Thursday, February 11, 2010

Austrian Economics Reading Group Spring 2010

An Austrian Economics Reading Group is starting in Raleigh, NC. I thought that some might wish to read along and post comments.

The first selection is "The Foundations of Modern Austrian Economics." By "Modern" we mean 1976. :-)

This week we are to read the first 2 chapters.

The book is here or you can follow this link:


Roy Cordato said...

Iterestingly enough Austrian economics had the same foudations in 1976 as it does today.

Roy Cordato

Nathan said...

So do the first two chapters mean Part I and Rothbard on methodology in Part II? I don't want to read the wrong chapters like I so often did as an undergraduate.

P F Cwik said...

Yes, the first article by Dolan and then Rothbard article on Methodology. In two weeks, we will be covering the next two chapters: Kirzner (Method) and Rothbard (Prehistory).

P F Cwik said...

The reading group was held at NC State University. There were about 7 or 8 students (both grad and undergrad), Drs. Steve Margolis, Roy Cordato and myself in attendance.

We covered the first two readings: Dolan and Rothbard.

The Dolan article was a prefatory article. It made a few points: first it used Kuhn’s rival paradigm analysis and “predicts” a crisis coming in economic theory. (Maybe I am reading too much into the subtext here.) Furthermore, Austrian Economics may be the paradigm that the profession shifts to because of the work in three areas: “of prices and markets, of capital, and of money and economic fluctuations.” (p. 8) The rest of the volume then explores these areas and the methodological differences between the Austrians and the mainstream.

Margolis raised an excellent point in our discussion. He asked what is it that Austrian Economics can explain that mainstream economics cannot. I think that there are many “puzzles” that Austrians can explain that the mainstream cannot, for example, (off the top of my head) entrepreneurship, advertising (no need for it in the Perfect Competition model), capital theory and thus macroeconomics, and non-neutral money and its monetary policy implications. (Perhaps you can think of more and add to this list.)

The Rothbard article was interesting, but you can tell that there has been a lot of progress since 1974. There were many quotes in the article. One, in particular by none other than J.M. Keynes, was excellent in its taking apart the mathematical approach.

The one point of contention I have is that Rothbard's attack on using math as a deductive tool is really making too much out of it. I agree that math is a less preferred approach. However, I think that Rothbard does an unintended disservice. Many Austrians were shaped by reading this book and that the idea that “math is bad, so don’t use it” got over-amplified. Austrians then developed a reputation of not just being anti-math, but math-illiterate. Of course this charge was never true, but that reputation developed and has been tough to overcome.

Finally, Rothbard references an unpublished Mises manuscript, “Comments about the Mathematical Treatment of Economic Problems.” It has been published in The Journal of Libertarian Studies, vol. 1, number 2, Spring 1977, pp. 97-100. It may be found here:

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