[Originally published 28 August 2012]
Does Davidson know what a neoclassical policy is? Does Boettke? Does anyone? I don’t think so, because neoclassical economics, as such, has no policy agenda. But whatever a neoclassical policy might be, Davidson assures us that Hayek is totally against it.
Now, although the term “neoclassical policy” is a pure nonsense term, I can guess how Davidson, after talking to a bunch of Austrians — I hope not Boetkke or Bruce Caldwell, who is also quoted in Davidson’s piece — picked up on the propensity of modern self-styled Austrians — generally followers of the fanatical Murray Rothbard, as distinguished from the authentic Austrians of Hayek’s generation — to deploy “neoclassical” as a term of abuse, providing sufficient justification for these modern Austrians to dismiss any economic doctrine or policy they don’t like by strategically applying the epithet “neoclassical” to it.
So let me assert flatly that F. A. Hayek was a neoclassical economist through and through. He was also an authentic Austrian economist, schooled in both branches of Austrian theory by way of his association with his primary teacher at the University of Vienna, Friedrich von Weiser, one of the two principal successors of Carl Menger, the founder of the Austrian School, and through his subsequent collaboration with Ludwig von Mises, a leading student of Eugen von Bohm-Bawerk, the other principal successor of Menger.
As well as placing Hayek in the economic mainstream (which most mainstream economists agree with), I love the fact that this post points out that neo-classical economics has no policy agenda. Pure neo-classical economics provides an objective framework that helps us to describe issues – given this framework we could then apply a varying set of value judgements, which can then in turn justify almost ANY policy agenda. The advantage of using the neo-classical framework is that we are forced to make our value judgements transparent – so that the trade-offs, and our assumed values, are plain to see!
The confusion about what neo-classical economics is pervades all discussion of economics, so it is nice to see this issue pointed out here
Update: Krugman has a nice post on the issue here.