The Long Rehabilitation of Frank Fetter

Economics has long history of “rehabilitations,” including W.H. Hutt’s rehabilitation of Say’s law, and Alfred Marshall’s attempt to rehabilitate David Ricardo. The rehabilitation of Frank A. Fetter should be as important as either of these, especially for economists working in the contemporary Austrian tradition. The historical records reveal that for the last century there has been underway a nearly unbroken series of efforts, especially by Austrian economists, to rehabilitate Fetter’s contributions and use them to revitalize economic theory. This paper relates this history, which chronicles the rise, decline, and rise again of one of the great American economic theorists. Yet crucially, this is not a story about Fetter alone, but also of the fortunes of the Austrian school and its rise, decline, and renaissance.

JHET Interviews: Karen Vaughn

Karen Vaughn received her BA in economics from Queens College of the City Universi-ty of New York in 1966 and her PhD from Duke University in 1971. From 1978 to 2004 she taught at George Mason University. She attended some of the earliest meet-ings of the History of Economics Society (HES) and was the editor of the HES Bulletin, which was the precursor of the Journal of the History of Economic Thought. Professor Vaughn has served as the President of the History of Economics Society and the South-ern Economic Association, and was the founding President of the Society for the Ad-vancement of Austrian Economics. She has books on John Locke and on the Austrian tradition in economics, and numerous articles on a variety of topics in professional jour-nals (the list of her publications is available as an online appendix to this interview).

The Problem of Accuracy of Economic Data

In his classic book On the Accuracy of Economic Observation Oskar Morgenstern deals with a common, yet widely neglected problem with which economic historians are faced, namely the quality of economic data. For the economic historian in the Austrian tradition, the quality of economic data is of utmost importance, since false data or belief in inaccurate data can lead the economic historian to faulty interpretations of the past. The quality of economic data is at least as important for economists who adhere to positivism in economics, since they use economic data to confirm or falsify their models. Likewise, Morgenstern’s insights are relevant for mathe-matical economists, as it makes sense to perform computations and solve a system of mathematical equations only if one has reliable data. Morgenstern’s sample equations show the significance of a small error in the observation. Yet, in more complex equations with extensive mathematical operations the extent of error due to unreliable data may increase (or, depending on the equation, the errors may cancel out). It is indeed surprising to note how much the problem of accuracy in economic data has been neglected. This is not so in the physical sciences. There the error of observation is always explicitly mentioned. Yet in economics there is simply no error estimate. This means that we do not know the accuracy of the economic data presented to us. This is even more troubling when we consider that in social or economic data there are more possible sources of error than in the physical sciences. We therefore face the question of why the problem of accuracy of economic data is rarely mentioned or passed over in silence in economics, while in the physical sciences this problem is widely acknowledged.

Interpreting the path of Italian economic thought: The contribution of Eraldo Fossati

In this article, we focus on the figure of Eraldo Fossati, He was a protagonist of the development of Italian economic thought in the central decades of the last century. At the beginning he tried to dynamize the Paretian theory of general equilibrium. In the first phase he emphasized the role of true uncertainty following the Austrian tradition. Ended a short corporatist parenthesis, after the second world war he supported the Keynesian theory and made an original proposal to reconcile Pareto and Keynes, considering the latter not as a revolutionary economist but rather as an innovator who furnished new tools to understanding the real workings of contemporary economic systems with their chronic unemployment. In fact, after the Second World War Fossati was one of the main exponents of the Keynesian turn in Italy.

Patron Saints: (2) Continental European Ethical Philosophy

This chapter examines the ways in which the distinctive conception of the moral order in conservative liberalism and Ordo-liberalism bears testament to the metaphysical and epistemological imprints of continental European ethical philosophy as it evolved in the period from the 1880s to the 1930s. Ethical philosophy helped to give flesh to their conception of liberalism as about human flourishing. The chapter begins by reflecting on the complex relationship with Adam Smith as political economist and moral philosopher and on the enormous importance of Immanuel Kant in shaping the broad parameters of the way in which conservative liberals and Ordo-liberals engaged with the ethical basis of liberalism. The founding thinkers of this tradition rejected Sigmund Freud, Karl Marx, Friedrich Nietzsche, and Jean-Jacques Rousseau. The chapter investigates in depth the complex connections—far from neat causal relationships—between conservative liberals and Ordo-liberals and a range of philosophers with whom they had often studied or knew as family friends: Rudolf Eucken, Edmund Husserl, Max Scheler, Nicolai Hartmann, William James, and G. E. Moore, as well as the special case of Louis Rougier and of French positivism in the work of Rougier and Jacques Rueff. Attention is also paid to the Euckenbund (Eucken Association). This context is important in understanding the hostility of the founding thinkers to determinism, subjectivism, utilitarianism, naturalism, empiricist Realism, and moral relativism. A contrast is drawn between the differing philosophical roots of the early Austrian tradition and Ordo-liberalism. The chapter closes with an examination of the implications of developments in philosophy for the reception of conservative liberalism and Ordo-liberalism and of the problematic relationship between truth and relevance as it arises in economic and financial crisis.

“Pandemic” in a Stateless Society

This chapter debunks the myth that only the state is capable of handling a pandemic. Instead, without the state, private individuals and entities, when given the full freedom, can better ameliorate the risk and harm of a virus outbreak and at the same time maximize the well-being of the entire society. In particular, this chapter discusses what would have happened in a world without a state and how would the economic laws in the Austrian tradition drive individuals to act in ways that maximize the net benefits not only to themselves but ultimately to every member of the society.

Savings, Private Property and Sound Money

The overarching goal of this paper is to provide an answer to the following question from the perspective of economists working within the Mengerian or Austrian tradition: What are the essential pre-requisites and pre-conditions for a process of economic growth and development to take place? In course of our discussion, we focus on three important pre-requisites. First, we look at the implications of the presence of time preference, especially for the importance that savings have for adopting longer and more productive production processes and boosting productivity. Second, we analyze the problem of economic calculation and isolate the important institutional pre-conditions that are necessary for the allocation of higher order goods: private property in higher order goods and the use of money. These institutional pre-conditions, as we discuss, are thus also essential for the process of economic growth. And finally, we discuss the importance of a sound monetary order for generating sustainable economic growth.

Entrepreneurial discovery in property market processes

Purpose This purpose of this paper is to introduce property researchers to the principles of Austrian economics and to consider their methodological relevance and potential for understanding the dynamics of property market processes. Design/methodology/approach This paper sets out the basic principles of the Austrian economics thesis, including an outline of the entrepreneurial discovery approach to market processes, a core precept of the Austrian thesis. It then relates the core assumptions of the Austrian school to the workings of the property market. Findings It is argued that the driving force of property market process is provided by the entrepreneurial and profit-seeking speculative activities of human agents as they are confronted with incomplete information in an uncertain property market context. Thus, Austrian economics offers a sound and practical alternative theoretical approach to the study of property market, which places the market within its socio-economic context. Originality/value In-depth examination of the provisions, assumptions, philosophical orientation and limitations of the Austrian tradition of economic thought toward a better understanding of the workings of the property market.