by Mario Rizzo
Many years ago (around 1982, I think) Jerry O’Driscoll and I wrote a paper that was the basis of an American Economic Association session. The paper was called “What is Austrian Economics?” The paper gradually evolved into our book, The Economics of Time and Ignorance.
The purpose of this book was to present Austrian economics in an updated fashion. To do this we needed to do two things: (1) uncover many of the fundamental ideas implicit in the tradition but not, as of then, sufficiently elaborated or made explicit; and (2) confront Austrian ideas with recent developments in economics, both mainstream and outside of the mainstream.
We faced many initial negative criticisms of the book. I will say that I was very disappointed by some of the old-guard reaction to the book. But do not confuse “old guard” with age because some of the greatest encouragement we received was from Professor Ludwig Lachmann who well understood the necessity of going beyond what the previous generation of Austrians had bequeathed us.
Remember that for many years Austrian economics was in the wilderness and the simple preservation of the Mises-Hayek tradition was a service of tremendous value. Many of those who were would-be Austrians in the 1970s and early 1980s really knew little of the tradition. They had to learn before they could make progress within the tradition.
But this resistance was more than loyalty to a tradition. It was symptom of the discomfort many felt in going from a stagnant research program to one that is growing, stretching, evolving and making errors. The true spirit of science, as Karl Popper continually taught, is to recognize that from errors we make some of our most important discoveries. Obviously, it is not that we strive to make errors. But bold thinking will, ex post, often reveal that the scientist was wrong. But we go on.
I do remember that some commentators made fun of us and the title of the book by saying things like “ignorance of economics” or “ignorant economists.” Some of these were outside of the Austrian camp and some were inside.
I also remember my friend Peter Boettke saying some years later that Ludwig von Mises was not afraid to criticize the great Eugen von Boehm-Bawerk. So neither should we fear to criticize previous Austrians.
This is history – much of which may not be known to younger generations of Austrians.
The history has a current purpose, however. We need now to refocus on the question: Just what is Austrian economics?
I raise this question because it came up at a recent colloquium at NYU during which my forthcoming New Palgrave article, “Austrian Economics: Recent Work” was discussed.
A comment was made that I did not tell the reader what Austrian economics is beyond the listing of some themes. The highly interrelated themes I listed are:
(1) the subjective, yet socially embedded, quality of human decision making; (2) the individual’s perception of the passage of time (‘real time’); (3) the radical uncertainty of expectations; (4) the decentralization of explicit and tacit knowledge in society; (5) the dynamic market processes generated by individual action, especially entrepreneurship; (6) the function of the price system in transmitting knowledge; (7) the supplementary role of cultural norms and other cultural products (‘institutions’) in conveying knowledge; and (8) the spontaneous – that is, not centrally directed – evolution of social institutions.
A list of themes is not definition. But to define a school of thought in precise terms is really inappropriate – almost a category mistake, I should think.
A framework for scientific thinking must be a loosely defined structure. It cannot predetermine what will be learned within that structure. It must give guidance but not rigid guidance. Its principles must be open to change but, of course, not all at once — and not in just any direction. Yet nothing is sacred. Those looking for intellectual comfort must look elsewhere.
Even the distinction among schools is a temporary – perhaps a disequilibrium phenomenon. An objection was raised during the colloquium discussion that other schools of thought would subscribe to some or many of the themes. Yes, that was one of the messages of The Economics of Time and Ignorance. In the time that has passed since the first publication of the book (1985) some of the overlap has widened across more “schools” while some distinctions among approaches have grown sharper.
The issues that separated Austrians from other schools of thought in previous decades cannot be the same today. Neoclassical economics has developed. It has attempted to capture with its ambit many of the previously uniquely Austrian themes. What separates approaches needs to be continually reassessed. No intellectual approach is standing still. The best work in Austrian economics during the past thirty-five years or so should be a surprise to any Rip van Winkle who fell asleep at the beginning of the Austrian revival.
So a viable Austrian economics must be only loosely conceived or else it will cease to function as a vehicle for the growth of knowledge.
Postscript: My article will be posted at the New Palgrave Online site soon. Here are the final page proofs Austrian Economics: Recent Work