Review of Austrian Economics, Volume 3 by Murray N. Rothbard

Author:Murray N. Rothbard
Language: eng
Format: mobi
ISBN: 9781610165396
Publisher: Ludwig von Mises Institute
Published: 1989-05-09T05:00:00+00:00

Analysis of Complex Phenomena

The second use of the ERE attributed to Mises by C-F is that the “ERE is an analytical building block or stepping stone towards analyzing complex phenomena in a world of change.” I think that this is a correct though vague characterization of Mises’ view. However, C-F’s criticism of it fails to account both for Mises’ own statements on the matter and for Mises’ purpose. C-F claim that such a use of the ERE is open to question because “there are no prices in the evenly rotating economy.” (p. 867). Mises says that the ERE “is a fictitious system in which the market prices of all goods and services coincide with final prices” (p. 247).

To C-F, it is a contradiction to maintain that we can learn something about how prices are formed by employing an image which, by definition, assumes that the prices are already formed. Their discussion in this respect ends with the rhetorical question: “How can an imaginary construct illuminate an institution [the system of markets and prices] that performs absolutely no function within that construct?” (p. 868).

C-F’s misinterpretation on this issue is due to their failure to grasp the fact that the ERE was employed by Mises solely to elucidate the entrepreneurship that causes factors of production to exist in a causal relation with wants. Mises’ use of the ERE to elucidate entrepreneurship can be most forcefully shown by an analogy to a one-person choice. In describing and understanding the nature of an individual’s choice, we would have to have in mind the ends that are sought. It would be senseless to attempt to describe or understand the deliberation process that precedes a choice, the learning that occurs, the experimentation that an individual carries out, and so on, unless we had in mind a set of ends the individual was trying to achieve. Another way to put this is to say that to elucidate deliberation processes and so on, we must have in mind an end point, namely, a point at which a choice is made.6 With this idea in mind, we proceed to work our way back, so to speak, to the activities that an individual can perform to cause this end point to be reached. It is difficult to conceive of any other way to proceed. If one merely described physical behavior and labelled it “deliberation,” “learning,” and so on without at the same time telling the end that was sought, his descriptions would be impossible to assess.

Similarly, it is essential for the economist to have a series of relative prices, production operations, and a final distribution of goods in mind when he begins to explore the signalling and trading processes through which the prices, production, and distribution are achieved. These prices, and so on are merely the economist’s abstract conceptualization of the ends of “consumers” and of the consequences of the entrepreneurial decisions that enable the ends to be met in some measure.

It is true that one can hardly conceive of

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.