Coordination Problem

Social Contract, Social Cooperation, and Endogenizing the Rules of the Social Game

|Peter Boettke|

Liberty Matters is hosting once again a very interesting discussion dealing with the work of Anthony de Jasay.  The lead essay is by Hartmut Kliemt and the first response has been authored by Chris Coyne.  Additional commentary will be provided by Michael Munger and Edward Stringham.

Back in 1987 in an essay long forgotten -- Virginia Political Economy: A View From Vienna -- see pp. 10-12 -- I argue that Buchanan's decision to treat the rules of the social game parametrically creates a serious problem for the student of political economy who want to understand the origin of real world property rights arrangements.  The social contract apparatus clearly can serve some very useful purposes in thought experiments but understanding the evolution of social cooperation requires a different intellectual move.  In the constitutional moment of post-communism a few years later, I was a bit more sympathetic to Buchanan's constitutional project, but even there rather than seek an alternative to what Kliemt catalogues as 'contractarian', 'evolutionary', and 'natural rights' as he argues de Jasay offered, I blend them into an explanation for how you can forge a new constitutional order in post-communism. See Why Perestroika Failed -- pp. 108-112.  The evolutionary, or Hume-Hayek, program is capable of absorbing within its focus on endogenous rule formation both a "convention" notion of natural rights, and a "contractual" notion of the institutionalization of the social convention.  It is this intellectual path, I believe, which leads to the research program of the positive political economy of 'anarchism' that Coyne so eloquently discusses in his reply to Kliemt's lead essay.

I hope the conversation continues, and that it inspires young scholars to look at the window and allow their natural curiosity to guide them to study the real world anarchism that is evident all around them -- from the pressing and troubling reality of failed and weak states to the beauty and source of human flourishing in private governance mechanism in the advanced material states of the world.  Endogenous rule formation, rather than restricting our vision to only what legal centralism and constitution making from the top down enables us to see, is the more productive path to progress in social theory.  

Hayek at GMU 1983

|Peter Boettke|

Last night I conducted my first graduate class in the newly established Mises Seminar Room, which is part of the office suite of the F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics.   Mises and Hayek.  I have had in my office since the mid 1980s a picture of Mises and Hayek together looking over a manuscript.  I don't know if the photo was staged, but it has always been to me the imagined relationship as we should understand it if we want to see Austrian economics as a progressive research program in the contemporary context.  It is a shared research program, not a conflicting one.  Human Action and Individualism and Economic Order are foundational texts in our educational programs, and have been for the history of the Mercatus Center.

GMU became an independent university in 1972, roughly a decade later the university established a PhD program in economics.  In 1983, F. A. Hayek visited and delivered a talk dealing with ideas that would later be published in The Fatal Conceit.  One productive way to read Hayek's work in this area is his attempt to restate Mises's argument for the Law of Association and the rules than enable free individuals to engage in productive specialization and live in peaceful cooperation with one another.  Mises's argument was more rationalistic, Hayek's more evolutionary -- but both were striving to identify those rules that enable human actors to live better together than they could apart.  To realize the gains from social cooperation, men must live by the rules of just conduct.  To Hayek, human reason is a by product of these rules, not the source.  As he put it in The Constitution of Liberty and even more clearly in Law, Legislation and Liberty, we have reason because we followed rules, we didn't follow rules because of our reason.

 

In the current issue of The Review of Austrian Economics there is a wonderful tribute to Hayek by James Buchanan from 1979.  One highlight from this tribute from the vantage point of today looking back on the situation in academic economics in 1979 is the following:

We are now winning a few battles in the ongoing war of ideas, but we cannot lapse into complacency. The islands of comparative strength in modern American academia (Miami, VPI, UCLA, Chicago, Rochester, NYU, Washington)—these must be strengthened and new islands (Auburn, Colorado) must be created. The diverse approaches of the intersecting “schools” must be the bases for conciliation, not conflict. We must marry the property-rights, law-and-economics, public-choice, Austrian subjectivist approaches. And we must continue to be able to secure sufficient independent and external financial support to ward off threats from the academic enemies within our institutions.

This, of course, was written before the GMU island was forged with the move of Buchanan and the Center for Study of Public Choice and the joining of forces with Rich Fink's Center for the Study of Market Processes through Karen Vaughn's academic entrepreneurship.  The Mercatus Center, which evolved out of CSMP, has always been grounded in the work of Mises and Hayek, but took seriously the Buchanan message of conciliation of the diverse schools of thought -- property rights, law and economics, public choice, and market process analysis -- and has let that effort be the defining guide in our research and graduate education programs.

What is Canonical Neoclassicism?

|Peter Boettke|

I give my first lecture in modern history of economic thought class tonight, and we are starting with Alfred Marshall's Principles, Book I and Book V. We are also discussing Baumol's QJE (2000) article on what Marshall knew and didn't know about modern economics.

In my lecture I am presenting what I consider the 5 canonical models of neoclassicism and then discussing how those models are interpreted by various streams of economic thought. I will also be discussing the nature of modeling and how economists have understood that intellectual exercise through the years. It turns out Marshall is an outstanding starting point for these sort of discussions.

My selection of the canonical models are (1) Max U, (2) Edgeworth Box, (3) Supply and Demand, (4) Perfect Competition, and (5) Production Possibilities Frontier.

Which 5 models would you include, and why?