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Mises, Rothbard, and Machlup

Pete Boettke has an interesting post arguing that Rothbard's interpretation of Mises's method although currently more popular is inferior to that of Fritz Machlup,  a student of Mises's  in Vienna who  later became a  prominent member of the U.S. economics profession.  Boettke also argues that the Rothbard's  interpretation will eventually be displaced by the operation of a putative "market for ideas."  For those who are interested, there follows my response. Pete’s post raises some provocative questions, most of which go unanswered. I will restrict myself to comments on the following passage: “Let me be clear about something, Rothbard's reading is a plausible one. If it wasn't at all plausible, it could not have been a contender and it could not have persisted as long as it has in the contestation of ideas. But that contestation isn't a smooth a process of intellectual progress as we might like to believe due to institutional impediments and intellectual path dependencies, etc. Still, the market for ideas is not wildly inefficient either -- it is just a process that has a lot of slack in the system. But being a plausible reading doesn't mean it is a correct reading, let alone the most productive reading for contemporary scholars. Machlup's reading of Mises might actually be more correct, it also might be more productive.” This is a very strong claim yet Pete does not provide any argument in support of it.  I raise two points in challenging his claim. First, the sole purpose of reasoning about method is to employ the protocol deduced in actually formulating a system of economic theory that is applicable to analyzing real-world phenomena. Methodological discussions are empty rhetoric unless they refer to the fruits of scientific investigation achieved by using the prescribed method. In short, the proof of the pudding is in the eating—and Pete does not supply the pudding. Now, as far as I know, no one has thought to develop a system of economic theory based on a Machlupian reading of Mises’s method. If I am wrong and someone—perhaps Pete himself—has done so, then I would ask Pete to point to an application of this system to interpreting some significant real-world event such as the recent monetary chaos in Euroland, the housing bubble, the financial crisis, the Great Recession, the recent Argentine currency “devaluation,” etc. There are plenty of explanations of these events based on the Rothbardian reading of Mises. In the absence of an existing Mises-Machlupian theoretical system and a record of its analytical results, comparing Machlup’s reading of Mises with Rothbard’s is pointless or at least irrelevant to scientific discourse. Second, in claiming “the market for ideas is not wildly inefficient either -- it is just a process that has a lot of slack in the system,“ it behooves Pete to give us some idea of how long it takes for his metaphorical “market for ideas” to equilibrate.  For example, it has been over 50 years since Rothbard unveiled the theoretical system based on his reading of Mises in Man, Economy, and State. Since that time, the Misesian-Rothbardian system has been “productive” of hundreds of applications--both by Rothbard and his followers--of its theorems to analyzing and interpreting historical reality. So the question then becomes: When does Pete anticipate that the market for ideas will begin to correct this massive disequilibrium and the analyses and interpretations of economic reality begin to pour forth from the yet to be developed Misesian-Machlupian system. It is true that Machlup did very interesting and important work in competition and monopoly theory and in economic semantics and some brilliant work in business cycle theory and international monetary economics. And, indeed, some of this work did mark a significant departure from mainstream economics. But at the end of the day, Machlup was very comfortable with neoclassical price theory, the core of theoretical economics. In fact, Machlup wrote the famous appendix to C. E. Ferguson’s Microeconomic Theory, a leading graduate-advanced undergraduate micro textbook in the 1960s and early 1970s.  Machlup’s 29-page appendix was “A Comprehensive Examination in Microeconomic Theory for Graduate Students.” So Pete needs to answer the questions why Machlup never developed his own reading of Mises into a distinct theoretical system and when he expects Machlup’s followers to do so as part of the corrective process in the market for ideas. The ball is in your court, Coach.:)  

Contact Joseph T. Salerno

Joseph Salerno is academic vice president of the Mises Institute, professor emeritus of economics at Pace University, and editor of the Quarterly Journal of Austrian Economics.

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