Critique of Austrian Economics
Part III: Appendix
QJAE Referee Comments
I submitted this paper to the QJAE in March of 2004. Seven months later I received the following referee comments. The envelope was postmarked 20 October 2004 though the letter inside had been back-dated to 16 April 2004.
“Critique of Austrian Economics From 1930 To 1990”
I can in no way recommend publication of this paper. Although purporting to be a critique of the Austrian tradition since 1930, and while citing a number of prominent Austrian economists, the paper reveals tremendous ignorance of the Austrian tradition the author is supposed to be criticizing. The notion that there was no Austrian tradition before Hayek published Prices and Production, and that the big split within the tradition occurs along Menger-Mises vs. Böhm-Bawerk/Hayek lines reveals that the author knows not of what he is speaking.
The author grossly errs in equating the Austrian tradition itself with capital theory, thus ignoring the core of Austrian economics: praxeological price theory. The author further spends an inordinate amount of time parsing details regarding which direction capital structure triangles lie and which way arrows on diagrams point. Although these may be important regarding pedagogy, they hardly define who gets the theory right and who gets it wrong.
Finally, while making relatively grandiose claims as to the success of his own axiomatic system as opposed to Mises’, the author merely asserts that his axioms are right and that Mises’ are wrong. A critique must be more than a tissue of assertions. It must reasonably demonstrate the problems of the object of the criticism. In order to provide such a critique, it is customary to know a reasonable amount of the object in question and to provide sound reasons for the critique. The author of this paper does neither. The writing is also way below the standard for acceptance in the Quarterly Journal of Austrian Economics. The paper is at times rambling, at others incoherent, at others unscholarly both in its form and content.
For all of these reasons, this paper does not merit publication in the QJAE (correspondence from Judith Thommesen, Managing Editor).
The QJAE does not publish papers about capital theory? How much things have changed since Fall 2001 when they devoted an entire issue to apotheosizing the author of a book titled The Macroeconomics of Capital Structure! Rather than subject this poor lady to more of my rambling and incoherent writing, I will defend my “gross error” by quoting from the dust jacket of her master’s 2001 book. “Roger W. Garrison claims that modern Austrian macroeconomics, which builds on the early writings of F. A. Hayek, can be comprehended as an effort to reinstate the capital-theory core that allows for a real coupling of short- and long-run perspectives.... This volume [Time and Money: The Macroeconomics of Capital Structure] puts forth a persuasive argument that the troubles that characterize modern capital-intensive economies, particularly the episodes of boom and bust, may best be analyzed with the aid of a capital-based macroeconomics.”37
Thommesen’s criticism of me for focusing on capital theory and ignoring praxeological price theory is related to her refusal to recognize the “big split” between Menger, Mises and myself, all of whom focused on praxeological38 price theory and Böhm-Bawerk, Hayek, Skousen and Garrison, all of whom focused on capital theory. Admittedly, Rothbard wrote on both topics, proving that they are not mutually exclusive, but he was prolific and wrote on many topics. Now I too have written on both topics: My 1999 Axiomatic Theory of Economics was about price theory while this paper reaches out to the capital theorists, who dominate modern Austrianism.
Section III is 700 words long, which does not seem inordinant.39 The fact that it concludes with my calling Hayek a Marxist should have provoked a stronger response than whining about the time I spent “parsing details” on boring pedantry. The direction of the capital structure, either looking forward into the future to see value in the consumption of the final products or backward into the past to see value in the costs of production, is the difference between being a Mengerian or a Marxist. That distinction does define who gets the theory right and who gets it wrong.
I wrote a 270-page book about my axiomatic system and proved many theorems based on those axioms. That is not a “tissue of assertions.” I am under no obligation to repeat all of that material here. I should be able to assume that any referee of this paper has already read my 1999 work.
It is obvious that, when the need to back-date some referee comments came up in October 2004, Thommesen panicked. Unwilling to involve anyone else, she wrote them herself. The reason they are so weak is that she is an administrator, not an economist. I need a more worthy opponent
37 Lest anyone doubt that Garrison is the master of the QJAE, consider Mark Thornton’s justification for their Fall 2001 issue. “While it is quite unusual to devote an entire issue of a journal to the appraisal of a single book [Garrison’s Time and Money], in this case it is warranted.... [T]he book is an important contribution to Austrian economics as well as the comparative study of macroeconomic schools of thought” (2001, pp 3-4). But Thornton, their Book Review Editor, has refused to review my 1999 Axiomatic Theory of Economics, so someone else may have to do the comparative study. Perhaps the school master himself?
38 “Praxeological” is not a dictionary word. Roughly, it means “axiomatic,” which is the word I use.
39 This appendix is 800 words, which is probably starting to seem very long indeed for Thommesen.