===== PAGE 1 ===== | oo oo oo oo | No #) The Question of Apriorism . . Co : by Barry Smith I is often said that Austrian economics embraces _ what might most properly be called an Aristote- “. lian methodology. Thus Austrian economists typically [+ adopt a realist perspective, holding that the world - ~ | exists independently of our thinking and reasoning. - .°. activities. They hold further thatthe world: ‘contains . certain simple essences or natures which may come + [together in law-like ways to form more complex static ~. | and dynamic ‘wholes. Moreover; ‘they hold that the ©, given essences and essential structures are intelligi- | ble, in the sense that they are capable of being non- "|. inductively grasped by the scientific theorist, much £5 as we enjoy a capacity to distinguish. reds from <1 greens, circles from squares, warnings from congrat- ulations, and so on, **- The science of economics is for the Austrian Aris- totelian, in no small part, a matter of establishing the laws governing the combination.or composition of the. . = ~~ IY Rk Smith © given: simple’ esgerices or. natures in ‘the field of eco- ~nomies. Such’ combination’ ig not’ merely” a matter of. are first and foremost tenets. of ontology: they tell u us - heaping or gluing together. It is, for example, a mat-. what the world is like and: how its various parts and | ter of certain entities or properties of entities arising ‘moments: are related. to each other. The question of in reflection of the existence in appropriate combina- ~~ apriorism, on’. the other hand, ‘is ‘skew to all such | tions of other sorts of entities. Thus, for example, a ontological concerns: Tt relates exclusively to the sort good exists as such, according to Menger, only ifthe ~~ of account one gives of the conditions under which following prerequisites are > simultaneously pres- knowledge i is acquired. “ent: er ae : 1. A need on 2 the part of s some. e human being. 2. Properties of the object. in question whith render it capable of being brought. into a causal ~ connection with the. satisfaction of this need. | “Subjective Value Theory A Reformulation : A Ti Ko ioienisiormarsssesinons Te —- 5 3. Knowledge of this causal connection on n the Lo by Alexander Tabarrg rm m—--—-——e-" IE part of the person involved. - IE LL Reinventing Socialism i in Burope SEER by Christopher Lingle. SPO OURSPORTS, _4..Command of the thing sufficient to direct it Co Robert Heilbroner Concedes: “tothe satisfaction of the need. SPR Co “Mises was Right!” re — _— 10 | Ba a good exists, then, as a matter: of der ro FORE a : ' Dotflemyer Lectire Series at Stanford .. a 1 entities of these other sorts exist also; Such structures | Con fererice Reports: ce 3 sof de re necessitation are, I want to claim, at the core El - Legacy Of AA SIN Livvvvviivemenrsonsinsimassassssssscsssns 1 not only of Menger’ 8 work but also of the entire tradition. |e 1990” Mises University”. erirebeestsstepintsnnearereen Dreraeesrareaanes 12 1 of Austrian economics, ~The tenets of Aristotelianism referred to above . * Book Bites .. EF —- . 14 ===== PAGE 2 ===== i! oe 3 - All defenders. of apriorism share the assumption categories (“essences” or “natures”) in reality and that we are capable of acquiring knowledge of a special - thata prior propositions reflect structures or connec- . sort, called “a priori knowledge” via non-inductive ‘tions Mong such essences existing autonomously i in [IE “means. They differ, hewever, in their accounts of where. =the sense that they are not the'result of : ‘any shaping. = i | such knowledge ‘comes ‘from. “Two. broad: families of © “or forming of reality onthe part of the experiencing Xi SE apriorist views can be distinguished i in this regard. CL subject. The impositionist, in contrast, insists that a EE . On the one hand are what might be called im- . Priori categories must be creatures of the mind, that, af i ol positionist views, which hold that a priori knowledge © they must be the result of some “imposition of form” - 10 + upon the world. The impositionist may therefore hold is possible as a result of the fact that the content of - ; such knowledge reflects ‘merely certain forms or that the issue as fo which Sorts of economic structures structures that have been imposed or inscribed upon the world by the knowing subject. Knowledge, on such | + views, is never directly". of: reality: itself; ‘rather, it . | reflects the “logical structures of the. mind,” and pen- 33 | | etrates to reality. only as formed, shaped o or r modelled I Austrian onan ics Siti what | by amind or'theory. ETI Ln omughtibe led an Aristotelian On the. other hand are reflectionist views, which el TERTE SL methodology. hold that ‘we can have a priori knowledge: of what ~~ ol exists, independently of all impositions or-inscrip- + tions of the: mind: asa result of the fact that certain | CEE a + structures in. the world enjoy some degr ee of intelli “exist i isa matter fors mote or less arbitrary legislation - gibility in their own right. The knowing subject and ‘by the economic theorist, or a matter of the “concep: ~ the objects’ of knowledge are ‘for the reflectionist in tual spectacles” of the. ec ondriic ‘agent. No grain. of some gense- ‘and to some ‘degree ‘pre-tuned. to each co this i idea is to be foun dts Menger. other. And directly a priori: knowledge of reality itself. = : is therefore possible, at least at:some level of gener- My claifm; now, is that the Austrian economist of | ality, much along the line in which we recognize the whatever hue works against the background of an | validity of a. proof in gic or’ geometry, ‘assumption to. the effect that the universals: of eco: } ‘nomic reality are not created or imposed in any serise, | ~The. impositionist view, of course, find : ~..obut are discovered through our theoretical efforts. ks co cal expression in the work of Kant, and I would argu : i * Economists. do wot stu dy concepts or othier creatures +t that great methodological confides 4 in the ranks of oft A 8 study the. qualitative na-- ‘Austrian. economics has” arisen as a. result: of the “tures of anid the relations between such ategoriesas pervasive assumption that all talk of the a priori . value, rent, profit; the. division’ of labor, money, ete. must of ‘necessity itnply an impositionist or Kantian a As Menger puts i itd in a well known passage: ) ground of Menger’ 8" thinking 8 quite clearly reflectionist. Menger believes that there are a priori Theor retical. canomics has the task of investigat- | “ing the general esserice and the general connection of economic phenomena, not of analyzing economic concepts and of drawing the conelusions resulting from” ‘this analysis, ‘The: ‘phenomena, or certain = : aspects of them, and not their linguistic image, the ‘concepts, are the object of theoretical research in the field: of economy. (1883, LA 64n; Eng. Pp. 87m) PA - Thirds however, ome v6 ive son hy an | imposition- 5 ist or Kantian: reading ( of the ‘propositions of Austrian a iN ‘economics has seem ) tempting to so many. This ~ |" ‘Durban, South Africa, -.- “i turns on the faet that Ménger lays stress bothion the |; ‘Barry Smith is profesor of philasophy at the wnter: | subjectivism and on the methodological individual- SN national Academy of Philosophy in the Principality of fui ism of economics. Indeé | Liechtenstein. He has’ recently. been appointed to og theoretical scie = BE succeed. John Hospers. as editor of The Morilst (the. |}. 5 Le secorid oldest American philosophy’ periodical andthe’ i PE {third oldest philosophy, periodical m the © English la tan- il 3 guage): Sel EASE : “Alexander Tabarrok is. a; graduate 5 student in eco Co . nomics at George ‘Mason, University, a Mises, fellow, 3 and a a correspondent V. EA ~ versitaire de: Sunn ar leave, as re sia ~ lecturer in economics’ from the University. of Nasal, 5 LL coming fio an wdersignd the ork how the value of goods ~ vy: at earlier stages in the process of Proluptile is de- ===== PAGE 3 ===== rived from the value to actual consumers of the prod- Mises qua methodologist was very clearly ucts of the later stages. Moreover, one can see why tempted by the idea that the laws of praxeology this same understanding must apply ceteris paribus should be analytic in this sense. The theoretical part 4 y to every economy in whatever time or place. And of economics would then be a purely formal or ana- a methodological individualism implies that the whole lytic discipline whose principles would flow from the ] of economics can in principle admit of an understand- logical analysis of certain concepts. Thus praxeology, ing of this sort, that there are no economic structures we are told, is like logic and mathematics in the sense ‘that cannot be grasped at least in principle in the that its content is a matter of empty tautologies: thought experiments of the economist. “Aprioristic reasoning is purely conceptual and de- ul None of the above, however, implies that the ductive. It cannot produce anything else but tautolo- economist’s understanding might flow from the fact gies and analytic judgments.” Thus for example: “In that the propositions of economics reflect structures the concept of money all the theorems of monetary f that have been imposed upon the world—in Kantian theory are already implied” (Mises 1966, p. 38). Thus fashion—Dby either the economic theorist or the eco- while impositionism is not explicitly defended by nomic agent. That is, the intelligibility of basic eco- Mises qua methodologist, he does insist on the ana- nomic structures does not imply ontological lytic character of a priori propositions. The method- V dependence of such structures on the mind, along the ology which results is thereby rendered inconsistent 1 lines suggested by the impositionist. Rather, with a reflectionist apriorism, since it implies that Menger’s view implies precisely that economicreality =~ such propositions are empty of content, and clearly | is such as to manifest intelligible structures in and of propositions that are empty of content are unable to itself. It is because economic reality is built up in picture anything (intelligible) on the side of the ob- intelligible ways out of structures involving human jects of the corresponding theory, thought and action that we are able, by appropriate i efforts, to read off these structures in and of them- selves. i II “Economics as a theoretical science We know now that there is an Aristotelian alter- rests on two theses: subj ectivism , 4 native to the Kantian form of apriorism. Mises, how- and methodological individualism. » ever, seems to see his methodology primarily in terms reflecting Kantian doctrines. Indeed the Aristotelian ; alternative seems not to have been explicitly recog- i nized as such by Mises at all, though this is hardly i surprising, given that the special nature of Austrian If we wish to hold on to the view that all the i- | Aristotelian apriorism was appreciated by very few propositions of praxeology are analytic in this sense, : at the time when Mises was working out the philo- however, then we shall have to insist that the whole sophical foundations of his praxeology.” of praxeology can be erected on the basis of premises Po Common to all aprioristic doctrines, as we said, is involving at most one single primitive non-logical a view to the effect that there are laws or propositions concept. For suppose that there were two such con- | which are intelligible (capable of being grasped by cepts, neither definable in terms of the other. Con- ; non-inductive means). Kantian impositionism is the sider, now, the propositions expressing the non-trivial ! view that such a priori laws ot propositions reflect relations between these concepts. These cannot, ex categorical impositions of the mind. As a result of the hypothesi, be analytic, for there are now no defined influence of the logical positivism of the Vienna circle, non-logical terms which could be eliminated in such now, recent Kantian varieties of apriorism have a way as to reveal the corresponding statements as tended to take the extreme form which sees such truths of logic, and no truth of logic contains a plural- categorical impositions as effected always via logic or ity of non-logical terms in other than trivial ways. But language. More specifically, a priori propositions are nor, from the Misesian point of view, can they be seen as being characterized by the fact that they can merely factual (synthetic a posteriori). On the posi- in every case be exposed—via a process of stripping tivist reading of the Kantian aprioristic doctrine, out defined terms and replacing them with definiens = however, no third alternative is available, which im- consisting of more primitive expressions—as mere plies that the original assumption that there are two tautologies or analytic truths, entirely empty of con- * (or more) such concepts must be rejected.’ This helps . tent. “All bachelors are unmarried” is revealed as to make intelligible the repeated insistence of Mises analytic in this way by being converted into a truth and his followers and critics that there is but one : to the effect that “All unmarried men are unmarried,” single non-logical concept (or “category” or “essence”) which is an instance of the logical law “All As which of the praxeological discipline, the concept human are B are B.” : action: 3- ===== PAGE 4 ===== CL The scope. of £ praxsology is the explication of the : purportedly. Kantian reading of Mises. which seeks to. ~ category of human action. All that is needed for the. © “hreak: through the. opposition. between impositionism’ -deduction’ of. all praxeological theorems i is knowl. Briism set out above by acknowledging the edge of the essence of human action... The: oaly oo exten nto which “the gulf between the: mental and the Sway toa “cognition ‘of these theorems is-logical ~. - : TH The i eiin oiieh : Aristotelian idea as ‘outlined. by. Menger. i ) : Action, we are told. by. Mises, fhvolves apprehen- Cel an ston” of causal” ‘relations and-of regularities in the * Ha phenomena.’ It presupposes being in a. position to .. } | influence causal relations. It presupposes felt uneds-: = cla f. iness. It involves the exercise of reason: It is astriving cou | to substitute a more: satisfacto yO less satisfactory CT hE | state of affairs. Te LE "Acting man transfers. the : Iyation of ends he oe aims at; to. the means he anticipates utilizing. Action EEE | takes. time; which “Tike other:scarce factors must be. economized. ‘Action presupposes: choosing. between £35 various opportunitie offered. for choice. Cee Ce © Action involves: the ‘expectation’ that purposeful fe hb behavior has. the, power. to remove or at least alleviate ~ uneasiness. Thus it’ presupposes. the. uncertainty of - the future: It involves ‘meanings which the acting. |. parties attribute to thé situation. A thing. becomes a’ means ‘only when ‘reason plans ‘to-employ it for the = - attainment of s somé ‘end and action really. employs it va for: this purpose. RE “Certainly some an above may reasonably be'c Edis may no. less re Co proposiiots thin than red, » “a promise’ gives ise opts involved in the: correlated claim and obligation,” “given any ted ogical concepts; three distinet tones, one lies intermediate between the : eived: as rie of : EE EE TE mn’ Faction (p. 20) But Ge As rn ===== PAGE 5 ===== .'1981. Epistemological Problems of Economics. New York and London: New York University Press. Reinach, Adolf. [1911] 1913. “Die apriorischen Grundlagen des biirgerlichen Rechts”. Jahrbuch fir Philosophie und phidnomenologische. Forschung 1: 685-847. Repr. in Adolf Reinach 1990. Eng. trans. in Aletheia 3 (1983): 1-142. . 1990. Sémtliche Werke. K. Schuhmann and Barry Smith, eds. Munich and Vienna: Philosophia. ‘Scheler, M. 1973. Formalism in Ethics and Non-Formal Ethics of Value. Trans. by M. S. Frings and R. L . Funk. Evanston: Northwestern University Press. Smith, Barry. 1982. Introduction to Adolf Reinach, “On the Theory of the Negative Judgment.” In Parts and Moments: Studies in Logic and Formal Ontology, Barry Smith, ed. Pp. 289-313. . 1986. “Austrian Economics and Austrian Philosophy”. In Austricn Economics: Historical and Philosophical Background, Wolfgang Grassl and Barry Smith, eds. Pp. 1-36. ©. 1990. “On the Austrianness of Austrian Economics.” Critical Review 4 (forthcoming). - Smith, B., ed."1982. Parts and Moments: Studies in Logic and Formal Ontology. Munich: Philosophia. Fe PRET - SL Zillian, H.G. 1990. Klarheit und Methode. Felix Kaufmanns Or do we know that it is true because of what we know : Wissenschaftstheorie (Studien zur Osterreichischen Philos-ophie, about preference and cost? Surely at least in part Vol 16. Amsterdam: Rodopi. ® because of the latter; but then the appeal to actions of denial in the explication of a priori economic knowl- edge is at best insufficient, and at worst redundant. How much better it would be to accept that we are Subjective Value Theory: dealing here with a family of a priori categories and A Reformulation categorical structures which would be synthetic in EA ET the sense of the (Aristotelian) reflectionist doctrine by Alexander Tabarrok set forth above. : a. a | Co B | : J he method of Austrian economics stresses the Cf. Carl Menger (1871, p. 3; Eng. p. 52, section 1 “On the Essence . use of words and concepts rather than mathe ~ of Goods”). The discussion of such de re necessitation relations in matics, but, unlike mathematics, words and concepts Smith (1982). change their: meaning through time. That f'(x) < 0 Here the work of the phenomenologist Adolf Reinach is espe- implies a negatively sloping curve was as clear to cially important. For Reinach, who achieved for legal science what Newton as itistoa modern mathematical economist. Menger and his school have achieved in the field of economics, was explicitly aware of the non-Kantian nature of his aprioristic views. The meaning Carl Menger ascribed to the term util- See Reinach (1913), Smith (1982), and chapter 2 of Scheler (1973), ity, however, differed from that of Mises. Further- a work in part inspired by the ontological theory of the a priori more, the meaning of words in one context can infuse defended by Reinach, and distort the meaning in another context. This is e phenomenological influence is present also in the work of Felix Kaufmann, whose relations to Mises and his circle are interest- why, as Austrian economists, we must occasionally ingly discussed in Zillian (1990). “clean house,” re-examine our concepts, and clarify *I have developed this argument at greater length in “Austrian any that have become distorted. Economics and Austrian Philosophy” (1986). “Consi der for ox ai ly i (1981, p. 24). This is particularly true in regard to subjective value theory. The concept of subjective value is a tool ‘References Ea Se | “used to explain the formation of prices and to clarify : Grass], Wolfgang, and Barry Smith; eds. 1986. Austrian Econom- - welfare theory. Unfortunately, it has become dis- ; ics: Historical and Philosophical Background. London and Sydney: torted because of four errors: (1) the theory has been ! Qroom Hel, confused with psychological concepts such as happi- pe Hoppe, Hans-Hermann. 1988. Prazeology and Economic Sci- psy g p pp ence. Auburn, Ala.: The Mises Institute. ness; (2) it has been extended to areas where it has ‘Menger, Carl 1871. Grundséitze der Volksuwirtschaftslehre. Vi- no relevance such as. ethics; (3) there has been a enna: Braumiiller. Trans. by James Dingwall and Bert F. Hoselitz as Principles of Economics. . New. York and London: New York University Press, 1981. 1883. Untersuchungen iiber die Methode der Social- wissenschaften, und der Politischen Okonomie ins- -besondere. Leip- SEN To deny that we can recognize zig: Duncker & Humblot. Trans. by Francis J. Nock as i ~~ happiness and misery in our fel- Investigations into the Method of the Social Sciences with Special Reference to Economics. New York and London: New York Univer- on low human beings is to deny the sity Press, 1985. | | LE “basis of economics. Mises, Ludwig von. 1966. Human Action. 3rd rev. ed. Chicago: Lt - Henry Regnery. ===== PAGE 6 ===== i» | misplaced emphasis on “utility” and its “im- emotion that has no necessary connection to a : measurability”; and (4) subjectivism has been given - person’s goals. People can and many people do act in ; | primacy over "ethodelogieal individualism. © ways that they know are detrimental to their emo- ir - tional well-being.* Subjectivism and Happiness REEL By itself, Mises’s peculiar definition of happiness ~~. does not necessarily imply error. However, on the | There is an unfortunate tendency among econo- basis of his definition Mises argues that the ordinary | mists to discuss value and costs as if they were psy: definition of happiness is meaningless. His argument chological concepts, i.e., as if they dealt with man’s Ee runs as follows: Since the aim of action is always to emotions. The word utility, often used interchange- achieve happiness, it follows that happiness can be ably with value or costs (as in utility forgone), sug- achieved by any action. This is verified by the fact gests that as man acquires more goods and gains that different people act to achieve different ends and utility hie becomes happier, more content, less uneasy, ~~ the same people at different times act to achieve more satisfied, etc. Other formulations of the same different ends. “Nobody,” therefore, “is in a position concept, such as. Mises’s definiti of action as an = to decree whi should make a fellow man happier.” attempt to remove felt uneasiness, also associate Buty given Mises’s gical and formal definition value theory with emotion. This is misleading. Tosay of happiness—as that which all acts aim to achieve— : that a thing has value is to say nothing more than it his conclusion is obvious and empty. However, when ~ | lisanend. Anendoravalueisthe goalofapurposively = we define happiness as a particular state of con- 1 | chosen course of action. This sense of value is purely sciousness, Mises’s assertion is incorrect. It would be formal—it implies nothing about whether an end is quite reasonable for someone to advise the young man } in fact valuable. Economists qua economists operate in the above ‘example that if he wishes to achieve his ; on this formal level. They cannot make any Judg- - own happiness he should follow his dreams and pur- IB ‘ments about why a particularend or value is chosen.! = gue a career in music. In other words, to achieve i As Ludwig von Mises argued, “The teachings of prax- happiness it may be Becessaty to adjust one’s hierar- | eology and economics are valid for every human ac- chy of values. RIS oo | tion without regard to its underlying motives, causes : ~ Happiness 5 an ond that like very. aff end, and goals.™ | Sar TE Le cannot be achieved i inany ‘random | ‘manner. Man is not Unfortunately, Mises himself has led to mitch of automatically. happy. The revenues of psychologists the confusion over subjective value theory. For exam- i and counsellors attest to this fact.” None of this con- 1) ple, he argues that there is “no valid objection toa ~~ tradicts subjective value theory properly understood. |\® usage that defines human action as the striving for ~~ Neither does asserting that we can know something } happiness.” He quickly adds that praxeology employs about another person’s misery.® Just as we recognize IN the term happiness in a purely formal sense and happiness we also recognize misery. Contra Mises, we - In reiterates that praxeology is “valid for all kinds of ‘say more than “we prefer it when others have food to- Hi action irrespective of the ends aimed at.’ "3 But, again, 8 eat” ” when we note that the starving Ethiopian peas- the meaning of words in one context infuses the meaning in ‘another context. Happiness, as sormally | understood, is a joyful state of consciousness. To use on = ik to “happiness; as Mises does, to mean simply that man c Sn ersten) i is not enough to tell us “acts and pursues goals is equivocation. “Happiness,” Za : : as Mises would define it, implies nothing about a ~ person’s state of consciousness, i.e. , nothing about his _ emotions or feelings. The Misesian sense of happiness has no direct connection to the ordinary s senses of the “word. Insulin, for ex mple, is ranked very ‘high ona diabetic’s scale of values, but the acquisition of i insu- : “lin does not make a diabetic happy. Or imagine a young man who loves playing his guitar and dreams of becoming a musician. He knows that a caree in music will make him happy, but he renounces mus = to follow his parents’ wishes and become ; doctor. It is disingenuous to argue that his actions show that i ~ what really makes him happy i is following his parents’ Cy “wishes. The only reasonable way to interpret this situation is to say that his parents’ wishes are higher on his value scale than his own happiness. Econo- ~~ = es : mists have nothing to gain by denyi ing what we know * Students isten aly at the opening session of the 1990 ~ to be true from everyday SEpeTiente: happiness is is. an Es © “Mises University” at Stanford. ===== PAGE 7 ===== that starving Ethiopians are miserable, then how can mate ends of human action are not open to examina- it tell us that-other people act? The only way we know tion from any absolute standard . . . Any examination others act is because we can interpret their state- = of ultimate ends turns out to be purely subjective and ments and movements in terms of goals and purposes therefore arbitrary”? In Theory and History, Mises _ that we understand and can relate to. It is our com- is even more explicit on this point, asserting that mon nature as living beings, and in_particular as “judgments of value are voluntaristic. They express human beings, that allows us to make statements feelings, tastes, or preferences of the individual who - about the happiness, misery, and actions of others. utters them. With regard to them there cannot be any A proper understanding of subjective value theory question of truth or falsity. They are ultimate and not is completely compatible with all of the above, The ~ subject to any proof or evidence.” primary purpose of subjective value theory is to ex- plain the formation of prices. To do this, it is impor- . = | Welfare Theory tant to know that people act and choose according to their hierarchy of values. It is not important to know on what basis the hierarchy of values is graded.’ Whether people act to achieve happiness or to achieve some other goal is irrelevant for economics. Praxeol- ogy does not suggest that we can recognize and dis- tinguish happy and miserable people. Whether one believes states of happiness can be identified is irrel- evant to praxeology. This is a separate question: and. issue which has no bearing on: economics. = What about welfare theory? If it is quite reason- - able to make distinctions about people’s happiness and- misery, is this not tantamount to claiming that interpersonal comparisons of utility are possible? Al: though the standard account of subjective value and the impossibility of interpersonal comparisons of util- ity may suggest this, Austrians need not and should not give up their strictures against comparing “util- ity.” But neither should they retreat into radical skep- ticism. in regards to gauging happiness and misery. The standard story about the subjectivity of value and the impossibility of comparing subjective states . ‘hinges on the immeasurability of “utility. ” There are “+ no “utils” with which pleasure or satisfaction can be lished is irrelevant to economics and to subjective ~~ measured, itis argued, and hence interpersonal com- value theory, then one’s belief or disbelief in objective parisons ‘are baseless. This argument, while nomi. > “ethical norms is also irrelevant (to economics). Moral. ~~ nally correct, suggests that if some device capable of iE ity arises as a science because it is not obvious what - measuring satisfaction or pleasure were developed “the life and happiness proper to man are—this is “hen interpersonal comparisons would be possible. something which must be discovered through thought Jeremy Shearmur, in an attack on this view, which and reflection. . he (and many Austrians) considers to be the essence of subjective value theory, argues that biology may be one way to make interpersonal comparisons of util- ity." Imagine, for example, that we come across a ‘Subjective Value Theory It the basis on which & a hiers As Mises. correctly points out, ‘whether any ethical theory i is correct is unimportant for economics. Since it is “not what a man should do, but what he does {that] counts. for praxeology and economics.”® The economist must explain the price of crack cocaine * regardless of whether he believes. drug addiction is Er conducive to the good life. oe : ET Methodological individualism is more fundamental than subjectivism. | In many respects. this discussion follows Mises's ~ own warnings. on imputing ethical doctrines into eco- - nomics. ‘He says for example that the science of human action “takes the ultimate ends chosen by - acting man as data, it is entirely neutral with regard to them.” Praxeology “is subjectivistic and takes the value judgments of acting man as. ultimate data not - open to any further eritical ‘examination; . . it is indifferent to the conflicts of all schools of Acgrnation and ethical doctrines, it is free from valuations and society where we are told that one group is given fewer goods because they. are less capable of feeling pleasure than another group. Shearmur suggests we may be able to check this claim through physiological examinations. Proponents of subjective value theory era who equate it with pleasure, satisfaction, or emotion preconceived ideas and judgments. . have no reasonable answer to this argument, Plea- Unfortunately Mises. does not take his own warn- sure is, at least partly, a result of physiclogical facts. ings seriously enough. To: be’ ‘entirely neutral and However, when ‘subjective value theory is interpre- ~ indifferent to all ethical doctrines is to remain neu- ted to'mean merely that people have a hierarchy of tral (qua economist) on the issue of their. truth or “ranked ends that have no necessary connection to falsity. According to Mises, however, praxeology- and - emotion," pleasure, happiness, or satisfaction, this economics “are fully aware of the fact that the’ ulti oo problem then: n-diseppdeee. Co ===== PAGE 8 ===== Interpersonal comparisons of vali or “utility” able to move down their hierarchy of values, i.e, are suspect because there is rio common denominator achieve more important ends than they would have by which the purposes of different people can be com- without the public good. Other citizens, however, will pared. The problem as traditionally stated isthat the . have:.to move up their hierarchy of values, i.e., the § ; utilities of A and B cannot be compared because there taxes incurred will force them to forgo some ends that | ins is no unit of utility: This incorrectly suggests that they otherwise would have been able to achieve. How | i there is something common to A and B; namely that can we possibly compare these ends or purposes? The. | -§ i they both are experiencing “utility.” In: fact, there is issue involved is not'centered on the absence of a unit I no commonality at all. The problem isnot the absence of measurement. The issue is: how can we possibly te of a unit of measurement; the problem is that there rank the purposes of individuals in a value-free man- i is nothing to attach the unit to. Comparing “utilities” = Der? One man might have to forgo surgery, another ir is like comparing apples and angels; there is nothing might now be unable to attain tickets to the ball common to them... oo game. These purposes are all unique. There is no cle | common factor by which they. could even in principle “Using the terms happiness, satisfaction, and util: be measured. ity in economics is not incorrect so Tong as one remem- bers that these: terms must be interpreted in a purely SA The Primacy of { Methodological formal manner—i.e., as definitional categories with- "Indivi dualism over Subje ectivism - out content. It is true that all action is motivated but there are many different motivators (love, hate, pain, Some Austriatis have argued that what ‘makes pride, duty, selfishness, etc.).'® If we wish to classify Austrian economies different is its insistence on sub- all of these under one general, but contentless, term jectivism. Methodological individualism, however, is such as happiness, utility, or satisfaction we may do more fundamental than subjectivism and should be s0. But there are compelling reasons not to use these seen as the true Austrian differentia. terms in economics. First, the ordinary meanings of . Methodological individualism implies that indi- these words leads one into the types of errors which vhtaaks. are different, they have different and varied were analyzed above. Second, and more importantly, tastes, goals, purposes, and ideas. Subjectivism, in these terms. add nothing to our understanding of other words, is implied by a consistent and principled ‘human action.’ To say that z is an end of Joe's is understanding of methodological individualism. The already to say that Joe wishes to achieve z. Our © greater fundamentality of methodological individual- knowledge is not increased by adding that Joe wishes . ~~ ism is evident in subjective value theory and welfare to achieve 2 in order to increase his utility. This theory. Interpersonal comparisons of value are verbo- confusing and inadequ ate terminology leads to se- ten because value is subjective but value is subjective rious error. When we say that z will increase Joe's because individuals are unique. To compare “utility” utility and ¢ will increase Bob’s utility we suggest is to try and compare the unique goals, ends and that Joe and Bob have some aim in common (to purposes of individuals. Ultimately this means to increase their utility) which i in principle is capable . compare and rank the lives of individuals—a task to of being measured. The proper way of stating this p which economics is sin Jar] unsuited. situation is to say that Joe has end z and Bob has Ad ad en Thi T d q. This describes the situation exactly as before "Nor d i they n need such ju dimen I. except we are no longer led into any: notioris of com- ’ « lit CL “Ludwig von Mises, Human Action. (New Haven: "Yale Univer- mona Ye Co Ce Co "sity Press, 1949), p. 21. 3 hid. ; 5. Ppe 14-15, To clarify this, let us. imagine ‘we are , trying to Ca decide who should receive a gift, of. $100 and that we Co ‘OF ‘course: it is! often true that what makes a. person ‘happy. is PE » ranked highly i in that person's hierarchy of values and vice versa. wish to do this on the basis of “utility.” If we give the = 5 in {$100 to Bob h will buy a bowling ball. If we o th : 5See Human Action, p. 14. See. also Ludwig von Mises, Theory ih e y g giv © | and History {Auburn, Ala. Mises Institute, [1957] 1985), p22. 5 $100 to Joe he will use the money: to buy. a book he EE Mises's description, see Human Action, p. 15. - wishes to study. The. problem we face is. not; one. of "Oprah Winfrey, Phil Donahue, and others have made 2 career comparing satisfactions or. happiness, We: may. very of doing this, as wall a numerous self-help books, the phenomenon well know: that Bob will be overj joyed by the chance to of friendship, dnd a multitude of other things which we donot want buy a: bowling ball. while Joe will hot. attach -any to: deny. Economists need not make themselves look foolish by iE rationalizing away. all these things in order to maintain subjective pleasure at all toreading the book. (Perhaps the book jayne theory, Cs is necessary reading: for a:university class he is not For Mises's position, wor Human Aston, 2 243. particularly. interested in.): Or. let us imagine that hid p: 123. - some economist suggests that: society would be made io; d, p96: hi better off if citizens were taxed in order to provide ~~ Ulbid, p: 22, emphasis added: 1 ‘them with a public good. Not everyone will value the : ~ “12bid, pp: 95-96. TREES - : : 1s good i in the same way. The publie good. will be henefi-. -. ... 1%Mises, Theory and: History, p19; It is interesting. that Mises, cial to some citizens, and they will in consequence be, who. rejected positivist dogma. in so many other areas, accepted it: ===== PAGE 9 ===== in the area of ethics. Second, rights specified in the Social(ist) Charter 14 = \ ) . Jeremy Shearmur, “From Hayek to: o Menger: Biology, Subjec- are particularistic, violating one of the central axioms tivism, and Welfare,” History of. Political Feongms, forthcoming special issue on Carl Menger. E for fairness and equity in the law, i.e., that laws must oo Nathaniel | Branden, “Isnt Everyone: Selfish? "in The Virtue of ~~ not be applied with different results for different Selfishness (New York: New Atherican Library, 1961), p. 60. persons. It should be understood that the primary 16Although these terms add nothing to our knowledge, they can beneficiaries of these particularist. rights (trade be useful as shorthand descriptions, Therefore, when we deal with unions in the richer countries) are by no coincidence erdinary economic problems which do. not hinge a the precise the conventional political constituency of its drafters meaning of these terms the can b te. ® 8 y can be appropriate. and supporters. (Besides, expanding the governmen- tal mechanisms in Brussels provides a political home Trade unions will certainly be the | , big a winner of the joint European - Community. | for nationally disenfranchised socialists where they gan preserve or expand their locally-defeated plat- forms.) Other winners will be those who are promoted “or hired by the necessarily expanded Brussels “Euro- cracy.” The real losers will be low-skilled workers of the poorer European countries kept out of the market - due to rising labor costs: ; : Third, a pidden political agenda i is served by iso- lating Prime Minister Margaret Thatcher as the most Reinventing : SAC outspoken. critic of the Charter. All socialist parties Socialism 3 in Europe Ce benefit by weakening the power of the most successful conservative force within the European Community. | by Christopher Lingle EE Fourth, the interventionism and centralism em- IE ; | bodied 4 in the Social Charter places it in conflict with D espite its potential impact, there is little de- the “subsidiarity” principle of the EC, whereby public “bate over the European Community (EC) policy actions are to be left with member states unless Charter on Fundamental Social Rights. Proposed in ~~. unambiguous gains can be derived from centraliza- 1988 by President: of the European Commission, tion. Enlargement and centralization of political pow- Jacques Delors, it seeks to add a “social dimension” ers in the Brussels bureaucracy is a move from to the elimination of trade restrictions among EC. democracy of citizens to dictatorship by functionar- members: Specifically, the Charter creates political .. ~ ies: : obligations for the: harmonization of. wages: and, bene- goon aI SE fils. | Fifth, concentration of © power will. give rise to more extensive manipulation of public policy by in- terest groups. Pay offs from special interest groups will induce a diversion-of funds away from jobs and investment. It should. be pointed out that rent- seek- ing should be eliminated by: all groups, capital. as well However, this apparently “noble” gesture has nu= merous problems which ‘need to be considered. First, contrary to the spirit of 1992 and ‘its’ dissolution of barriers to trade, the Social’ Charter. would impose new barriers in Tabor ‘market transactions. The rea- as labor. soning goes that the single market ‘may Ist the: rich B capitalists get ‘richer, while the" ‘poor workers get Finally, the. interregional protectionism in the ~ poorer. Such simplistic logic envisions a static-world, Social Charter should give pause to the United States ~ zéro-sum outcome of ‘exchange’ common. in ‘socialist and Japan. Such reasoning is symptomatic of the thought. Yet what this ignores is the obvious factthat rationalization for trade barriers which would lead to an expanded and unobstructed market can allow all. a “Fortress. Europe.” ‘Despite. rhetoric intended to to ‘prosper. This latter arguihent is not lost'on Eastern’ calm Europe’ 8 trading partners, supporters of Delor’s and. Central Europeans who demand relief from Just ~~ Charter are likely to apply the same logic te to obstruct these: types of market restrictions. : EERE extra-commodity trade... ===== PAGE 10 ===== oo - oo oo ried out by the more or less authoritarian use of power.” Moreover, he says, from 1929 to 1961, the U.S:8.R. grew “roughly twice as fast as the United States.” In 1980, Heilbroner praised Communism for “the immense material and cultural improvement that these regimes have brought to their peoples.” What does Héilbroner want now? “Not socialism” ‘as he says in this article However, he cautions dis readers not to. make the same mistake he did: embrace of ‘the market,’ which reminds me, in its simplistic fervor, of the embrace of: ‘planning in the days of capitalist malfunction fifty year wants instead “socialistic capitalism.” Ludwig von. Mises "He wants “the level of social welfare for which Sweden is famous; the mixture of public and private : A, Co Ce realms found in Austria, the respect for civil liberties Robert Heilbroner Concedes characteristic of the Netherlands, the public culture “Mises was Right!” enjoyed by France, the distribution of income that : exists in Norway, the security of employment that R prevails in Japan, and the gaiety of life that is palpa- obert Heilbroner, proto-socialist economist at ble in Italy.” the New School, and author of 20 books, has admitted in The New Yorker (Sept. 10, 1990) that Russian socialism was a tragic mistake, “Mises was right,” that central planners couldn’t plan, he says. To this, one wag quipped: “with Heilbroner in charge we would end up with a world in which the English did the cooking, the Italians delivered the mail; the Germans provided the entertainment, and ‘Heilbroner recounts his long association with so- } the French provided the national defense.” cialism and the details of the failures of the Russian : 7 J economy. He concludes: “All we know for certain is Economic Literature (vol. 28, September 1990) fea- that the system deteriorated to a point far beyond the : tures a more extensive version of The New Yorker “worst economic crisis ever experienced by capitalism, ee « and that the villain in this deterioration was ‘the co article entitled Analysis may Vision in the History of Modern. Economic Thought. central planning system itself.” -Heilbroner cites Ludwig von Mises as one of the Editor's note: The recent issue of the Journal of : ‘Robert H Heilbroner, Making of Economic Society, 3rd ed. i (Ingle- few economists who had “expressed doubts about the wood Cliffs: N.J.: Prentice-Hall, 1970), p. 175. feasibility of centrally planned socialism.” He men- hid, p. 178. tions the information and pricing problems, but stops : “® Robert Heilbroner, Marxism: For and Against (New York: W, W, short of stating the calculation argument in the way Norton, 1980), p. 143. = Mises did: namely, that absolutely free prices are necessary for a rational economy. Heilbroner sees the problems of socialism as being more related to the - oo . practical aspects of planning, plus incentive prob- ~~ Austrians and Stanford lems. He gives the distinct impression of remaining Economists Featured in mired in the Langian sludge of f shadow prices and supercomputers. Dofflemeyer Lecture Series He also conveniently leaves out that as late as Lo 1970, he was defending Stalinist. collectivization, IN array Rothbard, George. Selgin, and Yuri since “we must bear in mind that industrialization on A Maltsev, all faculty at the 1990 “Mises Univer- ‘the grand scale has always been wrenching, always sity,” were among the speakers at the first annual accompanied by economic sacrifice, and always car: “Visions For a Free Society” lecture series at Stanford + ow University this spring. The lecture series is spon- | __ sored jointly by Stanford's Decisions and Ethics Cen- Cle s ter and Robert T. Dofflemeyer, a member of the Mises ‘Heilbroner cites Misesasoneof the ~~. Institute’s Entrepreneurs Council, and the Mises In- - few economists who “expressed . stitute served as consultant for the series, whose goal |< 3 is to gather experts on a variety of economic and Ng doubts about the feasibility of cen- political issues and to provide a forum for discussion trally planned socialism.” and exchange of views. i | — : - Murray Rothbard of the University of Nevada, ; | 10 ===== PAGE 11 ===== Las Vegas, debated Nobel Laureate Kenneth Arrow Economics.” ' George Selgin of the University of Geor- gia discussed “Government: Intervention and Finan- cial Crisis” with Thomas. Sargent of the Hoover Institution. Yuri Malitsev, former member of the re- form committee’ ‘that advised Gorbachev and former -.memiber of the Soviet Academy of Sciences, lectured . ©. Nobel Laureates Commemorate on “The Collapse of Socialism.” Other sessions in- oe on - Legacy of: Adam Smith ‘cluded Doug Bandow ‘on the war on drugs”; Joseph a i. ER in Edinburgh Sobran of National Review on civil rights; ‘attorney Stephen Halbrook on gun control; and J ames s Bovard a i 1, his uly, sight of the twenty living Nobel Lau- | DPE RENCE EF ‘reates: in economics gathered in Edinburgh, on federal farm policy. cE = is a ob an ain Co cot and, to cele rate “Adam Smith and his egacy | The Rothbard and Selgin lecturss revealed valu SRR Econoraics,” a two-day conference commemorating | able insights on the relationship between: Austrian B : ‘the 200th anniversary of Smith's death. Smith was a economics and standard neoclassical analysis. Ken- = native of Kirkcaldy, a seaside town just across the neth Arrow, who admittedly based his know ledge of - Firth of Forth from Edinburgh, ‘and he also lectured the Austrian school on: familiarity only’ with: Menger, CUR dinburgh and Glasgow. before his semi.retire- Schumpeter, and Hayek, responded to Rothbards ori : “ment as Scottish Commissioner of Customs. The fa- i * tique of governinent and claimed that. the mainstream 7 ther of classical political economy | has of course been had thrown in the towel on, socialism by declaring 3 = celebrated before: “most. recently in 1976 for the Wl ‘Wealth :of Nations bicentennial, the same yedr in “oo which the Glasgow edition of Smith's Works and hen ask 31 ) Correspondence. appeared: ‘The ‘present conference doesn’t a nbossibility Theorem tell us that +. was sponsored by the Royal’ Bank: of Scotland and ‘democracy i is unworkable?” To which Professor Arrow. .an-investment group: called the Scottish Develop- replied: that if you. really take the Arrow Impossibil- Co “ment Agency.. The proceedings. will be’ ‘published ity Theorem literally, I'giiess you'd: have to exercise oe next year by Routledge and the Institute of Eco- x AE] caution in using democracy. Ina post- lecture. inter-- nomie Affairs. ENE view Rothbard explained: I was surprised to find that ~~ Billed as the. Jargest: assemblage of Leureates lo there are any Langians left and even more surprised since the economies. prize was instituted in 1969, the that it would be a Nobel Laureate! : © event featured: Franco Modigliani, Lawrence Klein, Arrow also. claimed. that for the most part Austri- © Maurice Allais, James Buchanan, Theodore Schultz, ans are merely stating i in words what their neoclassi- James ‘Tobin, Wassily - Leontief; and James Meade cal counterparts are saying in mathematics. That is, (Paul Samuelson and Richard Stone were late cancel- to the extent that Austrian economics is true, it is = =~ lations due’ to: illness). ‘Bach ‘speaker presented a "nothing new. Rothbard disagreed that the claim has" short paper to an audience of about 400 academics some validity both Mises and Hayek have o on occasion Tendo other. Professionals. {nearly all from the. U. K.); said as mue A el Co Gen TET SRE pT al eli : The issue of -Comp bility of views was also. Sal broached in the discussion bétween Selgin and Sar © ‘gent who found themselves in substantial agreement = ~ on the: stability of market-based financial systems “and the harmful effects of a ng regulation. ‘The Go ‘agreement is interesting: because: Sargent’s under Ga are depostid. i standing of the market, by his own account, is firmly ~~ he remains of coe rooted in the Arrow- Debreu: -general equilibrium ) ADAM SMITH fry model, from which say, Robert: Lucas emerges as the author of the Fag ! leading “free market” spokesman. Selgin by contrast Theory of Maral ~ is far more influenced by the Austrian énttepreneur- ~~ Sentimentsand. ial-discovery view of the market. Comite. Wealth of Nations CF Julya790 co Do Hee. | entry on the Austrian achool i in f the. Inter Li the Social Sciences: (1 968), p. 462. Fora tegen Science: Motes, N. RE Rowman & Little eld; 1 198 ===== PAGE 12 ===== groups of Laureates later participated in general question- -and-answer; sessions. : Topics ranged from modern readings of The Wealth of Nations (e.g., Modigliani’s: comparison ‘of Smith's views on consumption with his own and Mil- ton Friedman's; Klein's analysis of “Smith’s Use of Data”) to commentaries on the current state of eco- nomics (Tobin surveyed recent macro developments and Leontief assailed the slow progress of empirical research). The only really novel offerings were Allais’s attack on Walrasian equilibrium combined with his allegation. that the bulk of Smith’s ideason economics had been anticipated by Continental writ- ers, especially Condillac—a claim that few historians of thought would today’ dispute, except for the: ‘part about Condillac—and Buchanan's paper on the divi- sion of labor and the extent of the market (what we would now call “network externalities”). The proceed: ings, in short, were for the most part predictable, despite the eminence of the speakers. - The lack of controversy and excitement at’ this event may have been due to-the curious absence of professional historians of economic thought—the peo- ple, after all, who actually know Adam Smith's work. | (Happily there were exceptions: the audience in- cluded ‘Peter Groenewegen, Robert Hébert, and An- drew Skinner.) The composition of the participants no doubt reflects the fact that for the most part, the economics profession simply no longer recognizes the ~ history of thought as an important component of the discipline. None of the papers presented here, for -- instance, contained references to the journal History of Political Economy or any of the recent scholarship on classical economics. While this is fine for a scholar in another specialty who presents, say, “A Rumina- tion on a Theme in The Wealth of Nations,” it can become problematic for the “What Smith Really Meant” variety of research. Here though, paradoxically, we see the value of such. an event: where so many prestigious members of the discipline are gathered in one place, it is easy The 1990 “Mises University” at Stanford. - "Students gather after classes to discuss new insights = earned during the 1990 "Mises University.” to see e just where the profession i is, and where it may be going. For this reason one wishes such occasions could take place more often. ®@ 1990 Ludwig von Mises University - at Stanford—The Best Yet! : ] V, he 1990 “Mises University” was held July 7-14, . 1990, at Stanford University. This year’s enroll- ment made it the largest Mises University yet, with . graduate students, undergraduates, theologians, economists, journalists, and Institute Members at- tending the week-long session. There were also more classes and instructors than ever before. Fifty-seven courses and 12 seminars were offered at beginning, intermediate, and ad- vanced levels; 16 professors taught courses on topics from the gold standard to praxeology. ‘Each student chose 28 courses and two seminars for the eight-day period. There were five class periods a day with four courses conducted simultaneously. Evening sessions included economic seminars, lec- tures, and a social hour at the end of the long day gave students the chance to discuss the day’ § program with faculty one-on-one. "The dean. of the Mises University, and of the Austrian school of economics, Professor Murray N. "Rothbard of the University of Nevada, Las Vegas, gave the opening lecture on the foundations of Aus- "trian economics and a lecture the second evening on ‘the history of economic thought. This two-hour pre- “sentation covered everyone from the Greeks to the neoclassicals. Professor Rothbard also taught courses on the Progressive Era, Hoover and the Great Depres- sion, and the Federal Reserve System, and led a lively seminar on the ethics of liberty, as well as delivering “ the closing lecture on the future of Austrian econom- ics, which wag audiotaped, and will be available through the Institute. - 12 ===== PAGE 13 ===== . Another evening lecture, on life as a Soviet econ- . Gordon of the Mises Institute and Professor Hans- omist, was given by Dr. Yuri-N. Maltsev. Dr. Maltsev, =~ Hermann Hoppe: of the University of Nevada, Las before defecting last fall,” was a member of Vegas; taught’ courses in methodology and praxeol- a Gorbachev's economic reform teanr inthe U.S.S.R. He® ogy. Dr. Gordon also lectured on the problems with fy also taught courses on the history of Soviet economic “constitutional” economics, while Dr. Hoppe dis- thought and Soviet bureaucracy. ce : © cussed the objections to welfare economics and Pareto ~. Professor: Robert Higgs’ of the University of Seat- oo optimality. te was another new face. The noted economic histo- ~~~ Professor Jeffrey Herbener of Washington and rian gave lectures on the New Deal, the Great Society, Cl Jefferson College: conducted two graduate level and the war economy, arid he conducted a seminar on’ courses on-the shortcomings of econometrics and techniques of historical analysis. ..~. _. game theory. His seminaf on the ISLM model and the Phillips. curve illustrated how neoclassical econo- mists assume their way into an aggregated world that _ conveniently can be fine-tuned with government in- . tervention (by economists, of course), - Another new faculty member was fi TA Mark Thornton of Auburn University, who talked about the economics of drug laws; highlighting. his recent dissertation.on the subject. He also discussed he . the industrial revolution, economic efficiency, and "Government intervention was the topic of an in- experimental utopian communities. CLE ELAN troductory- level lecture by Dr. Walter Block of the . Fraser: Institute. ‘He discussed various government regulations and: how. they affect the market place. He ) also taught courses on price controls and environ. mental economics, and led a spirited seminar on the “hard cases” with Professor Deborah Walker of Loyola ~ University. Dr. Walker also taught courses in indus- trial organization, antitrust, and gender discrimina- tion. This last class attacked ¢omparable worth and Ls mandated ‘maternity leave, as voll - as the received view of the * ‘wage gap.” 9 Austrian philosophy and methodology divides the | school - from neoclassical econ mics; and Dr: David Writing i is an important tool for Austrian e econo- - mists and Sheldon Richman, senior editor at the Institute for Humane Studies, taught two courses to make sure that students can make better use of this ‘tool: He also’ taught on international trade and the collapse of communism. Students attending his eve- ning seminar on the Old Right were fortunate to hear 7 the ‘additional insights of Joseph Sobran, syndicated ar oe columnist and senior editor of National Review. Sm, » SE * Professor Joseph Salerno of Pace University de- + = livered lectures on ‘monetary and banking theory, a exchange-rate management, and the Misesian theory of economic calculation, which demonstrated that true socialism is impossible. Professor Salerno also led a seminar on international economics and the gold | standard, : ‘The gold o standard was. : also the topic of an intro- ductory level lecture by Professor Mark Skousen of "Rolling College. Dr, Skousen’s other lectures included ~~ the abuses: of economic forecasting and the structure Co of production, which i is also the: title of his new book, Professor. George Selgin of the University of Geor- . gia taught courses on inflation, unemployment, en- trepreneurship, and a graduate level class on Say’s Law. He also led a seminar on free banking. Students: were: ‘given. exposure ‘to financial and a : Some: of the members of the facilky for the “Mises Univer- -. @ © sity” this year (from right to left): Roger Garrison; Mark - SR futures. markets in classes taught by Professor Robert . Skouse; Robert Higgs; Robert Batemarco; Sheldon-Rich- :.:. * Batemarco of Marymount College. He also lectured man; Deborah Walker; and. Murray N: Rafael 4 the. iad oo . i on macroeconomics, economic statistics, and empiri- of the “Mises University.” cL la cal evidence for the Austrian business cycle. ===== PAGE 14 ===== * Professor Roger Garrison of Auburn University dis- oat imply that policy doesn’t ‘matter; it depends cussed the Austrian business cycle ‘and ‘capital and upon’ the type. of model used. But the “Lucas critique” interest theory. His graduate level courses examined Co should interest Austrians. Lucas arguesthat the pol- criticisms of Austrian cycle theory and recent macroecos icy ‘optimization procedure of macroeconomists is il . nomic controversies. His advanced-level seminar flawed. The standard [procedure estimates a reduced 11: looked at how empirical economics is used to. try to. : . - En justify modern macroeconomic theories and vice versa, : Although the days were very long, students re- lished the chance to learn so much about Austrian” = : - economics. University of Texas student Erich. - iH Schwarz spoke for many when he said that the pro- RY #4 | gram “bolstered my ability t to’ think: about’economics = 1k in a way that i is not presented i in y program. Were 1¥ it not for the Institute, T wouldn't have this chance. i All the rest of the year, I'm in ‘the ‘abyss-of neoclassi- = . oF cism and my mind gets: rusty. The * Mises University EE : revitalized me.” . RE al iE : Form equation. which establishes the basic stricture . of an. economy. The economist ‘then asks “what if?” But if people: change their behavior. when their expec- - tations.chiange, and if their expectations change when gt | 3 i oo . Co | | Co SE oo ) policy changes, ‘then the" “structure” ‘changes too. Re- i Doe PE d © “duced form equations are not policy invariant. The | Rational Expectations in result is that the predicted benefits of the new policy, of REN roece gy Introduction ~~. which was “optimized” to fit the old structure, will fail Hy I to Theory and Evider ceo... to materialize. The RE theorists, it seems, have re- “discovered an old Misesian slat: "There are no constants in Yan “action,” SEERA : ; CLF. Attfield, D. Demery, and N. wu are | ~~. Basil il Blackwell, 1987 J . I EE raise are, however, those of CT : SU HR ir only: given the. correctness of NB the past 15 years, theoretical work | in: ACT oeco: Hi ‘buildiz ga iodel of the economy with known coeffi- ~~