In this week’s conversation with Russ Roberts, Pete Boettke talks about Ludwig von Mises. A number of interesting issues come up. One phrase that recurs a few times is “recognized but marginalized,” which describes the fact that although many Austrian economists have been honored over the years, they and their contributions are not included in the standard curriculum at the leading graduate schools.

As Boettke points out, the profession is split between economists who work out the properties of equilibrium and economists who focus on institutional processes. The latter are marginalized, although they include many Nobel Laureates, including Douglass North and Elinor Ostrom.

The focus on properties of equilibrium attracts interventionists. You point out an undesirable property of an equilibrium, and then you propose a fix. For example, Stiglitz and Rothschild pointed out that a health insurance market could collapse because of adverse selection, so it follows that government should impose a mandate to purchase health insurance.

The focus on institutional processes attracts libertarians. You see the benefits of the forces of competition and creative destruction. You see the adverse institutional properties of government.

To the equilibrium theorist, the institutional economist is ignoring market failure. To the institutional economist, the equilibrium theorist is ignoring the reality that technology is changing, tastes are changing, there is no Walrasian auctioneer to set prices, and government far from omniscient.