"Let me step out of character for a moment and compliment you [I don't think that's all that out of character - DK]: You are a "deep" kind of guy who likes to think about what he's doing. You spend a lot of time at my blog keeping tabs on how those wacky Austro-libertarians look at the world, you read Sumner to see what mischief he's raising today, you read Boettke and Boudreaux to see how they are straw-manning people this morning... You get the point (and I'm trying to be funny), you spend a lot of time thinking through stuff. Most people--including economists--don't do that.He is referring to a point I made about how in a micro class I was teaching the week prior to the Kirzner lecture I asked them why they thought agents would grope toward equilibrium, what the incentives were for doing so, etc. - and that they gave (somewhat unsophisticated of course) market process answers.
So where am I going with this? The fact that you asked your micro class to think about finding equilibrium doesn't mean too much. It would be like me saying, "People say Austrians don't use math, but I taught a game theory class at Hillsdale." You are not a proxy for "the mainstream" since you keep abreast of a lot of approaches and like to think through what you're doing. You sort of gave away the game when you said, "But when we moved to Slutsky equation I lost them..." (or whatever). That's just what the Austrians say: They are doing intuitive, real-world economics, while mainstream does formal math models that are confusing and pointless.
Here's the thing, while I'd like to think I'd ask that anyway I didn't make that question off of the top of my head. I was covering a class for my adviser and I used his slides, and he used the textbook company's slides. Of course I guided the discussion how I chose to guide it but all of it was in the slides. My point still stands about the value of Kirzner: he thinks more deeply about this than most other economists. But the point is I'm not special. I genuinely think economists generally acknowledge the major points of market process theory, although of course they don't focus on it the same way. Very much like - as I alluded to in the last post - Newton acknowledged the reality of gravity and if I recall corresponded with people about possible explanations, but didn't worry so much about nailing that part of the problem down when he wrote up the Principia.
I'm not special. I'm not a great economist, I'm average and adequate at what I do. I didn't go to great schools, although I have nothing to complain about regarding my education. William and Mary especially is a very high quality school but the economics department, largely because it didn't have a PhD program, wasn't a superstar program or anything. With one exception* nothing I've come across in my education has been exceptional. I've used standard textbooks, had regular professors who generally had regular backgrounds themselves. They were very good professors of course but if you go to three schools you're bound to come across several of those (I had some bad professors too).
If I went to a Harvard or a Chicago I would worry that my outlook resulted from an exceptional background in some way - that I couldn't generalize from my experience to "standard economics education". But I don't have that background and I think I can say my experience is fairly typical (minus the unusual gender and Post-Keynesian, and even history of thought stuff I'm getting at AU, of course).
I think a much better explanation is that Kirzner is discounting the mainstream too much in a way that highlights his own contributions. Clearly the mainstream doesn't focus on Kirzner's research agenda with the energy that Kirzner focuses on Kirzner's research agenda. That's obviously true. But it seems to me that's a very different claim from the sorts that Kirzner was making the other day.
* The only thing close to a "best in the field" I've come into close contact with has been my work with Burt Barnow, who is one of the top experts in the job training literature.
Posts
"I'm not special. I'm not a great economist, I'm average and adequate at what I do. I didn't go to great schools, although I have nothing to complain about regarding my education. William and Mary especially is a very high quality school but the economics department, largely because it didn't have a PhD program, wasn't a superstar program or anything. With one exception* nothing I've come across in my education has been exceptional. I've used standard textbooks, had regular professors who generally had regular backgrounds themselves. They were very good professors of course but if you go to three schools you're bound to come across several of those (I had some bad professors too)."
ReplyDeleteI felt what you wrote was very true. A month ago or so, I spoke to a person who was a Rhodes Scholar and did his D.Phil. in economics. He told me that postgraduate studies - even in a place as prestigious as the University of Oxford - require more endurance, organisation, and persistence than talent...although of course, he didn't deny the importance of it.
To earn something like a Fields Medal or a Nobel Prize, one needs not just genius - one also needs luck. In the conversation we had, we agreed that although (as of the present) people do not have a proper understanding of how genius works - both of us agreed that it isn't a metaphysically-intangible mystery. Geniuses still do have to do a lot of ordinary things in the acquisition and development of knowledge. But even more important than luck or their capacity or an analysis of their technique for revealing insights is something much more simple: humility.
And that ought to be practised by any responsible scholar, genius or not.
Thought I might offer another perspective on this whole equilibrium versus market process thing here:
ReplyDeleteWhat strikes me is the two-step with which economists move from formal equilibrium models to qualitative 'market process' ideas. We are told the mathematical theory is a rigorous way to formulate our ideas, but since (at least at the level you're talking about) we can only describe equilibrium solutions, formal discussion of market processes is a no-go. Sure, we can do comparative statics, but this is very limited and in no way resembles the actual dynamic mathematics used in mechanics etc. So although we have a nice formal set of equations describing the economy, when the limitations of this are made clear we move to the kind of informal handwaving that economists say they use mathematics to escape. In the end, there's no real systemic discussion of the 'market process' other than an insistence that equilibrium is ultimately the main area of interest, which to me is as ridiculous as it would be if you applied it to any other dynamic, complex system (for example weather). I think a real investigation of 'the market process' has to abandon this type of methodology.
So I may be misunderstanding the comment, but of course economists do use dynamic mathematics to talk about transition dynamics. They don't just rely on statics. This was my point in the earlier post on dynamics and Kirzner, where I was musing on what he would think of transition dynamics as an exploration of the market process and the behavior of dynamic agents. It's missing a lot of the discovery things he's concerned with, of course, but it addresses other interests of his.
DeleteI don't think that your misunderstanding the comment, Daniel, but rather the problem is that unlearning misunderstands economics.
DeleteCheers anon, great argument.
DeleteDaniel, I'd be curious to know to which mathematics/models you are referring. My point is simply that in dynamic mathematics equilibrium is often irrelevant. However, in economics 'dynamics' tends to mean little more than a series of equilibrium states for each period, and the 'transition' - as implied by the name - refers only to how we get to these equilibria. The most obvious example of this I can think of is the infinite horizons framework; if you have any clear counterexamples I'm all ears.
What's the problem with getting to equilibrium?
DeleteWe don't like disequilibrium for disequilibrium's sake, right? We think equilibrium is very relevant in economic systems, whereas it might be less relevant in other systems. But we still care about disequilibrium in economic systems because (1.) sometimes the system may be out of equilibrium for any number of reasons - not the least of which being the equilibrium has moved out from under everyone, and (2.) we need a good sense of how equilibrium is achieved.
Maybe what I'm misunderstanding is why you think equilibrium should be irrelevant in economics as it is in some other systems.
Well, I think in many ways we are agreed on this matter: I am simply arguing that economic theory, even when it speaks of 'out of equilibrium' or 'dynamics', revolves around the concept of equilibrium in some way. You maintain that this is useful, while I don't. I feel like it would be a bit of a derail to go on about it, but I'll try and substantiate my argument a bit.
DeleteFor something to be in equilibrium, some aspect of it must not be changing. So in evolutionary biology, describing a species as in 'punctuated equilibrium' makes sense even if they are moving around, have intra-species differences etc. -underneath this, the genes of the species are not changing (or only changing very rarely).
My question would therefore be: which aspect of real world economies does not change often enough for us to speak of an 'equilibrium'? To me it seems that economies are in a constant state of change: new loans, jobs created and destroyed, new technological discovery, knowledge and reorganisation. You are arguing that even if something does change, it can be understood analytically using equilibrium, presumably simply by tweaking certain parameters. But if this change is frequent and ubiquitous, so the equilibrium is never reached, I don't see why we should study equilibrium at all: it will never tell us about observable real world behaviour, only hypothetical states.
Hope this ramble made some sense.
I have always found Franklin Fisher's writings on stability of general equilibrium much for useful and insightful than Kirzner's writings. Am I wrong? What am I missing?
ReplyDelete