Friday, May 27, 2011

Assault of Thoughts - 5/27/2011

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK

- Brad DeLong points to Milton Friedman's important efforts to make us all more Marshallian and less Walrasian. More could still be done on this front, I think. One of my favorite passages in economics comes from Marshall's Principles: "Nature's action is complex: and nothing is gained in the long run by pretending that it is simple, and trying to describe it in a series of elementary propositions".

- DeLong also asks "where are the speculators?" with respect to the financial crisis and the origins of the Great Recession. This is a very deep question, actually, and similar to the question I had posed earlier to determine whether the market can right itself: "can it be arbitraged?". Some people questioned whether "arbitrage" was exactly the right word for it. Maybe it's not. But the point is, we need an answer to the question "what profit seeking behavior could fix this?" if we're considering whether the market will fix itself on any specific problem.

- Subjective preferences are interesting things. Jonathan talks about how he's put down The General Theory for the time being because the writing is too hard to work through unless he has more time to focus. He's not the first one to say this about Keynes's writing. I and many others hold just the opposite view - I think he's a real pleasure to read. Very witty, and he packs a lot of content and insight in. Now I do agree that while chapters one through three are a great read, once you get into chapter four it gets a lot slower until later in the book. Still - different people look for different things. You hear the same thing about H.P. Lovecraft. Aside from the content of the writing, the style itself is one that people either love or hate.

- Peter Boettke points us to a Boston Globe article discussing the three phases of new ideas: ridicule, outrage, and obviousness. He likes it. I suppose it could work, although I haven't thought about it. An interesting sequence to consider nonetheless. I have a comment in the thread about misdiagnosing the implications of some of the "obvious" conclusions out there.


  1. Brad DeLong just got away with saying Paul Krugman is a Friedmanite.

    It reminds me of how he once said, "So the only true Austrian economist is...John Maynard Keynes!"

  2. I doubt Jonathan put the General Theory down because of the prose. One can be a good writer (aren't all British authors?), but write about complicated topics in, perhaps, convoluted ways.

    I'm like you, I actually really enjoy Keynes' witty British style of writing, but that doesn't mean the concepts in the General Theory are easy to breeze through and understand. I don't find Keynes to be very straightforward, even if his writing is a pleasure to read.

  3. "Nature's action is complex: and nothing is gained in the long run by pretending that it is simple, and trying to describe it in a series of elementary propositions"."

    Like Y=C+I+G? Or like saying that output is mathematically and functionally related to employment? :)

    I agree with Marshall. You're just on the wrong side of this.

  4. Mattheus -
    Be careful not to confuse the utility of modeling with at statement about what the nature of the world is.

    Y=C+I+G doesn't make nature simpler than it is. The mistake of assuming that Y=C+I+G is the only thing there is to say makes that mistake.

    I am on the right side of this - I am and always have been on Marshall's side of this.

  5. Samuel has it more or less right. My problem isn't the prose, but the way Keynes presents concepts and ideas. I really have to focus in order to be able to follow Keynes 100%, and hopefully some point soon I'll have the patience to do that.

    Regarding Marshall and Mattheus' comment, I think Austrians would have reason to believe that even Marshall was on the "wrong side" of his own statement.

  6. I think sometimes people mistake "they don't think my point is significant" for "they have an oversimplified view".

    Omission of bad points certainly shouldn't be dimissed as oversimplification!

    But more relevant to Mattheus's accusation - parsimony in exposition and oversimplification in understanding are two very, very different things.

  7. re: "Regarding Marshall and Mattheus' comment, I think Austrians would have reason to believe that even Marshall was on the "wrong side" of his own statement."

    It's fascinating to me that you say this, Jonathan. Austrian economics - at least Austrian economics with methodological fidelity - is based on the construction of a series of elementary propositions!

  8. The Mengerian/Misesian approach to economics is a little bit more complicated than just economics "based on the construction of a series of elementary propositions", and there are deeper differences between Menger's and Marshall's foci (including the latter's emphasis on the role of cost of production in long-run prices, whereas Menger focused on the derivation of prices in the everyday market based on subjective utility). Peter Klein spends some time differentiating in his short intro to the Mises Institute's edition of Menger's book.

  9. Costs of production which - let's be very clear - are based on subjective understandings of opportunity costs.

    One of my pet peeves is the accusation that cost curves, etc. aren't "subjective". I was floored when one day on Coordination Problem Steve Horwitz asserted that mainstream textbooks don't teach the relationship between supply curves and opportunity costs.

  10. And I know the approach is more than just that, but it seems like the people most at risk of violating this would be the guys that are brimming with a priorists and various other remorseless logicians.

  11. Right, but an explanation of cost by pointing at the long-run and cost of production, whether ultimately grounded on marginal utility or not, is more "classical" than any of Menger's work. Menger wasn't interested in the theoretical long-run price, rather he was concerned with price formation "in the moment".

    Here is Hayek on Marshall, "Even the first edition of A. Marshall's Principles, which appeared in 1890, showed a considerably stronger influence of Menger and his group than readers of the later editions of that great work would suspect."


All anonymous comments will be deleted. Consistent pseudonyms are fine.