… is from page 190 of Deirdre N. McCloskey’s 2006 book, The Bourgeois Virtues ; this quotation is from a profound chapter entitled “Humility and Truth” (links added):
Among the contending schools of economic science there is one which does at least theoretically recommend humility, listening, really listening, scientifically speaking – not certainly the Marxism I started with, nor the Harvard Samuelsonian I was trained in, nor the Good Old Chicago School I then practiced, but the NYU-Auburn-George-Mason-University Austrian economics  that [the late Don] Lavoie  discovered young as a student of computer science and improved in his work. Austrian economists are the free-market followers of the literal, ethnic Austrians Menger  (1840-1921), Mises  (1881-1973), and Hayek  (1899-1992). They have for about a century been explaining to us other economists that the economic scientist cannot expect to outguess the businessperson.
Writing as someone who studied economics at both NYU and at Auburn, and who has served proudly on George Mason University’s Economic faculty now for a total of 18 years (and counting) – and, also, as someone who overlapped as a fellow student at NYU with Don Lavoie, and later was Don’s colleague at GMU Econ – I, of course, applaud this quotation from Deirdre with special warmth and enthusiasm.
So yes, if I must be labeled as being certain kind of economist, that label must be ‘Austrian.’ I wear it proudly. Yet I have a tad more affection in this respect for the Good Old Chicago School than does Deirdre. Much of what I learned from the writings of honest-to-goodness Chicago economists – as from the Austrians – is precisely that the economic scientist cannot expect to outguess the businessperson.
Such appropriate – because scientifically well-grounded – humility is emphatically not possessed by many of today’s economists outside of Fairfax. The second-guessing that the typical economist does today of both the businessperson and of the consumer spending his or her own money is an exhibition of hubris and pride so over-bearing and unjustified that it would shame Satan himself. “Look here!” demands the typical modern economist. “I have, in addition to an authentic PhD, my simultaneous-equations model of an economy along with marvelously intricate econometric studies featuring statistically significant results! All you have, you businessperson you, is your experience, your own money at stake, and intimate knowledge of details that Hayek says are both important and largely unobservable to people distant from where the actual economic action occurs. But why should we take Hayek seriously? He was an ideologue who used little math. Indeed, I can’t think of a single econometric study that he published. No scientist he!”
Yet the humility so central to Austrian economists appears, productively, also in the works of Milton Friedman, Aaron Director, Frank Knight, Ronald Coase, Harold Demsetz, Robert Fogel, Sam Peltzman, and even Gary Becker, George Stigler, and Donald McCloskey . Not always – at least not as consistently as it appears in the works of the likes of Mises, Hayek, Machlup, Lachmann, Kirzner, Garrison, Higgs, Rizzo, Lavoie, Boettke, and Selgin. But I do find in much ‘Chicago’ scholarship such humility.
Maybe I’m being too generous to the Chicagoans. Or maybe I’m allowing my almost-boundless admiration for the late Armen Alchian (Stanford, UCLA – never Chicago), whose work is closely aligned with that of Chicago economists, to color my impression of Chicago economics, broadly defined.* But when put alongside work done in the Samuelsonian tradition – and alongside scientific and policy claims issued by economists such as Paul Krugman and Joseph Stiglitz (who work in the Samuelsonian tradition in which the economy is modeled so simplistically that it appears to be a machine capable of being engineered) – Good Old School Chicagoans seem to me to be nearly as humble, as wise, and as insightful as do the Austrians.
* Susan Woodward has just written a beautiful and insightful remembrance of Alchian . (HT Pete Boettke)