10 propositions of the Science of Economics by Peter Boettke

The Austrian school of economics was founded in 1871 with the publication of Carl Menger’s Principles of Economicsmenger, along with william stanley jevons and leon walras, developed the marginalist revolution in economic analysis. Menger dedicated Principles of Economics to his German colleague William Roscher, the leading figure in the German historical school, which dominated economic thinking in German-language countries. In his book, Menger argued that economic analysis is universally applicable and that the appropriate unit of analysis is man and his choices. These choices, he wrote, are determined by individual subjective preferences and the margin on which decisions are made (see marginalism). The logic of choice, he believed, is the essential building block to the development of a universally valid economic theory.

The historical school, on the other hand, had argued that economic science is incapable of generating universal principles and that scientific research should instead be focused on detailed historical examination. The historical school thought the English classical economists mistaken in believing in economic laws that transcended time and national boundaries. Menger’s Principles of Economics restated the classical political economy view of universal laws and did so using marginal analysis. Roscher’s students, especially Gustav Schmoller, took great exception to Menger’s defense of “theory” and gave the work of Menger and his followers, eugen böhm-bawerk and Friedrich Wieser, the derogatory name “Austrian school” because of their faculty positions at the University of Vienna. The term stuck.

Since the 1930s, no economists from the University of Vienna or any other Austrian university have become leading figures in the so-called Austrian school of economics. In the 1930s and 1940s, the Austrian school moved to Britain and the United States, and scholars associated with this approach to economic science were located primarily at the London School of Economics (1931–1950), New York University (1944–), Auburn University (1983–), and George Mason University (1981–). Many of the ideas of the leading mid-twentieth-century Austrian economists, such as ludwig von mises and f. a. hayek, are rooted in the ideas of classical economists such as adam smith and david hume, or early-twentieth-century figures such as knut wicksell, as well as Menger, Böhm-Bawerk, and Friedrich von Wieser. This diverse mix of intellectual traditions in economic science is even more obvious in contemporary Austrian school economists, who have been influenced by modern figures in economics. These include armen alchian, james buchanan, ronald coase, Harold Demsetz, Axel Leijonhufvud, douglass north, Mancur Olson, vernon smith, Gordon Tullock, Leland Yeager, and Oliver Williamson, as well as Israel Kirzner and Murray Rothbard. While one could argue that a unique Austrian school of economics operates within the economic profession today, one could also sensibly argue that the label “Austrian” no longer possesses any substantive meaning. In this article I concentrate on the main propositions about economics that so-called Austrians believe.

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WP: Austrian Economics, Market Process, and the EVA(R) Framework

In this paper, prepared for a symposium on Austrian Perspectives on Business Valuation for the Journal of Business Valuation and Economic Loss Analysis I study how topics highlighted in the Austrian literature accept a financial interpretation.

Abstract

In this paper I present a financial framework, known as Economic Value Added or EVA®, used to value firms and apply it to topics highlighted in the Austrian literature. In particular I contrast the market process emphasize in the Austrian literature with the neoclassical firm profit maximization and the role of Kirzner’s entrepreneurial alertness. Then I show how these micro topics can be aggregated into macro issues such as the Cantillon Effect, an aggregate average period of production, and the impact of country risk into value creation.

Download the paper from SSRN.

WP: Entrepreneurship and Bitcoin: Breaking the Network Effect

Borrador con Malavika Nair sobre empresarialidad y bienes network (ejemplificado con el caso Bitcoin).

Astract

This paper explores the question of whether the market process is capable of bringing about a spontaneous monetary switch to a new currency in the presence of strong network effects of the incumbent currency. It does so by examining current happenings around Bitcoin. It finds that two mechanisms stand out: the coordinative efforts of the profit-maximizing entrepreneur as well as the ability to use the old and the new currency simultaneously. It finds that marginal decisions made by rational agents seeking to maximize net private benefit in their choice of currency, be it entrepreneurs or buyers and sellers of currency, are capable of setting in motion a switch to a new currency, even in the absence of contingencies such as extreme inflation or political instability. Whether or not these mechanisms play out fully in the case of Bitcoin still remains to be seen.

Acceder al paper en SSRN.

Indice de Calidad Institucional

La Fundación Libertad y Progreso anuncia la publicación del Índice de Calidad Institucional 2016. En su anuncio, LyP afirma que la gestión kirchnerista destruyó la calidad institucional de Argentina. Esta destrucción se observa en los países bajo el llamado Socialismo del Siglo XXI. No es casualidad, concluye Krause, que Argentina sea uno de los países con mayor fuga de capitales hasta el 2015.

En los últimos 10 años Argentina descendió diez puestos, ubicándose en la posición 142 (entre Malawi y Mozambique) de 192 países.

Acceda aquí al anuncio de la Fundación Libertad y Progreso.

Acceda aquí al informe en español.

Acceda aquí al informe en inglés.

WP: El Deterioro de la Economia Argentina Durante el Gobierno Kirchner-Kirchner

Comparto el borrador de un texto sobre el deterioro económico de Argentina durante el kirchnerismo.

En este capítulo estudio los principales retrocesos económicos durante el gobierno Kirchner-Kirchner (2003-2015) así como una aplicación del análisis del Public Choice al caso de Argentina. En particular en lo económico me concentro (1) en el deterioro fiscal, (2) el regreso de la alta inflación, (3) el default del 2014. En lo que respecta al Public Choice aplicado el foco se encuentra en (1) las cuatro etapas del populismo macroeconómico, (2) los bandidos nómades y bandidos estacionarios, y (3) el comportamiento irracionalmente racional. El capítulo termina presentando los mayores desafíos que deja el kirchnerismo al gobierno entrante.

Acceder al paper.

Si bien no tengo espacio para expandir el texto, comentarios y sugerencias son bien recibidos.