[This paper was originally written for ECON 3469 - History of Economic Thought, and is my most challenging thesis yet. As with anything in HET, this is conjectural.]
Alfred Marshall, an Austrian Sympathizer in the Cambridge Court?
By Ryan Safner
I. INTRODUCTION
Alfred Marshall, the great founder of neoclassical economics, shared more in common with the Austrian School than is traditionally considered. Austrian economists tend to resent Alfred Marshall as the theorist who subsumed their subjectivist theories into an objective and static model of equilibrium analysis. However, they fail to recognize the connection between Marshall and elements of the Austrian methodological tradition. To be sure, Marshall is clearly no Austrian, but many of his comments on the form and scope of economics mark him as a potential fellow-traveler. The broad range of economic action described by Marshall, and his insistence on practical applications to the real world unites him with Austrian theorists. His descriptive emphasis on the biological-evolutionary nature of the market over physical-static modeling suggests of Austrian methodology. His deep comprehension and subsequent temperance towards mathematical economics also provides hints of Austrianism. Most mainstream economists believe that Marshall had historically captured all the Austrians’ relevant contributions into his work, thus rendering the successive generations of Austrians as unnecessary anachronisms. Such followers, however, fail to appreciate the distinction that Marshall may have seen, between his dynamic economics and the successive body of economics attributed “Marshallian.”
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Malthusian Underconsumptionism as Mere Product of the Times
by Ryan Safner
[This paper was originally written for ECON 3462 - History of Economic Thought]
Reverend Thomas Malthus’ attempts to refute the universality of “Say’s Law of Markets” were largely driven by the rash conditions of war and post-war recession in the UK. Malthus’ underconsumptionist fears, and his more famous population thesis, both come during a coincidently chaotic time in European history – the Napoleonic Wars and the subsequent post-war depression. A sound man of empirics like the good Reverend could find economic misery all across Europe in the early 1800s as a result of these conditions, and consequently would challenge Say’s Law in order to account for this. Malthus’ dismal theories were merely ‘a product of the times:’ in the bad times, during both the inflationary war and the deflationary recession, he contested the Classicals’ pristine assumptions of full employment. In the good times, by the 1820s when Europe had recovered, he simply lost interest in the debate and moved on. Both of Malthus’ unique theories – the “population principle” and the underconsumptionist call for an “unproductive class” can be explained by the empirical history of the chaotic era. The fears of a Malthusian catastrophe – that population would outstrip food production—may have largely been a result of barriers to international trade for wheat between the war-torn European powers. Following the war, amidst a depression, mass unemployment and “redundancy of capital” would prompt his calls for an “unproductive class” to sop up the excess production.
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[This paper was originally written for ECON 3499 - Independent Study in Austrian Economics]
Two Theories of the Entrepreneur in Austrian Economics
The role of the entrepreneur is one of the most pivotal elements in the economic theories of the Austrian School. The entrepreneurial nature of the market cited by Austrians is alone sufficient to distinguish their theories from orthodox economics. Instead of a set of static equilibrium models with pristine assumptions, the Austrians elucidate an emergent market revolving around the dynamic actions of entrepreneurs in an uncertain environment, a perpetual state of disequilibrium. Professors Joseph Schumpeter and Israel Kirzner, two of the most prominent entrepreneurial theorists, both agree on the fundamental role of the entrepreneur in the market process, and that economics ought to focus on disequilibrium. However, they interpret the function and purpose of the entrepreneur in two starkly contrasting ways. Schumpeter argued that it is a small cluster of entrepreneur-innovators that cause disequilibrium in the market with revolutionary new inventions, and that this unstable process will ultimately morph capitalism out of existence. Kirzner both incorporates the entrepreneurial nature of the market to a broader range of human action, and takes an optimistic approach, arguing that the entrepreneur instead alleviates disequilibrium and brings the market closer to equilibrium and economic harmony.
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This is a long rant, and there’s no hiding that, but it is critically important. People are not aware that there is a double standard within academics – that which is taught versus that which is true. Social sciences are a method of control if not learned properly, and it is almost never learned properly.
In our culture, truth takes a backseat to political convenience. Conclusions are drawn for the public by the talking heads. Dissent is unpatriotic. Going against the grain, no matter how right you are, and how wrong they are, is looked down upon. You will be branded a heretic, a traitor, and a crackpot.
This is my story, with a focus on Austrian Economics. I live this double standard every day in class, on tests, and in conversations with my peers. I can explain Keynesian & Neoclassical economics that I am taught, but I tell the truth–the Austrian perspective–whenever I can get away with it.
The morals:
*Think for yourself.
*Do not take what you learn/are told at face value (including what I say!)
*Always question, always reason, always test
*Truth is elusive and emergent, never established and static
*Thought control is more prevalent than you think.
*Be a nerd.
Follow these things and you are my hero, and the hero of humanity.
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[This article is a continuation of How Anarchic Market Forces (And Not the State) Created Civilization]
The epoch following the Neolithic Revolution in 10,000 B.C. was characterized by unprecedented growth in human population, culture, technology, and trade unrivaled in all of human history. The natural emergence of ideas and technology through entrepreneurial innovation and market processes over many years of natural selection led to the creation of the necessities of advanced civilization–agriculture, husbandry, pottery, medicine, metallurgy, trade, law, and money. States, as we consider them today, were conspicuously nonexistent.[1]
While some social stratification based on ability, function, or gender existed, on the whole, Neolithic societies were much more egalitarian than those found today. Most societies were centered around the family and the village, with some even looking down on excessive accumulation of wealth. Likely, there were wise elders or elites that emerged in each village based on reputation and respect, who adjudicated any possible disputes between community members; but they were not held to be a separate, superior class. The marvels of archaeological sites like Çatalhöyük, Abu Hureya, and Ain Ghazal in Ancient Mesopotamia are testaments to the success of voluntary relations and market exchanges. Based on the evidence found within these sites, it is accurate to say that human civilization predates the State by 4,000 years.
Some of the earliest States to be established were Arslantepe and Uruk, in the form of powerful cities dominating a surrounding hinterland. The “great” empires of old, Egypt, Babylon, and Assyria would model themselves on these Sumerian structures. Contrary to whatever fashionable methods are proposed today, a State can only arise through a very specific three-step process: through conquest, establishment of institutions, and ex post facto justification.
Jobs! Jobs! Jobs!
(Facts, Fictions, Fallacies)
The biggest spotlight in public policy today, especially due to the dismal economic climate, is the level of employment in the economy. Professional economists and citizens alike eagerly await the latest government statistics on “job growth” or more accurately, job losses. Despite these abundantly clear signals of economic and personal pain, establishment mouthpieces still have the effrontery to proclaim “the recession has passed.”
This claim is all the more ironic, as the siren song of political economy to always increase the amount of jobs in a nation, regardless of climate. Jobs are politically popular – from pork-barrel spending projects that enrich a single district[1], to massive public works programs, the jobs fetish of politicians and mainstream economists knows no bounds. The epitome of this viewpoint was the quip by the king of make-work programs, British economist John Maynard Keynes, who advocated the government in tough times to “pay people to dig holes and fill them back up again.”[2] Bear in mind, lest we forget, “we’re all Keynesians again.”[3] The Keynesian viewpoint manifests itself in the Obama-Geithner-Bernanke triumvirate over economic policy. These views are currently being encapsulated in President Obama’s propaganda campaign for a second new round of fiscal stimulus, known as the “jobs bill” to succeed the dubious $787,000,000,000 stimulus package in 2008.
While there might be a strong empirical correlation between the total number of jobs and total economic output (or their respective growth rates), it does not necessarily imply causation. Sycophantic Keynesians and their devout adherents in Washington make an offering at the jobs-altar with the sacrifice of causal economic laws. It is not the jobs that are the underlying engine of growth in an economy, but the savings and wealth that they produce.
While there are many fallacies in putting “jobs” on a pedestal, this article will deal with two of the most important: First, that jobs are intrinsically more valuable than the income they provide, and that thus everyone must have one; and second, that the free market naturally tends towards less than “full employment” in the long-run (the brunt of the Keynesian onslaught).
Before addressing the specific theoretical problems in the Keynesian system, every citizen in America, knowledgeable or not, should ask themselves one question: “Why should we ever trust the same people who promised us unprecedented prosperity and made an absolute mess of things to provide the solution to the problems they created?”
