More on Hayek's Neoclassicism

David Glasner has new posts here and here, specifically going over examples of Hayek's neoclassicism in his JPE article on the Ricardo Effect.

Ryan Murphy seems to differ a little, although he does allow that Hayek is a "marginalist". To me, marginalism comes pretty close to being synonmous with neoclassicism. It's certainly synonymous with a theory of maximizing behavior. I suppose you could be a marginalist but not think that equilibrium analysis (or equilibrating tendencies - as I pointed out to Jonathan very few people think we actually sit at equilibria, and those few people probably aren't the sort of people anyone should be listening to) is helpful. But I don't think there are many such people.

I found this interesting from Ryan: "Hayek largely abandoned much of the emphasis on equilibrium analysis and this is what characterizes modern Austrian economics (think Ludwig Lachmann for the “ideal type” of such economists – of course Glasner was right there in the NYU orbit [if I'm not mistaken] when this type of Austrian economics was at its peak, so I’m slightly confused). Caldwell refers to this as “Hayek’s transformation,” citing “Economics and Knowledge” as Hayek’s turning point on this."

I agree with the first part, and I believe I was careful to say this earlier (if not, I'm concurring now) - what's really neoclassical is Hayek's macro and "early Hayek". The hermeneutics, the neuro stuff, the emergent order stuff isn't "neoclassical". That's important to note because (1.) that's the Hayek you see from a lot of internet Austrians, and (2.) that's the Hayek that disagrees with Keynes, which is one of the big attractions of Hayek. I'm not sure I agree with Caldwell that Economics of Knowledge is the best example of the transformation, although perhaps it's a pivot point. The reason I say that is that the insights of Economics and Knowledge is as amenable to neoclassical economics as it is to non-neoclassical economics. In other words, if neoclassical macroeconomist Hayek had never made his "transformation" he still could have produced Economics and Knowledge. Indeed, if I recall at several points in the essay he stresses that older generations recognized what he was saying, that good equilibrium analysis required a cognizance of what he was saying, and that he was really just fleshing out a better dynamic equilibrium theory. Now, Caldwell is right insofar as this essay also opens the door to less neoclassical work.

I still think the case for Hayek and Austrian economics in general as neoclassical as pretty solid, unless we are specifically talking about the Lachmann stuff. I'm a little struck by the fact that Ryan says you only hear the far left saying this. I thought it was commonly accepted that Austrians were neoclassical. Anyway, I certainly don't see it as a perjorative - I'm a neoclassical. That's not to say I think non-neoclassical approaches are useless. It's just my paradigm - it's the best organizing principle we have laid out. It's certainly not the only good organizing principle or the final word on economic science.