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Accounting & Austrian Economics

September 29, 2000

Quarterly Journal of Austrian Economics

Volume 3.2, Summer 2000

ARTICLES

1. Current Developments in Cost Accounting and the Dynamics of Economic Calculation
by Thomas C. Taylor (Wake Forest University)

"The problem of cost is the cornerstone of economic calculation. Entrepreneurs act upon the cost implications of their decisions and depend on cost data that represent the actual pattern of resource consumption. These theoretical generalizations are essential; however, they do not elucidate the complexity of cost assignment and how cost accounting is driven to change when cost structures shift and operating segments multiply. Neither do they provide concrete illustrations of how actual decisions are influenced by the available cost information. Cost determinations, whether accurate or not, have their say about the way resources are actually directed in our economy by myriad companies like Whirlpool and Carrier. The need for improved output from cost accounting is a result of changing market conditions. More accurate costing and strategic cost management are now required and made available through advances in information technology. More costs are indirect and not unit-based–that is, more costs are fixed and tied to resources bought in large chunks of service-ability. More sophisticated cost analysis is needed to 'slice and dice' cost data across diverse segments or objects. By examining fundamentally new approaches to cost accounting, we see the operation of competitive market forces upon the quality of economic calculation itself. A critical facet of Austrian analysis is elucidated and clarified, showing that economic calculation is not perfunctory or static."

2. "Radical Subjectivism": Not Radical, Not Subjectivist
by John O’Neill (Lancaster University)

"The running debate in Austrian economics between radical subjectivists and their 'moderate' opponents is one that follows a subjectivist script. On one side the radical subjectivists accuse their more moderate counterparts of a failure of theoretical nerve in taking subjectivism to its proper conclusions. On the other side, the moderates accuse the radical subjectivists of abandoning the proper subjectivist insights of Mises and Hayek for a 'radically subjectivist nihilism.' In this article I argue that the whole debate is misconceived because it follows this subjectivist formulation. I do so by focusing on what is usually taken to be the core claim of radical subjectivism which is taken to define the essence of the position and which underlies its more specific claims questioning the existence of coordinative or equilibrating tendencies within market economies. I show that the core claim of radical subjectivism, as it is presented by its proponents, is neither radical nor subjectivist."

SYMPOSIUM: PUBLISHING IN AUSTRIAN ECONOMICS, Part 2

3. Austrian Economics and the Mainstream: View from the Boundary
by Roger E. Backhouse (University of Birmingham)

"As a mainstream economist who is sympathetic to some, but by no means all, Austrian themes, I wish to offer an interpretation of the difference between Austrian economics and the mainstream that differs from some of the ones I have found in the literature. It is my view that mainstream and Austrian economists should pay more attention to each other, but to do so requires a clearer understanding of what distinguishes these approaches. It is my view that the distinctive feature of mainstream economics, distinguishing it from Austrian economics, is model-building, and the important point about models is that they are not the real thing. This may seem a trivial and obvious point but it has been ignored in much of the literature comparing Austrian economics with the mainstream, even though, as I hope to show, it has great implications."

4. Austrian Journals: A Critique of Rosen, Yeager, Laband and Tollison, and Vedder and Gallaway
by Walter Block (University of Central Arkansas)

This piece critically examines four major articles discussing the place of Austrian theorizing in economics today, and defends the need for and contribution of journals devoted to internal development of a particular school of thought. It concludes that Austrian journals are accomplishing exactly what they hoped to accomplish when Murray Rothbard founded the Review of Austrian Economics: putting the mainstream on notice.

REVIEW ESSAY

5. The Drama Revisited
The Hayek-Keynes Debate: Lessons for Current Business Cycle Research
by John P. Cochran and Fred R. Glahe
(Lewiston, NY: Edwin Mellen Press, 1999)
Reviewed by Ludwig Van den Hauwe

"Careful study of the book under review is a rewarding experience. As Roger Garrison points out in the Foreword, Austrian capital-based business cycle theory has lost nothing of its relevance and timeliness. The theory identifies monetary mismanagement as a major source of economy-wide distortions in the intertemporal allocation of resources by focusing on the relative-price effects–and the corresponding quantity adjustments–of a monetary disturbance, as compared to tracking the movements in macroeconomic aggregates that conceal those relative price effects. It thus gives us a superior understanding of the real coupling between the short-run and the long-run macroeconomic pictures and of the nature of business cycles. Despite the book’s title, and although the authors treat Keynes’s ideas not unsympathetically, the outlook adopted in the book is Hayekian rather than Keynesian and the authors’ thesis is basically that 'Hayek was right'."

BOOK REVIEWS

6. The Market: Ethics, Knowledge, and Politics
by John O'Neill
(Routledge, 1998)
Reviewed by David Gordon

"Professor O’Neill raises a large number of issues in this important book, including the value and nature of autonomy, the merits of equality, and whether political institutions should be neutral between differing conceptions of the good. (He think they should not be.) Although our author sympathizes with socialism, he greatly respects the work of F.A. Hayek, and he is particular concerned to examine Hayek’s epistemological arguments for the market."

7. Dinor, Crédito Bancario y Ciclos Económicos
by Jesús Huerta de Soto
(Madrid: Unión Editorial, 1998)
Reviewed by Jörg Guido Hülsmann

"The significance of Jesús Huerta de Soto's new 681-page book (Money, Bank Credit, and Business Cycles) is precisely that it is the first Misesian treatise on money and banking to appear since the publication of Mises’s original work eighty-years ago. De Soto's book is both more restricted and much more ample in scope than Mises's. De Soto does not systematically deal with the principles of money, but explains them rather cursorily in his many brilliant discussions of specific issues relating to fractional-reserve banking. Although his book in sound on economic priniciples, it does not, strictly speaking, set forth a theory of money. Its primary focus is the analysis of money and banking from a legal, historical, and economic point of view, with a heavy emphasis on the business-cycle effects of fractional-reserve banking. Mises developed his theory of fractional-reserve banking by first analyzing the principles of money and then proceeding, step by step, to the examination of the economically relevant problems of banking. De Soto, by contrast, first examines the legal character of certain banking activities like credit banking and deposit banking, and then goes on, step by step, to spell out their economic implications.... Dinor, Crédito Bancario y Ciclos Económicos is the most comprehensive analysis of fractional-reserve banking and of business cycles in print. All serious students of these subjects matter will have to become acquainted with it. Let us hope, therefore, that it will soon be translated."


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8. Black 47 and Beyond: The Great Irish Famine in History, Economy, and Memory
by Cormac O Gráda
(Princeton University Press, 1999)
Reviewed by Mark Thornton

"The subject matter of this book is one of the great tragedies in human history. During the late 1840s more than one million Irish died and many more emigrated, with the Irish population not returning to its form level for more than a century. Author Cormac O Gráda would appear to be well suited to write about this tragedy. He is professor of economics at the University College in Dublin and is considered Ireland’s premier economic historian and leading authority on the Great Irish Famine. Despite his credentials and the fascinating nature of his subject matter, this book will be a big disappointment to many economists. It is a work of history, not economics... accepts the historical view that the famine was just a natural disaster."

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