catallaxy files

catallaxy in technical exile

Austrians at work

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The Austrian economists get a lot of stick for being obsessed with doctrinal purity, scorning mathematics and various other things. None of these criticisms seem to apply to the work posted by the four good men and true who blog at The Austrian Economists.

One of their colleagues at George Mason Uni is Tyler Cowen who asks on Marginal Revolutioon What is new and essential in economics?”

By “new,” restrict yourselves to 1990 and afterwards. I see mid-1980s as the end of a great era in economic theorizing. Take game theory, principal-agent theory, and the economics of information, and apply them to everything, for better or worse. This was an exciting, indeed intoxicating, time to learn economics. While applications continue, we have run out of new ideas on those fronts. Experimental economics is completely Nobel-worthy, but it is now over forty years old. What are the next breakthroughs or the breakthroughs which have just been made? Comments are open…

This was a link from The Austrian Economists along with a reference to the launch of a new journal, Capitalism and Society.

The Berkeley Electronic Press, together with the members of the Center on Capitalism and Society, Edmund Phelps (Director), Amar Bhidé, Roman Frydman, Bruce Greenwald, R. Glenn Hubbard, Janusz Ordover, Richard Nelson, Andrzej Rapaczynski, Jeffrey Sachs, Robert Shiller and Joseph Stiglitz, are pleased to announce the launch of the Center’s new peer-reviewed journal, Capitalism and Society.

The capitalist system is noted for its outstanding dynamism. Yet established economic theory does not capture that dynamism. The Center (and its new journal) aim to further understanding of the mechanisms of capitalist dynamism and the important satisfactions it bestows.

Sounds like a must-read for Clive Hamilton!

The gang of four is Peter Boettke, Peter Leeson, Frederic Sautet and Chris Coyne. Frederic spent some time with the Treasury in New Zealand and he has done some work on the question, Why have the Kiwis not become Tigers?

Fred Sautet and Israel Kirzner have written a paper on entrepreneurship which is one of the special interests of the Austrians.

Indeed, policy makers and others often associate entrepreneurship with the creation of new businesses. While this is an accurate description of one of the many outcomes of entrepreneurial activity, entrepreneurship fundamentally is not about business start-ups. It derives from the creative power of the human mind and consists of the discovery of profitable ideas that enable market actors to exploit new, socially beneficial gains from trade. As such, entrepreneurship is the driving force of the market, and it makes progress and sustained prosperity possible.

Israel Kirzner and I explain that entrepreneurship matters more to individual wellbeing than resources. As long as entrepreneurial activity is free to operate, economic systems are very resilient; they can adjust to all sorts of problems. However, when entrepreneurial discovery is stifled, resilience disappears and poverty increases. It follows that economic policy should focus on the institutional (and cultural) context that fosters socially-beneficial entrepreneurial activity. The quality of institutions, especially as they impact monetary profits, is crucial to enabling individuals to bet on the future and reap the profits they have discovered.

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Written by Admin

June 17, 2006 at 12:02 am

Posted in Uncategorized

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