Arnold Kling  

My First Austrian Moment?

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In January of 2001, I wrote,


You no longer need to plan and manage large capital expenditures, so you do not need a large bureaucracy. What I expect the Internet to generate is an increase in the number of small businesses, and a reduction in the proportion of the population employed in large enterprises.

I have been looking through some of my early essays in order to try to trace my gradual evolution toward Austrian economics. I did not really learn any actual Austrian economics (other than the theory of capital as roundabout production) until a few years ago, and I am still mostly illiterate in the great works on the subject.

What I had going for me was an intuitive sense that trial-and-error learning and bureaucratic planning are two ways to handle innovation in a complex world. The large organizational planning process, which I termed the Dilbert sector, tries to filter out error in advance through analysis and group politics. The trial-and-error process is decentralized.

I also had a sense that people have different models of reality. I called this Halberstam's Law, because it is one of the lessons that I drew from his book The Best and the Brightest.

Somehow, instead of internalizing the strong assumptions about human cognition that are implicit in the mainstream economics that I was taught at MIT, I have consistently been intrigued by human capacity for error and misunderstanding. I believe that is part of the foundation for Hayek's thought as well, which may explain how I ended up moving in the Austrian direction.


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CATEGORIES: Austrian Economics



COMMENTS (7 to date)
Lee Waaks writes:

Your comments suggest you would enjoy reading Jeffrey Freidman's & Wladimir Kraus' new book, _Engineering the Crisis_. They argue that radical ignorance on the part of regulators and market participants paved the way for the recession. Regulation is one-size-fits-all, but the market process is trial and error at the level of the firm and is not likely to generate systemic errors. I would love to see a review on Econlog.

J Storrs Hall writes:

I'd be very surprised if Hayek hadn't had interactions with Herb Simon, of bounded rationality fame. I have proceedings of early cybernetics and AI conferences where he is listed as an attendee, particularly the self-organizing systems ones.

Turner writes:

'What I had going for me was an intuitive sense that trial-and-error learning and bureaucratic planning are two ways to handle innovation in a complex world.'

I wonder if you've read Tom Slee's review of Adapt, which is a very good critique of this false dichotomy.

Rick Hull writes:

I am particularly reminded of William Easterly's distinction between planners and searchers: http://www.aei.org/article/24294

Arnold Kling writes:

Lee,
I have had a number of posts on Friedman and his book. See here, for example.

Troy Camplin writes:

I came to Austrian economics through chaos theory, complexity, cybernetics, self-organization, network theory, far-from-equilibrium theory, evolution, and evolutionary psychology. It's the economics that makes the most sense, by far, in that light.

Troy,

If you are interested in complex mathematics as applied to economics then you might enjoy David Orell's Economyths.

I'm not jumping to any conclusions, but I find many Austrians have an anti-government bias. If you do you won't like that book, but if you are genuinely interested in complex phenomena, no matter the policy conclusions, then you will enjoy it.

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