Kaleidic Society

Three Trends in Austrian Economics

There are at least three distinct, but overlapping, research programmes (to use Lakatos' term) in Austrian economics, at least according to Rothbard. Each of these styles of thought can rightfully claim to be based on Mengerian insight.

There is the Mises-Rothbard strand, which emphasizes rationality, equilibrium as a mental construct, and theorizing based on axioms and logical deduction. This comes directly from Menger's search for "exact laws" of economics and human action.

A more prominent mode of thought, at least among the mainstream, is the Hayek-Kirzner paradigm. Although this group can easily be split up further, it generally emphasizes spontaneous order, discovery procedures, and entrepreneurship. This can be derived from Menger's discussion of organic and pragmatic orders and organizations. The classic example of an organic order is the means of exchange, which spontaneously arose to fulfill the need created by the problem of finding a "double coincidence of wants".

Another, more controversial, research programme is the Lachmann-Shackle school of radical subjectivism. This method of analysis focuses on expectations, sociology, and disequilibriating elements in the economic process. It shares some elements with the Post-Keynesians, although these ideas are taken in drastically different directions. This draws on Menger's role as one of the founders of subjectivism and claims to complete the subjectivist revolution.

 

Posted: Sun, Jul 12 2009 2:48 PM by ziragt | with 2 comment(s)

Comments

martinf said:

That's an interesting division of the current Austrian School. The point you make that all these 'research programmes' have arised from Menger's ideas is very interesting.

With respect to the view of the market process, there might be only two groups (well, this is another possible classification): those who believe that the market is above all an equilibrating process (Mises-Hayek-Rothbard-Kirzner) and those who view two forces that are always competing: equilibrating and disequilibrating forces (Lachmann-Shackle-Rizzo...)

Do you think it is possible to unify all these distinct set of ideas together? Hayek-Mises-Kirzner with those of Lachmann. Depending on empirical considerations, in some situations, Lachmann's view may be more accurate, and in others the other one.

# July 14, 2009 7:02 AM

ziragt said:

I believe that it’s partly a matter of emphasis. Lachmann liked to focus on the inability of economic theory to “prove” that a free-market will lead to coordination. For Kirzner and the others, the fact that the market was able to coordinate action in the real world was enough proof, so they emphasized the tendency toward coordination. Of course, Lachmann also emphasized this in his work on institutions.

# July 14, 2009 5:29 PM