What works? Creativity. Innovation. Discovery. The Austrian core. And where did discovery come from? It came from the releasing of the West from ancient constraints on the dignity and liberty of the bourgeoisie, producing an intellectual and engineering explosion of ideas.
I assume that sums up her latest book. The quote comes from a recent talk.
There has been much discussion of Austrian economics in the blogosphere recently, stimulated by an essay by David Warsh taking the view that Hayek should not be viewed as a major figure in macroeconomics. I would say that Warsh was being a troll, but he is not that sort of persona at all. I am not even sure that he knows what trolling is. I think he genuinely believes that modern mainstream macroeconomics has ignored Hayek, and if you want to debate that as a factual issue, I think I would rather argue on Warsh's side.
My problem with framing things as Keynes vs. Hayek or what have you is that it turns what should be an argument over an ideas into an ad hominem. Also, energy that might otherwise go into arguing the merits of idea X instead goes into arguing over whether idea X is what Keynes or Hayek really meant.
As it happens, I am not persuaded that McCloskey is telling us what Kirzner really meant. Instead, I think she is reading into Kirzner a more sophisticated model of entrepreneurship than most others would find there. But whether I am right or wrong about that is not so important. Just forget about what comes from Kirzner and what comes from McCloskey. The ideas are worth examining.
I was explaining to someone at dinner the other night that I came to Austrian economics in a very odd way. I did not study the sacred texts. I spent the prime of my career outside of the academy, experiencing the behavior of organizations. I saw first-hand the challenge that large organizations have in dealing with innovation. I saw the tenuous grasp that bosses have over their organizations. Above all, I saw how impossible it is for top management at firms to have the sort of information and control that is casually assumed in mainstream economic models. It is a relatively small leap from that insight to the insight that government officials also lack the information that they need to exercise the sort of control that is casually assumed in mainstream economics.
I came to Austrian economics because that is how business in the real world felt to me.