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Lawrence, I wonder whether I was clear regarding my point about
the perfect knowledge assumption as a counterfactual. When we
say that the mind of the the human being is not a computer, we are
led to identify characteristics of the mind that differ from those that
we attribute to the computer. When we say that economic actors
do not have perfect knowledge, we are led to identify
characteristics of "real" economic knowledge. We are led to ask
what economic knowledge is and how it is relevant to the way
actors organize themselves in an effort to do better than they could
do if they chose not to trade. These are the fundamental questions
that using the perfect knowledge assumption as a counterfactual
leads one to ask. I'm sorry that my reference to acquiring, using
and communicating information led to you associate my comment
with Hayek. That was not my intent, although I can see why you
would interpret it in this way.
It seems to me that the question of who started the assumption of
perfect knowledge is not independent of the question of what the
user of this assumption expected it to accomplish. I suggest that
Knight's use was very different from that of Marshall. I agree with
your Weberian "ideal type" interpretation of Marshall (and the
British microeconomists who followed). But I do not think that this
interpretation applies to Knight or the Austrians.
(I realize that I am avoiding the broader philosophical implications
that Knight often attached to the perfect knowledge assumption.
See Ross's earlier comment. I am interested here only in the
assumption's use as a tool of understanding economic interaction.)
Robin's comment about policy is a good case to differentiate these
uses because she seems to have adopted the Marshallian
definition. Let me explain. Insofar as one assumes perfect
knowledge, the outcome of a policy is entirely predictable but, of
course, not very helpful in judging the outcome of policy in the real
world. Insofar as one has some idea of how actual knowledge
differs from perfect knowledge (the ideal type paradigm), the
outcome is less predictable and there is room for speculation about
whether the policy could succeed. This opens the door to a new
profession of speculators and model builders who base their policy
judgments on assumptions about the kinds of knowledge that
people actually have. The field of micro-economic policy is born.
However, insofar as one assumes (a) radical uncertainty or (b) that
economic actors have and are likely to acquire, use and
communicate knowledge that the policy maker could never hope to
acquire; there is grounds for doubting that micro-management
types of policies have any chance of succeeding even if they were
adopted. The whole professional enterprise of devising micro-
management policies may appear wasteful, fruitless, delusional,
and a garden to be plundered by political hacks. I think that there
are many economists who make the latter assumption. And many
of them would not regard themselves as followers of Shackle or
Austrians.
Finally, I would like to recall my earlier point that the economics
that followed the marginal (value) productivity theory of distribution
revolution was gaining consensus at the turn of the 19th century
and early 20th century was multi-faceted. I call this neoclassical
economics, although definitions are not important. I agree with you
that the dominant micro textbooks of today are largely Marshallian.
Nevertheless, I think we would mark ourselves as narrow-minded if
we disregarded the influence on these textbooks that
mathematicization of the profession has had. Nor would it be
sufficient to simply point to an edition of Marshall's _Principles_ in
which mathematics was de-emphasized in order to show that the
textbooks do not fully reflect neoclassical economics. The often
brilliant works of the Austrians, J. B. Clark, Herbert Davenport,
Frank Fetter, Frank Knight, and others were simply ignored in the
drive to manufacture a textbook that bureaucratic teachers would
require their students to buy. Many of these writers were strong
critics of Marshall.
Pat Gunning
Sultan Qaboos University, Oman
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