Mark Blaug (1927-2011), fellow traveller of Austrian economics

~ Frederic Sautet ~

It is not my intention to specialize in obituaries in this blog, but I would like to say a few words about Mark Blaug who just passed away and was a very important historian of economic thought (a dying subject in itself, but nonetheless vital to the understanding of the discipline of economics). Professor Blaug was a true scholar and gentleman (see Tyler Cowen’s post). His book, Economic Theory in Retrospect (ETR) is one of the best books on the history of economic doctrines out there. If one wants to understand the works of Alfred Marshall and Léon Walras, this is the place to go to.

Like many great minds, Mark Blaug never stopped learning and teaching. ETR came out in at least five editions over the years, and each new edition was extensively revised. He was skeptical of Austrian ideas at first, but then became more familiar with the works of Friedrich Hayek, Israel Kirzner (whom he met at several conferences, if my memory is correct), and other Austrian economists. While it has a whole chapter on the pre-WWII Austrian theory of capital and interest, it is true that ETR doesn’t make much room for more modern Austrian theories. Nevertheless, I believe Mark Blaug was an honest fellow traveller of Austrian economics, as the following passage in the 1996 edition of ETR reflects:

“I contend that perfect competition is a grossly misleading concept whose only value is to generate an endless series of examination questions. Economics would be a better subject if we discarded it once and for all. Having expunged perfect competition, we ought to follow it by also discarding Walrasian existence proofs and the Invisible Hand Theorem of welfare economics. First of all, everyone admits that these beautiful theorems are mental exercises without the slightest possibility of ever being practically relevant: first-best optima are never actually observed and in a second-best world, it is not in general desirable to fulfill any of the first-best optimum conditions; in other words, piecemeal welfare policies may be based on good or bad qualitative judgments but they are not based on rigorous analytical theorems. But once first-best, end-state competition is discarded as irrelevant, as precisely and rigorously wrong, and replaced by process-competition as imprecisely and loosely right, what are we left with? We are left with the content of every chapter in every textbook on imperfect or monopolistic competition, on oligopoly, duopoly and monopoly, in short, on industrial organization as a sub-discipline in economics. In those chapters, firms jostle for advantage by price and nonprice competition, undercutting and out-bidding rivals in the market place by advertising outlays and promotional expenses, launching new differentiated products, new technical processes, new methods of marketing and new organizational forms, and even new reward structures for their employees, all for the sake of head-start profits that they know will soon be eroded. In these chapters, there is never any doubt that competition is an active process, of discovery, of knowledge formation, of ‘creative destruction’. I call this ‘the Austrian view of competition’ because it is most firmly enshrined in the writings of such Austrian economists as Hayek, Schumpeter and, more recently, Kirzner.” (pp. 594-595)

Professor Blaug, thank you for your work. Rest in peace.

 

 

Comments

[austrian away]

This is sad news. Mark Blaug was one fine scholar. In addition to Economic Theory in Retrospect, which Dr. Sautet mentions, I would also point out that his book on eocnomic methdology was also very, very good. His contribution to economics was profound, and I hope that students continue to read, and learn from, his excellent work.

[Brad W.]

Is there a better history of economic thought book out there that's as detailed and rigorous? Perhaps there is but I can't seem to find one.

[Mario Rizzo]

Yes, I also detected a certain move by Mark Blaug toward greater understanding of and sympathy with the Austrian School as time went on. Initially, he was quite unsympathetic largely because of Mises's apparent "craziness" about the empirical aspect of economic theory. But as Blaug came to realize: (1) the limits of falsificationist methodology and (2) the potential of Austrian economics to understand the real world, he saw things differently.

[Richard Ebeling]

Blaug was also critical of Austrian criticisms of macroeconomics, sometimes arguing that insisting on a type of Austrian- based micro-process approach would mean the "end" of standard macroeconomic theory and policy -- and this seemed too "extreme" to him.

But the one fundamental problem that always bothered me with his "Economic Theory in Retrospect" was his analysis of all past theoretical contributions by the standard of contemporary mainstream theory. Thus, every past economist's contribution tended to be judged by the benchmark of "modern" neo-classical economics.

The idea of, also, analyzing and evaluating the economist's ideas in the context of his own time and controversies plays second- or third-place role in the book.

But having said this, his analysis is clear and precise. He has an excellent exposition of Wicksteed's reservation demand and reservation price theory.

Richard Ebeling

[Rafe Champion]

Mark Blaug wrote a beautiful memoire which I like so much I have put it on line. I like the way he went to Paris as a young man with The Open Society and its Enemies in his bag and did not go out for about three days until he had finished reading it.

http://www.the-rathouse.com/2011/Blaug-Memoire.html