History and theory

There is either history based on either sound theory or wrong theory, but there's no such a thing as history without theory.

Mises the Great

The more I read Mises, the deeper I find his work.

Keynes versus Mises: a guess

The General Theory is by and large more famous than Human Action.

Currently, Human Action is by and large being more read than The General Theory.

Austrian School: not market extremists, not even market defenders, just market explainers

"[The law of comparative advantage] is indispensable for understanding the origin of civilization and the course of history. Contrary to popular conceptions, it does not say that free trade is good and protection is bad. It merely demonstrates that protection is not a means to increase the supply of goods produced. Thus it says nothing about protection's suitability or unsuitability to attain other ends, for instance to improve a nation's chance of defending its independence in war."

Ludwig von Mises. Theory and History. Page 30.

"If one deals with economic policies from the point of view of this distinction between long- and short-run interests, there is no ground for charging the economist with bias. He does not condemn featherbedding of the railroadmen because it benefits the railroadmen at the expense of other groups whom he likes better. He shows that the railroadmen cannot prevent featherbedding from becoming a general practice and that then, that is, in the long run, it hurts them no less than other people."

Idem. Page 33.

The Austrian School as mainstream economics

For many people, Austrian and Neoclassical schools are like oil and water. However, it's very interesting that Mises often distinguishes instead between Classical and Modern schools, the boundary being the Marginalist Revolution by Jevons, Menger, and Walras.

"The history of modern economics begins with the resolution of the paradox of value by Menger, Jevons, and Walras." (1)


Also, in spite of Mises's criticism of the Classical School, it is meaningful to quote him at length on his opinion about the Classic School:

"Once one has correctly grasped the position of the concept of cost within the framework of modern science, one will have no difficulty in seeing that economics exhibits a continuity of development no less definite than that presented by the history of other sciences. The popular assertion that there are various schools of economics whose theories have nothing in common and that every economist begins by destroying the work of his predecessors in order to construct his own theory on its ruins is no more true than the other legends that the proponents of historicism, socialism, and interventionism have spread about economics. In fact, a straight line leads from the system of the classical economists to the subjectivist
economics of the present. The latter is erected not on the ruins, but on the foundations, of the classical system. Modern economics has taken from its predecessor the best that it was able to offer. Without the work that the classical economists accomplished, it would not have been possible to advance to the discoveries of the modern school. Indeed, it was the uncertainties of the objectivistic school itself that necessarily led to the solutions offered by subjectivism. No work that had been devoted to the problem was done in vain. Everything that appears to those who have come afterward as a blind alley or at least as a wrong turning on the way toward a solution was necessary in order to exhaust all possibilities and to explore and think through to its logical conclusion every consideration to which the problems might lead." (2)


Plus, take the "mainstream" definition of economics by Lord Robbins: "Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses." (3) Immediately following the definition, Robbins gives a list of 5 books in order to show that his definition was actually already being used by other economists. The two first books quoted are Menger's Grundsätze and Mises's Gemeinwirtschaft (Socialism). Compare that definition with Mises's definition of praxeology as "the general theory of human action" (4), this is of "purposeful behavior" (5). Then work out a little Mises's definition as to arrive at the fact that only scarce means can be the object of purposeful behavior; this is, of economizing, and you realize that some definitions amount at economics as the study of the same phenomenon, although Mises's definition seems to me easier to begin with in studying that phenomenon.

Of course, you have differences in the appreciation of such tools as mathematics, but this seems to me a solvable problem within the theory, given the method imposed by the study subject.

At the end, it's my appreciation that there's no insurmountable differences between the Austrian School and mainstream economics. The difference is rather on emphasis: Austrian scholars are particularly rigorous on methodology and being consequent on the use of definitions.


(1)MISES, Ludwig von. Epistemological Problems of Economics. Page 227.
(2) Idem. Page 175.
(3)ROBBINS, Lionel. An Essay on the Nature and Significance of Economic Science. Second edition. Page 16.
(3)MISES. Human Action. The scholar's edition. Page 3.
(4) Idem. Page 11.

Christianity as a techninque

It is absurd to judge Christianity on grounds of it imposing wrong ends on individuals. Christianity is a technique through which advice is given on how to reach final ends whatsoever. Yes, it's true that in doing this Christianity disentangles some apparent final ends and demonstrates that they are wrong means to reach truly final ends, truly being understood in a purely formal sense as anything which brings closer happiness to the individual.

Garrison and Hicks

Roger Garrison is the John Hicks of the Austrian School. In his renowned Time and Money, he expounds Hayek's conjuncture theory in a way easy to understand by means of a graphic analysis which to a large extent is a personal interpretation who puts Hayek theory to a Procrustean bed in as very the same fashion as John Hicks aspires to be Keynes's oracle in his Mr. Keynes and the "Classics"; A Suggested Interpretation.

No wonder that professor Garrison's work has be so widely accepted among Austrians. It says like "hey, you can be popular too, you can have graphs and even the promise of a mathematical model in the fashion of an equations' system and join your Keynesian macroeconomic buddies in their own playground".

In this context, it's good to remember the standard critique to Hicks: he could be mis-interpreting Keynes. Is Garrison mis-interpreting Hayek? Are we accepting more academic palatability in exchange for sacrificing the venerable methodology tuned up by Mises?

On the hardship of studying economics

Economics is not for pussies.

Aphorisms on risk

Neither risk aversion nor risk tolerance. In their minds, all agents are risk-neutral. Distinction between "risk-averse" or "risk-tolerant" must exclusively refer to subjective valuating differences that agents have in weighing risks with respect to some ultimately arbitrary benchmark.

Impossibility of risk loving or risk seeking. It is logically impossible that an agent be a "risk lover" or "risk seeker". Imagine there are, for some agent whosoever, something which is a good for him and something which is a bad for him, and that he is offered these two different lotteries: the first one which offers to him the good with (what for the agent is subjectively a) probability 1 and the bad with (also subjective and from the agent's viewpoint) probability 0, and the second one which offers him the good with probability 0.5 and the bad with probability 0.5. A true risk lover would accept the second lottery; nevertheless we can say apodictically that no agent will ever choose the second lottery. Not the wackiest loony cuckoo in history, not the sickest compulsive gambler in the world; not the most audacious, temerarious, rashest, most reckless, adventuresome daredevil have ever loved risk qua risk. What some people love is the risky prize, therefore being on the eyes of others risk tolerant. But there cannot, by definition, be "utility from risk".

Holmes' economics

The reason why there are secrets is mostly a lack of observation.

Free will

What the assumption of free will amounts to is a full renounce to any attempt to explain purposeful behavior as an effect of some material cause whatsoever. It is not a recognition, neither explicit nor implicit, that free will is un-caused. As long as a research program, for instance that of psychology, successfully bursts into the causes of purposeful behavior, it reveals free will as not really being such, it shatters it; not to speak of, say, the physiological study of the brain. Of course, these research programs are so humble that we will always have room for free will.

On the one side free will, i. e. purpose, can be interpreted as random and so, analyzed (in some, but clearly not the causal, aspects) through the methods of statistic inference. On the other side, it can be viewed as a spontaneous (this is, undesigned) order.

Starkey on institutions

"Almost all institutions are monarchical." David Starkey

Exceptions and randomness as lack of knowledge, not of cause

Exceptions are only apparent. They embody lack of knowledge not of cause. It is the same with randomness. A random event is an ultimately deterministic (caused) one, but we don't have a way to measure that cause so that we cannot forecast the outcome.

Pervading profits

There is not such a thing as a firm which doesn't maximize profit. When you apparently observe such a behavior, either you are not defining well who is the firm or you are not taking in account all the costly expenses or the incomes from the production of the good in question.

In what sense perfect competition is an optimum

The perfect competition partial equilibrium is Pareto-optimum with respect to the pre-equilibrium perfect competition. However, since the monopolist gets a better profit by being a monopolist than in perfect competition, a perfect competition partial equilibrium which starts with a pure-monopoly-then-turned-into-perfect-competition is not a Pareto-optimum. Or to put it another way, you can't use the perfect competition optimality as an argument to dismantle a monopoly. (By the way if you are trying to attack a monopoly, better use the Hayek argument on the spread of information through a free market.)

The much-trumpeted perfect competition optimality is not argument for perfect competition (whatever it is in the real world) but for not to stop the tendency through equilibrium in the particular structure of perfect competition; i. e., perfect competition optimality is a particular case of equilibrium optimality (vis-à-vis disequilibrium).

The monopolist as (necessarily) a price discriminator

The maybe most popular microeconomics book reads "we suppose that the monopolist knows the demand function for its product..." (1). This raises the question: why in the hell isn't such a monopolist a perfect discriminator? I mean, he know what prices he can charge for every marginal quantity supplied, and he doesn't do it?! Can we think about a pure monopolist not being at a time a perfect discriminator as something but a logical contradiction? Tell me a reason why such a monopolist would charge the same price to anyone knowing how much surplus he can exact from each.Yes, you can impose some institutional arrangement, but can you think of any which doesn't violate the standard Marshallian setting?

(1) Mas Colell et al. Microeconomic Theory. 1995. Page 384.

Government failure as a market failure as no failure at all

Some people say that there are government failures rather than market failures. However, one could ask how is that a already-so-well-working market allows for a failing government to appear and grow up. Or maybe, a failing State is not but a stage in the institutional development in the way of an ever-improving market.