On Beating Dead Horses

Frederic Sautet and I will offer a detailed comment on the recent controversy over Pete Leeson and Dan Klein's posts on Austrian vices.  But I couldn't resist listing a few reactions.

1. In my opinion Ludwig von Mises is the greatest economists of the 20th century.  That doesn't mean he is the only economist to make significant contributions to the discipline. It also doesn't mean that I don't find some of his presentations of arguments to be flawed on a variety of margins. But I do think his work in monetary theory, market theory, comparative political economy (calculation, interventionism, and interest group logic), and methodology represent some of the most provocative and insightful contributions ever made to economic science.  His work on socialist calculation, in my opinion, is the single most important contribution to political economy of the 20th century.

2. That history of thought is a viable research discipline within economics, and history of thought can in fact be an indispensible tool in contemporary theory construction.  As Kenneth Boulding once put it, "After Samuelson Who Needs Smith?" and to paraphrase Boulding's answer, 'We all do, because Smith can still speak to us today in a way that Samuelson cannot.'  What is true for Smith is also true for Menger, Bohm-Bawerk, Mises, Hayek, etc.

3. The most important thing is to make sense of the economic world we are studying, not be faithful to any school of thought.  Students of society should look "out the window" not necessarily just to the "blackboard" to find the problems and puzzles to work on.   Applied economics and political economy, not textual interpretation is the most productive use of most economists time.

4. Schools of thought are labeled by their intellectual enemies, whereas fields of research are defined by practioners.

5. Always remember what excited you about economics in the first place.  Why that first book caught your imagination, why that lecture made you rethink your world, etc.  If you do that, you will be a better teacher of economics to undergraduates, and a more enthusiastic and insightful researcher in the field and mentor to graduate students.  Too many professors forget the unsophisticated versions of themselves at 18, 19, 20 years of age and teach today's 18, 19, and 20 year olds as if they were the 30 year old version of themselves.  Remember what made you angry as a youth, remember what made you fight with others who were ignorant of economics, remember the policy issues that ignited your intellect and the philosophical issues that convinced you that the social sciences was something worthing of pursuing for your career.  Economics should be a passion and an obsession, not merely a "job" if you hope to make progress in understanding the world.  Respect the professors and books that turned you on to the economic way of thinking, even if you believe you have now become a more sophisticated analyst of the social world.

I do think there are unique contributions associated with the Austrian school.  My teaching of Austrian Economics focuses on Mises, Hayek, Rothbard and Kirzner.  I don't find too many other economists as insightful and as comprehensive as these four.  But that doesn't mean that I don't also stress the contributions to economic science of Buchanan and Tullock, Alchian and Demsetz, Friedman and Becker, and Vernon Smith, Coase and North.  And I think there are significant contributions made by many contemporary economists influenced by the Austrians and in particular Hayek, Kirzner and Lachmann that moves us forward in terms of advancing a progressive research program in the tradition of Mises and Hayek.

BTW, George Selgin has a great article from the 1980s on the real bills doctrine where he argues that it is important to beat dead horses in economics because dead horses have an unfortunate way of coming back to life.

Comments

[Neel]

"Economics should be a passion and an obsession, not merely a "job" if you hope to make progress in understanding the world. Respect the professors and books that turned you on to the economic way of thinking, even if you believe you have now become a more sophisticated analyst of the social world."

A great passage!

[Pearl]

Very good post.

[Joe Salerno]

I have to agree with Pete Leeson and Dan Klein in this discussion. Pete Boettke does not adequately meet their objections. If one's goal is a successful career at a top, or even mid-tier, government-funded research university, then the habits and inclinations they enumerate are indeed "vices to be avoided." I would add a twelth vice to be avoided at all costs: characterizing oneself as an Austrian economist. The contemporary modal mainstream economist neither knows nor cares what an "Austrian economist" is. You do yourself no favors by self-reference in terms of any school of thought; it will only muddy the waters, mark you as an eccentric, and not improve your chances at landing a job at a top forty research university. I gently chide Pete Leeson who seems to have lapsed into precisely this vice by referring to his "young Austrian students" in his post on "10 Vices to Be Avoided by Austrians."

[Peter T Leeson]

Joe,

I'm glad you liked the 10 vices post. But my point was not to say "avoid these vices because they will harm your professional career" (thought this may be an additional reason to avoid them).

My point was to say "avoid these vices if you want Austrian economics to progress as a research program and to improve our understanding of political economy."

As I think you know, I certainly don't want to jettison Austrian economics. In fact, nothing could be further from what I want. My desire is to encourage research in Austrian economics that moves Austrian economics forward (in my humble opinion, of course) and in doing so contributes to our understanding of the world. This is what the vices were about.

I have always called myself an Austrian economist, and I don't plan to stop calling myself this anytime soon. Likewise, I encourage my students to call themselves Austrians if in fact they believe the questions they are asking are inspired by this tradition (which, hopefully, they are).

I hope that clarifies my post somewhat.

[Pearl]

Dear Mr Leeson,

I'm glad you posted this clarification (your response to Dr. Salerno).

[Rafe Champion]

Whatever it is called, there is a body of economic and social thought that is unique and different due to a mix of themes that can be traced to Menger and come to us through the usual suspects cited by Pete Boettke. These include methodological individualism, the origin of social institutions as the unintended consequences of human action, the salience of dynamic competition and entrepreneurial innovation in the marketplace, the subjective theory of value, recognition of the time factor in social and economic processes, and the uncertainty of human knowledge. It will be helpful to find an alternative to doctrinaire a priorism in the core program because that is the major impediment to acceptance by other schools of thought.

This is not recent news but it should be significant that Mark Blaug did a 180 on his attitude to the Austrian approach (though with reservations about some aspects of Mises). http://catallaxyfiles.com/?p=2328

There is a need for a two-pronged attack, and this is clearly happening already: one at the level of the philosophy and methodology, the other on practical problems. The first will ensure that people who are alert to these issues cannot in all conscience keep on doing the kind of formalism, aggregate enalysis and model building that they are doing at present. The second line of work will reveal the beauty and power, the problem-solving capacity, the depth and the coherence of the alternative approach to economics, sociology and political economy in the large (that is, economics re-united with the other social sciences and cultural studies).

[[email protected]]

For Prof. Champion:

10. Stick a fork in the "philosophy talk."

You are not a philosopher. Your reader can tell this. You tend to find philosophical subjects, such as the philosophy of science, especially interesting. This is fine. But you are not going to make a major breakthrough on the epistemological status of economics like you think you are. The sooner you recognize this and devote your time to working on areas where you might have an impact the better.

[Carl]

I think in the parlance of our times, Leeson just got owned by Dr. Salerno.

[Joe Salerno]

Pete L., with all due respect, I have one minor objection to your response, which may be a result of my own confusion. Why is an Austrian one who believes "the questions [he is] asking are inspired by this tradition." It seems to me that all "mundane" economists (to use Peter Klein's felicitous term) interested in how the real economy works ask and try to answer the very same questions, but depending on their doctrinal orientation, their answers are different. Boehm-Bawerk inspired by Marx asked what determines the value of a good. Does that make Boehm-Bawerk a Marxian or Marx a proto- Austrian? Keynes, Rothbard, Friedman/Schwartz and sundry others all asked: "What caused the Great Depression?" and came away with radically different answers. What unified tradition were they part of? Hayek and Knight questioned whether capital was automatically and perpetually self-renewing and the former argued that the latter's answer was pure "mythology'? Galileo as well as his ecclesiastical critics queried whether it was the earth or the sun that moved. Were they all part of the same scientific tradition? Looking back over intellectual history, doesn't it seem that it is the answers given and not the questions asked that defined one as a member of one school or another? Can you come up with any significant question that Austrians ask that non-Austrian economists are not at least interested in?

[Peter T Leeson]

Joe,

Perhaps being inspired by the Austrian tradition does not fully define "being Austrian." Though, as I note in vice #11, I am not sure what the "correct" definition of an Austrian is. More importnatly, even if there is a "correct" definition, I am not sure why it matters.

Was Rothbard an Austrian? His answer on the epitemological status of economics differed somewhat from Mises' answer. Is Kirzner an Austrian? His answer to some questions regarding entrepreneurship differ from Lachmann. Is L. White an Austrian? He differs from Rothbard on the answer to whether or not fractional reserve banking is desirable. Is Hayek an Austrian? His answer to money and banking questions differ from both Robthbard and White. Is Bob Murphy an Austrian? His answer on issues of time preference differs from Boehm-Bawerk's. I could go on, but I think my point is clear.

It seems that if we want to define an Austrian by his answers, it is not possible to define all of the economists listed above as Austrians. They have different answers on the same questions.

I raise this fact to highlight two items. First, the problem of defining an Austrian economist by a specific set of answers. Second, who cares whether or not the economists listed above conform to an arbitrary definition of "Austrianism?"

All of the authors listed above have important insights. Further, I would call all of them Austrian. But what I would call them matters far less than the fact that they all have important insights.

I'm simply suggesting, let's focus more on the insights and less on whether or not person X is "truly Austrian," which seems to me to be an unproductive and ultimately unanswerable line of inquiry.

[David]

Leeson, throw the baby out with the bath water already and give back your dues to the Society for the Development of Austrian Economics.

By your definition Schmoller won the debate and we can go back to the historical school. We should all get over subjectivism and forget Karl Popper's and others critique of historicism.

I can appreciate the fact that you want to be taken seriously by the mainstream, but they are playing a different game than austrians so sooner or later you will have to take sides. Choose the side of truth and try to educate people on that basis including capital theory, history of economic thought, and subjectivism et al.

[Joe Salerno]

Pete:

With your last post I believe our positions have moved substantially closer together. You concede that asking questions inspired by the Austrian tradition does not necessarily mark one as an Austrian. You also express doubt about "what the "correct" definition of an Austrian is" and "why it matters." But then this seems to me to be inconsistent with your participation in a website entitled "The Austrian Economists" and the tenacity with which you cling to the term as a self-description in your previous comment. It also clashes with the advice which you say you give to your students to call themselvses Austrians. You also suggest that "whether or not person X is "truly Austrian," . . . seems . . . to be an unproductive and ultimately unanswerable line of inquiry." Here I agree with you completely, but maybe not fo the same reasons. Scientific terminology and labeling is purely conventional (or "spontaneous," if you will). It is not a matter of "truth" or "falsehood" but of semantic expediency and clarity. It is not a topic for argumentation and scientific discourse but a means of clarifying and resolving arguments and allowing the pursuit of truth to proceed. There has never been any arguments that I know of over who is or is not a monetarist or Keynesian or supply-sider. This is not because there exists some "true" definition of these terms, but because these terms are conventions that command general assent. So "Galbraith is not a monetarist but an institutionalist" should not be a controversial proposition but a conventional, common sensical, rough-and-ready method of describing Galbraith's views. I am only pleading with you to use the term Austrian in the same mundane and common sense way. I think you sow confusion and do violence to the way in which the term "Austrian" has been conventionally understood for over a century to apply it to eclectic public choice/game theoretic/new institutional exercises in economic history. By clinging to such conventionally ill-fitting and inappropriate labels you also undervalue your own original contributions to this new research agenda that you are pioneering.

[Geoffrey Lea]

"I think you [Leeson] sow confusion and do violence to the way in which the term "Austrian" has been conventionally understood for over a century to apply it to eclectic public choice/game theoretic/new institutional exercises in economic history."

Several things about this comment strike me. The first is that there is an explicit preference for the status quo, "the way [it]... has been conventionally understood for over a century." Does this imply that words should not shift in meaning? Words do shift in meaning, and an obvious example is the use of the word "liberal" in American English. Whether or not we--and defining who "we" is in this situation is also a sticky question--like the final outcome, words do change meaning in the way people use them. In light of this, I submit that the meaning of "Austrian" is/can/may be changing, and that is not something to automatically fear and fight against. It is reasonable to admit possibility that Leeson's attempt to broaden the term Austrian from its conventional meaning could be a huge boon to our movement. It might not be. Admitting that, however, begs the question that Leeson is a clear departure from the Austrian pedigree. Whether or not he is, and whether or not doing so influences the meaning of "Austrian" for woe or weal is depends on the nature of Leeson's work. And this is the second thing that jumps out at me from Salerno's statement.

Salerno cites Leeson's "eclectic public choice/game theoretic/new institutional exercises in economic history." He does not, however, demonstrate how any of these is explicitly non-Austrian, or even displays an unredeemable non-Austrianism. Since there is clearly non-Austrian public choice, game theory, and new institutionalist economic history done with non-Austrian presumptions and assumptions, how these tools are used determine the Austrianism of their application. For Leeson, the application of these tools is directly in the tradition of Menger and Mises. What makes them such? Most of Leeson's work is deeply steeped in Austrian economics because his economics is steeped in praxeology, genetic-causal explanations, market process explanations, and the tradition of institutional analysis going all the way back to Menger. There are people better qualified than I to discuss the extent to which Leeson's work fits this description, but to me these qualities are readily apparent in his work.

Perhaps Salerno and Leeson have differing opinions over what Austrian should be, since both men concede that we can't neatly describe what it is. I agree with the thrust of that argument, but I think we can do better. What does remain is that Austrian economics is a mosaic, not a monolith. What characterizes someone's work as “Austrian” isn't something we measure with a litmus test. What defines work as “Austrian” has to be found not only in the types of questions asked, but also the methods employed in answering them, and lastly the criteria for what qualifies as a satisfactory answer to those questions. Is there another standard?

[Steven Horwitz]

Geoff's last comment is worth noting. As I see the evolution of what self-described Austrians are doing, I see more attempts to make use of the tools of other approaches that share commonalities with AE but are still distinct (e.g. Public Choice and NIE especially). But I also see those attempts as not just mindlessly "importing" those approaches, but using and refashioning them in ways that render them more Austrian. Leeson's "bandits" paper is a good example of this. In my own recent work on the family, I'd like to think I'm doing the same.

The point is that what counts as "Austrian" will always have fluidity to it, and it always has. To believe there is some Platonic Idea of "Austrian", even as just a naming convention, seems to me to be antithetical to the tradition. Yes, there remains a core, but that core can be applied in new and creative ways and absorb and transform contributions from other approaches.

If we don't do that, we will not continue to be a progressive research program.

[[email protected]]

By Geoffrey Lea's reasoning, Shleifer and his co-authors are the leading contemporary Austrians? Sounds good to me. And that is surely healthy for all of us.

[xyz]

Austrian rule 14: never say genetic-causal (or praxeology)

Could you imagine Shleifer or Acemoglu using those terms?

[Geoffrey Lea]

xyz-

I'm not sure whether to take your comment sarcastically or not. Given your second comment, though, I'm going to presume that it's not sarcastic and respond to it that way. First, please allow me to caveat my statements by saying that I'm by no means an expert on Schleifer's entire cv, so this reflects my estimation from the exposure I have had.

There is a lot for Austrians--particularly those interested in political economy--to respect and value in Schleifer's work. By my criteria of questions, method, and answers, he definitely asks interesting questions and he tends to give pretty good answers. Where I think Schleifer would not be categorized as Austrian-esque is his method. He works mostly in equilibrium model-building and doesn't employ process style explanations in the way that Leeson, Boettke, Coyne (consider his forthcoming book _After War_), or the other Austrians doing political economy have. If you're familiar at all with the work of Richard Wagner, I would say that Schleifer isn't really "Austrian" in his work in the same way that Wagner is. For the two of them, it's mostly a methodological point, more than method employed and questions or answers.

To summarize, I think what has to define "Austrian" work is Austrian-inspired methodological positions, not necessarily based on the methods one chooses. These methodological positions will determine what makes interesting empirical puzzles (something Austrians and Schleifer agree on), what constitutes suitable scientific explanations of those puzzles, what methods are best for empirically exploring those explanations as well as collecting and analyzing evidence, and what criteria to use for evaluating the interplay of puzzle, explanation, and evidence. On these grounds, I don't think Schleifer would consider himself "Austrian." I would be glad to hear anyone else's thoughts on Schleifer and the Austrians, but this is my take on it in light of your question.

As my previous post indicated, I don't support an Austrian litmus test. Nevertheless, I think what defines the school and its adherents is a set of methodological presuppositions that inform the work they do.

[xyz]

As Geoffrey Lea notes, my remark was not meant to be sarcastic. Is it possible to avoid equilibrium model building (whether the model is explicit or implicit)? Austrian process explanations banish false trades, etc (all the same stuff the Walrasian model banishes) by analytical fiat.)

I think the questions and answers are more important than the method.

[Joe Salerno]

Steve

I will say it again: scientific terminology and labeling are arbitrary and conventional. They are a matter of expediency, common sense, rhetorical felicity and so on. they are also path dependent. They serve science and do not bind it. There is no institutionalist, monetarist or Austrian existing as an unchanging Platonic ideal form. As a science progesses and its semantic needs change, its vocabulary is also transformed as the meaning of some terms change and new terms are introduced.

Let me give you an example. I was not only present at South Royalton but also at the founding conference of Post-Keynesian economics organized by my macro professor Paul Davidson at Rutgers in the mid-1970's. The Post-Keynesians, with much justificiation, claimed that they were Keynes's true heirs and that Samuelson, Tobin et al. were "bastard Keynesians" (in Joan Robinson's terminology) whose "neoclassical synthesis" represented a bastardization of Keynes's views. Anyway, the Post-Keynesians, in a testament to their common sense, recognized that, given a long-existing and entrenched convention, they could not possibly call themselves "Keynesians" without risking a conflation of their own views with those of the bastard Keynesians. So they introduced the new term "Post-Keynesian" into doctrinal vocabulary, rahter than trying fruitlessly to appropriate a term which might have better fit them if scientific vocabulary and usage were not path dependent.

My point in all this is that the Boettkes and Leesons are in the same boat as the Post-Keynesians. Despite their protestations to the contrary, their research program is in fundamental conflict with that of many who have long called themselves Austrians--those who still pursue, contra Leeson's preachments, research in capital theory, the socialist calculation etc. So, instead of continually preaching to the rest of us, why not allow water to run its course down hill and adopt another term. Given the eclectic nature and anti-foundationalist orientation of the Boettke-Leeson research program and with a nod to their Austrian influences, I suggest the term "Post-Austrian" or "Post-Modernist Austrian." the first term is more euphonious, the second more descriptive.

Joe Salerno

[liberty]

I have to say that I disagree with I think every one of the ten vices, or rather I see them all as virtues.

Most economists have models stuck in the past - models which are static or which they call dynamic but which cannot model dynamic behavior - and yet have not learned from the past.

Empirical data is critical, I agree wholeheartedly that "Students of society should look "out the window" not necessarily just to the "blackboard" to find the problems and puzzles to work on. " -- not only to find puzzles but to find answers, to compare theory with reality and to discern what is important. But because of this we must go back to the fundamental questions of socialist calculation and to Mises and Hayek and core ideas of Austrian theory.

Why? Because it is quite obvious that economics and society have not advanced past some of these fundamentals: universal healthcare, transition economies, government employment programs, price controls, anti-trust. The same fundamental questions about central control of the economy and intervention in a complex system (Hayek the founding economist of Complex Systems Theory) and the problem of information loss due to rigidity of prices -- they are all still as relevant as ever.

Now we can combine disciplines (CAS theory, public choice, Austrian economics) and use new technologies - we have the computing power to model complete economies and to number crunch 75 years of empirical experimentation, for example.

And most economists will not only ignore these areas within the field of economics but they will remain ignorant of the lessons learned. Just as economics textbooks are a decade behind economists, I think most economists are at least that far behind society.

[Steven Horwitz]

Let me try one more time. I read Pete L's advice about not "redoing" capital theory, the calc debate, etc. as saying "trying to revisit those issues *in and of themselves* is not the way to advance a research program.

Instead, we should be *using* those insights every single day to try to better explain the world around us, and the world that came before us, and to argue for, in the realm of policy, what the next world should look like.

His point was not, I don't believe, that traditional Austrian ideas should be forsaken. His point was to move away (on the margin) from attempting to be *producers* of new theoretical insights to being *consumers* of those insights to be producers of better applied economics. Explaining the world better is what will move Austrian economics forward, not the missing volume of Pure Theory of Capital.

Of course there will be some whose comparative advantage is in theory, but as Pete and others have pointed out, the vast majority of us are not going to write the next *Human Action* nor are we going to revolutionize the philosophy of science. What we *can* do, if only we get out and do it, is do better economic history and do better policy analysis by using Austrian (and other) insights.

Put differently, we should be working at stages of intellectual production that are closer to the consumer good.

[[email protected]]

Since I accidentally slighted Prof Horwitz in an earlier post, I'll just say that I just read a chapter in one of his books, Chapter is on the pre-fed banking panics, spontaneous order, & regulatory chaos. This is tour de force economic history using austrian insights.

[[email protected]]

I note that the book I mention was a phd thesis written under the late Don C. Lavoie. Am I right in thinking that Lavoie called for something similar to Leeson (use austrian insights to write quality economic history) back in the early 90's?

[liberty]

Point taken. However, and maybe I am just a theory-person, but I see a gaping hole in economic theory that ought to be filled by the lessons learned from socialism and which ought to be addressed with the theories of that area (socialist calculation, complexity, Austrian theory etc.)

Meanwhile everyone and his brother writes empirical papers on the welfare state. Not that we shouldn't continue to do so, but to support the approach and models that can allow us to branch out where empirical data does not exist we need theory. And, if there is no ban on living in the past we can also use data from actual existing socialist countries.

I simply feel like this is bad advice because I think that it is already the trend. There are already too few economists willing to continue to learn from recent history. There are already too many detail-oriented papers, shunning big ideas, theories and questions in favor of realistic bite-size empirical policy questions. You can get your Ivy League Ph.D. nowadays with 3 little journal papers. Whatever happened to big questions and the dissertation as a publishable book?

[Steven Horwitz]

Thanks xyz. Glad to know someone still appreciates the classics. ;)

And yes, you are right: When Pete, Dave P. and I were at GMU as grad students in the late 80s, Don was really emphasizing doing economic history using Austrian theoretical insights. That chapter is from my dissertation, and both Pete's and Dave's were works heavily involving economic history as well. My first real publication in a real journal was a piece in the SEJ on the Panic of 1907 (1990). So yes, as Pete notes in his clarifying post tonight, Don deserves a lot of the credit (or blame in some people's eyes) for the directions in AE that have culminated in what I see as the excellent work of the "Boettke Boys."

[AE]

Salerno's last comment should serve as fair warning for the rest of us. The SDAE sessions this year will feature his patented Austrian Detectors at the door. If you don't fit Uncle Joe's definition of an Austrian, you won't be allowed admission.

[Daniel J. D'Amico]

Professor Salerno,

I'm confused by what you by a "fundamental conflict" between Boettke and Leeson's approach and how you see traditional Austrian theory. Could you explain this more fully?

I have a rather straight forward question. If I am an eager and motivated Austrian student, what would be a good dissertation topic? Mises offered dozens of suggestions
(http://www.mises.org/pdf/misesideas.pdf), that don't seem in "fundamental conflict" to Leeson or Boettke's general points; political economy and economic history are fruitful and needed areas for applied Austrian insight.

For example Mises says, "Good job for a thesis is to analyze a bad plan. This is the chief job of economists -- to analyze bad plans." The majority of the other ideas are just empirical puzzles in history that need more attention. Mises even suggests, "A history of shoes and stockings." It seems that in the majority of these entries there is some contextual reference like "in the 18th or 17th century," or how does a particular group "think an economic principle works." Looking at this document it seems clear that Mises' own vision was a multi-front research program.

Why would political economy and or economic history not be core parts of Austrian economics proper. Huge portions of Mises's, Hayek's, and Rothbard's writings were examples of this type of work.

[ChrisB]

Re. Joe Salerno's remark about "Anti-foundationalism": This term need not mean any more than an understanding that theory is underdetermined by data, that observation is in part shaped by theory, or similar. This is in fact the understanding shared by almost all contemporary philosophers (or at least by pretty much all those working in the fields of epistemology and methodology). I don't see why an approach to economics that takes seriously the implications of this understanding for social science need be "post-modernist." "Post-modernist" generally means a bit more than this. And beyond the work of one or two people involved in this discussion or mentioned here, I doubt the term "anti-foundationalist" is even applicable, as it hardly has any meaning outside of a methodological or philosophical context. I doubt most people here deal directly with that kind of stuff: Didn't all the talk of e.g. hermeneutics in AE kind of fade over the last few years? The battle against the logical empiricists that the Mises Institute and those connected with it seem to keep fighting was won a long time ago--but not by Mises and certainly not by his flavor of armchair rationalism.

[Martirosso]

Greetings to everybody! I've found austrianeconomists.typepad.com in Google nad I like this forumm!
I'm new here but hope we'll have great discussions in future!
You can call me Martirosso :)