Tuesday, June 19, 2012

This is why it's so hard to argue with people like Peter Boettke

I've always enjoyed reading Peter Boettke. He's a good writer and he has an excellent command of the literature. But here's a selection from his new book that exemplifies why it can be so hard to argue with him:

"But there are good reasons why economists forced these [underconsumptionist] theories into the underworld of economic opinion. They reflected bad economic analysis. What I mean by that is that these theories implicitly assume away scarcity and believe the fundamental problem of modern society is poverty amidst plenty; they explicitly deny both actor rationality and the coordinating role of prices, as well as the function prices serve in guiding decisions and the feedback and discipline provided by profit and loss. If you postulate a world of post scarcity, then neither the coordinating role of the price system, nor the incentives of the property rights structure is critical, and if you don’t allow the individuals that populate your economy to learn from market signals, and you don’t allow those signals to actually work, then of course the economy will not work! This is not mysterious." (from Chapter 1 of Living Economics, footnotes removed)

Peter glosses over the fact that Keynes disagreed with all of these "underworld" theorists (and in great detail), but he simply pointed out that the underconsumptionist position had important kernels of truth that had long been neglected. Anyway, we've got accusations of:

- Assuming away scarcity
- Denying actor rationality
- Denying the coordinating role of prices
- Denying the feedback role of prices
- Denying the discipline provided by profit and loss
- Not thinking the coordinating role of the price system is critical
- Not thinking the property rights structure is critical
- Not thinking individuals learn from market signals

That's a lot that he's packed into one paragraph! You want to know why the mainstream often ignores certain corners of the Austrian school? It's because certain corners of the Austrian school have a tendency to tell the mainstream what positions they are expected to hold and defend. The mainstream economist spends all his or her time running through these points and impressing upon them that actually not a single point on that list describes them instead of... you know... talking about economic ideas they actually have. Some of us are willing to wade into this lost cause. A lot aren't.

A warning to those still figuring out their view about economics and flirting with the Austrian school (which is fine - there's some interesting stuff to chew on in the Austrian school): if you tell a mainstream economist they don't think the coordinating role of the price system is critical or that the structure of property rights is critical, they're going to assume you don't know what you're talking about and not spend any more time on you.


  1. As if it is inherently bad to
    >Assume away scarcity
    Well, maybe not 'assume away', but why not acknowledge that some goods could remain unsold? Since when did it became contrary to the world around us?
    >Deny actor rationality
    Is Boettke rational? Do we go to the corner-shops armed with the preference curves? It is computationally impossible to be perfectly rational anyway.
    And so on.

    I am reading Hutchison 1938 now and it seems that times just do not change for our dismal science.

    P.S. Your CAPTCHA settings for anonymous are so strict that it wants me to recognise a blurry abstract image for a word. Sigh... I failed the Turing's test.

    1. These are good points, particularly on "rational" which can mean a lot of things to a lot of different people. Boettke will give you good reasons not to think everyone acts "rationally" (as some people understand it) either.

      I definitely approve of all those discussions... but the thrust of this passage is more than just that, and if you read it in the context of the ensuing pages he's referring to Keynesians writ large, throughout the twentieth century - not just the underconsumptionists of the nineteenth. He's insisting we play the role of neanderthal and the sort of person that insists on that, contrary to all evidence, can be hard to argue with.

    2. If you're referring to the little pictures of the numbers they recently added to the CAPTCHA, you actually don't have to write that... you can just type in the letters and it works.

    3. It is hard to argue with the mathematical tautologies or the world outside one's window. Arguing with theories of how this world works, on the other hand... 'Keynesian' or 'underconsumption' ideas are not sacrosanct and should be destroyed if they could be destroyed. But the same stands for any other theory, otherwise why do science at all?

  2. This is how I feel when arguing with some Austrians. There are just too many implicit claims about Keynes they've internalised and by the time you've unpacked them all they've linked you to so many Mises.org articles that you just want to go to bed.


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