|Peter Boettke|
Last weekend at one of our Adam Smith Fellows seminars, in response to a question about economic theory, I made reference to the idea that pure theory provides the skeleton and without it the body could not function.
Then last night I was teaching from the works of Frank Knight and he states in The Economic Organization(1951, 35) that: "Our task of putting the complex and often unlovely flesh and viscera of reality upon this clean white skeleton of abstract principles must be carried out in several stages." No doubt, but we can never forget the underlying skeleton or this might happen to our economic thinking.
So always be aware of the professors who promise "healing" spells in the economy by removing the bare bones of economics. As Harry says to Professor Lockhart, "No, not you." But alas the Professor didn't listen to Harry's plea.
Pete: Frank Knight went on to reject the "successive approximation" version of moving from the skeleton to the real world (what he described here as "stages" of transition from theory to real life).
Instead, in the late 1920s/early 1930s he adopted Max Weber's ideal type analysis. In "Statics and Dynamics" he said there is an "impassable" gulf between theory and reality. Theory could only be thought of as "relevant" to thinking about the real world, but could never be translated into a predictive science.
This is, in part, what led him to change his theory of capital away from Austrian theory.
Posted by: Ross Emmett | September 16, 2015 at 07:56 AM