Preface

The essay reprinted here is from the 1987 Review of Austrian Economics and is based upon a longer one written in 1982, when I was a second-year graduate student at New York University. That essay was composed in response to a seemingly indeterminable debate among participants in the N.Y.U. Austrian economics colloquium. The debate centered around the question of whether any “tendency toward equilibrium” is present in market economies. Israel Kirzner believed wholeheartedly in the tendency; Ludwig Lachmann was equally firm in his skepticism. The graduate students were more or less equally divided on the issue.

The obvious lack of progress in this controversy had convinced me that the disagreements involved resided in matters of definition or (a more troubling possibility) in some fundamental schism. Thinking furthermore that Ludwig von Mises’s own epistemological views were being inadequately appreciated on both sides of the debate, I decided to get involved. Part of my contribution was to suggest an alternative notion of “equilibration,” based upon a more consistent application of methodological subjectivism. My approach was, I think, consistent with prior developments in value theory which had stripped concepts like value, cost, and utility of their “objective” connotations, recasting them as purely subjective (or, in earlier parlance, “psychological”) magnitudes. A like revision of the concepts of rent and profit was, in my opinion, long overdue. The latter revision of the concepts led quite naturally to a new and strictly logical (“praxeological”) view of the equilibrative process—a view which could withstand the onslaught of Shacklian nihilism. Thus Kirzner (and, I think, Mises also) were to be saved by means of a consistent application of Lachmannian radical subjectivism! I confidently and naïvely expected to win converts on both sides.

In the event my confidence was displaced: rather than resolve the controversy I merely succeeded in creating another division. Both Kirzner and Lachmann were unmoved. Even worse was the response of several graduate students who argued that my efforts were nothing more than an exercise in argument by authority. Having observed my frequent use of quotations by Mises, they apparently lost track of the fact that the paper was, after all, largely intended as an interpretation and defense of Mises’s views. At George Mason University the paper provoked a similar, negative response.

All told, my critics appeared to me to have placed a disproportionate emphasis upon the lack of originality of what I had written. This was matched by a corresponding lack of attention to the arguments themselves. There may have been serious flaws in my logic; yet my harshest critics were unable or unwilling to point the flaws out to me.

A few bouquets did manage to float their way along the stream of criticisms against my essay. Murray Rothbard was an early source of encouragement: I still recall with great pleasure the evening spent with him in his New York apartment as he painstakingly reviewed my first draft. Far more unexpected were the kind remarks of G.L.S. Shackle, of all people, who saw some virtue in my arguments despite the fact that they were largely directed against him. Finally there was a lengthy and constructive report by a referee for Economics and Philosophy, who also detected the hand of Mises in what I had to say but viewed this as a mark in my essay’s favor. Thus it appeared that, to more “mainstream” theorists and also to non-Austrian outsiders like Shackle, “Misesian” thinking had its merits; whereas for many self-styled “Austrians” Misesian arguments had become strictly taboo!

That trend appears, fortunately, to have ended, and the adjective “Misesian” no longer serves (among the majority of Austrians, at least) as a term of opprobrium. The way is therefore clear for a more constructive reconsideration of “Praxeology and Understanding” against the background of recent debates within the Austrian school. Such circumstances make it a special delight for me to see “Praxeology and Understanding: An Analysis of the Controversy in Austrian Economics” reprinted. For this and other kindnesses extended to me in recent years by the Ludwig von Mises Institute, I am grateful.

George Selgin

Athens, Georgia

July, 1990