> I do think that it is important, as a matter of
> history, to get Mises right. Mises, far from
> being "heterodox," represents, in my opinion, the
> purest form of neoclassical orthodoxy, sort of an
> orthodoxy on steroids. After all, the man who
> accused his Mount Pellerian Society colleagues of
> being "a bunch of socialists" deserves some
> points for purity, if not for coherence.
This is absolutely wrong. Mises worked out a system,
right or wrong, that focused on true dynamics. To
Mises neolcassical competitive equilibria are purely
fictional. Mises recognized only a 'plain state of
rest'- the actual results of daily trading, where
competition would result in some set of actual non
optimal trades.
Mises reffered to competitve equilibrium as a 'final
state of rest'- which he argued was completely
impossible. Actual markets work in a series of plain
states of rest with only some tendency towards a
final state of rest. There are two points to mention
here. First, changing economic conditions imply that
the circumstances of the final state of rest are never
the same. With perfect information on existing
economic conditions we might attain a final state of
rest on a given day, but we do not have this
information. With unchanging conditions we might
approach a final state of rest through successive
trials, day after day. But with changing conditions
this is utterly impossible. In other words, to Mises
there is no unique and unchanging final state of rest,
as depicted in mainstream models. There are only
potential unseen final states of rest, which change
every day, for eternity, and actual realized market
trades- far from pareto optimal, but superior to
anything that state planning can generate. See this
link for further explanation-
http://www.mises.org/story/2289
Second. The tendency towards a final state of rest
derives from the action principle- we each perceive
our present situation, imagine some alternative
situations which we beleive to be feasible in the
future, and then undertake actions to attain what we
expect to be the most desirable situation out of our
known alternatives. Please tell me how any of this
fits in with the Neoclassical orthodoxy- which derives
from the purely fictional Walrasian thought
experiment.
Modern orthodoxy is Walrasian and Mises, as a true
evolutionary thinker, was absolutely opposed to such
static equilibrium theorizing. As for the Mt Pellerin
reference reference, this is irrelevant because it
does not represent his thinking on economics. Mises
had a very short fuse and was therefore prone behaving
like a jackass. Sorting Mises out as a scholar
requires one to look past his emotionally driven
tirades, and to focus instead on his thought driven
economic analysis. His analysis was truly brilliant,
so one should make some effort to look past his
obnoxious outbursts. Doing so reveals that his system
was fundamentally at odds with static neoclassical
theorizing.
DW MacKenzie
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