Here are some quick comments on Richard Ebeling’s and Geoffrey Lea’s second essays on Austrian economics in South Royalton, Vermont. All of the essays can be found here.
First, Richard Ebeling.
Richard tells a hilarious story about traveling to South Royalton, Vermont from Sacramento by bus. Wow! I remember that Harry Watson and I had our air fare paid for, if I recall correctly. I don’t know why the disparate treatment. The good news is that it didn’t seem to negatively affect Richard’s attitude unless he was normally even friendlier and more excited than he appeared.
One of my favorite parts of his second essay is his reminiscence of the late Sudha Shenoy. I remember her well. At the age of 23, I had never interacted at any length with an Indian woman. I enjoyed her immensely, especially her infectious laugh. I actually had heard of her famous father, economist B.R. Shenoy, and I think I had read one or two things he wrote. Again, if I remember correctly, he was the first economist I read who was critical of India’s government’s central planning. It’s hard to believe that she died in 2008. It seems much more recent.
Here’s a very sweet remembrance of Sudha by the late John Blundell.
Second, Geoffrey Lea.
I think Geoffrey is right to charitably interpret Milton Friedman‘s famous statement to the group in South Royalton that there’s no such thing as Austrian economics; there are only good economics and bad economics. I didn’t take him to mean that the Austrians didn’t have important insights. I took him to mean that the people gathered there shouldn’t let each other get away with incorrect statements or claims just because they sounded Austrian. And, by the way, I didn’t see people there letting each other get away with such claims.
The pic above is of Sudha. The other pic is of my late friend Harry Watson and his wife Ida Walters in front of the South Royalton hotel, the “scene of the crime.” I was visiting Harry and Ida in September 2015 in New Hampshire and we drove to the hotel to see what it was like. Harry and Ida had met at the conference and got married not long after.
READER COMMENTS
Roger McKinney
Jul 3 2024 at 2:57pm
I have an article somewhere on my hard drive that claims Friedman read Hayek’s Pure Theory of Capital but didn’t understand it. I assume Friedman couldn’t fit it into his math system. But how can one do good economics if one can’t understand Hayek’s Pure Theory?
Unlike physics, good science doesn’t drive out the bad in the social sciences. That’s largely due to the fact that economics is a much more complex science due to the subject matter. That complexity allows socialists like Oskar Lange, Stiglitz, Krugman and others to hawk socialism under the guise of economics and fool gullible people. As bad money drives out the good, so Economics suffers from bad economics driving out the good. That happened with Keynes and continues with the socialist economists today.
Roger McKinney
Jul 3 2024 at 3:34pm
Found it:
Let me emphasize, I am an enormous admirer of Hayek, but not for his economics. I think
“Prices and Production” is a very flawed book. I think his capital theory book is unreadable. On the other hand, The Road to Serfdom is one of the great books of our time. His writings in [political philosophy] are magnificent, and I have nothing but great admiration for them. I really believe that he found his right vocation — his right specialization — with The Road to Serfdom.
His earlier works were intended to be part of the literature of technical economics as a science, and, indeed, it was that characteristic of them that impressed Lionel Robbins and led Lionel to bring him from Austria to London. I never could understand why they were so impressed with the lectures that ended up as Prices and Production , and I still can’t . . . these very confused notions of periods of production, different orders of products, and so on.
-From Friedman-Ebenstein interview in 1995, quoted in Alan Ebenstein’s Hayek’s Journey: The Mind of Friedrich Hayek (2003) Ch.11.
Roger McKinney
Jul 3 2024 at 3:45pm
Sorry! It was Prices and Production he didn’t understand, not Pure Theory.
Monte
Jul 4 2024 at 11:58am
This is seemingly the case for most admirers of Hayek. Caplan, in Why I Am Not an Austrian Economist, points out that Hayek focused almost exclusively on “philosophy, law, and intellectual history after the 1930’s” – subject matter for which he is most famously remembered. Consistent with your views regarding “Prices and Production”, Paul Samuelson had this to say:
Nevertheless, his contributions to economic science, per se, are noteworthy.
Roger McKinney
Jul 5 2024 at 6:55pm
Cowen and Caplan complain that the Austrian business cycle theory requires that businessmen be stupid. It doesn’t. Mises wrote that businessmen are short term oriented and the economist must make them consider the long-term. The Fed’s own research shows that low rates encourage risky investing, many of which go bad. The Fed lowers rates until someone borrows and invests. The empirical evidence for that is too strong while Caplan and Cowen ignore it. Here are some responses to their attacks:
https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://mises.org/quarterly-journal-austrian-economics/risk-and-business-cycles-new-and-old-austrian-perspectives-tyler-cowen&ved=2ahUKEwiD6cbE_ZCHAxV0K0QIHTKoBwQQFnoECBMQAQ&usg=AOvVaw3uDkKmkcWnjqgGr2Tzwxah
https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.researchgate.net/publication/228286916_Tyler_Cowen_on_Austrian_Business_Cycle_Theory_A_Critique&ved=2ahUKEwiD6cbE_ZCHAxV0K0QIHTKoBwQQFnoECA4QAQ&usg=AOvVaw3i-KWmKFuKZEpsvlB4Hyl9
Roger McKinney
Jul 5 2024 at 7:05pm
Also, Cowen asserts that the ABCT teaches that the prices of consumer and investment goods will diverge during expansions when the evidence shows both rise. But the ABCT says prices will diverge only under a gold standard but under a fiat money system both will rise.
Every critic I’ve read attacks a strawman version of Hayek and Austrian economics.
Samuelson predicted in 1988 that the USSR would soon overtake the US in living standards, two years before it collapsed because it couldn’t feed its people.
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