Advancing economic analysis beyond the equilibrium framework

Twentieth century economics was dominated by the development and refinement of the concept of economic equilibrium. While it is worthwhile to understand the properties of economic equilibrium, equilibrium concepts have dominated economic thought to the point that they have obscured some of the more important issues economists have always strived to understand. At least since Adam Smith’s time, economists have tried to understand the causes of prosperity, and how economic welfare can be enhanced, but these issues are best understood outside the equilibrium framework. The foundations provided by the Austrian school point toward ways that economic analysis can expand beyond the equilibrium framework.

The complex role of Karl Menger in the Viennese economic theory

This paper is focused on the relation between economics and mathematics in the Wiener Kreis and in the Mathematische Kolloquium. In the 1930s, the economic theory became a part of Otto Neurath’s project of Unified Science, but in Menger’s Kolloquium, the reformulation of the model of general economic equilibrium (GEE) distanced it greatly from the Kreis’s neopositivist point of view. The role of Karl Menger is fundamental to understand the methodological and epistemological cleavage that arose in Mathematische Kolloquium. His role was very important also for understand the relation between the economic theory of the Austrian school and mathematical economics.

Export variety and the economic performance of countries

We explore the relationship between export variety and economic development, using data on OECD countries between 1964 and 2003. We show that structural change in the world economy has a particular arrow of time leading to a growing variety of exports. Distinguishing between related variety (within sectors) and unrelated variety (variety between sectors), we also show that related variety stimulates growth instantaneously, while unrelated variety only promotes growth with a considerable time lag. This finding is in line with the evolutionary notions that economic development and international trade patterns are path dependent.

Saving government failure theory from itself: recasting political economy from an Austrian perspective

The economic approach to politics revolutionized the way scholars in economics and political science approached the study of political decision-making by introducing the possibility of government failure. However, the persistent and consistent application of neoclassical models of economics also seemed to suggest that once the full costs were accounted for, this failure was an illusion. This paper counters these arguments, typically associated with George Stigler, Gary Becker and Donald Wittman, by focusing on the underlying economic theory. We develop an alternative model of political economy grounded in the Austrian conception of the dynamic market process.

Evolutionary thinking in environmental economics

Evolutionary and environmental economics have a potentially close relationship. This paper reviews past and identifies potential applications of evolutionary concepts and methods to environmental economics. This covers a number of themes: resource use and ecosystem management; growth and environmental resources; economic and evolutionary progress; and individual behavior and environmental policy. The treatment will address both biological and economic—including institutional, organizational and technological-evolutionary phenomena. Attention will be drawn to the fact that evolutionary economics shows a surprising neglect of environmental and natural resource factors.

Concordian Economics: Tools to Return Relevance to Economics

With the help of planes and solids, this paper presents an enlargement of the field of observation of economic theory. Through this transformation, the distribution of ownership rights to money and wealth assumes a central position in economic analysis. Thus social relevance is returned to economics. The validity of this operation is confirmed by the return of the millenarian field of economic justice to its traditional function as guidance to economic policy. The paper then presents four sets of economic rights and responsibilities that offer the potential of translating principles of economic justice into the complexities of the modern world.

Micro foundations for meso and macro economic theory

The natures of rational thought and rational lives are described as the basis of an adaptive economizing theory which presents an alternative microeconomic foundation contrasting with but complementary to optimal control theory for modeling mesoeconomic order. Contrastingly, that micro foundation seems to imply the inappropriateness of representing macro data as an optimal economic agent. Rather, direct representation of the emergent causal order in the macroeconomic data is suggested.

On good government

Besley’s treatment of principled agents is a major contribution to public choice and political economy. By focusing on politics as an agency problem, he has shown the way to a new generation of research on the interface of politics and economics.

Darwinism in economics: from analogy to continuity

Currently there is an ongoing discussion about how Darwinian concepts should be harnessed to further develop economic theory. Two approaches to this question, Universal Darwinism and the continuity hypothesis, are presented in this paper. It is shown whether abstract principles can be derived from Darwin’s explanatory model of biological evolution that can be applied to cultural evolution. Furthermore, the relation of the ontological basis of biological and cultural evolution is clarified. Some examples illustrate the respective potential of the two approaches to serve as a starting-point for theory development.

Is Pragmatism Good for Anything? Towards a Theory of Impractical Economics

This article discusses the relationship between classical pragmatism, political economy and economic policy. Classical pragmatism is contrasted with vulgar meanings and uses of the term pragmatism. Classical pragmatism aims at a deep, substantive theoretical understanding of real-world economic systems and supports application of well-warranted claims to knowledge to improve the human condition. The article reviews the contributions of the founder of pragmatism, Charles Sanders Peirce, to the areas of ontology and epistemology as well as their further development by contemporary classical pragmatist philosopher Susan Haack. Hilary Putnam’s argument that we can have ethics without ontology and objectivity without objects is then critiqued. We need ethics based on an ontology that is rooted in actual human experience; this provides better guidance for evaluating policy proposals. The paper concludes by discussing the affinity of classical pragmatism with different approaches to political economy and policy.

The Forms and Determinants of Social Exclusion in the European Union: The Case of Luxemburg

The paper investigates the social exclusion process in the European Union (EU), particularly in Luxemburg, addressing both conceptual and empirical issues. It examines aspects such as: the most appropriate definition of social exclusion for the case of Luxemburg, the way economic and social disadvantages cumulate within the social exclusion process, and the main determinants of social exclusion, income poverty and deprivation. To analyze the topics mentioned above, different econometric models have been applied.

Financial intermediation and growth: causality and causes without outliers

In a seminal paper, Levine et al. (J Monet Econ 46:31–77, 2000) provide cross-sectional evidence showing that financial development has positive average impact on long-run growth, using a sample of 71 countries. We argue that the evidence is sensitive to the presence of outliers.

What is specific about evolutionary economics?

Ever since an “evolutionary” perspective on the economy has been suggested, there have been differing, and partly incommensurable, views on what specifically this means. By working out where the differences lie and what motivates them, this paper identifies four major approaches to evolutionary economics. The differences between them can be traced back to opposite positions regarding the basic assumptions about reality and the proper conceptualization of evolution. The same differences can also be found in evolutionary game theory. Achievements of the major approaches to evolutionary economics and their prospects for future research are assessed by means of a peer survey.

On Laidler regarding the Austrian business cycle theory

The authors welcome criticisms emanating from neoclassical critics of Austrian economics. We congratulate Laidler for transcending the usual modes of macroeconomic analysis to take on praxeological considerations. This paper should be interpreted as a welcome for his efforts in the hope that they will be widely emulated within the profession.

Buchanan’s constitutional political economy: exchange vs. choice in economics and in politics

This article discusses the methodological foundations of Buchanan’s constitutional political economy. We argue that Buchanan is a constitutional economist because he is an economist or a political economist. In other words, Buchanan is a constitutional economist—he insists on the necessity of focusing on constitutions and to analyze the “rules of the social game”—because he defines economics as a science of exchange. Buchanan’s definition of economics is not only specific, it is also opposed to the definition of economics that other economists retain and, above all, opposed to the definition of economics that many public choice theorists use. The latter have, in effect, adopted the Robbins 1932 definition of economics as a science of choice that Buchanan criticizes and rejects. Buchanan’s constitutional economics can be a branch of public choice only under certain conditions.

What is Heterodox Economics? Conversations with Historians of Economic Thought

Since its intellectual inception, the development of the economics discipline has been accompanied by divergence of thought. Through the years, particularly in the latter half of the twentieth century, a fissure has emerged within the discipline, sociologically dividing conventional, mainstream economics from the dissention of heterodox economics. The nature of that division, however, as well as the nature of heterodox thought is unclear. Historians of economic thought would seem to be uniquely suited to specify the nature of heterodox economics and the mechanism of its marginalization. Although anecdotal, personal interviews with historians of economic thought provide a breadth and depth of study not available through surveys with an immediacy not allowed by doctrinal examination. The purpose of this study and intent of this paper is to reveal the ways that orthodox and heterodox economics differ, whether heterodox economics has any clear research program other than criticizing the limits of the more orthodox view, and what aspects of heterodox economics remain underdeveloped, all through the lens of the historian of economic thought.

Situational logic in social science inquiry: From economics to criminology

Karl R. Popper proposed that the method of explanation in economics, or situational logic, should become the general model for analyses across the social sciences. This article makes good Popper's proposal by extending situational logic to a social problem outside the traditional scope of economics: crime. Specifically, the discussion reviews models developed by economist Gary S. Becker and criminologist Ronald V. Clarke. Becker's ‘economic approach’ to crime incorporates essential features of situational logic. Clarke's ‘situational crime prevention’ offers an even better demonstration; it explicitly incorporates the ideas of piecemeal social engineering and unintended social repercussions. Popper took situational logic from Menger and the Austrians, making this emerging area of criminology an extension of Austrian economics.

The Austrian roots of the economics of institutions

This paper presents an analysis of the way the Austrian theory of institutions evolved from Menger’s main works. It also tries to advance the idea that the economics of institutions, when it deals with the emergence and evolution of rules and norms from interacting individuals, is inspired by Menger’s work and more generally by the Austrian analysis of the emergence and evolution of institutions. Recent works in the economics of institutions build on this earlier Austrian work to make it more formalized and testable.

Population and economic growth with human and physical capital investments

We present a two-sector endogenous growth model with human and physical capital accumulation to analyze the long-run relationship between population growth and real per capita income growth. Formal education and investment in physical capital are assumed to be two separate components of human capital production. Along the balanced growth path equilibrium, population change may have a positive, negative, or else neutral effect on economic growth depending on whether physical and human capital are complementary/substitutes for each other in the formation of new human capital and on their degree of complementarity.

The Social Economics of Neoliberal Globalization

The recent period of intensive and extensive development of global economic integration, or globalization, has reached a crossroads. The regime of the neoliberal Great Capitalist Restoration is not sustainable and fundamental governance changes must be made. This paper adds perspective to the choices that must be made at this critical juncture of the global social economy by applying the master concepts of Schumpeter’s Creative Destruction and Polanyi’s Protective Response.