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Quotation of the Day…

Posted By Don Boudreaux On December 21, 2012 @ 7:36 am In Hubris and humility,Monetary Policy,State of Macro | Comments Disabled

… is from pages 95-96 of the 1992 collection, edited by Michael Szenberg, entitled Eminent Economists: Their Life Philosophies [1] – a collection in which each of 22 eminent 20th-century economists reflects on his life’s work; specifically, this quotation is from the late Karl Brunner’s essay “My Quest for Economic Knowledge”:

The conflict between the two approaches covers a wide range including monetary and regulatory policy.  One approach [which Brunner calls "the Scottish hypothesis"] emphasizes the choice of institutional arrangements and general rules of procedures.  The other [which Brunner calls "the sociological model"], in contrast, addresses detailed and contingent actions specific to time and place.  The dispute is clearly visible in the field of monetary policy…..  It involves the hypothesis about man and the information he may command.  Human nature and the reliable information at hand crucially condition the working and consequences of different political institutions.  Advocacy of activist and discretionary policy is a rational consequence of the sociological model of man supplemented with full and reliable information about the structure of the relevant processes.  For many years I have argued that these conditions do not hold.  I had concluded that the sociological model, particularly in its form as the public interest, or goodwill, theory of government, is empirically untenable.  Moreover, the information requirement imposed by an activist policy can never be satisfied.  The social process continually generates and disseminates new information.  The resulting modification of perceived opportunities induces revisions of optimal behavior patterns, and thus variations in the economic structure over time.  The best we can achieve is the choice of institutional arrangements that minimize uncertainty and offer as many women and men as possible a chance to shape their own lives.

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[1] Eminent Economists: Their Life Philosophies: http://www.amazon.com/Eminent-Economists-Their-Life-Philosophies/dp/0521449871/ref=sr_1_5?s=books&ie=UTF8&qid=1356092180&sr=1-5

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