Topic: Methodology

Quotes

Max Weber, Economy And Society (1968)

• The most essential aspect of economic action for practical purposes is the prudent choice between ends. … The presence of a “technical question” always means that there is some doubt over the choice of the most rational means to an end#

Axel Leijonhufvud, Information and Coordination (1981)

• General equilibrium theorists have at their command an impressive array of proven techniques for modelling systems that “always work well”. Keynesian economists have experience with modelling systems that “never work”. But, as yet, no one has the recipe for modelling systems that function pretty well most of the time but sometimes work very badly to coordinate economic activities.#Quoted in Ronald Heiner, “The Origin of Predictable Behavior” (1983)

Brian Arthur, Complexity and the Economy (2015)

• Agents generally do not optimize in the standard sense, not because they are constrained by finite memory or processing capability, but because the very concept of an optimal course of action often cannot be defined.#
• Equations do well with changes in number or quantities within given categories, but poorly with the appearance of new categories themselves.#
• If a system contains only negative feedbacks (in economics, diminishing returns) it quickly converges to equilibrium and shows “dead” behavior. If it contains only positive feedbacks, it runs away and shows explosive behavior. With a mixture of both it shows “interesting” or “complex” behavior.#
• To the degree that outcomes are unknowable, the decision problems they pose are not well-defined. It follows that rationality—pure deductive rationality—is not well-defined either, for the simple reason that there cannot be a logical solution to a problem that is not logically defined. It follows that in such situations deductive rationality is not just a bad assumption; it cannot exist. There might be intelligent behavior, there might be sensible behavior, there might be farsighted behavior, but rigorously speaking there cannot be deductively rational behavior. Therefore we cannot assume it.#
• Complexity is not a theory but a movement in the sciences that studies how the interacting elements in a system create overall patterns, and how these overall patterns in turn cause the interacting elements to change or adapt… Complexity, in other words, asks how individual behaviors might react to the pattern they together create, and how that pattern would alter itself as a result. This#

F.A. Hayek, The Pure Theory of Capital (1941)

• In the sphere of capital theory, as we have seen, the construction of a stationary state is particularly useless because the main problem, that of investment, arises just because people intend to do in the future something different from what they are doing in the present.#

Alfred Marshall, Principles of Economics (1890)

• The chief use of pure mathematics in economic questions seems to be … to make sure that [a person] has enough, and only enough, premisses for his conclusions (i.e. that his equations are neither more nor less in number than his unknowns).#Quoted in John Hicks, Value and Capital (1939)

Israel Kirzner, Essays on Capital and Interest (1996)

• The ability to define usefully the terms used in theoretical economic discussion turns out invariably to call for the very same insight into economic processes that is required for the enunciation of theoretical propositions themselves.#

G.L.S. Shackle, Epistemics and Economics (1972)

• Freedom to devise constructions is not compatible with the existence of an omni-competent, all-inclusive general theory.#
• To claim (as the present writer does) that these questions which can be divorced from considerations of time are essential to our understanding, and the answers to them necessary for full illumination of the economic field, is to say that the field, of its nature, cannot be served by a completely general, undivided theory springing from one sole set of presuppositions. Economics, concerned with thoughts and only secondarily with things, the objects of those thoughts, must be as protean as thought itself. To adopt one rigid frame and appeal exclusively to it is bound to be fatal. It is as though we should draw up a plan of exploration of an unknown country, and rule out any change of that plan, even one suggested by what the explorers actually find.#
• The paradox of rationality is that it must concern itself with choosing amongst things fully nown; but in the world of time, only that is fully known which is already beyond the reach of choice, having already become actual and thus knowable.#
• The strength of the timeless system is that it can be self-contained, totally independent of any world outside itself. Any system which exists in time and includes expectation is exposed to the whole conceivable range of non-economic events. For how can we limit the classes of events which can offer suggestions to expectation?#
• The prime duty of a theory is to tidy the mind, leaving it clear for practical activity.#
• That language of ex ante and ex post was the key which released economic theory from its subservience to that conception of time which prevails in celestial mechanics, the time which is a mere dimension where the distinction between past and future is meaningless.#

James Buchanan & Geoffrey Brennan, The Reason of Rules (1985)

• The commonality of [a] norm, at least over a large number of persons, is a necessary feature of any operationally useful theory of choice or action that moves beyond the strict individualistic models#

James Buchanan, The Demand and Supply of Public Goods (1968)

• [A] multiplicity of optima is a characteristic of all interaction processes where gains-from-trade are possible [i.e. sharing of the inframarginal gains]. The apparent uniqueness present under perfectly competitive conditions in the private-goods market should be treated as a bizarre exception, not as a characteristic to be mirrored in other settings.#

Sam Bowles & Herbert Gintis, A Cooperative Species (2011)

• The economic theory of cooperation based on repeated games proves the existence of equilibria with socially desirable properties, while leaving the question of how such equilibria are achieved as an afterthought.#
• The reason that individuals are content to interact through prices alone [in the Arrow-Debreu model], and hence have no incentive to engage in strategic personal interactions, is that all relevant aspects of exchanges are assumed to be covered by complete contracts, enforceable at no cost to the exchanging parties.#
• In the signaling model the third party responds favorably because the signal is correlated with some desirable but unobservable property of the actor; in the indirect reciprocity model the signal (cooperating with those in good standing) is the desirable property itself. In the case of indirect reciprocity, I want to associate with the hunter who shares his ample prey with other members of the group because I too would like a share of meat. In the signaling model I want to associate with him because the fact that he has lots of meat to share indicates that he is physically able and would be a good mate or coalition partner.#
• Glaeser et al. (2000) . . . found that experimental behavior was a quite good predictor of behavior outside the lab, while the usual measures of trust, based on survey questions, provided virtually no information.#
• Optimizing models are commonly used to describe behavior not because they mimic the cognitive processes of the actors, which they rarely do, but because they capture important influences on individual behavior in a succinct and analytically tractable way.#

Gerald O'Driscoll & Mario Rizzo, The Economics of Time and Ignorance (1985)

• There is a “sponginess” to neoclassical economics that enables it to absorb divergent elements around it without ever emphasizing their main points. These fringe ideas become footnotes to which theorists can refer as evidence that they have taken the ideas into account.#
• While it may not be appealing to assume that individuals make errors that they themselves could have predicted (ex ante error), it is not obviously wrong to suppose that others could have predicted the errors of the first group. Any act of entrepreneurship or speculation involves trying to outguess the market, to do better than the crowd or the median asset-holder. Entrepreneurs and speculators are constantly taking actions that assume that most people make “predictable” errors (predictable by entrepreneurs).#
• The mutual determination of prices is a characteristic of general equilibrium, not a method of attaining that equilibrium.#
• Neoclassical economics conflates the plan with the process of planning, the completed act with the process of acting.#

Richard Wagner, “Boom and Bust: The Political Economy of Economic Disorder” (1980)

• The way that [national income] accounts are constructed, resources devoted to the correction of error are valued equivalently with resources devoted to other production.#Quoted in Steven Horwitz, Microfoundations and Macroeconomics (2000)
• By virtue of the law of conservation, all engines are necessarily 100 percent efficient. To say that an engine is less than perfectly efficient requires a normative judgment that separates the output into useful or desired output and waste. A pump that moves water uphill to a house can be said to be less than 100 percent efficient only as a result of someone’s having judged that such things as the water lost in transit and the heat dissipated in the pump house are unwanted and hence represent waste. It is the same with society. . . . The efficiency of an economy cannot be judged without placing some valuation upon different uses of time, any more than the efficiency of an engine can be judged without placing some valuation upon different transformations of energy.#

Steven Horwitz, Microfoundations and Macroeconomics (2000)

• The assumption in most textbook Keynesian models of a fixed price level, or of a one-commodity world, is completely consistent with Keynesian treatments of the money- interest relationship. If the results of monetary excesses and deficiencies are all borne by the interest rate, where can one fit in the price level? Conversely, if one assumes the price level is fixed, then the adjustments to monetary disequilibria must take place through some other variable. #
• In Keynesian models, any excess supply of money that finds its way into the hands of consumers will be put into the bond market, driving up bond prices and driving down interest rates.#

Don Lavoie, Rivalry and Central Planning (1985)

• The labor theory approach essentially reduces all scarcities to scarcity of labor time, but the practical task before the central planners is to husband all scarce goods.#

W.H. Hutt, The Theory of Idle Resources (1939)

• In ‘pure theory’, the irrational origin of preferences may be taken as part of the data in the light of which a particular result may be explained. As soon as we bring the question of ‘irrationality’ into discussion as a phenomenon to be deplored, we have, strictly speaking, left the field of economic controversy.#

K. Mittermaier, “Mechanomorphism” (1986)

• A scientist engages in anthropomorphism when he ascribes human attributes to what is otherwise recognized as inanimate or at least not human. By analogy we may say that an economist engages in mechanomorphism when he ascribes mechanical properties to what is otherwise recognized as an aspect of human affairs or when he treats an economic system as though it were a mechanical system. #Quoted in Peter Boettke & Steven Horwitz, “Beyond equilibrium economics: reflections on the uniqueness of the Austrian tradition” (1994)

Peter Boettke & Steven Horwitz, “Beyond equilibrium economics: reflections on the uniqueness of the Austrian tradition” (1994)

• Consider what it would mean for human evolution to tend toward a final state. No biologist would ever say that we need to have a concept of a “fully evolved” human to understand the process of evolution. It would also seem questionable to attempt to explain evolution as a process “tending toward” such a being. That would necessitate both constructing the being and explaining the process. Similarly, the evolutionary process in economics does not refer to an end-state, but instead explains how creativity leads to complexity, while retaining a sufficient degree of coordination to make the complexity beneficial.#
• The equilibrium benchmark can only be justified if we take “equilibrium” to mean market clearing, rather than general equilibrium. Certainly market clearing is essential for a theory of market order. In any given market there is a tendency for supply to meet demand, but this is quite different from the mechanical metaphor of equilibration. While equilibrium implies market clearing, market clearing does not imply equilibrium, with all of its questionable assumptions. #

Israel Kirzner, How Markets Work (1997)

• A science of ‘human action’ must be a science of the equilibrative properties of entrepreneur-driven market processes.#
• Once one appreciates the Hayekian insight that an attained state of equilibrium means universal perfect knowledge, it becomes obvious that no model in which perfect knowledge is assumed can be of direct assistance in explaining how an equilibrating tendency might occur.#
• The mere failure of a theoretical picture to replicate with precision all features of the reality it seeks to explain, is not necessarily fatal for the usefulness of that theoretical picture. But mainstream theory filters out of the picture those aspects of reality which are the core of an adequate explanation for market phenomena.#

Armen Alchian, “Uncertainty, Evolution, and Economic Theory” (1950)

• [Economic tools] are made more powerful if they are not pretentiously assumed to be necessarily associated with, and dependent upon, individual foresight and adjustment.#
• Like the biologist, the economist predicts the effects of environmental changes on the surviving class of living organisms; the economist need not assume that each participant is aware of, or acts according to, his cost and demand situation.#

Fritz Malchup, “The Problem of Verification in Economics” (1955)

• Mill does not propose to put the assumptions of economic theory to empirical tests, but only the predicted results that are deduced from them. And this, I submit, is what all the proponents of pure, exact, or aprioristic economic theory had in mind, however provocative their contentions sounded.#Quoted in Gabriel Zanotti & Nicolás Cachanosky, “The Epistemological Implications of Machlups Interpretation of Mises’s Epistemology” (2015)

Gabriel Zanotti & Nicolás Cachanosky, “The Epistemological Implications of Machlups Interpretation of Mises’s Epistemology” (2015)

• A contradiction between facts and theory points to a problem, but it remains unanswered from the experiment whether the problem falls in the theory, in an unquestioned fundamental assumption, or in an assumed condition particular to the case under study.#

Steven Landsburg, The Armchair Economist (1995)

• An economist with a theory has at least a chance that his theory is the right one. An economist who relies on nothing but statistical extrapolations has no chance at all.#

Leland Yeager, “The Significance of Monetary Disequilibrium” (1986)

• In tackling questions about the long-run effects on prices and outputs of specified changes in wants, resources, technology, and legislation, one may legitimately neglect intervening disequilibrium to get on with the analysis. But when questions of macroeconomics are at issue—essentially, questions concerning disruptions or imperfections or delays in processes working to coordinate the plans and activities of many different people—then attention properly turns to how quickly and smoothly markets respond when disturbed, to transitional stages, and to the frictions of reality.#

Peter Boettke & Robert Subrick, “From The Philosophy of Mind to the Philosophy of the Market” (2002)

• General equilibrium theory was able to capture in abstract form the interconnectedness of all markets in an economic system, but it did so at the cost of assuming away the processes through which the division of knowledge in society is coordinated so that the interconnectedness can be realized. . . . Similarly, work in hard AI is able to replicate the mind as a ‘thinking machine’ and the interconnectedness of different parts of the brain, but at the cost of losing the human attributes of meaning and intentionality.#

Dierdre McCloskey, The Rhetoric of Economics (1985)

• Economics is unsuccessful as social weather forecasting, a role forced on it by the rhetoric of politics and journalism. But it is strikingly successful as social history.#
• Flexibility is frequently praised in scientific theories and of course should be. But flexibility is simply a promise that the theory will be able to evade crucial tests, surviving unscathed from positivist tortures. Nothing could be further from naïve falsification.#
• Much of economics turns on quarrels of characterization. Is America monopolistic? Were medieval peasants selfish? Is the market for goods worldwide? Is capitalism stable? These are quantitative questions, all depending on answers to the question, “How large is large?”#
• At the level of broad scientific law, scientists simply use their theories. They seldom try to falsify them.#

Thomas Kuhn, The Essential Tension: Selected Studies in Scientific Tradition and Change (1977)

• The scientist often seems rather to be struggling with facts, trying to force them in conformity with a theory he does not doubt.#Quoted in Dierdre McCloskey, The Rhetoric of Economics (1985)

George Selgin, Praxeology and Understanding (1990)

• Concrete individual ends and values have historical but not theoretical significance; that is, they are relevant to all applications of pure theory to particular, historical circumstances, but enter only as auxiliary assumptions in constructing theory itself.#
• The pure theory that forms the heart of praxeological analysis requires a type of subjectivism distinct from the subjectivism needed in historical analysis. Praxeologists, as developers of pure theory, must consider market phenomena without presuming any knowledge of agents’ preferences and beliefs. They must view the world, not as “understanding” beings employing “common sense” to interpret a specific historical event, but as theorists in search of the logical patterns that underlie the actions of all “understanding” individuals.#
• Praxeology recognizes price discrepancies among identical goods only to the extent that such discrepancies may be identified with subsequent acts of successful arbitrage. In the same manner, entrepreneurial profit opportunities in general are ephemeral phenomena, formed in the imaginations of enterprising people and defined by the very actions that “eliminate” them.#
• It is misleading to treat profit opportunities as having an objective basis (i.e., as existing “out there”) because it is improper to treat consumer preferences as if they existed apart from realized acts of choice.#
• Whenever one speaks of unexploited opportunities for profit one departs from the domain of theoretical science and exemplifies the perspective of the historian or would-be entrepreneur.#

Frank Knight, The Ethics of Competition and Other Essays (1935)

• There are no laws regarding the content of economic behavior, but there are laws universally valid as to its form.#Quoted in George Selgin, Praxeology and Understanding (1990)

Ludwig Von Mises, Theory and History (1957)

• The a priori discipline of human action, praxeology, does not deal with the actual content of value judgments. It deals only with the fact that men value and then act according to their valuations. What we know about the actual content of judgments of value can be derived only from experience.#Quoted in George Selgin, Praxeology and Understanding (1990)

Richard Wagner, “Austrian Cycle Theory: Saving the Wheat while Discarding the Chaff” (1999)

• The specific Austrian story of a shift in the structure of prices due to an expansion of credit is simply one particular way of recognizing that the central focus of macro theory should be on coordination, because macro variables are not objects of choice but only emergent outcomes.#
• The standard variables of macroeconomics, rates of growth, levels of employment, and rates of inflation, are not objects of choice for anyone, but rather are emergent outcomes of complex economic processes. Governments may do things that might influence the subsequent measures that are assigned to those variables, but this is a very different thing from choosing values for those variables.#

Ludwig Lachmann, Capital, Expectations, and the Market Process (1940)

• Economic man appears in classical theory only in his capacity as a factor of production. This means not merely that the consumer is not an economic subject, but that homo oeconomicus is always a producer.#
• An economic plan as an observed fact does not lose its significance for us when it fails. On the contrary, we owe to such a plan our criterion of success, which alone allows us to speak of failure.#
• It is intelligibility and not determinateness that social science should strive to achieve.#
• If we say that we wish to “explain” an action, what we mean is not merely that we wish to know its purpose, but also that we wish to see the plan behind the action. Plan, a product of the mind, is both the common denominator of all human action and its mental pattern, and it is by reducing “action” to “plan” that we “understand” the actions of individuals.#
• Observable events as such have no significance except with reference to a framework of interpretation which is logically prior to them.#
• The merits of a particular model have to be judged by comparison with those of another model, actual or potential, not by comparison with “reality” which is, and always must remain, beyond our theoretical grasp. The common sense case for the equilibrium method is that if we wish to survey a constellation of diverse forces, the easiest method of doing so is to perform the mental experiment of imagining that state of affairs which would be reached when all these forces have unfolded all their implications.#
• Methodological individualism, in its backward-looking form, means simply that we shall not be satisfied with any type of explanation of a social phenomena which does not lead us ultimately to a human plan.#
• The business of the economist consists in very little else but asking what human choices have caused a given phenomenon, say a change in price, or output, or employment.#
• It is not the nature of our empirical material, but the nature of the questions we ask of our material, that determines the boundaries between sciences.#
• Economics has more nearly approached the ideal of a closed theoretical system in which all propositions are linked to each other and the number of fundamental hypotheses reduced to a bare minimum, than any other social science. This can hardly be an accident. No doubt such an achievement was easier for a science which deals with a sphere of life in which conduct has to be rational, on penalty of bankruptcy, and which can thus use the Logic of Action as the logical cement of its own edifice.#

James Buchanan, The Logical Foundations of Constitutional Liberty (1998)

• The distinction to be drawn between economics and politics, as disciplines, lies in the nature of the social relationships among individuals that is examined in each. In so far as individuals exchange, trade, as freely contracting units, the predominant characteristic of their behavior is “economic.” And this, of course, extends our range far beyond the ordinary price-money nexus. In so far as individuals meet one another in a relationship of superior-inferior, leader to follower, principal to agent, the predominant characteristic in their behavior is “political.” . . . Economics is the study of the whole system of exchange relationships. Politics is the study of the whole system of coercive or potentially coercive relationships.#
• A felicific calculus becomes absurd in this setting [where man can choose what pleases him], as does all talk of such things as “national goals;’ “national priorities;’ or even such familiar things as “university objectives.” Traditionally, many of us who have been critical of such talk remark that “only individuals can have goals.” But I am here advancing the more radical notion that not even individuals have well-defined and well-articulated objectives that exist independently of choices themselves.#
• A necessary condition for deriving a social welfare function is that all possible social states be ordered outside or external to the decision-making process itself.#
• It is clearly wasteful to devote intellectual resources in proffering advice to a nonexistent decision-maker.#
• The optimality or efficiency of any file prohibiting voluntary agreements can only be demonstrated in those cases where some external effects are present and where there is done asymmetry in the costs of organizing different voluntary agreements.#
• As it operates and as we observe it to operate, ordinary politics may remain conflictual . . . while participation in the inclusive political game that defines the rules for ordinary politics may embody positively valued prospects for all members of the polity. In other words, constitutional politics does lend itself to examination in a cooperative analytical framework, while ordinary politics continues to lend itself to analysis that employs conflict models of interaction.#
• The categorical distinction between choices among rules and choices within rules all but disappears in the utilitarian configuration.#
• The communitarian challenge to methodological individualism must go beyond the claim that individuals influence one another reciprocally through presence in communities. The challenge must make the stronger claim that individuation, the separation of the individual from community, is not conceptually possible, that it becomes meaningless to think of potential divergence between and among individual interests in a community.#
• [In the prisoners’ dilemma,] the outcome predicted, and possibly observed, to emerge may be classified as “presumably inefficient” for the set of prisoners considered as a group because they are not allowed to make explicit exchanges. . . . [It] may, however, be an efficient institution for forcing prisoners to confess. That is to say, the subset of the population made up of prisoners only may not be the set relevant for a political-collective evaluation of the institution. In the more inclusive community, the test for whether or not that institution which removes the option of binding contracts among prisoners is efficient would depend on the attainment or nonattainment of community-wide consensus on change to some alternative institution.#

Ludwig Von Mises, Human Action (1949)

• [T]he mere fact that we hypostatize the unexplained element of this behavior as a force and call it instinct does not enlarge our knowledge. We must never forget that this word instinct is nothing but a landmark to indicate a point beyond which we are unable, up to the present at least, to carry our scientific scrutiny.#
• The impracticability of measurement [in economics] is not due to the lack of technical methods for the establishment of measure. It is due to the absence of constant relations.#

Don Lavoie, “Economics and Hermeneutics – Intro” (1990)

• Succeeding in restricting macro to its Walrasian micro foundations would amount to a destruction of macro, precisely because time and money would cease to be taken seriously.#

Don Lavoie, “The Accounting of Interpretations and the Interpretation of Accounts: The Communicative Function of “The Language of Business”” (1987)

• The whole purpose of the theoretical social sciences . . . is to equip people with the capacity better to distinguish acceptable from unacceptable historical narratives.#Quoted in Arjo Klamer, “Towards the Native’s Point of View: The Difficulty of Changing the Conversation” (1990)

Dierdre McCloskey, “Storytelling in Economics” (1990)

• Stories or articles can give only a small sample of experience, because actual experience is overwhelmed with irrelevance: taking out the garbage, bumping the table, scratching the back of one’s head, seeing the title of the book one was not looking for. It is a sense of pointedness that distinguishes the good storyteller and the good scientific thinker from the bad.#

Philip Mirowski, “The Philosophical Bases of Institutionalist Economics” (1990)

• The Duhem/Quine thesis . . . states that no hypothesis is definitively falsified, because it can always be immunized to adverse tests by some adjustment in the ever-present auxiliary hypotheses which accompany it.#

Randall Kroszner, “On The Microfoundations of Money” (1990)

• Rather than providing a basis for ‘representation’ of economic phenomena, the GE construct may be more usefully considered as a moneyless comparison point which is used to sharpen other approaches.#

Tom Palmer, “The Hermeneutical View of Freedom” (1990)

• Persuasion should be an integral part of our understanding of the market process because the preferences of suppliers and consumers are not data – merely the Latin term for ‘givens’ – to be fed into a vast calculating mechanism, thereby yielding a fully determinate result that was implicit in the initial conditions. Instead, the market exchange process is better illumined in the light cast by rhetoric, the art of persuasion (a constant and recurrent theme in Gadamer’s work). There was no ‘given’ demand for portable computers, digital laser-guided music systems, video games, pet rocks, or genetic engineering, to take but a few recent examples, before they were developed by inventor-entrepreneurs who ‘created’ (i.e. persuaded) the demand for them.#

James Buchanan, “Order Defined in the Process of Its Emergence” (1985)

• Individuals do not act so as to maximize utilities described in independently-existing functions. They confront genuine choices, and the sequence of decisions taken may be conceptualized, ex post, in terms of ‘as if’ functions that are maximized. But these ‘as if’ functions are themselves generated in the choosing process, not separately from such process. If viewed in this perspective, there is no means by which even the most idealized omniscient designer could duplicate the results of voluntary interchange.#Quoted in Tom Palmer, “The Hermeneutical View of Freedom” (1990)

Ludwig Lachmann, Capital and Its Structure (1956)

• The two greatest achievements of [economic] science within the last hundred years, subjective value and the introduction of expectations, became possible only when it was realized that the causes of certain phenomena do not lie in the ‘facts of the situation’ but in the appraisal of such a situation by active minds.#
• The econometricians have thus far failed to explain why in an uncertain world the meaning of past events should be the only certain thing, and why its ‘correct’ interpretation by entrepreneurs can always be taken for granted.#
• Equilibrium analysis can tell us whether courses of action are, or are not, consistent with each other. It cannot, except in rather special circumstances, explain how inconsistencies are removed.#
• [In equilibrium analysis,] while the failure of each successive plan conveys significant additional knowledge to the individuals concerned, it does not affect the shape of the demand and supply curves. It merely induces individual actors to choose other points on them for testing. It is usually assumed that as a result of the accumulating experience gained from a series of unsuccessful tests, a consistent solution is sure to be found in the end, in other words, that in the ‘real world’ there does exist a ‘tendency towards equilibrium’.#
• Process analysis, we may say, combines the equilibrium of the decision-making unit, firm or household, with the disequilibrium of the market.#
• Why gramophone records with the music of Irving Berlin find a readier sale than those with the music of Schoenberg is a question about which the economist has nothing to say, but why in an inflation people come to prefer the most illiquid assets to money is a question he can hardly shirk. ‘Asset preference’ is not an ultimate determinant in the sense in which a taste for tobacco is.#

Roger Koppl, Big Players and the Economic Theory of Expectations (2002)

• The interpretive sociologist uses ideal types of varying degrees of anonymity. What we call either “history” or “applied economics” entails the use of relatively concrete ideal types. “Theory” uses more anonymous types. The distinction, therefore, between theory and history is not the categorical one Mises imagined. We use the term “theory” for arguments and explanations that use only relatively anonymous types; we use the terms “history” and “applied theory” when relatively concrete types are used.#
• In Mises’ methodology, only the most completely anonymous ideal types are admitted into economic theory. But the sorts of predictions Mises thought economics to give require ideal types that are not completely anonymous. They are highly anonymous, but not perfectly anonymous. With Schutz we can and should admit such imperfectly anonymous types into economic theory.#

Alfred Schutz, Phenomenology of the Social World (1932)

• Mises’ argument [against the use of ideal types in economic theory] really turns out to be a defense against the intrusion of ideal types of too great concreteness and too little anonymity into economics.#Quoted in Roger Koppl, Big Players and the Economic Theory of Expectations (2002)

Jason Potts, The New Evolutionary Microeconomics (2000)

• Once it is recognized that the essence of the neowalrasian microtheory is the field construct [of n-dimensional integral space] it becomes readily apparent that all major points of heterodox critique reduce to this single criticism.#
• As critics have often argued, it remains something of a travesty of investigation to interpret the economic problem as a problem of choice and then to abstract from all the essential features of choice in the human context.#
• Interactions, knowledge, and structure are specific connections between points in space and therefore the very existence of these concepts is excluded by the assumption that all points relate, a priori, to all other points directly; that is, with a single mathematical operation. In a world of omniscience there can be no such concept as knowledge, as in a world of omnipresence there can be no such concept as organization: both knowledge and organization, along with structure and processes, are meaningful only in the particular. That is, they are phenomena of particular interactions, not generalized actions. Particular interactions cannot be defined in an integral space. Interactions exist only in non-integral space.#
• These functions (the utility/preference fields and the technology/production fields) are assertions about the nature of economic space. They are not statements about the nature of the things that populate the space (as the concept of a function seemingly implies); which is to say that they are not statements about consumers or firms, as they are almost exclusively sold.#
• Which metatheoretical construct is primary—the elements, or the space of connections between the elements? For instance, underneath the contrast between the orthodox conception of a firm as a production function and the New Institutional conception of a firm as a governance structure are the two sides of this basic ontological issue: is a firm a set of factors or is it a set of interactions? Similarly, the sometimes subtle difference between the Austrian school of economics and the broad neoclassical school turns on this same point: is an agent a set of behaviors or a set of endowments? In other words, is knowledge (including technology) a thing or a relation between things? Do the fundamental units of an economic system exist in space, or are they in fact the structure of space?#
• As the neowalrasian microtheory assumes, everything must be directly connected to everything else. But it also invokes something much stronger: these connections must then be understood to constitute the essential reality of the system. Yet this is in direct contradiction with the other pillar of the theory, namely that the economic system is simply the aggregate of free agents who are themselves the basic unit of analysis. This is the hypothesis of methodological individualism, and is the keystone for all formulations and interpretations of the theory. Thus the fundamental problem of the orthodox microtheory is that the set of operations that connect all elements in the space together, and which by the mandate of field theory must be the ultimate locus of existence, yet has no basis for existence.#
• Disequilibrium trading cannot be logically defined within the context of a field because a disequilibrium trade is by definition in non-integral space: each agent interacts with only some other agents.#
• The orthodox meaning of rationality, which pivots about consistent and transitive rankings in the instance of choice, presupposes the concept of an integral space over which choice occurs. Indeed, the two concepts of rationality that Simon calls substantive and procedural are in the present context integral and non-integral referents.#
• It was not so much that the neowalrasian paradigm could not consider such factors [as knowledge, structure, coordination, uncertainty, and history], but that the way it considered them abstracted from the very properties that were most of interest from a dynamic, evolutionary perspective. When organizational structure, knowledge, uncertainty, institutions and suchlike were read into an integral space, these concepts were denied their nature as complex webs of interactions, that is, as systems.#
• The way in which expectations are treated is not an addendum to an otherwise well-defined analytical framework, but effectively determines the ultimate nature of that framework.#
• [Rational Expectations] is not a theory of how expectations are formed, but rather is the theoretical conjecturing of an ex ante data set consistent with the assumption of an exhaustive list of possible outcomes, each, ultimately, correctly weighted.#

Richard Wagner, Mind, Society, and Human Action (2010)

• As a tool of thought, the neo-Walrasian metaphysics of general equilibrium is surely indispensable for economic theory because it conveys the general interdependence among economic relationships in a society. As a description of reality, the situation is not so clear. It is possible to set forth necessary conditions for the existence of a general competitive equilibrium. What comes out of these formulations is mostly a sense that reality does not match these conditions.#
• The neo-Walrasian program provides a view of society as an equilibrated structure of relationships that is characterized by a set of prices that is consistent with market-clearing in light of consumer demands. You cannot get any more orderly than this. Much work in economic theory involves claims of market failure, which brings in claims that the observed degree of orderliness is not as complete as it could be. This claim of market failure, however, cannot be rendered intelligible without an ontological effort that would account for plausibility regarding the actual degree of orderliness within a society. The neo-Walrasian program makes no effort to develop such an account of plausibility.#
• When economic theory is constructed within an analytical window that uses closed concepts to portray economic phenomena as reflections of static equilibriums, it is hard to see how U-max could be displaced because it is a construction that is perfectly suited for characterizing static relationships among variables: the value of any variable is what it is and not something else because that is where the opposing forces in play neutralize one another; the only question at issue is how to identify and account for these other forces.#
• If you work with equilibrium, you cannot allow structure to be anything other than a sideshow. If you want structure to matter, you cannot work with equilibrium.#

Peter Boettke, Calculation and Coordination (2000)

• Despite the formal similarity of the choice problem across time and place, the fact remains that the institutional context of choice changes the margins on which economic decisions are based.#

Konrad Lorenz, “The Comparative Method in Studying Innate Behaviour” (1950)

• No important scientific fact has ever been ‘proved’ that has not previously been simply and immediately seen by intuitive gestalt perception.#Quoted in F.A. Hayek, Studies in Philosophy, Politics, and Economics (1968)

Elinor Ostrom, “Beyond Markets and States: Polycentric Governance of Complex Economic Systems” (2010)

• While utility was originally conceived of as a way of combining a diversity of external values on a single internal scale, in practice it has come to be equated with one externalized unit of measure—such as expected profits.#

James Buchanan, Cost and Choice (1969)

• Cost is relevant to decision, and it must reflect the value of foregone alternatives. A budget, however, reflects the prospective or anticipated revenue and outlay sides of a decision that has been made. It is erroneous to consider such prospective outlays as appear in a budget as costs. The budget must, however, also be distinguished from the account, which measures realized revenues and outlays that result from a particular course of action.#
• There is necessarily a close correlation between the relevance of objectively measured costs for a theory of choice in either long-term or short-term equilibrium and the presence or absence of uncertainty. In the face of uncertainty, the evaluation of alternatives by the actual decision-taker may differ from the evaluations of any external observer, even if the qualifying conditions are met. The inherent subjectivity of cost in any theory of choice reasserts itself here.#
• The cost-benefit expert cannot have it both ways. He cannot claim ‘‘scientific’’ precision for his estimates unless he restricts himself rigidly to objectively observable magnitudes. But if he does this, he cannot claim that his estimates reflect reasonable norms upon which ‘‘social’’ choices should be based.#
• So long as individuals on either side of the market are allowed to express their preferences by continuous adjustments in behavior, nonpecuniary elements will be fully embodied in the solution that emerges. Prices will tend to equal marginal opportunity costs. What is destroyed by the presence of nonpecuniary elements in choice is the spurious objectivity of costs, as measured by prices of resource services.#
• Only if costs can be objectified can they be divorced from choice, and only if they are divorced from choice can the institutional-organizational setting that the chooser inhabits have no influence on costs.#

Paul Samuelson, “Parable and Realism in Capital Theory: The Surrogate Production Function” (1962)

• Because of a Gresham’s Law that operates in economics, one’s easier expositions get more readers than one’s harder. And it is partly for this reason that such simple models or parables do, I think, have considerable heuristic value in giving insights into the fundamentals of interest theory in all its complexities.#

F.A. Hayek, The Counterrevolution of Science (1955)

• If social phenomena showed no order except insofar as they were consciously designed, there would indeed be no room for theoretical sciences of society and there would be, as is often argued, only problems of psychology. It is only insofar as some sort of order arises as a result of individual action but without being designed by any individual that a problem is raised which demands a theoretical explanation.#

Morris Cohen, Reason and Nature (1931)

• If, then, social phenomena depend upon more factors than we readily manipulate, even the doctrine of universal determinism will not guarantee an attainable expression of laws governing the specific phenomena of social life. Social phenomena, though determined, might not to a finite mind in limited time display any laws at all.#Quoted in F.A. Hayek, The Counterrevolution of Science (1955)

James Buchanan, Economics: Between Predictive Science and Moral Philosophy (1987)

• The purpose for which homo economicus was used in classical political economy was largely that of comparing the properties of alternative socioeconomic arrangements (constitutions) and not that of explaining “scientifically” (making predictions about) the behavior of economizing actors.#
• Ultimately, of course, discussion must reduce to values, but when it does so it is done. If the indolent scholar relies on an appeal to values at the outset, his role in genuine discussion is, almost by definition, eliminated.#

Robert Clower, “On The Origin of Monetary Exchange” (1995)

• If controversy seems especially common in economics and other social sciences, that is probably because they use language closer to ordinary speech than do, say, mechanics or biochemistry. With respect to exact sciences, one must feel expert (or be mildly demented) to quarrel comfortably with professionals; but one has merely to be alive to quarrel comfortably with economists and their kind – or so one infers from the remarks of media pundits and politicians.#

Joseph Ostroy & Ross Starr, “The Transactions Role of Money” (1990)

• In an exchange economy, putting money, even real money balances, into the utility function is an unreliable choice-theoretic short cut for modelling the transactions role of money.#
• the Arrow-Debreu theory establishes sufficient conditions for money to be useless and positively denies it any intertemporal allocative function. Though striking, this conclusion is unsurprising; money has no job to perform here because its job is being done by futures markets. . . . Conversely, if the conditions that allow the futures markets so fully to exercise their function are absent, we may expect a role for money and for futures markets in money (debt instruments). #

Axel Leijonhufvud, “Costs and Consequences of Inflation” (1975)

• There can be no epistemological guarantee that interactions between the “economic”, the “political”, and the “social” spheres of the system we study will be negligible. . . . It may be the case that in the world we inhabit, before the “near-neutral” adjustments can all be smoothly achieved, “society unlearns to use money confidently” and reacts by restrictions on “the circles people shall serve, the prices they shall charge, and the goods they can buy.” If such reactions are in fact endogenous to the social system, we misidentify the consequences of inflation to the extent that we regard them as fortuitous “political” events exogenously impinging on “the economy.”#
• The Samuelsonian “necessity” of imagining a social welfare function follows only from prior acceptance of the “necessity” of conceptualizing any problem of policy in choice-theoretical terms.#

James Buchanan & Gordon Tullock, The Calculus of Consent (1962)

• The only purpose of science is its ultimate assistance in the development of normative propositions. We seek to learn how the world works in order to make it work “better”, to “improve” things: this is as true for physical science as it is for social science.#
• In an opportunity cost sense, the failure to take cooperative action when such is actually more “efficient” is precisely equivalent to the taking of positive private action that is detrimental to overall “efficiency”.#

Vincent Ostrom, The Intellectual Crisis in American Public Administration (1973)

• Tolerating great gaps between theory and practice implies that we have so distanced ourselves from reality that we are no longer informed observers of human societies.#

Frank Knight, “Intellectual Confusion on Morals and Economics” (1935)

• The familiar diagram showing the intersection of an ascending and a descending curve (typically called “supply” and “demand”) is a picture of the action of any two opposed elastic forces.#

Tyler Cowen & Daniel Sutter, “The Costs of Cooperation” (1999)

• A public good for a small group may be a public bad for the larger community, as illustrated by the example of monopolistic cartels. #
• Free market economists typically express confidence in the ability of markets to produce public goods. They cite norms, sanctions, and repeated small group interactions as mechanisms encouraging public goods production. At the same time, free market economists tend to be pessimistic about the stability of cartels in an unregulated market. If markets successfully produce local public goods, however, why are stable cartels not more prevalent? Critics of the market tend to take the contrary positions, leading to tensions in the opposite direction. Left-wing economists doubt the ability of markets to produce public goods, but they also fear that free market cartels possess great stability and power.#

Lawrence White, “Skepticism about Minsky’s Financial Instability Hypothesis” (2014)

• An appeal to swings in investor optimism/pessimism or ‘animal spirits’ is not wrong, so much as it merely pushes the question back one stage: What explains the swings in investor enthusiasm?#

Nicholas Kaldor, “The Irrelevance of Equilibrium Economics” (1972)

• The careful accumulation and sifting of statistics and the development of refined methods of statistical inference cannot make up for the lack of any basic understanding of how the actual economy works.#
• The very notion of “general equilibrium” carries the implication that it is legitimate to assume that the operation of economic forces is con- strained by a set of exogenous variables which are “given” from the outside and stable over time. It assumes that economic forces operate in an environment that is “imposed” on the system in a sense other than being just a heritage of the past-one could almost say an environment which, in its most significant characteristics, is independent of history.#

Douglas Whitman, “Hayek Contra Pangloss on Evolutionary Systems” (1998)

• To theorize that evolution could have led to a different and possibly superior outcome is fine, but to say precisely what that outcome would have been is an act of the imagination, and trying to realize an imaginary outcome in the real world is to engage, not in evolutionary theory, but in rational constructivist design.#

Georg Simmel, The Philosophy of Money (1907)

• If we did not assume general conditions, universal drives and regular series of effects as a basis for specific cases, there would not be any historical explanation at all; the whole would disintegrate into a chaos of atomized events.#

James Buchanan, Economic Inquiry and its Logic (2000)

• Statistical inquiry may reveal the existence of parallel increases in minimum wages and in employment. But to rely on such empiricism to invalidate the economists’ scientific enterprise is equivalent to making the observation that Peter Pan really does fly because one’s vision does not disclose the existence of the supporting wires from the rafters.#

Richard Lewontin, “Billions and Billions of Demons” (1997)

• It is not that the methods and institutions of science somehow compel us to accept a material explanation of the phenomenal world, but, on the contrary, that we are forced by our a priori adherence to material causes to create an apparatus of investigation and a set of concepts that produce material explanations, no matter how counter-intuitive, no matter how mystifying to the uninitiated.#Quoted in J Budziszewski, What We Can’t Not Know (2003)

Roger Garrison, Time and Money: The Macroeconomics of Capital Structure (2001)

• Unlike the Keynesian and Austrian visions, then, the Monetarist vision can be stated in terms of changes in output Q or real income Y/P without special reference to the individual objects of expenditure or components of output V and I. In effect, Monetarism is virtually framework-independent. As long as a framework gives sufficient play to the variables included in the equation of exchange, the Monetarist vision can be expressed in that framework. #

Abraham Kuyper, Lectures on Calvinism (1898)

• Only when there is faith in the organic interconnection of the Universe, will there be also a possibility for science to ascend from the empirical investigation of the special phenomena to the general, and from the general to the law which rules over it, and from that law to the principle, which is dominant over all.#
• The entire development of science in our age presupposes a cosmos which does not fall a prey to the freaks of chance, but exists and develops from one principle, according to a firm order, aiming at one fixed plan.#

Ludwig Von Mises, The Ultimate Foundation of Economic Science (1962)

• Political science merely records what has been done or has been suggested in its field in the past, but is at a loss to tell anything about invariant relations among the elements with which it deals.#