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post-autistic
economics review |
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issue 18
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Austrian
Economics and the Post-Autistic Economics Challenge
Peter Wynarczyk (Northumbria University, UK) © Copyright 2003 Peter Wynarczyk 1 Introduction The post-autistic challenge to orthodox economics echoes criticisms that have been made by non-mainstream economists ever since entrenched conventional wisdoms were established within the discipline. They represent variations on standard heterodox themes, albeit largely originating from refreshingly grass-root student sources. The following short article is sympathetic towards a large part of the post-autistic agenda but remains wary of several issues located at the core of that agenda. In addition, it suggests that the Austrian research tradition has made a sustained and constructive case (over a prolonged period of time) against the prevailing mainstream orthodoxies, increased and widened knowledge of which would serve to enhance and enrich the post-autistic challenge itself. Increased dialogue between these two parties, as well as with all other heterodox elements along with orthodoxy, can only serve to improve matters and actualise the promise of the intellectual gains from trading ideas embedded within the commitment to pluralism within the discipline as a whole. 2 The Post-Autistic Agenda The post-autistic challenge has crystallised around several key problematic elements associated with economics as a discipline, the hegemony of neoclassical ideas, and the teaching content and delivery of the subject within university academic circles. Taking my cue from the grass-root concerns of students (and some of their teachers) in France, Cambridge UK, and Kansas City, and relayed by this review and its earlier incarnation, it can be argued that the post-autistic agenda highlights contra orthodoxy: 1 the need for the recognised inclusion of a plurality of approaches and methods within economics, respecting the history of ideas, fostering debate and critical thinking, alongside inter and intra disciplinary dialogue, diversity and openness; 2 the need for the triumph of real over imaginary constructs; 3 the removal of formalism for formalism’s sake, especially with regard to the preoccupation and over-application of mathematics (usually as an end in itself) and the heavy dosage of theory largely unattached to any empirical base; 4 the adoption of richer models of human agency and institutional change which seriously consider such factors as culture and history as significant active ingredients in any explanatory framework; I view these four points as the core of the post-autistic agenda and the basis of its critique of a detached, monopolistic and hegemonic neoclassical orthodoxy. Indeed, dissatisfaction is largely captured by points 1 and 2; with points 3 and 4 as a further teasing out of the consequences of point 2 and the application of point 1. In what briefly follows I will suggest that Austrian economics anticipates and already addresses most of these concerns. Over its not inconsiderable life cycle it has persistently challenged the restrictive and overly limited ‘what is’ approach of mainstream thinking and offered a constructive glimpse of the possible, of ‘what can be’. To its credit, and unlike a number of its heterodox rivals, it has been more focused on highlighting and demonstrating the inadequacies and shortcomings in neoclassicalism and endeavouring to overcome them than in dwelling on the alleged irrelevancies without attempting to sufficiently advance beyond them. 3 Austrian Anticipations of
the Challenge and Their Answers Almost all of the post-autistic critique of orthodoxy outlined above was raised and is largely being answered by the Austrian research tradition. This may be surprising to those who have tried to reduce Austrian economics to a subset of neoclassicalism. I am not suggesting that Austrian economics was alone in anticipating the post-autistic critique, a pitch can, and has, already been made by others for institutionalism, but rather that it would be a mistake to believe that the target of orthodoxy includes Austrian economics itself – it cannot. Modern Austrian economics increasingly presents itself much more as an alternative to orthodoxy rather than a supplement. Given Austrian arguments against simplistic aggregation it should come as no surprise to find that the research tradition has always contained (and been willing to sustain) a diversity of views. Currently there are two opposing but dominant wings within Austrianism represented by Lachmann and Kirzner; with the former advancing a more radical form of dynamic subjectivism to replace mainstream ‘equilibrium always’ theorising, and the latter an entrepreneurial and process orientated but ‘equilibrium tending’ approach as a bolt-on to orthodoxy. In recent years there has been noticeable increased intellectual convergence and reconciliation between these two positions, entertaining the possibility of both dis-equilibrating and equilibrating activity allowing for both change and order. Since the 1970s the Austrians have been largely engaged in rediscovering their Mengerian insights which, when allied to distinctive Misesian and Hayekian contributions, raises serious questions, at the ontological and conceptual level, against standard economics. It also suggests that the Austrian research tradition today, taken as a whole, is as far removed from mainstream economics as it has ever been in its history. Its commitment to the construction of ‘better theory’ addressing issues largely neglected but epistemically threatening to orthodoxy means that incorporation into the modern neoclassical fold is neither wanted nor warranted. Given this background, it is now time to consider how Austrian economics anticipated, largely answered, and remains less vulnerable to attack from the core points of the post-autistic agenda outlined above. Each point will be examined in turn in order to explore the merits, similarities and possible differences between Austrian economics and the post-autistic challenge. 3.1 Pluralism and Dialogue The Austrian research tradition has demonstrated throughout its history a willingness to entertain diversity and embrace debate. It has engaged with the mainstream and the heterodox in equal measure and on an equal footing. Austrianism has challenged neo-Walrasian economics (captured in the planning debate concerned with the possibility of economic calculation under socialism) and Marshallian economics (most notably the debate over the nature of economic crisis). In addition, it had an infamous ‘methodenstreit’ with German historicism, made repeated attempts to ‘close’ Marxism, and endeavoured to undermine Keynesianism. It continues to engage with the largely Chicago-based mainstream and with the heterodox elements of Post-Keynesian and Institutional economics. I believe that this is all to Austrian economics credit and reflects its commitment to pluralism and its belief in the competition of ideas. Austrians appear to have taken John Stuart Mill’s strictures On Liberty seriously. His text advances the pluralist case by advocating the maintenance of rivalry between different perspectives on the grounds that this leads to pronounced benefits. Mill believed that dialogue between alternative frameworks was both a defence against stifling dogma and a positive sum gain to all parties concerned. He argued that the existence of rival traditions provided a necessary safeguard against intellectual slavery and complacency by keeping us on our toes and alert to improvement. This would be further enhanced if we welcomed criticism from without and endeavoured to understand our opponents from within. This potent argument for pluralism is further buttressed by Austrian insights on the dangers of monopoly provision and state socialism where the absence of genuine rivalrous competition will prevent innovation of products and ideas that may prove to be of far greater benefit than those currently employed (hence preventing the market to act as a discovery procedure). Deeply entrenched vested interests will endeavour to stifle any enterprise and developments, no matter how meritorious, which threaten and undermine its own. It is useful to remain mindful here of Schumpeter’s insight on ‘creative destruction’ and the need for the new to promote progress. Another notable feature of Austrian economics has been its continued interest in the history of the discipline in general and its own history in particular. Hayek, Robbins, and Schumpeter especially stand out here with regard to their seminal contributions to economic historiography. Given orthodoxy’s increasing neglect of the past (since anything of value is assumed to be adequately contained in the present stock of neoclassical knowledge) these and other accounts of pioneering efforts go largely unread. Mainstream texts are now usually presented as sterile, complete, polished, and fully-formed accounts of orthodox thinking at its current destination without adequate discussion of the interesting way it got there. In contrast, Austrian economics continues to have a fascination and respect for its own history (and that of the wider discipline). Austrian economists remain firmly wedded to the central texts which have driven their research tradition from Menger onwards as sources of inspiration and direction. By accepting the need to ‘rediscover’ Menger or ‘reinterpret’ the economic calculation debate, they are rejecting the orthodox stance already alluded to that the present by necessity contains all of the useful past. A key exponent of the Austrian treatment of historiography who epitomises this position most forcibly is Lachmann. He adopts a critical but humane stance in his treatment of intellectual forebears by accepting that the ideas they advanced were neither the final word on the matter (without limitations or open to challenge from alternative explanations) nor inherently exhaustive or fully-developed (in the sense of being articulated to complete closure). Lachmann is asking us to be alert to the possibilities of re-examining the ideas of the past in the hope that they might further illuminate the present or a problem of which their originator may have been unaware. He has drawn attention to the problem of the ‘storage of ideas’ – the carrying over of intellectual capital that has not been fully utilised from one generation to the next - and the need to ‘salvage’ such ideas when lost. In his own work he has endeavoured to re-examine the legacy of Max Weber, to reconcile aspects of Keynes and the Austrians, and to explore the striking similarities between the outlooks of Mises and Shackle. 3.2 Real Over Imaginary
Constructs Orthodox economics continues to allocate too many intellectual resources to fictions and imaginary constructs detached from reality. Its comparative success within the limited and restrictive domain it has set itself cannot be denied but it has been slow to move persuasively beyond this insulated fabled terrain and engage meaningfully with real world matters. Whilst some underlying assumptions may be relaxed and more realistic applications pursued, especially at the margins, its core remains largely immunised from any degree of external epistemic threat. The Austrian research tradition has been engaged in a persistent and sustained assault on the methodological, ontological, conceptual, and theoretical limitations and shortcomings of mainstream economics ever since its inception. Much of their critique has been directed at the lack of realistic assumptions, over-simplistic argument, and models that continue to capture at best surface phenomena rather than essential characteristics. Several examples drawn from the Austrian research tradition serve to attest to these claims: Menger’s rich presentation of inherently flawed human agency remains at odds with the clinical rational choice maximisation model; Mises’ recognition that orthodoxy dwells on fictions such as the imaginary constructions of equilibrium and neutral money rather than market process and money having real effects; Hayek’s demonstration of mainstream economics concentration on the static ‘pure logic of choice’ framework and its fatal neglect of knowledge and informational deficiencies; and finally, Lachmann’s vibrant and intricate picture of capital and its structure illuminates an area of economics that continues to be largely shrouded in darkness. Perhaps the best example of the Austrian case against orthodoxy is captured in their ‘fundamentalist revolution’ – the so-called economic calculation debate. As modern Austrians have shown in their reappraisal of the significance of that debate, economic calculation demonstrated more than the impossibility of socialism, it showed the wide gulf between the rediscovery of the Mengerian vision by Mises and Hayek and the neoclassical Walrasian vision employed by the competitive socialists. It helped to pronounce the huge and increasingly unbridgeable distance separating Austrian and mainstream economics to this day. It also demonstrated the importance of the need to re-examine and salvage ideas insufficiently regarded in the past. 3.3 Substance Over Form Mark Blaug, one of a growing band of economists who has drawn attention to the widespread misuse of formalism in modern economics, sees it as ‘an ugly current’, ‘a disease’ and a ‘bad game’ that economists increasingly play. Given what was said in the previous sub section it should come as no surprise to find that Austrians too deplore orthodoxy’s predilection for form over substance and the use of formalism for formalism’s sake. They, unlike much of the mainstream, have always been willing to trade form for substance and this has been a major driver of their research tradition. Attention has already been drawn to the Austrian rejection of micro-formalism, and the same is true of their rejection of macro-formalism with its heady mix of aggregation and prediction. They have a record of rejecting both the over-application of mathematics (usually as an end in itself) and the use of pseudo-scientific econometric methods lacking adequate correspondence with the social realm. Austrians largely eschew mathematics because it lends itself to the neglect of qualitative change and genuine novelty whilst econometric techniques endeavour to reduce the social world to the physical. It has to be conceded here that whilst the Austrians do want their theory to be grounded in reality they have, to date, set less store in identifying the appropriate empirical base for their analysis. They will certainly need to explore such matters, especially with regard to their identification of the relative strength of the forces of equilibrium and disequibrium appertaining in the economy at any particular time. 3.4 Human Agency and
Institutional Change Orthodox economics is beset with behavioural and institutional deficiencies largely caused by its failure to embrace the temporal and non-price dimensions of human activity. Culture and history tend to be underscored because economic action (often generalised into capturing all action) usually takes place outside of interpersonal space or historical time. Individuals tend to come fully-formed and sufficiently informed to ply their maximisation techniques, removed from any societal or historical context. This picture of human agency has long been a target of attack and ridicule from heterodox economics including Austrian economics. Indeed I would suggest that the Austrian alternative remains far richer and more developed than any so far advanced outside of the mainstream. Austrian economics advances a middle-ground position with regard to human agency: rejecting both the idea of the individual as a completely independent entity or as an agent who has no meaningful or purposeful choices to make. This is all captured in Mises’ notion of human action; with the human emphasising the social element and the action emphasising that such activity can make a difference. Austrians, following Mises, recognise that agents are social beings, the products of given situational contexts, and prime movers of change. They also acknowledge that preferences are neither fully-formed nor stable but have to be discovered and are largely endogenously determined. In addition, Austrians accept that human agency takes place within historical time and an institutional setting. Human decisions are fallible, based upon inherent and irremovable ignorance, borne out of the existence of pervasive and genuine uncertainty and concomitant computational problems. Within such a framework, institutions serve both to constrain and enable purposeful behaviour by providing a set of rules, conventions, or inertias. The Austrians, ever since Menger, have been interested in the role of firstly, spontaneous, then secondly, designed institutions or orders. They have displayed a preference for the former (especially the market) over the latter (especially the state) in the non-ergodic transmutable reality which we live, serving as uncertainty-reducing (but not eliminating) ‘points of orientation’. Of course, more work needs to be done by the Austrians with regard to institutions but efforts by the likes of Hayek, Lachmann, and more recently O’Driscoll and Rizzo, suggest possibilities for further progress, especially embedded within an evolutionary, path-dependent, framework buttressed by human action under uncertainty. 4 Final Thoughts It has been argued above that Austrian economics offers an interesting window from which to view the post-autistic challenge to orthodoxy. The Austrian research tradition offers both a robust critique of mainstream economics and an alternative borne out of pluralism and dialogue with all its rivals and a commitment to real rather than imaginary constructs. It rejects formalism and advocates a richer model of human agency than any of its competitors. ______________________________ |