Coordination Problem

The Federal Reserve System Centennial

|Peter Boettke|

I will be heading off this weekend to Jekyll Island, Georgia to participate in a Liberty Fund seminar run by Jerry Jordan on "Questions About Liberty and Responsibility at the Federal Reserve System Centennial."  Others in attendance include Michael Bordo, Kevin Dowd, Alan Meltzer, Jerry O'Driscoll, Larry White, George Selgin, Steve Horwitz, etc.  Bottom line: everyone in attendance has forgotten more about monetary theory and policy than I will ever learn, so I need to be very quiet and listen and learn.

Still, I do know this -- the conversation will be slightly different in tone and substance than this particular take on the history of the Fed (except for those parts where Michael Bordo is talking).  BTW, for GMU folks, our former colleague Gary Richardson makes an appearance in this video.  Anyway, just on the claim about life prior to the Fed and life after in terms of economic volitility see Selgin, Lastrapes and White.

As Milton Friedman wrote in Capitalism & Freedom any institution that is capable of bringing an economy to its knees due to a sincere error by a few is perhaps an institution we cannot afford to have.  The Fed at 100 does give us a good point of departure for reconsideration.

 

Reminder - SDAE Sessions - Friday Deadline to Submit Paper Proposals

Call for Papers: 2014 SDAE meetings

 

Atlanta, GA, November 22-24, 2014 (Saturday - Monday)

 

 

The annual conference of the Society for the Development of Austrian Economics will be held during the Southern Economics Association meetings in Atlanta, Georgia, at the Atlanta Marriott Marquis.

 

Members interested in presenting papers, serving as chairs/discussants, or proposing entire panels should submit proposals by Friday, March 28, 2014. With all submissions, please include the following information for each participant, including non-attending co-authors:

 

1. Name

2. Affiliation (Title and institution)

3. E-mail address

4. Telephone number

5. Title of paper(s)

6. Abstract(s) of no more than 100 words

 

Any attachments must be either Adobe Acrobat (.pdf) or Word (.doc or .docx) format.

 

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 are proposing an entire panel (including a roundtable or debate), please have all the contact information for all the participants when you send the materials. 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.

 

Please note that the conference organizers have to be free to place your paper or panel on any of the conference days.

 

SDAE members who are current in their annual membership dues are given priority for SDAE panels.If you wish to renew your membership, you can do so online at: http://it.stlawu.edu/sdae/apply.htm

 

Please send your submissions by email only to SDAE President-Elect Benjamin Powell at free.market@ttu.edu (with “SDAE 2013” in the subject line of the e-mail).

 

Benjamin Powell

Free Market Institute

Texas Tech University

Machlup and Mises

|Peter Boettke|

Israel Kirzner has often repeated the story that after studying for a while under Mises, Mises arranged for him to receive a PhD fellowship to continue his studies at Johns Hopkins under the mentorship of Fritz Machlup.  As Mises explained to Kirzner, Machlup would be a better mentor for a young economist who had talents to advance their career.  When Kirzner tells the story, he stresses how impressed he was by Mises's generiosity in working out this arrangement for him and in his assessment of Kirzner's promise as an economist.  Kirzner, however, stayed on at NYU to complete his dissertation under Mises's direction, and then was hired by NYU as a faculty member (another fact that has important signals about Kirzner's widely recognized skills by those at NYU given this break from normal academic protocol).   Over the years, Kirzner would climb the academic ranks -- both at NYU moving from Assistant Professor to Full Professor to Professor Emeritus, and throughout the economics profession world-wide as he became the leading scholarly representative of the modern Austrian School of Economics.

It would be an interesting exercise in counter-factual intellectual history to consider what if Kirzner had taken up Mises on his offer and pursued his PhD not at NYU, but at Johns Hopkins under the mentorship of Fritz Machlup.  Kirzner's work from the start would have been tied closer to the industrial organzation literature of that time, rather than more general theory and history of doctrine.  No doubt, his work would have been process oriented, but perhaps more of an evolutionary bent.  And, his own development of praxeology, including his entrepreneurial theory of the market process might only have been evident to those who are so emersed in Mises's system to know the difference between that Austrian version of early neoclassical economics from the later versions of neoclassicla economics as it evolved in the post-WWII era.  In many ways, Kirzner's fate might be similar to Machlup's with respect to modern Austrian economics.

Not enough attention is paid to Machlup within the contemporary Austrian school -- save Roger Koppl and Richard Langlois.*  But perhaps this will change with some recent work by Gabriel Zanotti and Nicholas Cachanovsky, folks will start to understand the important place that Machlup holds in the history of the Austrian school of economics -- analytically and methodologically.  Machlup was Mises's student from Vienna and he went on to a stellar career in the US -- teaching not only at Hopkins but eventually at Princeton.  He worked tirelessly throughout his US career to aid his fellow Viennese academics to negotiate the turbulent seas of post WWII academics in the US.  He was close with Mises's other students, such as Alfred Schutz and of course F. A. Hayek.

What I have become intrigued about recently is the concept of path dependency in intellectual history work.  Certain readings of authors become cannonical, and then that can alter our understanding of what that author had to say about critical issues.  Consider the most recent battle over the intellectual legacy of Adam Smith, with readings such as Emma Rothschild or Sam Fleischacker in contrast with the work of James Otteson or Ryan Hanley.  A similar sort of issue could emerge over the legacy of MIses with respect to economics, political economy and social philosophy.  As Zanotti and Cachanovsky argue, in the immediate aftermath of Mises's Human Action, two readings emerged of Mises's methodological pronouncements: a Rothbardian defense of extreme apriorism, and Machlup's more subtle reading of Mises's position which anticipated many of the arguments that would later be understood as implications of both Duhem-Quine and Lakatos.**  Machlup's argument has the advantage of linking Mises more closely with folks such as Schutz and Hayek.  But Rothbard's reading prevailed -- as both young friends of the libertarian message thought they found a bedrock foundation for their views, and foes who thought they caught the old man in an obvious trap of dogmatic nonsense embraced the Rothbardian reading of Mises.  It thus became the way everyone came to understand Mises's praxeological system, and as a result the earlier connection between Mises's rational actor centered approach to the sciences of man that was attractive to scholars from Buchanan and Tullock to several others who championed methodogical individualism such as Vincent Ostrom and James Coleman (and even John Rawls) became less and less obvious.  And even the invisible hand style of reasoning that follows that is so closely associated with Hayek, but actually was taught to Hayek by Menger and Mises, gets lost in the evolution of understanding the Misesian project.  Rothbard's reading has consequences, and it is important we start to acknowledge these.

Let me be clear about something, Rothbard's reading is a plausible one.  If it wasn't at all plausible, it could not have been a contender and it could not have persisted as long as it has in the contestation of ideas. But that contestation isn't a smooth a process of intellectual progress as we might like to believe due to institutional impediments and intellectual path dependencies, etc.  Still, the market for ideas is not wildly inefficient either -- it is just a process that has a lot of slack in the system.  But being a plausible reading doesn't mean it is a correct reading, let alone the most productive reading for contemporary scholars.  Machlup's reading of Mises might actually be more correct, it also might be more productive.  This would be the current counter-factual that we might need to contemplate in methodological discourse.  Zanotti and Cachanovsky are giving us good reasons to consider that altenative reading and understanding about Mises's position and the way forward in the sciences of man methodologically.

____________

*Richard Ebeling, of course, always has acknowledged Machlup's central importance in the history of the Austrian School of Economics. And there is also a nice paper in the QJAE by Carol Connell.

**I must confess my complete sympathy with Zanotti and Cachanovsky here given my own effort to present Mises's methodology in his light in my chapter for The Handbook of Economic Methodology.  My reading of MIses, also fits with Mario Rizzo's effort at Lakatosian reconstruction. A careful reading of my paper with Pete Leeson, "Was Mises Right?" will reveal that we make this argument again, though we work with the tripartite division of the realms of knowledge between pure theory, institutionally contingent theory (or applied theory) and historical economics.

What Computers Can't Do, and Arguably Never Will Be Able to Do

|Peter Boettke|

Listening to NPR one morning, this story about soccer playing robots came on and I was intrigued by the discussion.

When I entered graduate school and was assigned to Don Lavoie, my expectation would be that I would be working on questions related to the problems of economic calculation under socialism.  Of course, I wasn't disappointed as in the first 2 years of graduate study Lavoie was finishing up Rivalry and Central Planning, and National Economic Planning: What is Left?  But most of my work for Don at that stage of those projects was reference checking, his argument was already completed and written down.  So besides learning by reading his books, I learned how to work the open stacks at the Library of Congress and browse the University of Maryland library shelves to double check and track down accurate references that Lavoie was citing.  But in the process, Lavoie was also exploring the full implications of Hayek's argument about "knowledge of time and place" and the Hayek-Polanyi argument about "tacit knowledge".  This led him, and those close to him, into an examination of the nature of learning, the differences between technical knowledge and practical knowledge, and ultimately into an examination of both cognitive sciences and the philosophy of mind.

So in addition to learning Gould and Ferguson (Micro), Henderson and Quandt (Micro), Varian (Micro), Branson (Macro), Barro (Macro), Chiang (math econ), Silberberg (math econ), Theil (econometrics) and Kmenta (econometrics) during my first year, I was spending weekends reading not only Michael Polanyi but Herbert Dryfus, John Searle, etc.  One of the reasons this was so relevant to my core interests in the problems of economic calculation is that many economists at the time thought that super computers would one day be able to solve the problem. (e.g., Lange 1967).

The relevant point for economics turns on the differences between information and knowledge in understanding the economic forces at work under alternative institutional arrangements.  It is not the costliness of information that is the critical issue, and thus the incentives that actors face in acquiring and utilizing the bits and pieces of information that are scattered throughout the economy, it is instead the contextual nature of the knowledge that exists only within certain contexts and outside of that contexts does not exist at all -- and therefore cannot be discovered and utilized by actors in the economic system not matter how hard they search.

The enthusiastic hard AI would-be economic planner is ultimately conflating syntax with semantics in 'the grammar of the economic calculus'*.  Formalism can provide clarity with respect to syntactic knowledge but remains silient with respect to semantic knowledge.  In the affairs of men, however, it is semantics that we must uncover for understanding how the world works.  As Searle argued long ago now, machine langue is not the same as human language no matter how much we try to mimic it.

Well now go back to think about our soccer playing robots.  The effort is to mimic human playing soccer players, with the ultimate goal of competing against elite soccer players.  But in this effort, I would argue that the analogy to chess is misplaced.  It is not just the physical dexterity required to play a sport such as soccer at an elite level, but the decision making capacity of the players with so many degrees of freedom.  Chess is no doubt an extremely taxing game of mental capacity (perhaps the hardest such game), but it is also played within an extremely structured environment with only so many permutations and combinations.  In a sport such as soccess, or basketball, or tennis, the permutations and combinations are in some practical sense far more open-ended, and thus leaving greater scope for, and necessity of, "entrepreneurial alertness" to hitherto unrecognized opportunities for winning plays, counter-strategies, and new techniques and tactics.

It is not just physical dexterity that presents a challenge to what computers can do, but mental nuance.  Nuance and semantic knowledge go hand in hand, without access to semantic knowledge nuance is not possible.  So the quest for soccer playing robots will continue to be frustrating if judged against the standard of elite human players.  This does not mean that (a) robots will not play soccer (or any other sport) against each other in the future, they just will not successfully mimic elite human play, and (b) some sort of singularity momement where man and machine merge will produce a hybrid human player that will be stronger, faster, and more capable than the current human elite player.  All I am saying is that the computer will not substitute for the cognitively nuanced aspects of the human player -- computers will not take over those parts of the playing of the game that require nuance; that require the skillful utilization of the semantic knowledge of context; that are grounded in the unique knowledge of time and place.

Bob Subrick and I explore the implications of this sort of philosophy of mind argument in our paper "From the Philosophy of Mind to the Philosophy of the Market."

 

*This is the proposed title of an unpublished book of Hayek's that he was working on in the decades after WWII.

Praxeology and the Purpose of Political Economy: Illustration from Ben Powell

|Peter Boettke|

Let me be clear, I consider Ludwig von Mises the fountainhead for the rediscovery of sound economic reasoning post Keynes.  He was, to put this simply, the most consistent and persistent theorist of microfoundations, and the development of the universal applicability of the rational actor model across the various disciplines associated with the study of man.  In developing his ideas he made sharp distinctions not only between theoretical examinations and historical scholarship, but between normative philosophizing and positive analysis.  He developed his positive/normative split following Max Weber, and the Weber-Mises positiion represents positive analysis in the sciences of man prior to the development of positivist philosophy of science.  This is extremely important to keep in mind when thinking through the philosophy of science, and the nature of argument in the sciences of man.  But before I wade too deep in philosophical waters, let me get back to the dry land of social sciences.

Mises used the term praxeology to describe his system -- he also used economics and catallactics to delineate spheres of praxeological reasoning.  Early in his career he used the term sociology rather than praxeology, but as the disciplines evolved this option was closed off to him least he cause great confusion in his readers.  Praxeology is described as a discipline --- the study of acting man in all walks of life.  Praxeology is also described at times as a method --- deduction of theoretical principles from the apriori proposition of purposeful human action.  Praxeology is also described as a perfectly value free science of man which treats ends as given and analyzes the effectiveness of chosen means to the attainment of those given ends.  The vast majority of Mises's major contributions to political economy are in this style of argument --- negative knowledge --- as he demonstrates through praxeological reasoning that the very goals of the policy actors are undermined by the means they choose to pursue their goals.

As a student I was so convinced of the force of Mises's argument that I decided I wanted to spend my life as a teacher attempting to articulate and communicate to others the power of Mises's praxeological approach to the sciences of man.  As a teacher, especially of PhD students, this has been my driving motivation because I believe it is the way we make progress in the sciences of man, and how we can best make a useful contribution to the public debate over public policy.  Praxeology, as I say in Living Economics, puts parameters on people's utopias.

Ben Powell's Out of Poverty, is a classic example of praxeological reasoning and the purpose of political economy in the hands of a skilled thinker influenced by Mises's approach.  Listen to his discussion of the book, he treats the ends of the critics of sweatshops as given, he deploys straightforward analysis of the effectiveness of the chosen means for the attainment of those given ends, and demonstrates in a non-normative yet powerful way how the critics and policy makers influenced by the critics are in fact engaged in counter-productive policies from their own point of view.  Graduate students and young economists take notice, this is how you are supposed to be doing (as opposed to talking) praxeology.

 

Don't get me wrong, it is vitally important for young scholars (and old) to engage in pure theory, and to also engage in intellectual history and methodological discussions to refine our understanding of praxeology, but ultimately the purpose of theory is found in the application to history and contemporary history (also known as public policy).  Ben Powell is demonstrating to young scholars (and old) how to engage in sound economic reasoning and engage a hot-botton issue in contemporary public policy.  Mises, no doubt, would be thrilled to see how his approach to the sciences of man is being developed and utilized by a masterful economist.

Want Some "New Thinking in Political Economy"?

|Peter Boettke|

Since there seems to be an increased demand, especially among young aspiring economists, for "new thinking" I'd like to suggest that perhaps some of the books in the series I have been editing for Edward Elgar since the 1990s might be a good source.  

You don't have to be a behavioral economist to have new ideas, and you don't have to be heterodox to have compasion for the least advantaged.

Attend, Represent, and Explore: INET's YSI April 10-12, 2014 (Toronto, Canada)

|Peter Boettke|

"The Institute for New Economic Thinking’s Young Scholars Initiative (YSI) supports and inspires the next generation of new economic thinkers. As a community, YSI seeks to transform the discourse in economics by establishing an open space for economic thought and inquiry. Ultimately, we aim to renew economic thinking by embodying the change we hope to see within economics discipline.

The community is comprised of more than 4000 students, post-doctoral economists, assistant professors, and young researchers and professionals from around the world, with regional hubs in North America, Europe, Latin America, Asia, and Africa. We organize conferences, workshops, webinars, and working and discussion groups on a range of subjects."

Check it out here.

 

Here is a preview of the Toronto conference.

Any GMU PhD students interested in attending this please come and see me.  In the meantime, make sure to join the mailing list, etc.

Win a Trip to Hong Kong --- 2014 MPS Hayek Essay Contest

|Peter Boettke|

 

Mario Rizzo on The State and Civil Society

|Peter Boettke|

Here is a video from 1999 of Mario Rizzo discussing the state and civil society.  As we grapple with questions of scale and scope of government in the 21st century, the insights in Rizzo's talk are critical for us to consider in depth.

Last fall Richard Epstein and Mario Rizzo established the Classical Liberal Institute at the New York University School of Law.  This is an awesome development for these ideas and for NYU as an institution -- a private institution in the public service (listen around min 18 to get the inside joke).

I taught at NYU from 1990-1998 --- the moment Mario called me to tell me I would be getting the job at NYU may very well be the greatest moment of sheer joy I have experienced in my academic history. And working alongside of Mario and Israel Kirzner was a dream come true for me.  Mario was an outstanding colleague for a junior faculty member and his encouragement and critical comments on my papers and book projects as well as teaching advice during that period helped me tremendously, and left a lasting imprint on me.

 

Spring Break Reading -- GMU March 10-15, 2014

|Peter Boettke|

Before I can experience Spring Break 2014, I will be heading off to Charleston, SC for the Public Choice Society annual meetings.  I return to NoVA on Sunday and will being Spring Break -- hopefully all the snow will melt while I am in SC.  I have a backlog of writing assignments and readings associated with those that must be completed during this time.  But I also plan to do some reading about the economics profession during my trip and on the break.

First, I recently picked up Secrets of Economic Editors to read about the various trials and tribulations of some of the top journal editors in our discipline.

Second, I just ordered via Amazon Getting a PhD in Economics -- it is supposedly a witty and honest look at the entire process from admission to getting a quality job written under a pseudonym to hide the identity of the academic economist who wrote it.  I am not in general a fan of pseudonymous publishing, but I will read this quickly to see what folks are thinking.  Of course, we already have a decent basically common-sensical guide in short form that is pretty recent. 

Third, I plan on tackling on the trip to and from SC Diane Coyle's GDP: A Brief But Affectionate History. 

What have you been reading?