November 8, 2022
A few weeks ago, Tyler Cowen offered another of his famous “over/underrated” assessments.
Bauer:
“Peter Bauer is underrated. He was a brilliant development economist who wrote seminal early and detailed books on the rubber sector and also networks of West African trade. He also recognized the importance of the informal sector early on. He then moved into a more polemic mode, writing books on market-oriented development strategies and very critical of foreign aid. I believe at the time he was largely correct about foreign aid, though I would recognize also that since then the quality and effectiveness of foreign aid has improved considerably, most of all because the receiving governments have on average improved in quality.”
Agreed. Though Cowen gives short shrift to aid’s inability to spark genuine growth.
Robinson?
“Joan Robinson’s Theory of Imperfect Competition was a very important book, and it laid the groundwork for a lot of later thinking about market structure, both geometrically and conceptually. But she didn’t understand actual economics, was a Maoist , and seemed to like the regime of North Korea. So I have to say overrated. Her Accumulation of Capital also was no great shakes, though hardly her greatest sin. Her growth theory was far too Marxian, and far too fond of “Golden Rule” constructs, which are mechanistic rather than insightful as models ought to be. Her writings in Economic Philosophy were not profound. So she has one truly major contribution, but I can’t get past the really bad stuff.”
And Mises?
“Mises is underrated. His 1922 book Socialism is still the best and also historically most important critique of socialism, ever. His earlier articles about the impossibility of economic calculation under socialism are among the most important economics articles, ever. Those are already some pretty important contributions, and yet he is often talked of as a crank, perhaps because in part some of his followers were indeed cranks.
Liberalism I quite like. His book Bureaucracy is underdeveloped but still pretty interesting, and his hypotheses about the logic of cascading interventionism, if not entirely correct, still are an important contribution to public choice. They do explain a lot of the data. Human Action is big, cranky, and dogmatic, but for some people a useful tonic and alternative to the usual stuff. I can’t say I have ever really liked it, and in an odd way the whole emphasis on “Man acts” undoes at least one part of marginalism. [emphasis mine]. The early Theory of Money and Credit was a pretty good early 20th century book on monetary theory.
Hayek somehow ended up as “the reasonable face of classical liberalism,” but in fact Mises was far more politically correct by current standards.
Obviously there is a sliver of people who very much overrate Mises. Here is a guy who hardly anyone rates properly. I’m still sticking with considerably underrated.”
Interestingly, this wasn’t the first time Cowen had assessed Mises’ assessors. But at least he’s consistent. In 2018, he wrote:
“Ayn Rand and Ludwig Mises belong in a separate category, because they both have overzealous disciples who so overrate them. That in turn makes them somewhat underrated almost everywhere else. Rand’s cocktail party analysis of the sociology of capitalism-hatred remains one of the great contributions to political thought, plus she reaffirmed the necessary high status of the business producer. Mises’s Liberalism and also Socialism were two of the best books of the first part of the 20th century. So I am happy to call them both underrated, subject to the above not entirely insignificant caveat.”
The conflation of Rand and Mises is unfortunate here because it perpetuates the man-on-the-street’s view that Mises was an ideologue, instead of an analytical, scientific, and value-free economist.
So, is Cowen a fan (sort of?) of Mises’ political economy?
Certainly not of Mises’ analytical apparatus, as seems clear from his cryptic comment about “action” somehow “undoing” “at least one part of marginalism.”
Per Bylund has weighed in on the rest of Cowen’s remarks here, so I’d like to venture a guess at what Cowen has in mind, though I’m likely wrong! After all, Cowen is somewhat known for cryptic claims.
Mises wrote that Carl Menger—one of the Marginal Revolutionaries—”made” him an economist.
In writing Human Action, was Mises somehow wittingly or unwittingly undoing what he’d learned from Menger? I don’t think so, but making sense of Cowen’s comment requires that we recall the Marginal Revolutionaries were not all alike. See Dick Langlois’ helpful breakdown here.
Jevons’ and Walras’ approaches, their own differences notwithstanding, offered a framework that was formalized by Hicks and Samuelson, eventually coming to dominate 20th century microeconomics.
Utility is an intensive phenomenon for Menger, questionably so for Jevons/Walras. And what of “marginalism” itself? Infinitely divisible units populated the models which were heirs of the more mathematically precise Jevons/Walras constructions. In the MIT-esque economic theory that now reigns supreme, microeconomics collapses to calculus.
By contrast, “marginal” doesn’t even mean the same thing in the Mengerian paradigm. Menger and his followers treated “marginal” as a modifier of a particular unit in a person’s stock of goods. The marginal unit is the one a person allocates to his least highly valued end. In contemporary microeconomic theory, “marginal” means “a teensy weensy little bit of something” (where the “something” is satisfaction).
Because Mises followed in the footsteps of Menger, rejecting as he did, the smoothly continuous, twice-differentiable approach to utility, I suppose it’s not wrong to say he “undid” “part of marginalism.” To my mind, it’s the “part” of marginalism, as the term came to be used, that is unrealistic and even misleading. Of course, that’s merely another way of saying that I don’t think Mises “undid” marginalism properly understood.
I’d add that many also underrate Mises by forgetting his influence—direct or indirect—on a host of 20th century giants. Narratives painting Mises as isolated or entirely disconnected from the rest of the economics profession feed this erroneous perception. But that’s a topic for another post.