A Companion to the History of Economic Thought - Chapter 28 doc

POSTWAR HETERODOX ECONOMICS 445 CHAPTER TWENTY- EIGHT Postwar Heterodox Economics A THE AUSTRIAN SCHOOL OF ECONOMICS, 1950–2000 Peter J. Boettke and Peter T. Leeson 28A.1 THE EARLIER HISTORY OF THE AUSTRIAN SCHOOL The doctrines that comprise the Austrian school of economics have varied and the relative position of the school within the mainstream of economic thought has moved from the center to the fringe several times throughout the 130 years of its history. Carl Menger, in his Grundsatze der Volkswirthshaftslehre of 1871, substi- tuted subjective marginal utility for the classicists’ objective cost of production as the theory of value. Friedrich von Wieser introduced the idea of opportunity cost and emphasized its subjective and ubiquitous character. Eugen von Böhm-Bawerk engaged in applying Menger’s theory of value to the theories of capital and interest. The next generation’s leaders were Ludwig von Mises and Hans Mayer, who emphasized epistemic, ontological, and other philosophical themes. A fourth generation of Austrian economists emerged (most of whom would make their academic mark in the USA after World War II) that included such major econom- ists as F. A. Hayek, Gottfried Haberler, Oskar Morgenstern, Fritz Machlup, and Paul Rosenstein-Rodan. Austrian economics flourished in the period immediately following World War I. By the mid-1930s, however, the idea of a distinct Austrian program, even in the minds of the Austrians themselves, was seriously waning, in part because the mainstream more or less absorbed the important points the Austrians were making. Von Mises (1981 [1933], p. 214) had argued that while it is commonplace in modern economics to distinguish between the Austrian, Anglo-American, and Lausanne schools, “these three schools of thought differ only in their mode of expressing the same fundamental idea and that they are divided more by 446 P. J. BOETTKE AND P. T. LEESON their terminology and by peculiarities of presentation than by the substance of their teachings.” Hayek was even more explicit when he wrote as late as 1968 that while the fourth generation of Austrian economists continued to show their training in Vienna in the 1920s in terms of their style of thinking and theoretical interests, they could hardly be considered a separate school of thought anymore. “A school has its greatest success when it ceases as such to exist because its leading ideals have become a part of the general dominant teaching. The Vienna school has to a great extent come to enjoy such a success” (1968, p. 52). Yet by the period immediately after World War I, the basic insights of von Mises and Hayek were much less appreciated by their fellow economists. The main tenets of the Austrian school that members of the fourth genera- tion thought had been fully incorporated into the mainstream are clear. Fritz Machlup (1982, p. 42) emphasized that Austrian economists had never been uniform in their belief structure, intensely debating among themselves over the relative importance of concepts and tenets. Nevertheless, Machlup offered six “main tenets” which economists trained in the Austrian approach would accept: 1 Methodological individualism. Ultimately, we can trace all economic phenomena back to the actions of individuals; thus individual actions must serve as the basic building blocks of economic theory. 2 Methodological subjectivism. Economics takes man’s ultimate ends and judg- ments of value as given. Questions of value, expectations, intent, and know- ledge are created in the minds of individuals and must be considered in this light. 3 Marginalism. All economic decisions are made on the margin. All choices are choices regarding the last unit added or subtracted from a given stock. 4 Tastes and preferences. Individuals’ demands for goods and services are the result of their subjective valuations of the ability of such goods and services to satisfy their wants. 5 Opportunity costs. All activities have a cost. This cost is the most highly valued alternative that is forgone because the means for its satisfaction have been devoted to some other (more highly valued) use. 6 Time structure of consumption and production. All decisions take place in time. Decisions about how to allocate resources for the purposes of consumption and production across time are determined by individuals’ time-preferences. Machlup offers two other tenets of the Austrian school that he considered “highly controversial”: 7 Consumer sovereignty. In the marketplace, the consumer is king. Consumers’ demands drive the shape of the market and determine how resources are used. Intervention in the marketplace stifles this process. 8 Political individualism. Political freedom is impossible without economic freedom. POSTWAR HETERODOX ECONOMICS 447 Machlup also hinted at the Austrian view of markets as a process – that is, the adjustment process and path toward equilibrium – rather than the correctness and usefulness of equilibrium theory and the conditions of static equilibrium. Machlup’s six main tenets are all positions that are more or less embraced by mainstream economics. The key to what differentiates Austrian economics from mainstream economics in Machlup’s eyes then seems to be the controversial tenets seven and eight. Unlike the previous six tenets, these two have a norm- ative edge to them. Both, on some level or another, seem to be saying that free markets are superior to government intervention. Indeed, in his piece, Machlup points out that contrary to many Austrians who view their economic statements as wertfrei, “nevertheless, the label, ‘Austrian economics’ has come to imply a commitment to the libertarian program” (1982, p. 45). Thus, in Machlup’s mind Austrian economics is neoclassical economics with a free market bent. No doubt Machlup is proud of his educational pedigree in Vienna, but even more so because it had proven so successful in getting its main teaching accepted as part of the dominant teaching in economics. For Austrians like Machlup trained in the 1920s, the defining characteristics of Austrian economics are tenets held in common by the mainstream. But if we agree with this statement, how does the notion of an Austrian school of thought distinct from the mainstream make sense? The answer to this question lies in the advances that Austrian economics achieved after World War II, in particular in the unique contributions that Hayek and von Mises made in the 1940s in Individualism and Economic Order (Hayek, 1948) and Human Action: A Treatise on Economics (von Mises, 1949) respectively. For von Mises and Hayek, the ideas in these works were merely statements of “modern economics,” but in the hands of the fifth (Rothbard, Lachmann, and Kirzner), sixth (e.g., Rizzo, Lavoie, Garrison, White, Block, and Salerno) and seventh (e.g., Selgin, Boettke, Horwitz, and Prychitko) generations of Austrian economists these ideas would become the framework for an alternative paradigm in economic science. 28A.2 REDRAWING THE LINES: MAINSTREAM AND AUSTRIAN ECONOMICS DEHOMOGENIZED In the 1920s and 1930s, von Mises and Hayek were engaged in an intellectual battle with the socialists over the feasibility of socialism (see Boettke, 2000). The great debate that ensued between these two and the socialist’s most prominent figure, Oskar Lange, came to be called the “Socialist Calculation debate.” Von Mises maintained that since socialism, by definition, precludes the possibility of private ownership of the means of production, no market prices that reflect the relative scarcities of resources can emerge. Without market prices to guide production, he argued, socialism is unable to rationally allocate resources among competing ends. Strictly speaking, socialism is impossible. Lange responded by claiming that market prices are unnecessary to rationally allocate resources. The socialist central planners need only establish shadow prices and then instruct industry managers to produce at that level of output which sets 448 P. J. BOETTKE AND P. T. LEESON price equal to marginal costs, and minimize average costs. If the planning board selects the wrong prices, simple trial and error will quickly reveal the correct prices. Lange postulated an adjustment process within his model that is similar to the process that underlies the Walrasian model. Hayek responded to Lange’s rebuttal by pointing out that Lange’s model assumes everything that it needs to prove. Only in a state of final equilibrium, where final prices are known, could the planners set price equal to marginal costs and minimize average costs. In the Walrasian model, equilibrium is guaranteed through a pre-reconciliation of plans. In equilibrium, agents’ plans dovetail with one another so that all opportunities for mutual learning have been exhausted. The Walrasian model clarifies the conditions under which equilibrium could be said to be obtained, but the model is silent on how actors’ plans could be adjusted in an equilibration process. The pre-reconciliation of plans is a defining characteristic of equilibrium, but the key theoretical question that economists must address is how in the absence of such pre-reconciliation individual actors will be led to reconcile their plans with one another. Hayek argued that individuals outside of the equilibrium state will be moved to discover the opportunities for mutual learning, since each unexploited opportunity represents possibilities for improvement in their lot in life. The ceaseless activity of the market is driven by the opportunities for mutual gain. If the data of the market were frozen this activity would converge quickly on a state of affairs where all mutual gains are exhausted. Due to the constantly changing nature of market conditions, this equilibrium is constantly shifting. What allows capitalism to discover the know- ledge necessary to allocate resources effectively is the competitive market process. Only via this process can we generate the knowledge necessary to make rational allocation possible. Lange’s model left no room for the activity of economic life and, as such, his model could not address the dynamic problems that socialist planning would have to confront in practice. Later, von Mises buttressed Hayek’s argument with his notion of the entre- preneur. The entrepreneur, von Mises stated, is the driving force of the market process. Entrepreneurs both create and respond to the changes in market conditions, and through their profit-seeking push the market in the direction of clearing. Absent the institutional framework of private property that allows entrepreneurs to appraise the economic situation via the price system, socialist planning must fail. While Hayek’s work in response to the market socialists focused on fleshing out the importance of the market as a process that generates a price system that enables us to make use of dispersed knowledge, von Mises’s subsequent work not only restated his argument on the impossibility of economic calculation under socialism, but also developed his notion of the entrepreneur as the driving force in the market economy. It was only in the years following the Socialist Calculation debate, in the late 1940s, that von Mises and Hayek fully understood that their view of the nature of the economic process was fundamentally different from the view of the rest of the economics profession (see Kirzner, 1987). The increasing emphasis by von Mises and Hayek on uncertainty, entrepreneurship, knowledge, and market processes all emerged in the calculation debate. The calculation debate forced POSTWAR HETERODOX ECONOMICS 449 von Mises and Hayek to really elucidate their understandings of the market process, and it made them realize the implications of their own ideas. They were blind-sided by the fact that Lange (and Lerner) used neoclassical arguments to construct a defense of socialist economic organization. Although by the 1930s it seemed as though the mainstream had incorporated Austrian ideas rather fully, it became clear to those trained under them in the late 1940s and the 1950s that the von Mises and Hayek understanding of the economic process was very different, and far from being accepted by the profession at large. The dividing line between Austrian and mainstream ideas was redrawn and with it the Austrian school, as a distinct school of economic thought, reborn. 28A.3 THE PERSPECTIVE OF AUSTRIAN ECONOMICS AFTER WORLD WAR II Against this backdrop grew the next generation of Austrian economists, who trained after World War II, in the 1950s. The tenets of market process theory and a focus on the importance of entrepreneurship are conspicuously absent in Machlup, who trained in the 1920s. Only after World War II did the importance of these elements to Austrian economics (along with several others, to be dis- cussed later) emerge. How, then, did Austrians trained in the 1950s view Austrian economics? We can see these differences most clearly by looking at the way in which an Austrian trained in the 1950s defined his school of thought, and then con- trast them with Machlup’s understanding. Kirzner (1986) acknowledges the correctness of Machlup’s six tenets but points out that the existing list does not take into account the theoretical advances made in the 1940s by von Mises and Hayek. In light of the contributions made by von Mises and Hayek in the Socialist Calculation debate, Kirzner believes that two more tenets must be added to Machlup’s basic six to complete the list. These are: (a) Markets as a process – the notion of markets and competition as learning and discovery processes. (b) Radical uncertainty – uncertainty pervades all our actions and is the ubiquitous context in which all choice must be made. While these ideas only become articulated in the postwar work of von Mises and Hayek, they were partly evident as far back as the early 1930s. Indeed, Kirzner points out that the Austrian critique of “functional price theories,” and calling for “causal-genetic theories,” was an early expression of the importance of market process theory (see Cowan and Rizzo, 1996). The Austrians were stressing the importance of understanding the sequence of events that cause prices to emerge over the sterile description of static equilibrium. But Austrians in the von Mises circle in Vienna, Kirzner says, did not recognize this insight as a radical departure from mainstream economic theory. 450 P. J. BOETTKE AND P. T. LEESON For Kirzner, it is this notion of market process and uncertainty that distin- guishes Austrian economics from the mainstream. Kirzner’s work, while empha- sizing the uncertainty present in all human decision-making, has primarily focused on the entrepreneurial market process (e.g., Kirzner, 1973). Ludwig Lachmann, on the other hand, tended to emphasize the elements of radical subjectivism and radical uncertainty that are inherent in the economic process (e.g., Lachmann, 1977). The different emphases of these two scholars led to the internal theoretical debate within the Austrian school in the 1970s and 1980s on the equilibrating properties of the market process (see Vaughn, 1994). O’Driscoll and Rizzo’s The Economics of Time and Ignorance (1985) sought to build on the twin themes of uncertainty and market process, and restated the theoretical contribution of the Austrian school of economics in relation to contemporary economic theory and policy. O’Driscoll and Rizzo’s work appealed to an audience of heterodox economists, who found the emphasis on subjectivism, time, uncertainty, and indeterminancy within the economic process a welcomed relief from the sterile theory of neoclassical economics. The debate between Kirzner and Lachmann remains unsettled in the literature, but as much of modern mainstream theory has moved away from general equilibrium models, so have Austrians ceased to focus their theoretical attention on the issue of whether or not the market process converges to general competitive equilibrium. 28A.4 BEYOND MICROECONOMICS Our story has emphasized the distinguishing characteristics of the Austrian approach in the field of microeconomic theory. The Austrian position with regard to macroeconomic theory can be summed up as follows: while there may indeed be macroeconomic problems (unemployment, inflation, business cycles), there are only microeconomic explanations and solutions. There are no aggregate relationships unmoored to individual choices that matter for economic analysis. This position, of course, brought the Austrians into opposition with a postwar economics domin- ated by Keynesianism and its emphasis on the relationship between aggregate variables. Hayek had identified this aggregation problem with Keynes’ economics in his earlier debate with Keynes in the 1930s. He argued that aggregation masked the structural composition of an economy, which must be scrutinized if the eco- nomist hopes to understand overall economic performance (see Caldwell, 1995). While their work on capital theory (e.g., Lachmann, 1956; Kirzner, 1966) provides a bridge between microeconomics and macroeconomics, Israel Kirzner and Ludwig Lachmann tended to emphasize the microeconomic tenets that constituted a unique Austrian understanding of the market economy, while the other fifth-generation economist, Murray Rothbard, tended to emphasize the macroeconomic analysis that would differentiate the Austrians from other schools of economic thought in the 1960s (see Rothbard, 1962, pp. 661–764, 832–9, 850– 79). The key to this, in Rothbard’s mind, was an explanation of the costs and consequences of government pursuing inflationary credit expansion. Rothbard argued that the “bust” in the business cycle was causally linked to the earlier POSTWAR HETERODOX ECONOMICS 451 government generated “boom.” The market economy is self-correcting and will quickly eliminate the earlier government-generated errors in investment, unless the process of adjustment is interfered with by government policies. Rothbard’s message, like the similar message provided by von Mises and Hayek during the 1930s, was rejected by the majority of economists in the 1960s, who believed that the role of the economist was to provide sage advice to govern- ment policy-makers on how to maintain the economy in full employment. But for a generation of economists coming of age in the late 1960s and early 1970s, the earlier macroeconomics consensus was fracturing in light of the theoretical incoherence of the Keynesian synthesis and the empirical record of Keynesian demand management policy. The monetarist counter-revolution led by Milton Friedman, and the New Classical revolution led by Robert Lucas, effectively displaced the Keynesian hegemony in macroeconomics by the mid-1970s. In that mix, a resurgent Austrian school of economics must also be mentioned. Hayek was awarded the Nobel Prize in 1974, and his pre-Keynesian theories of the economic process started to be read more widely. A group of younger econom- ists earning their Ph.D.’s precisely at this time, who were raised on Rothbard’s writings, capitalized on the moment to pursue new work in macroeconomics. Gerald O’Driscoll’s Economics as a Coordination Problem (1977) was the first systemic examination of the work of F. A. Hayek that placed Hayek’s work on monetary theory and the trade cycle within a broader unified framework of economics. Roger Garrison began to present the Austrian cycle within a standard model for a comparative analysis in the 1970s. Garrison’s work culminated in his Time and Money (2000), where he argues for a switch from the labor-based macroeconomics of Keynesianism and monetarism to a capital-based macro- economics championed by the Austrians. Peter Lewin’s Capital in Disequilibrium (1998) and Steve Horwitz’s Microfoundations and Macroeconomics (2000) are other contemporary contributions to Austrian macroeconomics. In addition to the problems of the trade cycle, Rothbard’s work emphasized the fraudulent and destructive force that the government represents with its monopoly position over the money supply. Hayek also wrote against government monopoly of the money supply and in the 1970s called for the The Denationalization of Money (1976). Again, young scholars raised on Rothbard’s writings on the problems of government money were able to exploit the inflationary period of the 1970s and offer a radical argument for “free banking.” Lawrence H. White’s Free Banking in Britain (1984) led to a burgeoning literature on how a system of competitive currency would in fact operate. This “free banking” strain of modern Austrian economics has had considerable success in addressing the mainstream of the economics profession, and it is not uncommon for work in this field to be published in the leading professional journals (see, e.g., Selgin and White, 1994). 28A.5 ECONOMIC SYSTEMS AND ECONOMIC DEVELOPMENT The collapse of the Soviet-type economies in the late 1980s was the most signi- ficant political economy event since the Great Depression. Standard models of 452 P. J. BOETTKE AND P. T. LEESON optimal planning and the macroeconomic examination of Soviet economic growth proved to be unable to explain the collapse of the Soviet system and offer advice for the transition from socialism to capitalism. The Austrian economists had long been the most vocal critics of the socialist economic system within the economics profession. Don Lavoie’s Rivalry and Central Planning (1985) was perfectly timed in order to capitalize on this historical situation. Lavoie’s work demonstrated how the market socialist model of neoclassical economists diverted the debate into statics, and how a reexamination of the dynamic character of the market economy should transform economic research to focus on questions of the institutional environment and the entrepreneurial character of economic activity. Following up on Lavoie’s work, Boettke (1990) addressed the origin of the Soviet political and economic system, and Prychitko (1991) took up the challenge of the workers’ control model of socialism. The modern Austrian focus on the import- ance of institutions in providing the incentives for the acquisition and use of information and entrepreneurial innovation has merged considerably with the work of the New Institutional Economics of James Buchanan, Ronald Coase, Douglass North, Gordon Tullock, and Oliver Williamson (see Boettke, 1993, 2001). Development economics has also been transformed in the wake of the collapse of communism. Scholars are now emphasizing the underlying institutional envi- ronment and cultural preconditions that enable countries to realize generalized prosperity (see Lal, 1999). Recent work in economic development is taking up the task of testing Hayek’s claims about common-law traditions and the rule of law (Mahoney, 2001). In short, in the area of economic systems and development, Austrian ideas are making significant inroads into the mainstream of contem- porary research. 28A.6 CONCLUSION Contemporary Austrians straddle heterodoxy and orthodoxy within the eco- nomics profession. They offer a heterodox critique of formal theory, but contribute to the policy consensus that has emerged in the past 20 years, that has moved away from state-led development to a more laissez-faire position in international and domestic policy. But the intellectual battleground today is much more defined by methodological issues than ideological ones. Indeed, many of the policy wisdoms that flow from an Austrian analysis of the market economy are part of the com- mon knowledge of market-oriented economists, but the Austrian methodological stance, and the theoretical agenda that generated that wisdom, are rejected by those who still pursue the model and measure research strategy in economic science. Thus, today, the Austrian school finds itself in a strange position with regard to its fellow economists. It believes that others have stumbled upon the right answers to many practical policy questions, but for the wrong reasons. Note We thank John Robert Subrick, Edward Stringham, Scott Beaulier, Ryan Oprea, and Warren Samuels for their comments on an earlier version. POSTWAR HETERODOX ECONOMICS 453 Bibliography Boettke, P. 1990: The Political Economy of Soviet Socialism: The Formative Years, 1918–1928. Boston: Kluwer. —— 1993: Why Perestroika Failed: The Politics and Economics of Socialist Transformation. London: Routledge. —— (ed.) 2000: Socialism and the Market Economy: The Socialist Calculation Debate Revisited, 9 vols. London: Routledge. —— 2001: Calculation and Coordination: Essays on Socialism and Transitional Political Economy. London: Routledge. Caldwell, B. (ed.) 1995: The Collected Works of F. A. Hayek: Contra Keynes and Cambridge. Chicago: The University of Chicago Press. Cowan, R. and Rizzo, M. 1996: The casual genetic moment in economics. Kyklos, 49(3), 273–316. Garrison, R. 2000: Time and Money. New York: Routledge. Hayek, F. A. 1948: Individualism and Economic Order. Chicago: The University of Chicago Press. —— 1968: Economic thought VI: The Austrian school of economics. In D. M. Sills and R. K. Merton (eds.), International Encyclopedia of the Social Sciences. New York: Macmillan. —— 1976: The Denationalization of Money. London: Institute for Economic Affairs. Horwitz, S. 2000: Microfoundations and Macroeconomics. New York: Routledge. Kirzner, I. 1966: An Essay on Capital. New York: Augustus M. Kelley. —— 1973: Competition and Entrepreneurship. Chicago: The University of Chicago Press. —— 1986: The Austrian school of economics. In J. Eatwell, M. Milgate, and P. Newman (eds.), The New Palgrave: A Dictionary of Economics, 4 vols. London: Macmillan. —— 1987: The socialist calculation debate: lessons for Austrians. Review of Austrian Economics, 2, 1–18. Lachmann, L. 1956: Capital and Its Structure. London: London School of Economics. —— 1977: Capital, Expectations and the Market Process. Kansas City, MO: Sheed and McMeel. Lal, D. 1998: Unintended Consequences. Cambridge, MA: The MIT Press. Lavoie, D. 1985: Rivalry and Central Planning. New York: Cambridge University Press. Lewin, P. 1998: Capital in Disequilibrium. New York: Routledge. Machlup, F. 1982: Austrian economics. In D. Greenwald (ed.), Encyclopedia of Economics. New York: McGraw-Hill. Mahoney, P. 2001: The common law and economic growth: Hayek might be right. Journal of Legal Studies, 30(2), 503–25. Mises, L. von 1949: Human Action: A Treatise on Economics. Chicago, IL: Henry Regnery. —— 1981 [1933]: Epistemological Problems in Economics. New York: New York University Press, 1981. O’Driscoll, G. 1977: Economics as a Coordination Problem. Kansas City, MO: Sheed and McMeel. —— and Rizzo, M. 1985: The Economic of Time and Ignorance. Oxford: Blackwell. Prychitko, D. 1991: Marxism and Workers’ Self-Management. Westport, CT: Greenwood. Rothbard, M. 1962: Man, Economy and State, 2 vols. Princeton, NJ: Van Nostrand. Selgin, G. and White, L. H. 1994: How would the invisible hand handle money? Journal of Economic Literature, 32(4), 1718–49. Vaughn, K. 1994: Austrian Economics in America. New York: Cambridge University Press. White, L. H. 1984: Free Banking in Britain. New York: Cambridge University Press. 454 P. J. BOETTKE AND P. T. LEESON B FEMINIST ECONOMICS Janet A. Seiz 28B.1 INTRODUCTION Beginning in the mid-1960s, feminists in most of the social sciences and humanit- ies forcefully challenged their disciplines’ treatment of issues related to women and gender. By the mid-1980s, feminist scholarship had significantly altered many disciplines. Feminist economists, however, had little progress to report: relatively few feminist critiques of economics had appeared, and they had not been influential. By the mid-1990s, the picture was changing. While economics had by no means been transformed, feminist economists were much more numerous, and far more explicitly feminist work was being published. Space constraints permit here only a very rough sketch of this ongoing story, but references are pro- vided for further reading (for more detailed surveys, see Beneria, 1995; Hewitson, 1999). 28B.2 HOW IT BEGAN In the 1970s and 1980s, the economics profession appeared to welcome neither women nor feminist ideas. Women received only 6 percent of the economics Ph.D.’s awarded in the USA in 1970, about 14 percent in 1980, and just 20 percent in 1990 (Kahn, 1995, p. 194; see also Albelda, 1997). “Most economists,” wrote Barbara Bergmann (1987, p. 132), were “hostile to any suggestion that the economic position of women needs improvement.” Economic literature had little to say about gender. Economists “showed little interest in those segments of the economy that have been largely the domain of women, namely household production and volunteer work” and “generally ignored the extent to which women were involved in the rest of the economy” (Ferber and Teiman, 1981, p. 128). Using definitions of “work” modeled on men’s experiences, economists and statisticians greatly underestimated women’s economic contributions (Ciancanelli and Berch, 1987). Gender inequality was commonly treated as “beyond the purview of economic analysis, either in the realm of biological givens or sociological imponderables” (Folbre and Hartmann, 1988, p. 184). Economists’ discussions of policies regarding, for example, government budgets, economic development, and international trade almost never addressed the effects of policy choices on women or gender relations. It was true that women’s economic lives had at last received some serious attention from labor economists, but the dominant writings in the field were read as strongly antifeminist. The path-breakers in neoclassical work on gender – Jacob Mincer, Gary Becker, and Solomon Polachek – collectively constructed a tight “supply-side” account in which the differences between women’s and men’s work and earnings appeared to be unproblematic. Starting in the mid-1960s, Becker created a “new home economics” dealing with household production, 454 J. A. SEIZ [...]... Sweden), and Karl Polanyi (1886–1964, Austria and Hungary) Kapp (1950) made major contributions to the theory of social cost and the environmental impact of business enterprise, as well to general institutional theory Myrdal is well known for his additions to monetary theory, as well as his later applications of the theory of cumulative causation to studies of ethnic disadvantage, regional disparity and... for example, has been the focus of policy application of a range of distinctive Post Keynesian theoretical developments Arestis, McCauley and Sawyer (2001) offer a critique of an institutional structure based on orthodox theory with its separation of real and monetary variables, and argue for an alternative that takes account of: • the interdependence of the monetary and the real, such that there is... account of a complex literature and plays a substantive part in the development of thought The following traces the institutional and social arrangements that played an active part in the evolution of Post Keynesian economics In a further categorization, the postwar period is divided into three sub-periods The first, spanning the 1950s and 1960s, saw the contemporaries and students of Keynes, Kalecki, and... onset of Cold War anti-communism, there was precious little terrain upon which to establish a radical vision in the United States (Sweezy and Magdoff, 1988) With the exception of the journal Monthly Review, first published in 1942, and Steindl’s Maturity and Stagnation in American Capitalism (1952), there was little in the way of contemporary radical economic analysis of capitalism In contrast to neoclassical... the theoretical interface between economics and law; Mitchell had a theory – and not merely a description – of the business cycle; Clark pioneered work on the interaction between the multiplier and the accelerator, and foreshadowed the concept of bounded rationality; and so on If institutional economics involves the acceptance of the malleability of preferences, then it is clear that a number of other... issue They questioned both the meaning of the aggregate “capital” and the meaning of equilibrium and its relation to the real world, or history. ” The debate marked out and explicated Post Keynesianism as a distinctive approach to economics By the end of this period, the community of Post Keynesians was still centered on Cambridge, but the influence of this view of Keynes had spread, both in the UK (in the. .. 1930s However, the original tradition of institutional economics survives and shows the signs of a revival today Its renewal has in part been stimulated by the rise after 1975 of the so-called “new institutional economics” of Oliver Williamson, Richard Posner, Mancur Olson, and others But the theoretical approach of the “new” institutional economics is closer to postwar mainstream economics and in some... formation of concordant habits Again, all these themes are found in the “old” institutionalism Remarkably, another recent theoretical development has revived a theme that was prevalent in the German historical school, concerning the necessary role of the state in consolidating and legitimating some institutions Against the idea that laws and property rights can evolve fully without the state, Itai Sened... for example, attracted a wider range of interests than a focus purely on Keynes, Kalecki, and Sraffa, and Post Keynesians took part in the activities of other organizations, such as the institutionalist organizations (the European Association of Evolutionary Political Economy and the Association for Evolutionary Economics); Arestis (1996) stresses the growing interface with institutionalism The growing... percent of economics Ph.D.’s in the USA, and they are still scarce on the faculties of Ph.D.-granting universities (see Kahn, 1995; Hammond, 1999; Olsen and Emami, 2002) A 1992 survey of American Economic Association members suggested that feminist work had had little impact on the profession (Albelda, 1997) Within a few years, however, feminist economists had a professional association and a journal of their . though the mainstream had incorporated Austrian ideas rather fully, it became clear to those trained under them in the late 1940s and the 1950s that the von Mises and Hayek understanding of the economic. short, in the area of economic systems and development, Austrian ideas are making significant inroads into the mainstream of contem- porary research. 2 8A. 6 CONCLUSION Contemporary Austrians straddle. For Ayres, the influence of John Dewey was more important than that of the earlier prag- matists. However, Ayres did not place the same degree of emphasis as Dewey on the explanatory value of psychology.