Friday, August 20, 2010

Some Defunct Economist - Hayek and Veblen - 8/19/2010

"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist" - JMK

This is more of post to share an acquisition and ask a question, rather than providing any insightful citation or reflection on these two.

- First, I'm continuing to explore this idea of how Hayek and Bastiat would have done econometrics if either ever had such an inclination, and I'm trying to make sure I'm addressing this right. I'm sure I there are volumes and volumes from Hayek on the "aggregation fallacy", but I want to keep this concise so I just want to speak to the representative high-points. I have Reflections on the Pure Theory of Money of Mr. J. M. Keynes (1931), which I take to be pretty important and an early engagement with Keynes, which is nice too. What else addresses the "aggregation fallacy", specifically, in a canonical way. I'm thinking of looking at three or four pieces. I suppose the same goes for Bastiat. I'm looking at "What is Seen and What is Not Seen" in Selected Essays on Political Economy, and "Post Hoc Ergo Propter Hoc" in Economic Sophisms. Is there anything else of his that might inform the question of what Bastiatian econometrics would look like? In other words, that would speak to "if we look at the world for evidence of economic processes, what is important to look at"? If you have any thoughts on either of them, I'd appreciate it!

- Second, we just finished a multi-million dollar proposal that has been consuming many of my mornings, nights, and weekends for the last two weeks, so I celebrated the conclusion of the proposal like any normal person would: with a trip to the used bookstore during my lunch hour to treat myself in celebration of a job well done! I snagged two really good ones - two volumes from the seven volume set of The Writings of Thorstein Veblen, from the Reprints of Economic Classics series. I picked up What Veblen Taught, which was edited by W.C. Mitchell, and Essays on Our Changing Order. Both are a collection of essays and chapters. In What Veblen Taught I'm especially excited to get to "The Cultural Incidence of the Machine Process" and "The Captains of Finance and the Engineers", and "The Savage State of the Industrial Arts". In Essays on Our Changing Order I'm looking forward to reading "The Overproduction Fallacy" and "The Beginnings of Ownership". Veblen is an interesting figure in general that I don't know much about, but would like to. More immediately speaking, I'm interested in him as a window on the economic thought of H.P. Lovecraft and the whole world of non-classical, non-neo-classical, institutionalist economic thought in the U.S. in the late 19th century and early 20th century. A lot of the issues that Lovecraft talks about - technological development, the consumption of the wealthy, overproduction, governance by engineers (i.e. - technocracy), etc. are taken up by Veblen (hopefully in a somewhat more sophisticated way!). These issues and explanations were put forward by a lot of people in pre-WWII America, but with the rise of the "American Keynesians" in the late thirties and forties a lot of this disappeared. Thorstein Veblen is also, as far as I can tell, the only economist that Lovecraft was actually familiar with and cited (he mentions Jevons in one of his stories but doesn't appear to be influenced by him at all). How much Veblen was actually read by Lovecraft is obviously dubious. But Veblen was in the air in the teens and twenties and Lovecraft certainly picked up on it.

The Journal of Economic Issues is a prominent institutional economics journal that often has material on Veblen.

Finally, a note on used bookstores for people interested in history of economic thought that should have been obvious to me: don't just look in the section that they've labeled "economics". I wandered over to their "politics" section today and I was amazed at how many classic economics texts they had there: Nassau Senior, Gottfried Haberler (I actually may go back tomorrow for him), and a couple others. Used bookstores do their best, but they can't be experts in everything - look beyond economics!


  1. "I have Reflections on the Pure Theory of Money of Mr. J. M. Keynes (1931), which I take to be pretty important and an early engagement with Keynes, which is nice too."

    That's the work which Keynes told Hayek that he had totally changed his mind about. Which is part of the reason why Hayek never reviewed "The General Theory..." - he simply assumed it would be a wasted effort.

    The most important work by Bastiat is that on the negative railroad. It is the best distillation of his ideas.

    Given Veblen's disdain for the working class, for consumption as a means to confer status, etc. it isn't surprising that Lovecraft would find something profitable in his work. Since Veblen's ideas are in some ways analogous with the Technocracy movement that was so popular in the 1920s and 1930s I'd wonder how much Lovecraft plugged into the latter.

  2. - Ya - funny story on that. That was the last of many reasons Hayek gave for not reviewing the general theory. Earlier reasons included his doubts that the General Theory would end up being all that important of a book.

    I suppose it was a little embarassing to keep repeating that reason after it became probably the most important work of economics written in the 20th century.

    - I'll look into the negative railroad but does it address empirical evidence for economic ideas? I'm thinking pretty narrowly here. I'll take a look.

    - Well Lovecraft definitely plugged into the latter. What I'm not sure of is the extent to which Veblen did. Clearly he did to a certain extent, but I'm guessing not as extensively as the guys at Columbia who were working on it. I'm guessing Veblen had more "scientific management" and general managed development sympathies than full-blown "technocracy" sympathies. "Technocracy" meant a very specific thing in the 1920s and 1930s that is quite different from the "rule by elites" definition it has acquired today.

  3. Anyway, sounds like you might want to read stuff on the "Progressive Era" generally. I'd suggest McGerr's (or McGarr?) "A Fierce Discontent" to start with.

  4. On Bastiat ... you'd just have to look at it.

    "I suppose it was a little embarassing to keep repeating that reason after it became probably the most important work of economics written in the 20th century."

    Well, by that point, what would be the point exactly? Hayek had moved on to other things by that point. Hayek's interests were just to varied (and his intellectual behavior just to broad) for him to want to revisit something like that.

  5. Right - I'm not blaming Hayek for not reviewing it - I'm shedding a little light on this meme that Keynes was some flake and that that was why he didn't review it. I'd believe Keynes said that in jest... it's a pretty weak reason not to review a book, particularly when you only think to mention it decades after the fact.

  6. *And when I say "said it in jest" I mean the flippancy. Clearly Keynes's ideas did develop between 1930 and 1936. But don't everybody's ideas develop when they're pushing the frontiers of theory in the context of a depressed global economy?

  7. I think Hayek was thinking along the lines of "burn me once your fault, burn me twice, my fault."

  8. The meaning of the statement by Hayek in the 70s or 80s or whenever that was is completely unambiguous, Xenophon. It's clear what he was thinking then. The question at hand is whether that was what he was thinking in the 1930s.


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