An Unfaithful Companion
Mises Review 1, No. 2 (Summer 1995)
THE ELGAR COMPANION TO AUSTRIAN ECONOMICS
Edited by Peter J. Boettke
Edward Elgar, 1994, xvii + 628 pp.
This entry in Edward Elgar’s Companion Series purports to be a survey and guide to modern Austrian economics. It contains eighty-seven articles on a variety of topics related to the Austrian School. When faced with a book of eighty-seven articles, the reader confronts a problem-where to begin? Articles by Professor Don Lavoie of George Mason University never fail to astonish, and so I at once found my way to his “The Interpretive Turn.” I was not disappointed.
Lavoie has uncovered a crucial defect in the way many Austrians discuss valuation: “Subjectivism is often expressed by Austrians in mentalistic terms. Subjective tastes are `in the mind’ of the actor; subjective cost is the next most valued option the actor had in mind at the moment of choice.” This statement about subjective tastes “is mired in the metaphysical view that all I can be certain of is what is self-evident to my own mind, and that, in order to interact with others, I need to take it on faith that other minds are constituted like mine.” On this view Lavoie believes, “the cost of an action would appear to involve some kind of mysterious mind-reading process.” Instead, Austrians should move “away from the Cartesian model of the isolated individual mind, and towards the notion of intersubjectivity and language . . . meaning is not inaccessibly buried in the private recesses of isolated minds; <it is publicly available in all sorts of readable texts” (p. 57).
Few passages have in recent years puzzled me so much as this. Does Lavoie really think that preferences are not mental? That, for example, when I prefer vanilla to chocolate ice cream, nothing is going on in my mind? Lavoie of course is right that there are all sorts of difficult questions, raised by Wittgenstein and others, about how one has access to someone else’s thoughts; but surely it is the very midsummer of madness to deny that preferences are mental at all. Is my preference for vanilla ice cream, if I may revert to a topic I find far more congenial than Lavoie’s lucubrations, in a text? Who wrote it, and where can it be purchased?
And why does Lavoie think that to recognize that preferences are mental commits one to a Cartesian position? Descartes held that mind and body are separate but interacting substances: what does this have to do with the simple acknowledgement that preference is “in the mind”? Incidentally, Descartes did not think it rested on faith that there are other minds; but to pursue at length Lavoie’s interpretation of Cartesian philosophy would prove an unprofitable enterprise.
Methodological individualism, as usually understood, fares no better at the hands of our philosophical revolutionary. “To be sure, society is composed of individuals, but just as surely individuals are composed of society. The claim that the action of an isolated actor is fundamentally simpler than social action is not convincing” (p. 58). What society I am composed of? the United States? Russia? Or does Lavoie mean only that individuals are influenced by society? But who ever denied that? Who are the dreaded “atomists” and “Cartesians” that so arouse Lavoie’s ire?
As one might expect, Crusoe economics, like the individual mind, must be banished; neither can be admitted into an up-to-date Austrianism based on “phenomenological hermeneutics.” “The Crusoe of the novel thinks in socially constituted categories; he is unquestionably the product of the British culture of his day. . . , thus Crusoe economics is either deceptive or incoherent” (p. 58). What nonsense! How has Lavoie managed to remain unaware that Crusoe examples do not take the genesis of thought as their subject?
Fortunately, the other contributors steer clear of the Cloud-Cuckoo land where Lavoie (one hopes temporarily) resides. But the volume elsewhere displays, if in a less extreme form, the dubious doctrines of the “radical subjectivists.” David L. Prychitkto, in an entry entitled “Praxeology,” has no use for the distinct methodological trait of the school: The claim that economics may be derived deductively from the self-evident axioms. “Austrian praxeology has failed to answer that apparently innocent, but troubling, [Bruce] Caldwell question-how does one choose between rival systems of thought that also claim to be deduced from absolutely true axioms?” (p. 81).
The Caldwell Question troubles me much less than it does Prychitko. I should have thought the answer obvious: one examines the rival systems, testing for logical validity in standard fashion and scrutinizing the axioms’ alleged self-evidence. If the difficulty is supposed to be that both systems pass all the tests and thus leave the ground for choice obscure, one can respond only by denying that the supposition is coherent. If reason leads inevitably to contradiction, we might as well all close up shop.
The objection Prychitko has raised, if in my view invalid, nevertheless is interesting. I cannot say the same for the following: “A scientist that claims he beholds timeless, absolute truth embodied by an irrefutable system of thought, no matter how sincere his beliefs may be, is a scientist who effectively closes himself off from discourse. The claim of `apodictic certainty’ tends to break down into a kicking, stomping, unreasonable and apoplectic certainty in the face of criticism” (p. 81). No doubt we have here the explanation for the proverbial violence of mathematicians and philosophers. These denizens of the a priori, faced with opposition, must at once don their brass knuckles.
Ralph Raico, in his superb “Classical Liberalism and the Austrian School” has a different view: “a rather odd claim of both T.W. Hutchinson and Milton Friedman may be mentioned. These authors have asserted that the strictly a priori approach of Mises and his followers (praxeology) is incompatible with the values and spirit of liberalism. Neither Hutchinson nor Friedman, however, has provided a sufficiently coherent argument to warrant, or even allow, serious rebuttal” (p. 322).
After perusal of Lavoie and Prychitko, it is a relief to turn to Barry Smith’s “Aristotelianism, Apriorism, Essentialism.” Smith maintains that Austrian economics has been for at least a hundred years, “the standardbearer of the Aristotelian methodology” (p. 33). Among the tenets of this position he includes “The world exists, independently of our thinking and reasoning. . . . We can know what the world is like, at least in its broad outlines, both via common sense and via scientific method” (pp. 33-34 emphasis omitted).
Methodology is but one of the volume’s parts, and the work ranges widely over “Fields of Research,” “Applied Economics and Public Policy,” and “History of Thought and Alternative Schools and Approaches” as well. Obviously, only a few articles can be singled out for discussion. Peter Klein’s “Mergers and the Market for Corporate Control” repays careful study. As Klein insightfully notes, Rothbard showed that the exigencies of monetary calculation place “an upper bound on the size of the firm” (p. 397). Further, Mises anticipated the central point of an influential article by Henry Manne on shareholders’ limitation of managerial autonomy.
Another outstanding piece, though one I am unable entirely to agree with, is Leland Yeager’s “Utilitarianism.” Yeager spurns act-utilitarianism; instead, like Mises and Hazlitt before him, he makes the promotion of social cooperation “the indispensable means to what human beings find good for themselves individually and jointly” (p. 330). Yeager clearly has identified a central element in ethics, but I doubt that the sum and substance of morality can be derived from social cooperation alone. How, as an instance, does social cooperation bear on the rightness or wrongness of abortion?
The essays by Robert Batemarco and Peter Lewin on capital theory and the business cycle respectively are competent and welcome, and the cycle is discussed in a few other places. But why are so few pages allotted to discussion of Austrian macroeconomics? Did Hayek not merit the Nobel Prize for work on the Misesian theory of the business cycle? Did this theory, and related matters of capital and interest, not propel the Austrian school into new prominence? Is the Austrian theory of the interest rate so insignificant as to warrant no entry?
The work includes essays on “Causation and Genetic Causation in Austrian Economics,” “Self-organizing Systems,” and “The Freiburg School of Law and Economics” but nothing on Fetter’s theory of rent or Mises’s money regression theorem and the discussions of it by, among others, Don Patinkin and Benjamin Anderson. Other oddities: the section entitled “Precursors and Alternatives” to the Austrian school includes two precursors and fifteen alternatives; the section on political philosophy contains nothing on natural rights.
In sum, the work is mistitled. It is not a Companion to Austrian Economics but rather a guide to an eccentric selection of topics that match the editor’s foibles.
