Thursday, September 13, 2012

George Selgin with advice for young Austrians


He suggests that if you have a paper, search for the word "Austrian", delete it, and rewrite if necessary. Does your paper hold up without it?

If so, good.

As you all know, I think there is a set of Austrian ideas that are very useful and I think there is a set of Austrian ideas that are not useful. Layered on all of this is a tribal mentality that is preventing scientific advance (i.e. - dropping that bad stuff and making the good stuff mainstream). This is a critical part of the process.

Do any young Austrian readers - PhD students and below lets say - have any projects they want to share? Are they designed for the Austrian tribe or for the broader community of scholars?


  1. What if its an empirical paper on ABCT? Do we call it the Misesians theory of the business cycle? As for your question, I do have a paper on the panic of 1873 from the perspective of Austrian business cycle theory. I do think its good research and certainly intended for any audience, but I'm not sure it would be better by deleting the word Austrian...

    1. I don't know - I guess it depends on how you frame it. For example, it's certainly possible to talk about capital structure distortions without referencing Austrians... but then again that seems like you're not doing due diligence in the citations.

      Maybe Selgin has an exception for references?

      I think the really critical thing is to not frame it as an "Austrian school paper". The way to frame it is that you have a particular mechanism that you're interested in elaborating on. You have a case for why it's a good mechanism to talk about. Oh and by the way this Austrian guy said something similar once.

      I think this is how "Keynesian" papers are written. Unless you're dealing with the post Keynesians you don't really hear much talk about a Keynesian school. You just get an argument that happens to mention output gaps and price stickiness and demand shocks. And either that argument is convincing or not. Sometimes in the abstract it'll get referred to as a "New Keynesian model", but there's no school of thought affiliation permeating the discussion. It's just an argument.

    2. What are you planning to do with the 1873 paper?

    3. I sent a condensed version in for an essay contest. As for publishing, I am not sure.

  2. Daniel,

    Time to put up or shut up.

    1. Thanks for the paper, but I'm a little confused at what you're trying to communicate to me.

    2. From the paper:

      "Partly for this reason the second, laissez faire, Hayek is thought to be a direct consequence
      of the first. But this is a non-sequitur. As we have seen, taking seriously the first Hayek's
      great innovation|representing economies as information processing mechanisms and prices
      as the conveyors of information|pinpoints three weakness of the second Hayek. First, even
      supposing that a competitive equilibrium did not exhibit the usual market failures associated
      with environmental spillovers and economies of scale, economists have been unable to provide
      any general proof that prices will work as Hayek supposed, driving the uncoordinated actions
      of individuals towards an e cient allocation of resources. Second, if the individuals making
      up the economy were to take Hayek seriously, they would use the information conveyed
      by price changes in ways that can frequently generate speculative bubbles. And third, the
      market economy is made up not simply of individuals interacting with prices, but also of
      rms that are themselves privately owned command economies in which the information
      problems of central planning have exact analogues."

      In a nutshell, Hayek has nothing to teach us about the problems we face. Markets are far more irrational than you have ever considered, probably to the point that macroeconomics requires entire new ways of thinking, past Keynes, not in opposition to him.

  3. Daniel, your correspondent's "summary," in the last paragraph above, of the article he links to, is quite dishonest. Do have a look at it and you will see so for yourself. The authors merely claim to show that markets may not always allocate efficiently. They also very clearly say that this doesn't mean that reliance upon the market price system isn't necessary (as opposed to sufficient); they also note that their paper only points to theoretical possibilities without suggesting either that markets actually fail in any particular instances; finally the paper offers no demonstration that intervention can succeed where markets fail. On a more fundamental level the analysis, in taking the achievement of GE ("efficient allocation") to be the ultimate desideratum of economic policy, thoroughly misconstrues the Austrian perspective, which is not a matter of "efficiency" except w.r.t. the use of available knowledge. My essay "Praxeology and Understanding" addresses the difference, as do many other Austrian works, some of which you no doubt are already aware of.

    1. George Selgin you lie.

      The summary is not mine.

      It is a quotation taken directly from the paper.

      You have not read the paper. You lied when you said you had.

      The paper shows you are wrong and rather than admit you are wrong to you lie and dissemble.

      Repeat after me: Hayek was a biased little ...

      Hayek was mad that his family lost everything after WWI and he was jealous of Keynes

      Do not waste time with Hayek. Go do something useful as an economist---study biology, evolution, the mind, psychology until we truly come to understand how irrational we are. Then try to come up with an economics based on real science. Or, work backwards.

      For example, What would an economy look like that had no lost manhours of work due to mal-investment. What do we need to do to get there? We have or almost have that technology now, as 85% of our work is office work that the internet permits to be done from anywhere.

      If a business fails, today, why aren't the people going back to work tomorrow? What are the frictions. How do we eliminate them. How to be speed up recognition of losses. Should we take Smith's ideas on insurance and spread risk even more broadly.

      On the last, I like this though experiment. You have a small village in a jungle. The people are working to build a road out, with hand tools easily made from local hardwood trees. Food is easily gathered from the jungle. Each day they build 10 feet of road. One night its rains---a shock--- and 10 feet of road is washed out. The next morning they get up, universally recognize the loss, and go back to, first, replacing the washed out section, and then building the road. The point, under their system, losses are recognized immediately so that every shares in them and as a consequence everyone returns to work the next day.

      Our system is completely different, with what are called agency problems. First, we have managers and designers who don't report the washout (it might be due to poor design) and they could be fired. Second, we have the BOD that hides the info so to be better able to manipulate the stock price. I could go on and on, but there is no need. The perceptive reader will understand. Hayek has nothing to say about these problems or how to solve them. However, any independent observer with altitude over our current situation could make a pretty compelling case (as Stiglitz is doing) that Capitalism has finally failed because it has been captured by all of the dishonest agents.

      You are on here trumping your paper because it and Praxeology are valueless and you know the jig is up but you don't won't to be written off as valueless, but you are. Your paper and 25 cents, together, won't buy a cup of copy. It is nothing but MM

    2. The summary Selgin referred to was not the quotation, but your last paragraph which began "In a nutshell". Economic papers do not address readers as "you", and do not make assumptions about how irrational the reader has considered markets to be.

    3. Thanks, Wonks Anonymous, for coming to my defense. And thanks to you too, Anonymous, for making a display guaranteed to help everyone here value your posts at their true worth. (And for the record: I already have a degree in zoology, thanks.)

    4. to quote the paper

      "economists have been unable to provide
      any general proof that prices will work as Hayek supposed, driving the uncoordinated actions
      of individuals towards an efficient allocation of resources.

      in sum, there is nothing to Hayek. markets don't work as he supposes.

    5. Anonymous, you seem to have a hard time closing your quotations. Tricky, tricky!

      Daniel's smarter readers, not to mention DK himself, will no doubt recognize that there's a big different between an argument lacking formal proof and it's being wrong.

      But keep it up: I'm always going after the crazier sorts of Austrians, and occasionally need someone to put matters in perspective by reminding me that even they aren't the most foolish act in town.

  4. Caplan, per this blog

    "All true. But Horwitz ignores the existence of a massive intellectual movement that spent the last forty years developing these insights: behavioral economics.[8] If you really want to learn about human’s “beliefs about the world,” the “limits of our knowledge,” or our “ability to optimize,” read Daniel Kahneman’s magnum opus Thinking, Fast and Slow. Kahneman elegantly and carefully explains dozens of major discoveries about how people think. Compared to this fountain of knowledge, Austrian talk about subjectivism is empty generalities."

    Let me be blunt. You are intellectually lazy, content to be a Newt Gingrich professor--to appear to be what dumb people think a smart person is like. Your head is full of empty generalities and your work useless.


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