remark about "market fundamentalism," are there other aspects regarding Hayek's views or the state of economic theory here as described by Soros that you have problems with?

BTW, in contrast to both Hayek and Soros (and I think you as well most of the time, and many regular readers here), I do think that some scientific theories (and, eeeek, math) can be applied to economics. However, this must be done with the greatest of care. Hayek's analysis of "scientism" is indeed a serious matter.


I am not sure I get your point about "imperfect knowledge economics". Coyne and I just published a monograph last summer entitled Context Matters dealing with entrepreneurship and institutions. To get entrepreneurship off the ground you have to work with "imperfect knowledge economics". In addition, my book with Paul Aligica, Challenging Institutional Analysis and Development (Routledge, 2009) discusses at length the epistemic turn in public choice analysis that Vincent Ostrom advocates.

Have you seen Roger Koppl's work on forensic science and epistemic communities in general?

I also have a forthcoming history of thought paper entitled "The Context of Context" that focuses on how economists came to emphasize 'imperfect knowledge economics' within the Austrian camp. And I have also just started a project on "Does Hayek Travel in the Field?" which picks up from Vernon Smith's Hayek Hypothesis paper and asks questions about the field experiment research in the same way that Vernon asked about lab experiments.

Perhaps you have very strong criticisms of much of this work. I know that you have questions about some of the applied work that people have done, but I don't think you have quite gotten the point of the applications and their scalability, nor the theoretical ideas that are being developed by those working on those projects.

But I just don't think it is accurate to say that individuals in the contemporary Austrian school are not pursuing 'imperfect knowledge economics' in their own way.


Soros is supposed to be a huge admirer of Popper who he encountered at the LSE but apart from the idea of the open society he has not demonstrated any interest or understanding of Popper's most important ideas. In the current situation these include the need to TEST policies and interventions by checking the results, the idea of limited government under the rule of law and the Hayekian concept of governing by rules rather than orders.

Hayek didn't have anproblem with math in economics -- he came upmwith the idea of indifference curve analysis and suggested tomHicks that he develop it. There's all sorts of math in Hayek's TPTofC, and Hayek was one of the first on the continent to uses modern statistical analysis in the study aggregate data and the business cycle. NAND Hayek believed that economics was science -- and he showe HOW it offered actual causal explanations for problem raising patterns in our expirience -- something almost no other economists has coherently suceeded in doing. In other words, I'm baffled Barkley by the following remarks.

"BTW, in contrast to both Hayek and Soros (and I think you as well most of the time, and many regular readers here), I do think that some scientific theories (and, eeeek, math) can be applied to economics. However, this must be done with the greatest of care. Hayek's analysis of "scientism" is indeed a serious matter."


It appears from your comments that Prof Horwitz is permitting us to resume the discussion of mathematical economics.

I am still waiting for just one example of it.

I have no doubt that you could furnish me with references, links, allusions, and symbolic representations of such examples, and, of “mathematics without quantities.”

I'm not interested in any of that.

I'm asking for mathematics with quantities, in economics, and right here before our very eyes.

And still betting that we'll never see it.



Haven't yet, and sure been asking.

DG - please don't start. Your definition is weird and no matter what anyone says you will dismiss it. People have shown you how math is used the same in economics as it is in areas of engineering; people have shown you how it is used to theorize about empirical (historical) data; whatever anyone says you have an answer, but not a convincing one. Its boring. Please pipe down about it.

Pete, That's great, so why don't you submit a proposal to Soros's center instead of carping about the fact that (like any random sampling of heterodox economists, too, would be) the advisers tilt left?


I am obviously not being clear. The point is that the advisor list is NOT heterodox, but entrenched within the mainstream of economic thought. In other words, Soros will not get any New Thinking because the thinking he is relying on is already the dominate way most economists think.

They have misidentified the intellectual error of mainstream economics, they have inferred a policy position which actually hasn't been practiced, and they presume that there are empirical results which are not that robust.

Don't you think this is a rather interesting dilemma?

Prof Friedman,

Why don't you waste your time, too?

Why should anyone have to submit a proposal for both sides of the argument? Doesn't Mr Soros know that there is another side to it? And, if he wanted it, wouldn't he already have it?

Why don't you submit the proposal for both sides of the argument, and when Mr Soros has invited it, I'm sure Prof Boettke would be delighted to furnish it.


Greg reopened the issue, not I, and Prof Horwitz permitted him to do so, not I. Prof Horwitz would not encourage one side of the argument and suppress the other, and he is running this site, not you. If he tells me to allow the claims for mathematical economics to go unchallenged, I shall do so. But until he does, I shall continue to challenge it wherever it appears.

Again, I get no example of mathematical economics, just the claim that, somehow, somewhere else it has been been given to me.

Show me where, and I will never say another word on the subject.

Now, surely there is an offer you can't refuse.


I can't answer you because I am in jail in the DPRK at your request, learning my lessons, and being confused because one day Greg tells us that Hayek saw the weaknesses of math econ while now he is telling me how the North Koreans should beat me even more severely because I appeared to diss Hayek as being insufficiently mathematical (ouch! stop that!).

Pete--What EXACTLY is the mainstream error in which Leijonhufvud and Frydman are entrenched?

Barkley -- this math thing isn't that difficult.

Math helps us picture overall economic order (e.g. the IE construct) and this non-designed order provides a proble raising pattern in our experience.

And tautological/non-causal math helps us isolate the explanatory causal element in economics -- learning in the context of changing local conditions and relative prices.

This causal element can't be captured in a math construct.

Hayek explains this stuff in his essays "Economics &Knowledge" and "The Use of Knowledge in Society" and in the first few chapters of The Pure Theory of Capital.

Barkley, I recommend these to your attention.

Still, no example.

Mathmatical economics is getting to be like the weather, everybody talking about it but nobody doing anything about it.

Show me the beef!

"This math thing isn't that difficult."

Oh yeah? Tell that to all those folks flunking out of calculus!


You want to see the beef? Get thee to a MacDonald's!


Get back in your cell, where you belong!

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