by Gene Callahan
I’ve been asked that question several times (often via e-mail from some reader of an online article of mine.) Well, Monday, at our colloquium, we discussed a paper presented by the Italian economist Giandomenica Becchio on the economic (and ethical) work of Karl Menger, the son of the founding Austrian economist Carl Menger. She had several remarks in her paper that caught my fancy. She noted that Karl, in his advocacy of mathematical economics, saw himself as forwarding his father’s program of seeking “exact economic laws.” She quoted Oskar Morgenstern saying that “the axiomatic method must be applied to economics with no regard to the realism of hypotheses” — which struck me as a modified version of Mises’s “a priorism.’ And she asserted that those efforts were foundational to the newly emerging mathematical economics. These remarks coalesced with my memories of Israel Kirzner’s lectures on the history of the Austrian School, where he would note that, for instance, the reason that Fritz Machlup, by the 1950s, no longer called himself “an Austrian economist” was because he felt that the Austrians had won, and by then almost all economists were Austrians.
What resulted from that coalescence is, as of the time of my posting, still only an intuition. Nevertheless, I here put forward a Popperian “bold conjecture,” without any pretense that I have (as of yet) done the research necessary to defend it adequately: the generation of Austrians following Mises, influenced as they were by the logical positivist thought current in Vienna at that time, did not see themselves as breaking with their tradition, but only as giving that tradition its “proper,” mathematical foundation. If that conjecture is correct, then the answer to the question, “Has anyone tried to formalize Austrian Economics?” is, “Yes — and the result is called ‘Neoclassical Economics.'”