Quotation of the Day…

by Don Boudreaux on January 14, 2017

in Complexity & Emergence, Economics

… is from page 109 of Robert Higgs’s insightful 2011 article “The Dangers of Samuelson’s Economic Method” as this article is reprinted in Higgs’s 2015 volume, Taking a Stand; (Higgs’s quotation of Buchanan is from the latter’s 1979 article “General Implications of Subjectivism in Economics,” which is reprinted in Volume XII of Buchanan’s Collected Works) (link added; brackets original to Higgs):

taking_a_stand_180x270.jpgNothing has done more to render modern economic theory a sterile and irrelevant exercise in autoeroticism than its practitioners’ obsession with mathematical, general-equilibrium models.  Not only does this focus result in the futile spinning of mental wheels by mathematical pseudo-economists, but it has pernicious consequences for policy formulation because, as James M. Buchanan has observed, it gives rise to “the most sophisticated fallacy in economic theory, the notion that because certain relationships hold in equilibrium [in the model] the forced interferences designed to implement these relationships [in the real world] will, in fact, be desirable.”

DBx: Precisely.  Neither society in general, nor the economy in particular, is a machine to be engineered; instead, each is a process that emerges, along with each of their many and ever-changing specific features, as the result of human action but not of human design.  Economists whom I regard as the greatest – economists such as (to name only a few) Adam Smith, Ludwig von Mises, F.A. Hayek, Ludwig Lachmann, Ronald Coase, Armen Alchian, Jim Buchanan, Leland Yeager, Israel Kirzner, Harold Demsetz, Julian Simon, Richard Wagner, Deirdre McCloskey, and Bob Higgs – focus their attention on understanding the processes of human interactions and how these interactions generate undesigned and unintended orders.  These orders are never in a state of equilibrium, but they do feature extraordinarily complex interconnections and feedback loops that ‘knit’ together, into a society and an economy, all individuals whose actions contribute to the formation and maintenance of these orders.

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