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Amen to that! COuldn't agree more.

Pete, what is your take on Salerno's argument that in one sense Hayek was a part of the problem in the 1930s because he promoted "equilibrium thinking" at the LSE, as a result of the influence of Weiser?

PS Dont miss John Quiggin's comments on the Catallaxy piece. He is a professor of economics and the leading leftwing blogger in Australia. I have lately been lobbing some range-finding shots into his Weekend Reflections section which is open house (to his credit). My Sept 22 piece calls for Peter Boettke to come over as my big brother and bash up the bullies who have set upon me.


From Weekend Reflections Sept 22

September 23rd, 2006 at 8:04 am
The rejoinders from Nicholas Gruen, John Quiggin and James Farrell at the end of last weeks Reflections have raised a number of issues about the contributions and achievements of Keynes (of the General Theory), Samuelson and others. To put my challenge in a nutshell, I am not convinced that the approach by way of mathematica formalism and aggregation results in theories that relate to the activities of flesh and blood people going about their business in the real world. So if economics and political economy are concerned with the real world then it is a moot point whether the mathematical formalists and GET theorists should be regarded as economists at all, let along great and helpful ones.

This raises the kind of issues about the nature and purpose of economics that Menger and Schmoller addressed in the methodenstreit over a hundred years ago. Working economists, people unlike myself who are actually DOING economics rather than just talking about it, may not see much point in this kind of debate but I think it might be worthwhile to have a go at it. Anyway, since you guys are ganging up on me, like bullies in the schoolyard, and because I am not trained in economics, working in economics or in touch with economists on a daily basis for discussion I am going to run off and get my big brother Pete Boettke to help.

This long piece appeared in the journal Critical Review (1997).


Several people replied, Daniel Hausman, Robert Heilbroner and Thomas Mayer, then Boettke replied to them


Boettke concluded that the problem with modern economics is that it restricts the questions we can ask about the real world. He stands by the historical narrative, with Knight, Mises, Coase, Hayek, Buchanan, Olsen. He questions the contribution of such brilliant formalists as Tinbergen, Arrow, Lucas, Samuelson and more recently Stiglitz. His judgement is not shared by most economists and he asks why not?

These issues will take some time to explore and I will post a summary of Boettke’s arguments in due course to invite further discussion. This exchange may need to go on for some time and it will make some demands on the patience and goodwill of all parties. I will have to learn some more economics and other people will need to come to grips with some ideas that they will not at first find congenial. So be it!

jquiggin Says:
September 23rd, 2006 at 10:29 am
“demands on the patience and goodwill”

Rafe, you’re close to exhausting this with your repeated insults directed at other participants, claims to superior knowledge in fields where your ignorance is evident and so on. Your latest post hasn’t helped.

If you want to continue, I suggest a retraction of various remarks you’ve directed against others is in order. I certainly don’t intend to respond any further until this is forthcoming.

From Weekend Reflections Sept 15
Rafe Says:
September 19th, 2006 at 1:30 pm
John I do not mean to be rude, as most people know I am the very soul of conviviality and civility.

However I really want to know what error in Popper you think has been corrected by Lakatos, or what it is about the ideas advanced by Lakatos that represent an advance.

In fact the program initiated by Latsis and Blaug and others such as Wade Hands to upgrade economics by the introduction of Lakatos has produced a mass of papers but zero progress that can be detected.

If you are looking for inspiration from the direction of the philosophy of science in general and Popper in particular, then you need to look at situational analysis. This represents a convergence with the robust elements of the Austrian method and the “action frame of reference” that Talcott Parsons re-invented in The Structure of Social Action and then abandoned under the influence of general systems theory at Harvard.

I also would like to know why you think the Austrian program has collapsed when you can see it at work at Geo Mason Uni and practical projects like the fieldwork they are doing in Africa.

jquiggin Says:
September 19th, 2006 at 6:01 pm
Rafe, I’ve answered your question several times already. I’ve concluded that the hard core of your program is the hypothesis that you, and only you, know everything worth knowing on this topic. Not surprisingly, the result is a degenerating SRP.

James Farrell Says:
September 20th, 2006 at 12:54 am
“…Samuelson, the man who wrote year after year, up to the fall of the wall, that the Soviet economy was strong and overhauling the US?”

Fiddlesticks. What Samuelson did, year after year, was to explain that long run estimates of US growth and in particular Soviet growth were so uncertain that a very wide range of outcomes could occur. Overhauling the US was one possibility. In the 1967 edition I have on my shelf he says

Over the whole period since World War II, the percentage growth rate of the Soviet Economy almost certainly exceeded the American growth rate. But in the 1960s the Soviet growth rate may well have fallen behind the American (and it has certainly fallen below those of West Germany, Japan, Italy and France). Furthermore many experts believe that it is easier initially for an economy that starts frrom a lower level of productiveity to achieve a high percentage growth rate…the unused opportunities for imitating Western technology are likely to diminish. Hence it may be unwise to extrapolate past growth rates in the Soviet Union into the distant future.

I don’t know whether Samuelson was still drawing on the best available information in 1989, but the claim that Soviet growth exceeded US growth in the 1960s accords with the figures (4.9% versus 3.8) in Kornai’s magnum opus The Soshalist System, which is not exactly an apologia for soshalist planning.

The point is, as both Samuelson and Kornai know perfectly well, that a high GDP growth in itself means nothing if high and indeed increasing investment rates are necessary to sustain it. Far less does high growth imply that people are satisfied either as consumers or as political beings.

I defy any fair minded person to read Samuelson’s chapter on alternative economic systems and find there an endorsement of central planning. Certainly the Soviet censors didn’t think so, since they removed
the entire section on growth from the Russian edition.

This is your daffiest witch hunt so far, Rafe. By the way, what do you see as the connection between the theory of revealed preference and Samuelson’s policy recommendations?

Rafe Says:
September 20th, 2006 at 4:06 pm
John, I can’t see where you have explained how Lakatos corrected some alleged error in Popper’s critical method. Lakatos knew nothing about economics so he could not help directly and it is not apparent that his followers have been any more helpful. Blaug in the washup after the second Greek Island conferenc (funded by Latsis senior) mourned that there were more papers that were critical of the Lakatos approach than papers that actually used it. He also noted in an aside that he had come around to the the Austrian way of thinking about the nature of competition, rather interesting in view of his previous delight in retailing Samuelson’s abuse of the Austrians.

I expect that the Austrian program, though not currently large in size, may become more widespread and will be more helpful than your own analysis of the outcome of deregulation in Australia, unless you have revised your negative opinion.

Do you have any comment to make on the Enterprise Africa project, an Austrian venture operating out of George Mason University? That is the Austrian program in the field. What do you offer as an alternative?

rather noteworthy that raf does not refute the comments on samuelson

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