November 10, 2015: Public Choice Theory

RECORDING:

Watch on YouTube.

READING:

Politics Without Romance: A Sketch of Positive Public Choice Theory and Its Normative Implications” by James M. Buchanan

Popper, Weber, and Hayek: The Epistemology and Politics of Ignorance” by Jeffrey Friedman

“An ‘Austrian’ Perspective on Public Choice” by Peter Boettke and Peter Leeson

STUDY QUESTIONS:

1. What is the opinion of Buchanan, founder of public choice theory and the Virginia School of Economics, on the Austrian School of Economics? Does he use any “Austrian” nomenclature? Does he use any “non-Austrian” nomenclature?

2. What is Buchanan’s opinion of homo economicus? Of politico altruisticus?

3. Can voting or constitutional rights constrain the government, according to Buchanan?

4. Buchanan talks about the economics of the “minimal, night-watchman” state in his description of constitutional government. Would all constitutions need to provide such a state if they were to succeed, according to Buchanan? What might a possible critique of Buchanan be?

5. What two economists hold the view that committees and democracies can’t be rational under certain circumstances?

6. What is Buchanan’s criticism of Black and Arrow?

7. What problems arise with representative government (senates, boards elected by shareholders) that don’t arise with consensus or direct-democracy majoritarian governments?

8. What is the primary difference between democracy and the market, for Buchanan?

9. Buchanan thinks that, due to the fact government “has gotten out of hand,” politicians and bureaucracies should be modeled more as a monopoly than as a competing unit. Why might this be a problematic analysis?

10. What killed socialism and “deromanticized politics,” for Buchanan and the other economists?

May 18, 2015: Models of Human Action with Economist Vipin Veetil

RECORDING:

Watch on YouTube.

READING:

“Models of Human Action” by Vipin Veetil and Peter Boettke.

April 20, 2015: Evolutionary Economics (Institutional Economics)

RECORDING:

https://docs.google.com/file/d/0B1PyfFMxPhAKaGtfcTB0b1dWWXM/edit

READINGS:

“Evolution and Economics: Austrians as Institutionalists” by Peter Boettke
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1530883

“Austrians and Institutionalists: The Historical Origins of Their Shared Characteristics” by Bruce J. Caldwell
http://public.econ.duke.edu/~bjc18/docs/Austrians%20and%20Institutionalists.pdf

STUDY QUESTIONS

“Evolution and Economics: Austrians as Institutionalists”

1. Who popularized the institutional/evolutionary methodology in economics? What is the typical view of how Austrian economics relates to institutional/evolutionary economics?
2. What is the main difference between the neoclassical economists and the institutional economists?
3. What does it mean for an institution to be the result of (as Hayek put it) “human action, not of human design”? How does this contrast with Mirowski’s view of entrepreneur as market designer? How are both rooted in evolutionary theory?
4. Was Veblen a methodological individualist? Mirowski? The neoclassicals? Do any other schools claim this banner? How does Austrian methodological individualism differ from what is often called the methodological individualism of neoclassical microeconomics?
5. How did Veblen misinterpret Austrian economics? Who did he critique?
6. What is Hayek’s critique of neoclassical equilibrium?
7. How did Menger differ from the other founding fathers of the Marginal Revolution: Jevons and Walras?
8. Should the economist focus more on verbs, nouns, or expletives?
9. Is it fair to paint institutionalists as historicists? What did Veblen think of the Historical School?
10. According to Boettke, the Austrians view the market as a “telecommunication system”. How is this similar to Mirowski’s view?

“Austrians and Institutionalists: The Historical Origins of Their Shared Characteristics”

11. What cultural characteristics do the Austrians and institutionalists share?
12. In what way is Austrian economics more “mainstream” than institutional economics?
13. How did the Calculation Debate change Austrian economics?
14. What is the role of empiricism for Hayek?
15. How did the Austrians attack neoclassical theory? How did the institutionalists attack neoclassical empiricism?

March 30, 2015: Milton Friedman’s “Plucking Model” of the Business Cycle

RECORDING:

http://www.spreecast.com/events/austrian-economics-fss-4

READINGS:

“Friedman’s ‘Plucking Model'”
Roger Garrison
http://www.auburn.edu/~garriro/fm1pluck.htm

“The ‘Plucking Model’ of Business Fluctuations Revisited”
Milton Friedman
http://bit.ly/1CSj4VH

STUDY QUESTIONS:

1. What correlations did Friedman examine when finalizing his Plucking Model? What did these correlations show?
2. Does Friedman think that his findings are consistent with the Austrian theory? How might this correlation fit into Austrian theory?
3. What was the existing predominant business cycle model when Friedman wrote? How did his data challenge this?
4. What physical metaphor was previously used for business cycles, and what physical metaphor does Friedman propose?
5. Why does Friedman think that falling prices correlate with falling output? What is the Austrian view on this? Is falling output always a bad thing for Friedman? For the Austrians?
6. Does Friedman’s Plucking Model contain the mainstream idea that an economy can grow too fast and overheat? In what ways is the Austrian Theory closer to the mainstream than Friedman’s Plucking Model?
7. Why does Friedman think that the Plucking Model applies to output but not prices? How would the Great Depression or the Depression of 1920 contradict this?
8. Does Friedman think that the old sine model successfully explains prices and money supply but not outputs? How do these two models complement each other?
9. What non-monetary causes of business cycles does Friedman cite?
10. In Friedman’s terminology, the peak of the business cycle corresponds to potential output of the economy. Why might this be problematic?
11. Does Friedman claim to know what causes the output plucks? The oscillations in money supply and price level?
12. How is the oscillation in money supply consistent with the Austrian Theory of the Business Cycle?

March 16, 2015: The Austrian Influence on Game Theory

RECORDING:

https://www.dropbox.com/s/7ue9ppt12nv8pjv/game_theory.m4a?dl=0

READINGS:

Chapter 5 of “Von Neumann, Morgenstern, and the Creation of Game Theory”: “Equilibrium on Trial: The Austrian Interwar Critics” (some pages are missing from this book preview, apologies)
http://bit.ly/199SnQX

“Austrian Economics and Game Theory: A Preliminary Methodological Stocktaking”
http://www3.druid.dk/wp/19980028.pdf

STUDY QUESTIONS:

“Equilibrium on Trial”

1. How were the Hungarian mathematicians analyzing chess? How were the Austrian mathematicians analyzing chess?
2. Who was Morgenstern influenced by before he adopted the Austrian methodology? Which two economists converted him to the Austrian methodology?
3. Which Austrian economist has been disowned by the rest of the school, despite being (arguably) instrumental in its development?
4. What was the “Law of the Level of Marginal Utility”? What does this have to do with such concepts as “money as a veil”? What does this have to do with the concept of “ceteris paribus”? What does this have to do with the “indifference curve” concept of Fisher and Pareto?
5. What was the methodological conclusion that Mayer drew from the breakdown of the “Law of the Level of Marginal Utility”? What does this have to say about the concept of process-independent, instantaneous, infinitesimal transactions producing an equilibrium?
6. How did Mises expand Menger and Bohm Bawerk’s subjectivism in “The Theory of Money and Credit”? What did this do to the aggregated equations of Fisher? What did Mises say about equilibrium and friction? Was Mises drastically different from Mayer in his methodology? His political prescriptions?
7. Which two seminars did Morgenstern mostly draw from in his methodological development in Vienna?

“Austrian Economics and Game Theory: A Preliminary Methodological Stocktaking”

1. What shift in mainstream microeconomic methodology has occurred over the past few decades?
2. What theoretical model of industrial organization (IO) used to exist in mainstream microeconomics, and what model has supplanted it? Is this is a win for the Austrians? Is it a complete triumph? Do the Austrians need to update their critiques of the mainstream?
3. What aspects of game theory are distinctly un-Austrian? What was Kirzner’s critique of game theory? What was Lachmann’s? What are some aspects of game theory that are controversial even among contemporary mathematicians?
4. What equilibrium theorist has been extremely harsh in criticizing game theory? How did this lead to game theory’s suppression during the first two thirds of the 20th century? Does game theory have physics envy? Does economics (according to Mirowski)?
5. How did Von Neumann influence Morgenstern? Did Morgenstern’s views change significantly from his embrace of Mayer to “The Theory of Games and Economic Behavior”? Where was Morgenstern working shortly before he co-authored the book?
6. What famous economic parable of Morgenstern’s laid the foundations for game theory? How did it simultaneously critique the original formulation of game theory? What type of game did Morgenstern and Von Neumann write about? How did they get around this paradox?
7. What type of game did Morgenstern and Von Neumann write about?
8. How did game theory first become accepted by the economic mainstream? How did Morgenstern critique this “Walras-Pareto fixation”? How does this parallel the most-accepted Austrian economists? When did game theory really take off, according to Rizvi? Is there another view on this?
9. Who does Foss see as the link between the modern game theorists and the modern Austrians?
10. How is the Folk Theorem in game theory relevant for the Austrians, especially Kirzner?
11. Which economists have recently brought imperfect knowledge into game theory? What do they say about process-dependent equilibria? How is this more Lachmannian/Mirowskiite than Kirznerian?
12. Which modern game theorists explicitly draw on Hayek and Menger, identifying themselves in the Austrian School? What is their work concerned with?
13. Did Mises conflate “mathematically formal” with “quantitative”? Conversely, is verbal logic every appropriate for the natural sciences? To what degree is the Austrian School mathematically formal? To what degree does it use verbal non-colloquial operational definitions? To what degree does it use non-verbal non-colloquial operational definitions (mathematical formalism)?
14. What two extremes of game theory’s knowledge assumptions do the Austrians critique? Is game theory worse than general equilibrium theory in some of its knowledge assumptions?
15. Does game theory use equilibrium? Do the Austrians critique equilibrium? How could both Kirzner and the game theorists be critiqued as a patch-over for neoclassical equilibrium models?
16. What is the game theory assumption of raciocination? How is this, in some sense, too pro- laissez faire? How did Hayek and Morgenstern himself critique ratiocination?
17. What is the Lachmann/Shackle critique of game theory? What is the Kirzner critique? What is the Mises critique? What is the Menger critique? Which Austrian’s theories seem to most conveniently fit game theory?
18. How are Rizzo and O’Driscoll’s critiques of game theory’s formalism really critiques of the rational knowledge and common knowledge assumptions of basic game theory?
19. Economic discoordination, such as empty supermarket shelves, is presented in general equilibrium models as an incentive problem. How does game theory present an explanation more in line with the Hayekian Knowledge Problem and the Misesean Calculation Problem?

March 2, 2015: Economist Philip Mirowski Joined us to Discuss Markomata

RECORDING:

https://libertyme.adobeconnect.com/p24m1z5j48a/?launcher=false&fcsContent=true&pbMode=normal

READINGS:

“Markets Come to Bits”: http://bit.ly/17F7TTe

“Inherent Vice”: http://bit.ly/1AkIjcT

View Mirowski’s relevant talk at Rethinking Economics:
http://new.livestream.com/RethinkNY/reny2014/videos/61975310

STUDY QUESTIONS:

“Inherent Vice”

1. What are a few examples of the typical responses that were passed around explaining the ’08 crash?
2. What is proposed as an alternative research path?
3. What does the “complexity approach” explore?
4. What is a “Minsky Moment” and what is meant by “inherent vice”?
5. What is a problem highlighted with Minsky’s approach?
6. What are some traditional orthodox assumptions that will need to be pushed out to move towards a more heterodox understanding of markets?
7. What do the implications of these changes imply for entrepreneurial theories such as Kirzner’s, where an entrepreneur doesn’t create anything “ex-nihilo”, but rather “discovers” arbitrage discrepancies and moves a market towards equilibrium?
8. What are some examples given as “quasi-orthodox” attempts to bring institutional elements into the fray?
9. What impacts would the structure of markets have on calculation? For example: markets precluded by high transaction costs, markets where fix-prices dominate, or markets where liquidity preference is high?
10. What are some roles of algorithms in contemporary financial systems?
11. What are “markomata”? How do they evolve and what are some implications of them?
12. What are some criteria of a failing markomata? What are some examples?

“Markets Come to Bits”

1. What implicit role has physics played in Neoclassical theory?
2. Why has “the market” been generally seen and modeled as a homogeneous and undifferentiated entity?
3. How would a market be defined within the computational approach? What are the functions of these markets?
4. What are some areas researchers on markets as computational entities have focused on in the past? What are some specific examples?
5. What has been a detriment to how the field of markets as computational entities has developed up to now?
6. What would a market theory based upon automata theory imply?

February 10, 2015: Lachmann and Kirzner on Equilibrium

RECORDING:

https://libertyme.adobeconnect.com/p224pza06kz/?launcher=false&fcsContent=true&pbMode=normal

READINGS:

“The Problem of Order in Austrian Economics: Kirzner vs. Lachmann” by Karen Vaughn http://bit.ly/1upEqSw

Wrestling with Time, Chapter 9, by Currie and Steedman http://bit.ly/1yZ0riq

STUDY QUESTIONS:

“The Problem of Order in Austrian Economics: Kirzner vs. Lachmann”:

1. What is the function of the entrepreneur in Kirzner’s theory?
2. What is the function of the entrepreneur in Schumpeter’s theory?
3. How do Kirzner and Mises define entrepreneurship differently?
4. What the two types of uncertainty Vaughn uses to critique Kirzner’s “alertness” theory?
5. What is the Keynesian criticism of entrepreneurship? Does Kirzner’s theory adequately address it?
6. How does Kirzner’s theory critique the neoclassical definition of monopoly?
7. Can entrepreneurial action be wasteful in Lachmann’s view?
8. There is no existing equilibrium, realized or unrealized, in Lachmann’s theory, so how does the word “equilibrium” enter Lachmann’s theory?
9. Does Kirzner’s Robbinsian maximizing overlap with Lachmann’s “routine action”? Does Kirzner’s “undetermined entrepreneurial behavior” overlap with Lachmann’s entrepreneurship?
10. How does Lachmann redefine praxeology?
11. Fill in the blank: Entrepreneurs are not oriented toward equilibrium in Lachmann’s theory, they are oriented toward “recurrent patterns of conduct,” “a point of orientation,” and “a common signpost”, also known as ________.
12. How does Lachmann view monetary profit?
13. What does the price system offer that assists in human planning?
14. What two features do successful institutions have?
15. What is “a foil against which to hold real events so as to bring about particular properties of the latter by comparison”?
16. What is a real type? How should these be studied?
17. Instead of “the market”, what does Lachmann propose we study?
18. What is Vaughn’s suggested research program to complete Lachmann’s theory?

“Wrestling With Time”:

1. What does Lachmann see as the “vice” of formalism in neoclassical economics?
2. Does Lachmann view the market process as terminating in a stage of long-run general equilibrium?
3. Who do the authors say are an inspiration to Lachmann?
4. Do the authors see Lachmann as being representative of the modern Austrian school? Why or why not and is their exposition fair?
5. How do Lachmann and Shackle’s ideas on time differ? How are they similar?
6. How is action formulated in Lachmann’s system? How might this differ from some other Austrians?
7. How does equilibrium enter Lachmann’s framework in regards to individuals?

January 12, 2015: Peer Review!

RECORDING:

Part 1: https://www.dropbox.com/s/rl951ul3sqf32iz/ZOOM0123.MP3?dl=0

Part 2: https://www.dropbox.com/s/hgjf0dwjwfavhlk/ZOOM0124.MP3?dl=0

READINGS:

“The ‘Incompleteness’ of Menger’s Subjectivism, As Viewed by Kirzner and Lachmann”
by Michael Valcic
https://docs.google.com/document/d/1jvUJiMYJ6GZe5LLx18p8x1UZjJJJdDrmYHVIGt0xc0c/edit

“No Values, No Masters: A Wertfrei Take on Anarcho-Capitalism”
by Andrew Criscione
https://www.dropbox.com/s/0pywxviswbm6e64/No%20Values.docx?dl=0