Saturday, August 21, 2010

Economics (and blogging) that matters

"The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds." - JMK

Peter Boettke has a great post up on what he sees as a major problem of modern Austrian economics: the pursuit of Austrian economics as a secondary literature. I think this can really be a problem with any economist that enjoys the history of economic thought. Peter writes:
"Let me confess something as I begin this post, I am a historian of economic thought. It is one of my main areas of professional specialization. It has been listed on my CV since the 1980s and I have taught courses in the field, published in the journals in the field, and attended the professional meetings in the field just as long. I am a contributor to the "secondary literature" on Mises, on Hayek, on Kirzner, on Buchanan, on Boulding, on the Ostroms, etc. I obviously view history of economic thought as a worthy professional endeavor.

But I also think this is the #1 problem with modern Austrian economics --- both internal and external perspectives on it. Those working in the area view their work as part of a secondary literature providing commentary on the works of Menger, Mises, Hayek, Rothbard, Kirzner, Lachmann, etc. The question that should be raised is, Did Mises think of himself as part of a secondary literature on the works of Menger and Bohm-Bawerk? The answer is clear; No, he did not. Mises saw himself as part of a primary literature on economics. How about Murray Rothbard? Didn't he start his career off by trying to straighten people out on what Mises said? Again the answer is clear; Yes, but he also saw himself as contributing to the primary literature in economics (and politics, and philosophy, and history)."
It's hard to strike out and break new ground, particularly when you've had a taste of really classic economics (and not just a textbook restatement of it). But reading and restating the classics I think is important for at least two reasons:

1. The classics are often caricatured, and all these guys were brilliant so its never a bad idea to revisit them and rescue them from the caricature because it's likely in many cases you'll contribute more by rescuing the insights of genius from caricature than you will from your own contribution. A good example I think is the pains I go through in my 1920-21 article to demonstrate that Keynes did think that nominal wage adjustments could clear the labor market and that he did not always oppose deflation. I suppose my interpretation of the history was original to a certain extent - but rescuing those old insights from Keynes and bringing it to the attention of three scholars who bought into a cartoon version of Keynes and modern Keynesians was worthwhile. There's also simply the act of salvaging forgotten ideas. There's Ricardian Equivalence (maybe not the best idea, but it reinvigorated the public finance debate), or Krugman's citation of Marshall and von Thunen in his work on agglomeration economies.

2. The classics gave us an excellent starting point and a fairly good body of theory, and presumably we want to move forward by fixing what they got wrong or undertheorized, not by starting from scratch. I'm very interested in working on the connection between output and employment in Keynesian models, specifically considering corporate liquidity preference not as a determinant of output (Keynes did that) but as a determinant of what he called the employment function. That was a section of Keynes that was glossed over. The body of theory works, but that's where it could be improved. The other area of course comes from the contracting literature (and I suppose is also consistent with my Austrian friends) - asset and labor specificity and heterogeneity. It's definitely in the General Theory but it's not given too much treatment. I can't blame Keynes - he had bigger points to lay out at the time - but it's something that could always be worked on more. So knowing the classic works gives us a starting point for figuring out where to add.

I think blogging risks being a "secondary literature" endeavor too. Often it's simply reposting what other people have posted, perhaps with brief comment. That's not bad in and of itself. I bring a lot of things together here that you wouldn't normally find together, but which interest me. People know they can read my blog to read those sorts of things (history of economic thought, for example - you won't find too many bloggers that do history of economic thought and give both Keynesian and Austrian schools a fair amount of treatment). The re-posting and aggregating function of blogs is good, but it would be nice if blogging could make original contributions as well.

I've tried to do that on at least a couple themes:

- Differentiating between calculation problems and incentive problems, and therefore providing another way to look at the Socialist Calculation Debate that I think clarifies a few questions.

- Pointing out the macroeconomic role of state budgets, which are often ignored.

- Highlighting the importance of externalities to economic life outside of the pollution examples you always hear (granted I talk about pollution too), and

- I feel like I've tried to post several times on the importance of corporate liquidity preference for depressions and hiring in contrast with general consumer liquidity preference (the function of which is much better understood), and

- promoting the idea of a "necessary but not sufficient" view of macroeconomic theory that doesn't see most macroeconomic theories as exhaustive or inconsistent - but simply describing different economic processes that all occur simultaneously.

These aren't necessarily original to me, but they're common themes that I blog on and try to post new material on (in addition, of course, to all my aggregation and reposting of other material). I think blogs that can do this - that can make new contributions and continue to build on a set of points - are more useful than blogs that are simply "secondary literature", as Peter Boettke puts it.

What about readers? What are your new ideas or what are areas where you would like to produce new ideas, rather than just regurgitating old ones? And what are your views on the appropriate way to interact with classic works?

1 comment:

  1. I actually invented ABCT. I had no idea what ABCT was until 2008, after the recession began. I was trying to understand what had happened, and I started thinking about monetary expansion and its effect on prices. I developed a crude form of ABCT and then discovered Austrian macroeconomics. Of course, I rabidly consumed Austrian literature and blogs after that, and now my views are expressed in similar language and style. However, I still feel a sense of ownership over such ideas, and a little annoyed that someone else got ther first.

    I guess that doesn't count. Oh well.


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