A critique of mises’s theory of monopoly prices

Conclusion Built on Rothbardian insights, our attempt to show the peculiarities of Misesian monopoly theory results in a few conclusions. First of all, in Mises’s theory of monopoly two of the three conditions for the emergence of monopoly prices belong to different realms of scientific inquiry. On the one hand, Mises points out the idea of a counterfactual comparison between competitive price and monopoly price; on the other hand, he stresses the importance of an empirical method to discover monopoly prices. The latter, even if it describes a true statement about market conditions, i.e., the entrepreneurs do not know (beforehand) the market demand curve, does not help us to identify the monopoly price on market. Second, Mises erroneously founds his welfare arguments on value theory. His utilitarian endeavor to show that “consumers’ sovereignty” is infringed by monopolistic restriction of production does not succeed. He based his arguments on nonscientific interpersonal and intertemporal comparisons of utility. Third, Mises is not consistent in the use of a standard of comparison for “monopoly prices”: on the one hand, the market prices are not distinguishable from “monopoly prices”; on the other hand, the transfer of the discussion to the equilibrium framework does not help us either, as we try to explain real market phenomena. Thus, Mises’s attempts to incorporate the neoclassical concept of monopoly price into the framework of the market process, as depicted by Austrians, do not succeed. Our inquiry supports the largely shared opinion among Austrian economists that monopoly price (at least in its present definition) does not exist on the free market; it appears only, and is logically identifiable, as a result of a privilege given by the State.     

Do free-market economists practice what they teach?

Conclusion There is then a fundamental inconsistency between theory and application for political economists who both rely on standard microeconomics for their support of the free market and scorn government intervention. Theory matters in free-market critiques of public policy. It matters, however, not only in determining the content of those critiques, but also, from a methodological standpoint, in the sense of whether the world-view presupposed by theory is one that leaves room for any meaningful critique to take place at all. It should not be news that the authorities in charge of public policy are ignorant. Surprisingly, if we start from the presumptions of perfect-knowledge economics we would be logically led to conclude that those authorities indeed never make mistakes, or if they do that it must have been planned that way all along. Fortunately, political economists working in the Austrian tradition are, as they have been since B?hm-Bawerk’s and Mises’s devastating critiques of Marxian economics and socialism, free from having to maintain this curious point of view. He also studied with Professor Sennholz at Grove City College.     

Austrians and post keynesians: The questions of ignorance and uncertainty

Conclusion We do not wish to imply that there is nothing of value in Davidson’s presentation of the Post Keynesian approach to uncertainty. Nor do we believe that there is no possibility of fruitful dialogue on various aspects of the uncertainty problem between Austrians and Post Keynesians. Credit is certainly due to Davidson for his ability to frame the risk-uncertainty distinction in the language of modern, neoclassical theories of stochastic processes. And, apart from the omissions we have discussed, most Austrians will find little to disagree with in his discussion of entrepreneurship and “crucial” decisions. Unfortunately, those omissions are of fundamental relevance to the whole issue of uncertainty. The strength of the Austrian approach is demonstrated in its close attention to the entrepreneurial function that other traditions, including the Post Keynesians, tend to ignore.     

Human capital: A critique

The human capital approach increasingly has been absorbed within the folds of cultural determinism. The trend has been so pronounced that it prompted the organization of a session at the December 1984 American Economic Association meetings in Dallas, Texas, entitled “Human Capital and Culture: Analyses of Variations in Labor Market Performance.” The papers from that session are available in the May 1985 issue of theAmerican Economic Review. One of the discussants for the session was Stephen Steinberg, a sociologist at Queens College. Steinberg was invited to comment on the presented papers for two major reasons—first, he had written an outstanding study that debunked many of the conventional linkages made between culture and ethnic achievement,The Ethnic Myth, and second, as a sociologist, he was expected to provide a perspective on the subject quite different from the rest of the panelists, all of whom were economists. In the midst of the coven of economists, Steinberg appeared well armed. He arrived with his own paper, a paper that went far beyond comments on the presented papers. Unfortunately, the current rules governing the inclusion of papers in the AEA proceedings prohibit publication of the discussants’ remarks. Fortunately, Steinberg graciously has consented to have the paper appear in theReview of Black Political Economy.     

The origin,birth, and adolescence of the review of black political economy and the black economic research center

The Review of Black Political Economy (RBPE) and the Black Economic Research Center (BERC) arose from the atmosphere of the late sixties, when black nationalism was at its apex and vigorous efforts were under way to give meaning to the concepts of “black economic development” and “black capitalism.” They were created as vehicles to assist black economists and economic activists to analyze and disseminate relevant data on black economic affairs and to explore and facilitate new approaches to black economic problems.RBPE offered black economists a place where they could publish their work and share it with their colleagues. The flavor ofRBPE has changed somewhat over its twenty-three year life, becoming less polemical and more scholarly.     

The theories of ‘stages of growth’

Abstract

The idea of a ‘virtuous circle’ has always been implied in the theories of ‘stages of growth’, though never systematically demonstrated, We are here concerned with two aspects of these theories: (1) the implied theory of circular causation with cumulative effects; (2) the implicit systematic biases. The biases operate through the selection of strategic factors on which interest is focussed and of assumptions concerning their role in historical processes. This selection of strategic factors and of assumptions about their role remains essentially a priori, however much illustrative material is amassed. It never is—and, in this teleological approach, it never can be—empirically verified or refuted. A fundamental preconception is, moreover, the similarity of evolution in different countries at different historical periods; this is why these theories can be used, and are used, for prediction. But similarity depends on the level of abstraction and the choice of features compared. Such comparisons can be refuted only by demonstrating that other principles of selection and comparison are equally possible—and, of course, ex post, that the predictions do not come true.     

Ranking Economics Journals,Economics Departments,and Economists Using Teaching-Focused Research Productivity

This paper constructs new rankings of economics journals, economics departments, and economists that employ a measure of teaching-focused research productivity, an area of growing importance in recent years. The ranking methodologies presented here use information from articles that were published from 1991 through the early part of 2005 within the Journal of Economic Literature's “economic education” classifications (A200-A290). The Journal of Economic Literature tops the list of journals, followed by the Review of Economics and Statistics and the American Economic Review. Among the top institutions are Vanderbilt University, Indiana University, and the University of Wisconsin. Others that rank high here, such as Oberlin College and Denison University, do not often fare as well using methodologies that evaluate more traditional types of economics research. Finally, among the economists we find that John Siegfried, William Becker, and Michael Watts are ranked above other economists.     

Of Positivism and the History of Economic Thought

The rhetoric of positivism had a profound effect on the worldview and practice of economists in the middle of the last century. Though this influence has greatly diminished, it still may be found in the attitude of many economists toward the history of their discipline. This article traces the effects of positivism in economics and then argues that the history of economics is a critical component of both the undergraduate teaching and the graduate training of economists, and that as such, it should be reintroduced into the economics curriculum. It concludes by documenting some recent hopeful signs of change.     

A pre-history of misesian calculation: The contribution of adolphe thiers

Conclusion Mises’s argument on the impossibility of economic calculation under socialism, first proposed in 1920, has forerunners. One of the early forerunners was Adolphe Thiers in his book De la propiété, which was published in 1848. Thiers understood that he was fighting for the case of the economists against socialists and communists. He wrote a popular book after the socialist revolution of 1848 putting forward an eloquent defense of property as the foundation of society. Although largely neglected, his work is interesting because he based economic argument on a property-rights framework and because he already hinted towards the problem of economic calculation under socialism. The particular force of his argument lies in the refutation of economic calculation under socialism not only on grounds of practicability, but of a theoretical reasoning about the role of property and thus the role of the market and prices for the allocation of goods. Being himself a politician he was compromising in the application of his own principles, which makes especially the last part of his book, On Taxation, contradictory in view of the preceding parts. Thiers’s argument can be interpreted as resulting from the tradition of the natural-law school of the Physiocrats, who could themselves draw on the Catholic tradition of natural law and the discussion of the “just price.” a libertarian think-tank to promote the Austrian School in Germany.     

The methodology of profit maximization: An Austrian alternative

Conclusion While the MR=MC profit-maximizing model that is used almost religiously by the economics profession has been challenged over the years, it still remains the dominant model to explain firm behavior. However, its popularity does not mean that the model accurately describes what actually occurs in firm decision making. Given that modern mainstream neoclassical economists have failed (through omission or commission) to examine their models through the lens of time, they have lost that component that presents accuracy and enrichment to their arguments. This paper has incorporated challenges to the dominant neoclassical model that were fashioned by Rothbard and, to a much lesser extent, Baumol. In examining the work of both economists, we conclude that the Rothbard model is more complete, as it factors time into the model, where Baumol’s does not, which renders it fatally incomplete. Both authors, however, make a solid point that if one is to analyze the workings of the firm in the real world, other models such as revenue maximization must be taken into account if we are to assume that firms attempt to maximize profits. To be sure, there is much work to be done in the creation of alternative theories of the firm. Klein and others have attempted to build upon the work of Mises and Rothbard to construct a theory of the firm that can stand up to intellectual scrutiny and explain the various aspects of the decision making process within the firm. We attempt through this paper to add to this alternative theoretical construct.     

New classical and austrian business cycle theory: Is there a difference?

Conclusions To compare new classical and Austrian theory seems legitimate only with respect to a particular aspect of economic reality, namely business cycles. In the past century, Austrians have covered so many fields of economic theory that the achievements of new classicals are comparatively small. The discussions of both approaches showed that it would not be appropriate to claim that Austrians have developed theonly theory of business cycles which refers to individual behavior and choice. New classicals have rediscovered this approach and used many of the tenets for their explanation. This is not to say that new classical theory completely follows Austrian traditions. But many of the differences appear to be small or are only semantic in character.     

Sharecropping was sometimes efficient: sharecropping with compensation for improvements in European viticulture†

There is no consensus among specialists in agricultural contracts over whether the long‐term inefficiencies that classical economists attributed to sharecropping actually exist. This article maintains that they do exist and are partly caused by the fact that sharecropping is hardly compatible with the tenant being compensated for improvements, viticulture being the main historical exception. In line with recent contributions to the sharecropping literature, the article contends that the widely held belief among scholars of agricultural contracts that sharecropping was very frequent in Europe's vineyards is incorrect. However, it also provides evidence of an issue whose importance has gone largely unnoticed: prior to the twentieth century, many of the European vineyards worked by sharecroppers had been created by the sharecroppers themselves, through contracts which entitled them to compensation. Those contracts abounded while viticulture depended basically on two inputs, land and labour. When viticulture became a heavy consumer of capital, they were rapidly abandoned, but not in Catalonia, with a paradoxical result: the Catalan rabassa morta contract, which for centuries had made it possible to eliminate both the long‐ and short‐term inefficiencies of sharecropping, ended up becoming an obstacle to overcoming the short‐term inefficiencies. The article discusses why that happened.     

Deflation: When Austrians become interventionists

Conclusion The aforementioned six Austrian economists, especially Rothbard, refute most arguments that mainstream economists mention against deflation. To differing degrees they are much less deflation-phobic than the mainstream. Nevertheless, when it comes to deflation, they diverge very much and do not staunchly champion the free market. In contrast to their laissez-faire views on most other subjects, in order to fight deflation, they come up with an arsenal of state interventions, like government bailouts, redistribution of gold, amnesty and privileges for the banking system, government-planned monetary reforms, public works, credit expansion, and inflation. Curiously, with these interventions they want to prevent the liberating deflation, i.e., the free market reaction to an abstention of all government interventions into the monetary system, especially the fractional reserve banks’ privileges and amnesty. They fail to see that deflation is a fast, smooth, direct, and ethical way to a sound financial system.     

Mining improbable postulates and the theory of diverting toys(Advances in General Equilibrium Theory) Donald A. Walker Edward Elgar, 1997, 165 pp.

Walker'sAdvances in General Equilibrium Theory summarizes his position on the usefulness and appropriateness of much of modern general equilibrium modeling. He argues that much of modern general equilibrium modeling does not have the objective of explaining the real economy. His comments concerning general equilibrium theory are easily seen to be related to his study of Walras. In his text, Walker is critical of the general equilibrium theorizing of a number of well-known economists. He spends the majority of the book tearing down general equilibrium theory and models as they are presented in literature. He concludes his book by summarizing his opinion about how realistic models of the economy should be structured.     

“Mr Keynes and the ‘Classics’” Again: A Methodological Enquiry

Keynes is usually interpreted as proposing, or intending to propose an original theory of employment and income. However, this paper shows that Keynes was actually proposing more than a theoretical alternative. He saw himself breaking away from the ‘Classics’ at the connected levels of theory and methodology. This paper thus argues that modern economists going back to the old story of the relation between Mr. Keynes and the ‘Classics’ can learn something about several controversial issues in macroeconomics and methodology like for instance the role of experiments and formal arguments in economics.The paper is the development of a chapter in my Ph.D. thesis and has greatly benefited from discussion with Mark Blaug, Anna Carabelli, Bill Gerrard, Marc Lavoie, Tony Lawson, Roy Rotheim, and especially Geoff Harcourt and Malcolm Sawyer. Errors and omissions are, of course, solely my responsibility. A first draft of the paper was presented at the UK Autumn HET Conference (Glasgow Caledonian University, September 1999) and the AISPE Conference (University of Florence, September 1999). Finally, the paper was completed when I was visiting Research Professor at the Economics Department and C-FEPS, University of Missouri Kansas City (UMKC), Kansas City (USA) and Visiting Fellow at Clare Hall College and CCEPP, University of Cambridge, Cambridge (UK). I would like to express appreciation to members of those institutions for providing a stimulating and pleasant working environment.     

Reverse-lag reserve accounting,bank behavior,and monetary control: A formal analysis

Conclusion The fundamental conclusion of the analysis contained in this paper is that Laurent's claims concerning the potential monetary control enhancements of the adoption of a reverse-lag reserve accounting system are correct. This result conflicts with those reached by other studies of the monetary control properties of RLA, because the model of RLA used in this paper has been based on an analysis of the microeconomic behavior of banks. The conclusion that monetary control could be improved by adoption of RLA vindicates Laurent's [1984] argument that a “microbank analysis” is fundamental to understanding correctly the workings of an RLA system. An important qualification that prohibits a conclusion that RLA clearly is superior to lagged or contemporaneous accounting is that the monetary control enhancements resulting from adoption of RLA are mitigated to some extent by the existence of the Federal Reserve discount window. Indeed, the relative desirability of RLA as compared to alternative reserve accounting systems cannot be evaluateda priori in the presence of a discount window. Any serious consideration of RLA would need to be prefaced by a careful study of the relationship of the money stock to bank borrowing in an RLA setting. The final version of this paper was written while the author was a visiting economist at the Board of Governors of the Federal Reserve System. This paper has benefited considerably from comments and suggestions by Robert Laurent, Kenneth Kopecky, Daniel Friel, Chris Waller, Elmus Wicker, and participants in a seminar at the Federal Reserve Bank of Chicago and in the Indiana University Money and Banking Seminar. Initial work on this topic was supported by an Indiana University Summer Faculty Fellowship. Any errors are the author's responsibility, and any views expressed in the paper do not necessarily reflect those of the Board of Governors of the Federal Reserve System or its staff.     

IS THERE AN ASYMMETRIC BEHAVIOUR IN AFRICAN INFLATION? A NON‐LINEAR APPROACH

In this paper we test the inflation persistence hypothesis as well as model the long‐run behaviour of inflation rates in a pool of African countries using a non‐linear framework. In order to do so, we rely on unit root tests applied to non‐linear models and fractional integration. The results show that the hypothesis of inflation persistence does not hold empirically for most of the countries. In addition, the estimated models (logistic smooth transition autoregressions) are stable in the sense that the variable tends to remain in the regime (low inflation or high inflation) once reached, and changes between regimes are only achieved after a shock. The results also indicate that the effects of the shocks on inflation tend to die out; exogenous factors, i.e. supply shocks and inertia may be causing this outcome, as they play a substantial role in the determination of the inflation rates for our selected African countries.     

A theorist on basic questions of economic history

Abstract

The author of this slim, essay-like book—now translated into Swedish¹—s-is a leading economic theoretician, noted for his contribution to the development of Keynesian theory and to the theory of the short-run dynamics of the trade cycle, as well as to modem theory of macro-economic growth. He is, however, known to a generation of modern economists above all as a ‘market’ theorist within the Walrasian tradition. In the present book he abandons his role as a strict market theorist, concerned with such things as the ‘existence’ and ‘stability’ of market equilibria, and attempts to explain the historical emergence and development of the market system or economy as an institution or set of institutions. He disarmingly forfeits any claims to expertise on this topic, and I think wisely so; but he is far from being altogether a layman or a newcomer to economic history. He professes an early love of the subject, and although it was a romance that never resulted in marriage, he has, through constant association with leading British economic historians and through his own writings in the history of economic thought, preserved and developed some of the faculties of a historian. Yet, this book-as its title indicates-is essentially theoretical. Hicks develops a set of interpretative hypotheses mainly by a priori reasoning. The empirical references must be looked upon more as illustrations of his theses than as evidence in support of their empirical validity.     

Economics: The Sexy Social Science?

Michael Watts of Purdue University organized this symposium as a session at the 2002 Southern Economic Association Meetings in New Orleans. He invited five economists, who are specialists in economic education and other areas, to comment on William Becker's paper, “How to make economics the sexy social science.” which first appeared in the Chronicle of Higher Education (December 7, 2001). Their comments and Professor Becker's response appear below.     

Hayek the Neoclassical Font: A Review Essay on Hayek’s Challenge

Caldwell sets out to answer the question: what can neoclassical economists of the late twentieth/early twenty-first century, learn from Hayek’s writings? His reply constitutes an intellectual tour de force of the neoclassical approach. If neoclassical economists read only one book on Hayek, this would have to be it. Caldwell is not just sympathetic and open, his objective is nothing less than to demonstrate to neoclassical economists, clearly and trenchantly, just how much they have to gain from certain of Hayek’s writings. He succeeds remarkably.