Are real Austrian economists neoclassical?

According to this lovely post, the answer is yes (ht Economist’s View).  Choice quote:

Does Davidson know what a neoclassical policy is? Does Boettke? Does anyone? I don’t think so, because neoclassical economics, as such, has no policy agenda. But whatever a neoclassical policy might be, Davidson assures us that Hayek is totally against it.

Now, although the term “neoclassical policy” is a pure nonsense term, I can guess how Davidson, after talking to a bunch of Austrians — I hope not Boetkke or Bruce Caldwell, who is also quoted in Davidson’s piece — picked up on the propensity of modern self-styled Austrians — generally followers of the fanatical Murray Rothbard, as distinguished from the authentic Austrians of Hayek’s generation — to deploy “neoclassical” as a term of abuse, providing sufficient justification for these modern Austrians to dismiss any economic doctrine or policy they don’t like by strategically applying the epithet “neoclassical” to it.

So let me assert flatly that F. A. Hayek was a neoclassical economist through and through. He was also an authentic Austrian economist, schooled in both branches of Austrian theory by way of his association with his primary teacher at the University of Vienna, Friedrich von Weiser, one of the two principal successors of Carl Menger, the founder of the Austrian School, and through his subsequent collaboration with Ludwig von Mises, a leading student of Eugen von Bohm-Bawerk, the other principal successor of Menger.

As well as placing Hayek in the economic mainstream (which most mainstream economists agree with), I love the fact that this post points out that neo-classical economics has no policy agenda.  Pure neo-classical economics provides an objective framework that helps us to describe issues – given this framework we could then apply a varying set of value judgements, which can then in turn justify almost ANY policy agenda.  The advantage of using the neo-classical framework is that we are forced to make our value judgements transparent – so that the trade-offs, and our assumed values, are plain to see!

The confusion about what neo-classical economics is pervades all discussion of economics, so it is nice to see this issue pointed out here 😉

Update:  Krugman has a nice post on the issue here.

4 replies
  1. jamesz
    jamesz says:

    Economists can justify almost any policy agenda?! That’s not the impression I get from reading other economics blogs, which seem to spend much of their time criticising policy proposals!

    • Matt Nolan
      Matt Nolan says:

      Being able to criticise EVERY proposal is very similar to being about the justify every proposal right – it just takes less time to do, and time is scarce 😉

  2. Paul Walker
    Paul Walker says:

    Both Mises and Hayek were, in the beginning, neoclassical economists. Up until the socialist calculation debate Austrian economics was part of the neoclassical family. It was the use of GE by the market socialists in the calculation debate that made the Austrians see themselves as different from the neoclassicals,

    • Matt Nolan
      Matt Nolan says:

      The reason I find that a bit strange is that the calculation debate and market socialists were only a subset of neoclassical economics – they were not neoclassical economics in of itself.

      The debate about planning vs free markets was one within the discipline, about appropriate value judgments and evidence to apply to the neoclassical framework, rather than one that stepped outside of the framework.

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