Alfred Schütz and George Shackle: Two Views of Choice

Within the Austrian school of economics, Ludwig Lachmann identified Alfred Schütz and George Shackle as master subjectivists. Subjectivists trace aggregate economic phenomena back to the subjective thoughts and expectations of individuals. Schütz was a member of the Mises Circle of Austrian economists. Shackle was a student of the Austrian economist F.A. Hayek, but a follower of Hayek's great rival, John Maynard Keynes. Austrians respect both figures as important subjectivists who offered valuable accounts of the role of uncertainty in human action. The paper serves two purposes. First, it is a useful primer on the distinct theories of Schuts and Shackle. Second, it draws attention to the problem of change and novelty in the work of Schütz and Shackle. Schütz underemphasized the role of novelty in society. Shackle, by contrast, exaggerated the role of novelty in choice. A middle ground position is defended.     

An experimental study of blind proficiency tests in forensic science

We conducted a series of sender?Creceiver experiments to study the consequences of implementing a regime of blind proficiency tests in forensic science to reduce error rates and improve the criminal justice system. Senders are our surrogate for forensic laboratories and receivers, for the judge or jury. Our experimental surrogate (random audits with a penalty) for blind proficiency tests reduced sender error rates by as much as 46% depending on the level of experimentally induced bias. When penalties improve information quality, receiver error rates fell by as much as 26% depending on the level of the sender bias. We also find that the penalty must be large relative to the payoff to induce the reduction in errors. Our results suggest that a regime of blind proficiency testing has the potential to reduce forensic science errors.     

Big Players in Slovenia

The subjectivism of Austrian economics helps to explain the statistical fact of long memory in asset prices. The theory of Big Players is an Austrian approach to understanding the effects of discretionary policymaking in markets. It leads to implications that can be tested with statistics. In particular, Big Players induce herding and, thereby, an increase of persistence in asset prices. A recent episode in Slovenian monetary theory provides a case study. This case study adds to a set of similar studies, all tending to support the theory of Big Players.     

Hayek, Keynes, and modern macroeconomics

The Great Recession seems to be creating a change in the trend of macroeconomic thinking. Prior to the financial crisis of 2008, dynamic stochastic general equilibrium (DSGE) models dominated the macroeconomics literature without any apparent challengers on the horizon. Since then, however, we have seen an increasing interest in macroeconomic models that address the state of confidence (??animal spirits??), complexity, cognition, and radical uncertainty. Most of the renewed interest in animal spirits, complexity, cognition, and radical uncertainty has come from a more or less ??Keynesian?? perspective. We discuss the potential to emphasize these elements from a more ??Hayekian?? perspective and argue that Austrian approaches to macroeconomics along these lines are more likely to resonate with mainstream economists than in years past.     

Confidence in Keynes and Hayek: Reply to Burczak

We agree with Burczak's identification of the crucial issues. We disagree with his interpretation of them. We expand our defense of the claim that Keynes was a rationalist. We introduce the "horizon principle" to critize Keynes' dichotomy between short-term and long-term expectations. We question the statistical simile guiding some Post Keynesian dsiscussions of uncertainty. We point to the role of evolution in shaping conventions that fit the economic environment in a world with novel events. We think the evidence favors our view over Burczak's. Finally, we put in a plea for framing the issues in a way that facilitates empirical testing.     

Hayekian expectations: Theory and empirical applications

We show that the orderliness of market processes and outcomes, and hence the realization and coordination of individuals' plans, are dependent on the social environment in which individuals function. In specific, when atomicity and stable (social) rules are compromised in the case of Big Players, markets are less orderly despite the fact that individuals are behaving rationally.—The paper provides an account of individual rationality by generating a theory of expectations based on Hayek's cognitive theory. Hayekian expectations are coherent, competitive, and endogenous. This suggests that expectational analysis must take account of the context of constraint—the “environment” or what we call “filtering conditions”—within which individuals function and to which they must adapt. The paper provides a theoretical analysis of expectations at the individual level and shows that the particular behaviors stemming from those expectations require a specification of the rules governing social and market activities. We thank Karen Palasek, Don Boudreaux, Joe Cobb, Peter Boettke, and the participants of the Hayek 1993 Memorial Symposium in Freiburg, Germany for helpful suggestions and comments on earlier drafts. All remaining errors are ours.     

All That I Have to Say Has Already Crossed Your Mind

We present three arguments regarding the limits to rationality, prediction and control in economics, based on Morgenstern’s analysis of the Holmes–Moriarty problem. The first uses a standard metamathematical theorem on computability to indicate logical limits to forecasting the future. The second provides possible nonconvergence for Bayesian forecasting in infinite–dimensional space. The third shows the impossibility of a computer perfectly forecasting an economy with agents knowing its forecasting program. Thus, economic order is partly the product of something other than calculative rationality. The joint presentation of these existing results should introduce the reader to implications of these concepts for certain shared concerns of Keynes and Hayek.     

Against representative agent methodology

Garnett and Boettke both seek to identify the appropriate behavior for the representative scientist. The social structure of science is better represented, however, with a heterogeneous agent model. Social epistemology and epistemological naturalism provide context for the argument against representative agent methodology. Asking whether individual scientists should “commit themselves to an approach and pursue it doggedly” or make “a professional commitment to intellectual tolerance, openness, and broad-mindedness” is like asking whether it is better to be a bouncer or a bookkeeper. The question depends on particulars that vary from person to person. Down with representative agent methodology. Up with diversity.