On overdoing the history of economic thought

Somehow I missed it when it was first written, but I was recently hipped to Pete Leeson’s post “10 Austrian Vices and How to Avoid Them”. It anticipated one of my (few) complaints about the GMU economics program, the emphasis on history of economic thought. I understand the motivations: Hayek won the calculation debate in the sense that his ideas were more correct than Keynes’s ideas, but Keynes gets the credit for being the greater economist. Macroeconomics more broadly was on a good path that got sidetracked away from Böhm-Bawerk, Wicksell, and others. Mises set up a fantastic framework for social science that was ignored by Samuelson and his followers. All of these things were detrimental to economic science and the world in general. We want to correct this. We want to illuminate the history of economic thought to demonstrate that we were on the right path and can return to it.

My issue with this is twofold: first, Keynesian ideas didn’t win out because they were better, and second, the opportunity cost is too high.

Keynesian ideas won because they were popular with governments, telling them they had good reasons for doing what they wanted to do anyway (and were already doing). The court intellectuals found it better for their careers to go along and were also swept away by the Zeitgeist. I recognize that there’s more to it, but this seems to me to be the essence of the Keynesian victory. Austrians treat the Keynesian victory as an intellectual problem, which is incorrect. It won’t be won after all these years by pointing out that we were right back then.

More than a handful of intellectual history papers here and there is also a waste of effort. Since the Keynesian revolution was not primarily an intellectual exercise, we ought to treat it as an extremely successful fluke. Most economists do not care about history of thought papers, and by writing them we’re really only talking to ourselves. No dyed-in-the-wool Keynesian of today is ever going to see these papers, much less be won over by them. The best way to make people realize that Hayek won is to apply Austrian insights to new problems and let them trace back on their own. Not only is staying relevant important for its own sake, it’s also the best way to bring people into the history of economic thought on their own. If they see you are right about something, they’ll wonder what else you were right about and give it more credence than if you whack them over the head with intellectual battles from 50+ years ago.

It’s not that I don’t value the history of economic thought as a subdiscipline or enjoy it. I really do. It’s critical for the hard core to have a thorough understanding of where their ideas came from. But these papers are only for the hard core and most of our efforts should be forward-looking.

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Author: rfmcelroyiii

Student and instructor of economics.

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