Tuesday, October 12, 2010

Jack of all trades Vs Master of one-
In his definition of the scope of Austrian economists Caplan discusses why he chooses the work of Mises and Rothbard over that of Hayek to be more “Austrian”. In other words Jack of All Trades aka Hayek vs Master of one aka Mises+ Rothbard . Now I am no expert on Austrain Economists, or economics in general, but from the discussions we have had at SWEET it is very apparent to me that maybe this is not the best way to judge whether someone’s economic ideas are well founded or developed enough. In our conversations at SWEET we always diverge off to talk about sciences relating to economics. We have also recently been talking about the importance of psychology in economics. This makes me think that maybe Hayek is a better rounded individual, maybe the fact that he is interested in “philosophy, law, and intellectual history after the 1930's” is not such a bad thing after all. Caplan’s first point about Mises and Rothbard rejecting many of the key elements of modern neoclassical economics seems to be valid but disregarding an economist who is also well versed in subjects that clearly relate to economics is not!

A Taste of New-
Finally! I have not been a fan of Austrian economics, but I really enjoyed reading this article because it really brings about light to newer economists, and how their thinking has evolved and changed. Reading Mises and Rothbard sounds outdated, something irrational, however I enjoyed reading neoclassical views like those that Caplan mentions about cardinal utility, and how this was viewed by Rothbard, and how neoclassical economists avoid it!

"Every market transaction benefits all participants”-
Welfare economics is where I think I most greatly differ in view from the Austrians. The above statement sounds very accurate. In simple terms I would think of this as the market allows for comparative advantage, which leads to resources being allocated fairly, which leads to the perfect balance between demand and supply. All this is fine and dandy, but where my criticism comes in is what type of equation does one use to determine market players? In other words who are these participants? It seems fair that some participants can afford a Ferrari whereas other participants like me will have to make do with a second hand Subaru. However, what if there exist participants that can afford medication for genetic disorders like cystic fibrosis and there are other participants that cannot. Does the market have a solution to this? The pharmaceutical industry cannot really cut costs because of crucial research that needs to be done in order to release drugs, research that costs billions of dollars. If government intervention is not key here, then what is the other solution?
Caplan also talks about how neoclassical thought can come up with, “Communism was inefficient, or rent control is inefficient, or piracy was inefficient.” I think that in the above example, taxes going to help the patient with cystic fibrosis are inefficient too, but inefficiency is not always the worst method to apply to an economy.


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