There is, quite simply, a lot here to comment on, but I will limit myself to these remarks:
(1) Kirzner sees Menger’s immediate successors as developing a “static” form of subjectivism. As Lachmann would later say, the “subjectivist” revolution was not complete until subjectivism was applied to expectations. Kirzner sees “dynamic” subjectivism as the more advanced from that replaced the early Austrian school (1871-1930s).
(2) Kirzner notes that by the 1940s virtually everyone thought that the Austrian tradition was dead. Indeed, Kirzner says it was an embarrassment to admit he was studying under Mises in the 1940s (from 10.20).
(3) Eugen von Böhm-Bawerk and Friedrich von Wieser were not students of Carl Menger (1840–1921), but colleagues. Kirzner notes the conflict between the early Austrian school and the German Historical School, over economic method (the “Methodenstreit” or “debate over methods”). The term “Austrian school” was first coined by members of the German Historical School as a derogatory term for their enemies in Vienna.
(4) A serious shortcoming of this talk is its failure to examine the progressive liberal and even Fabian socialist sympathies amongst some of the early Austrian economics, such as Eugen von Philippovich, Friedrich von Wieser, the early Hayek, and Richard von Strigl. For that, see here:“Why are There No Austrian Socialists?,” June 3, 2011.(5) Kirzner speaks on the role of Lachmann (from 29.37), and how he witnessed the rise and fall of Hayek in the UK. Kirzner is mistaken in saying that when Lachmann came to London in 1933 “everybody was a Hayekian.” What Lachmann said was this:“When I arrived at the London School of Economics in the spring of 1933, all important economists there were Hayekians. At the end of the decade Hayek was a rather lonely figure, even though he remained editor of Economica throughout the war.” (Lachmann 1994: 160).That is to say, it was only at the LSE that “all important economists there were Hayekians.” That is quite a big difference.
(6) The merits of subjectivism have their limits, however. For example, just because economic “value” might be defined as the subjective pleasure, utility or satisfaction we derive from commodities, this does not mean prices are therefore all subjective. It is necessary to distinguish “price theory” from “value theory.” The price of a commodity and its value are two different things. It is clear that the normal price of many newly produced commodities is related to the cost of production. For what business could offer a long run, standard price for its commodities below its costs of production? There is no contradiction in also saying that whatever economic “value” (that is, utility or satisfaction) that a commodity has to any individual human being is subjective.
(7) From 52.00, Kirzner makes a very important point: he cites the view of Fritz Machlup (1902–1983) that everything that was important in the Austrian school of the 1920s had been successfully absorbed into the neoclassical mainstream. Kirzner agrees with this. Thus Machlup did not even find it necessary to identify himself as an “Austrian,” because he saw the Austrian tradition as having been successfully absorbed. When Machlup was asked to list the most important tenets of the Austrian school, he produced this list:(1) methodological individualism;Kirzner argues that all of these are part of the neoclassical mainstream now.
(2) methodological subjectivism;
(4) opportunity cost;
(5) time structure of production;
(6) dominance of utility.
The only two features that Kirzner thinks are unique in modern, post-1950 Austrian economics not taken into account by the mainstream are (1) that markets are processes of learning and discovery, and (2) that choice is taken in the context of radical uncertainty.
(8) For reference, here is a list of the early Austrian economics:Carl Menger 1840–1921
First Generation of the Austrian School
Eugen von Böhm-Bawerk 1851–1914
Friedrich von Wieser 1851–1926
Eugen von Philippovich 1858–1917
Second Generation of the Austrian School
Ludwig von Mises 1881–1973
Joseph Schumpeter 1883–1950 (who became a neoclassical)
Karl Schlesinger 1889–1938
Hans Mayer 1879–1955, professor at Vienna
Richard von Strigl 1891–1942
Leo Illy (Leo Shönfeld) 1888–1952
Third Generation of the Austrian School
Friedrich August von Hayek 1889–1992
Oskar Morgenstern 1902–1976
Gottfried von Haberler 1900–1995
Fritz Machlup 1902–1983
Ewald Schams 1899–1955
Paul N. Rosenstein-Rodan 1902–1985
Ludwig M. Lachmann 1906–1990
Friedrich A. Lutz 1901–1975
Vera C. Smith (Lutz)
Felix Kaufmann 1895–1949
Alfred Schütz 1899–1959, social scientist
Foreign Associates of the Austrian School
Philip H. Wicksteed 1844–1927
Knut Wicksell 1851–1926
Irving Fisher 1867–1947
William T. Smart 1853–1915
Frank A. Fetter 1863–1949
Michel Auguste Adolphe Landry 1874–1956
Herbert J. Davenport 1861–1931
Frank H. Knight 1885–1972
Lionel C. Robbins 1898–1984
John R. Hicks 1904–1989
George L. S. Shackle 1903–1992
Lachmann, L. M. 1994. Expectations and the Meaning of Institutions: Essays in Economics (ed. Don Lavoie). Routledge, London.
I would like to know what you mean by "associates". I would not put Hicks and Fisher in the same tenet as the Austrians. And about Wicksell, well, he demolished Boehm-Bawerk's theory of interest, and I would even claim that if you talk about Wicksell's criticism of Boehm-Bawerk, that would be a GREAT post.ReplyDelete
"associates" = people who were connected to, associated with the Austrians to varying degrees of significance.Delete
Perhaps Wicksell does not belong in there.
To extend point 4, another shortcoming is a lack of explanation of what Menger's classical liberalism implies. I posted on my blog a few days ago how Menger supported policy in which prevented deforestation and improved workers' conditions (in fear that if workers' conditions weren't improved, that there would be a workers rebellion which would lead to communism).ReplyDelete
On point 7, it is important to emphasize that while these things are taught in the mainstream, they do a bad job at applying what they imply about economics. For example, looking at untils vs looking at actual human action (decisions and costs) subjectively. This at least leads to certain misinterpretations and misleadings when talking about the concepts. It's almost like how neoclassicals use the concept of aggregate demand using ISLM but this leads to certain misleadings about what the concept of AD implies. Its not a perfect example but it does show how neoclassicals can misinterpret quite fundamental concepts.
4.50+ -- No, the supply-side is not what Kirzner -- in Hegelian fashion, I might add -- calls "objective". By using techniques of advertising and marketing supply conditions can be changed. If a Nike tick is put on a cheap runner is "objectively" changes in many different ways. Looking at advertising and marketing as "demand stimulation" is simply incorrect. Looked at properly Kirzner's terms blur and Austrian philosophy and economics begins to be seen for the confused metaphysical garble that it is.
10.30+ -- Yes, after the 1930s the Austrian School WAS dead as a school of economics. After this they began to construct a political program based on a metaphysical propaganda system similar to, but more advanced than, Ayn Rand's megalomaniacal project. Nobody's understanding was being "advanced" -- as Kirzner claims -- instead they were having their political aims concentrated through a metaphysical indoctrination not unlike a cult (Scientology, the Moonies etc.). This was no longer a project to construct a theory that led to a better understanding of capitalism -- and this it was no longer social science in any meaningful way. (This partly explains why Kirzner's lecture more so resembles a walk through a graveyard rather than a discussion of ideas in a modern context).
33.50+ -- Again, the production process is not completely physical (objective). And as time goes by the physical processes become less and less important. (Note that Kirzner only mentions services in passing...).
38.00+ -- His key analogy is pure sophistry. The key is not worth $1bn. The combination of the key and the chest are worth $1bn. Even in Kirzner's own terms -- which are stupid and have nothing to do with the price of consumer goods -- but even in his own terms, it is the combined price of the two goods that is $1bn. Without the chest the key is worth zero and without the key the chest is worth zero. Better to view them then as one rather than two consumer goods. That's closer to a Sraffian view rather than the sophistical nonsense that Kirzner is trying to fob off on his listeners. What he calls "subectivism" is metaphysical nonsense cooked up out of logical sophistry. It sounds good. But it means almost nothing.
47.00+ -- The "dynamic" view is more realistic. However, it is still based on the above metaphysical nonsense -- hence why Kirzner calls it "dynamic SUBJECTIVISM".
And that is the end of that. Bury it.
Actually, quick thought experiment regarding my above comment on Kirzner's key analogy (38.00+).ReplyDelete
The analogy is used to TRY to show that marginalism is rational. So, let's replace the key and the chest with two other "commodities" which have the same properties: capital and labour.
We'll call the key "capital" and the chest "labour".
Kirzner's view is that there is treasure buried within labour (the chest) but that the labourer cannot access it without capital (the key). Therefore -- and this is implicit in Kirzner's argument -- labour has to accept whatever capitalists offer. Seriously, listen to his story , this is what he thinks.
This is a metaphysical judgement however and not reality. This is a judgement passed by Kirzner to justify his supply-side political ideals.
Now, let's take a realistic view. In actual fact neither the chest (labour) nor the key (capital) are salable on their own. So, both parties have equal bargaining power vis-a-vis each other. I.e. the keyholder is just as vulnerable as the guy who owns the chest.
This is obscured by Kirzner's assumption that the possessor of the chest originally owned the key. Which is nonsense.
Anyway, when looked at through the lens of Kirzner's own crap analogy and followed through properly we don't end up at marginalism -- we end up with Sraffa!
Now, how many people have any idea what I'm ranting about? ;-)