Two posts -
David Glasners declaring that Hayek is neoclassical. I think he's right. I don't think he's only neoclassical, but he clearly did neoclassical economics.
Krugman with lots of thoughts on the value of neoclassicism, agent based modeling as an alternative, and the shortcomings of the Austrian school.
Krugman's post is interesting in that every point he raises was discussed at length in my Macro Political Economy class last night. He is more receptive to neoclassicism than my professor, and I am with Krugman on this. But he took much the same view as my professor on the Old Keynesian approach to things that was much more willing to part ways on methodological individualism. I agree with my professor and the Old Keynesians on this. Methodological individualism is really an odd obsession if you think about it - no other science works likes this. And yes, we can say this without denying the value of good microfoundations.
As far as Hayek being neoclassical, I actually spent my train ride home thinking a lot about this very question, not because I was considering the discussion in class (which didn't mention Hayek), but because I was jotting down more for my Critical Review paper. I think there is a relatively simple marginal condition that can turn a typical "mainstream" model into a model with an Austrian capital structure, and the marginal condition does not at all guarantee an Austrian style business cycle. That depends (as I've said before) on your interest rate theory. I'll probably play around with this more in the future, but it won't make it into the Critical Review paper, which is supposed to stay relatively non-technical.
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I would say that Hayek came to some neoclassical conclusions, not that he was a neoclassical economist per se. But I have to agree with what Glasner stated in his post:
ReplyDelete"But no tradition is static. When a tradition stops changing, when it stops evolving, it becomes a relic, not a tradition. And with change come differences of opinion and disagreements, even bitter disagreements, between practitioners operating within a single broad tradition."
As for Krugman's piece, I can agree with him to a certain extent - the debate over "What Keynes Really Meant" can get really sterile if it's not handled by the right people. Unfortunately, to a large extent, the Post Keynesian school appears to lack the skills of calculus at the lower division level (differential and integral calculus) to work through Keynes's mathematical model in The General Theory.
The key to the supply side of The General Theory can be found in A.C. Pigou's The Theory of Unemployment (1933). I believe Dr. Michael Emmett Brady has stated that Part II of The Theory of Unemployment (and specifically, Chapters 8 to 10) contain Pigou's mathematical exposition. For further reference, please read Dr. Michael Emmett Brady's articles in the History of Economics Review and History of Political Economy.
I think that excerpt from Glasner's post is especially important and undermines his own conclusions. No tradition is static, and it became clearer and clearer to economists like Hayek and Mises that the neoclassical school was moving in a different direction than they preferred. But, it's not just a case of a bifurcation, but of the revelation that different concepts were interpreted and formalized in different ways.
Delete=Methodological individualism is really an odd obsession if you think about it - no other science works likes this.=
DeleteDaniel, there is a good reason why economics (and social science in general) cannot do away with methodological individualism. It is because it is very clear that the phenomena economics purports to study are not just reducible to the actions of individual agents (as the chemical phenomena are reducible to the "actions" of microphysical particles) but totally coincide with them.
To make my point more clear, contrast an economy to a chair. Both are reducible to their component elements. But in case of a chair there is a sort of organizing principle (or principles) that (at least prima facie) supervene on the microphysical phenomena. This principle(s) is that those particles have been mulled by external forces to form a chair. It is in this sense that we can say that a chair is a discrete phenomenon that actually exists (in the sense of being related to other phenomena) while we can't say the same about, say, the aggregate demand.
I don't see how your point requires an exclusively methodological individualist approach (although perhaps you're not proposing that).
DeleteI disagree, and I really want to stress that you shouldn't confuse my disagreement with devaluing methodological individualism - I'm simply disagreeing with exclusively relying on methodological individualism (call it methodological pluralism or organicism if you like).
My point is more that when we study a chair, we have (at least) two options. We can study the properties of its composite particles, drilling down to the most fundamental particles that we are capable of. We learn very interesting things when we do this. We can also study the physical relations of the chair to things around it (say, the forces exerted to build the chair, as you allude to). That gives very interesting answers too. Often, coming at it from these different directions give seemingly contradictory results. Sometimes it's easy to reconcile the different directions, and sometimes its hard. But there's no reason to privilege one.
The same with a geneticist or a population biologist. Methodological individualists often sound like geneticists insisting that all biologist build everything they do up from the genetic level all the time.
But you don't hear biologists saying silly things like that. They recognize you don't have to do that, while still acknowledging the value of microfoundations.
The reason you see this in the social sciences, I think, is that we like to think humans are special. We don't like to think of ourselves as just another kind of primate. Primatologists studying primates other than humans don't usually get into these kinds of debates because they invest less mysticism in their subject.
Daniel, but, unless you deny the idea that human beings have free will, we, humans, are indeed special. That is, despite sociological metaphors to the contrary, we are not qua agents toys of the external forces, external forces do not make humans into shapes like they make particles into chairs. It is this absence of determinacy of each and every human choice that allows us to say that choices are essentially all there is about the economic phenomena. And that is what makes methodological individualism not just an indispensable but the only possible principle for studying social phenomena.
DeleteI'd leave the matter at that because at this point, although my explanation is admittedly messy, I do not see how it is possible to improve on it. But I hope that it is possible to intuitively grasp the idea.
I don't think we are toys of external forces, but I'm not sure we have free will in any fundamentally different way than a monkey or my cat does (whatever "free will" actually is, we may have a more sophisticated sort of agency but certainly we are not exclusive in having agency).
DeleteYou seem to be arguing against something different from what I am proposing. You seem to be arguing against the view that it is never worthwhile taking human agency as the starting point. I don't think that.
re: "It is this absence of determinacy of each and every human choice that allows us to say that choices are essentially all there is about the economic phenomena. And that is what makes methodological individualism not just an indispensable but the only possible principle for studying social phenomena."
I don't think this is a solid argument.
Physical objects are entirely constituted by their constituent particles, just like economic phenomena are constituted by human decisions. It does not follow from this that one can't usefully take a more macro approach to studying a physical object.
Let me put it this way - our actions boil down to our brains and our neural chemistry, right? So why stop at methodological individualism? Why not reduce economics down to organic chemistry?
The answer is because stopping at the level of the individual in the case of economics has proven particularly productive for science. There is nothing that necessitates keeping a lot of our analysis at that level.
Well, as I said, I cannot explain the idea of supervenience in the case of chairs vis-a-vis their constituent particles and its absence in the case of economies vis-a-vis agents' choices (whom I btw believe to be qualitatively different from cats) any better than I did.
DeleteJust to paraphrase, I mean that phenomenon X being entirely reducible to its constituent elements and the constituent elements being all there is to phenomenon X are different claims to me.
OK - I'm getting some of the nuance of what you're saying now.
DeleteI'd ask:
1. Is choice all there really is to economic phenomena? I have doubts. Certainly there are technological and institutional constraints that have little directly to do with what we typically think of as economic choice,
2. Even if that were "all there is to it", you still have not justified why that means that we can't profitably study it in a different way. You seem to be confusing a sort of metaphysical statement with a methodological statement.
"Physical objects are entirely constituted by their constituent particles, just like economic phenomena are constituted by human decisions. It does not follow from this that one can't usefully take a more macro approach to studying a physical object."
DeleteI don't really agree with strong methodological individualism. But, this sentence shows why there are good reasons for *preferring* to start from a individual perspective as opposed to requiring it or ignoring the individual perspective. When I look at myself I notice that I'm not an atom, and I'm not a fundamental building block of matter. There is no benefit in physics starting from the human being, it should start wherever fits the problem best. For economics though things are different, I look at myself and notice that I'm a human and therefore a building block in economic science. So, why shouldn't I take advantage of that fact and build economic ideas bottom-up from choice rather than top-down? And why shouldn't other human economists not do the same?
Oh definitely - it is a preferred starting point, not the only option and not something to be ignored.
DeleteMacroeconomics gets tricky. The individual is actually hard to justify as a "starting point" there for exactly the reason you state: it's not an obvious building block. Some sense of a general equilibrium - an "economy" - is the obvious constituent part. This is particularly true since we know of so many fallacies of composition associated with macroeconomic thought.
Even there, of course, the individual is an important place to look for answers. But not the only place.
1. But those things constrain, not supervene. More on supervenience here http://plato.stanford.edu/entries/supervenience/
Delete2. I don't understand how you can meaningfully say that X only exists (in the sense mentioned above of directly relating to other phenomena) and Y doesn't, and then say that it may still be methodologically fruitful to proceed as if Y existed.
Oops, I wrongly posted my comment as a reply to Blue Aurora. It was intended as a comment on the original post.
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