Saturday, April 29, 2017

Friedrich Hayek's price theory

Freidrich Hayek (1899-1992) is an influential economist best known for his theory of prices and support for libertarianism. Hayek has also made contributions to Austrian school of economics. Economist, Bradford Delong says,
The basic problem is that there are three Hayeks: 
the (absolutely brilliant) price-system-as-information-aggregator Hayek.
the (absolutely bonkers) business-cycle 'liquidationist' Hayek.
the (absolutely wrong ) social-democracy-is-evil Hayek.
The first was a genius. The second was a moron--his could never make his arguments cohere either conceptually or empirically, but he kept doubling down on them and wound up in infinite reputational bankruptcy. The third was wrong--I would say blinded ex ante by ideology, others would say proved wrong ex post by events. The problem is that the modern-day Hayekians are by-and-large uninterested in the good Hayek (1), and interested only in the bad Hayeks (2) and (3)...
This post is a collection of quotes from Hayek regarding his main contributions to economics.

Price Theory

"The misconception that costs determined prices prevented economists for a long time from recognizing that it was prices which operated as the indispensable signals telling producers what costs it was worth expending on the production of the various commodities and services, and not the other way around.  It was the costs which they had expended which determined the prices of things produced... It was this crucial insight which finally broke through and established itself about a hundred years ago through the so-called marginal revolution in economics." (Coping with Ignorance, 1978)

"I don't know what monetarism is... If it means the particular version of Milton Friedman, I think it has because he imagines that he can achieve - ascertain - a clear quantity relationship between a measurable quantity of money and the price level. I don't think that is possible." (Interview with F. A. Hayek, 1983)

Critique of socialism

"Questions about the influence of socialism are increasingly more difficult to answer as the word socialism has so many meanings." (quoted in Friedrich Hayek: A Biography by Ebenstein)

"The more the state 'plans' the more difficult planning becomes for the individual." (The Road to Serfdom, 1944)

"There mere idea that the planning authority could ever possess a complete inventory of the amounts and qualities of all the different materials and instruments of production of which the manager of a particular plant will know or be able to find out makes the whole proposal a somewhat comic fiction. Once this is recognised it becomes obvious that what prices ought to be can never be determined without relying on competitive markets." (Two Pages of Fiction, 1982)

"The reasons why the adoption of a system of central planning necessarily produces a totalitarian system are fairly simple. Whoever controls the means must decide which ends they are to serve." (Planning, Science and Freedom, 1941)

Critique of democracy

"The mechanism by which the interaction of democratic decisions and their implementation by the experts often produces results which nobody has desired is a subject which would deserve much more careful attention than it usually receives." (The Political Ideal of the Rule of Law, 1955)

"A limited democracy might indeed be the best protector of individual liberty and be better than any other form of limited government, but an unlimited democracy is probably worse than any other form of unlimited government, because its government loses the power even to do what it thinks right if any group on which its majority depends thinks otherwise." (Letter to the Times, 1978)

Microeconomics and macroeconomics

"What has done much damage to microeconomics is striving for a pseudo-exactness by imitating methods of the physical sciences which have to deal with what are fundamentally much more simple phenomena." (Coping with Ignorance, 1978)

"I believe it is only microeconomics which enables us to understand the crucial functions of the market process: that it enables us to make effective use of information about thousands of facts of which nobody can have full knowledge." (Coping with Ignorance, 1978)

"It seems to me more and more that the immense efforts which during the great popularity of macroeconomics over the last thirty or forty years have been devoted to it, were largely misspent, and that if we want to be useful in the future we shall have to be content to improve and spread the admittedly limited insights which microeconomics conveys." (Coping with Ignorance, 1978)

Philosophy of economics

"I must confess that if I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it... The Nobel Prize confers on an individual an authority which in economics no man ought to possess." (Nobel Banquet Speech, 1974)

This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence." " (Nobel Banquet Speech, 1974)

"You cannot successfully use your technical knowledge unless you are a fairly educated person, and, in particular, have some knowledge of the whole field of the social sciences as well as some knowledge of history and philosophy." (On being an economist, 1991)

Thursday, April 27, 2017

Thorstein Veblen and the consumer lifestyle

Thorstein Veblen (1857-1929) is a famous economist best known for his analysis of leisure and the consumer lifestyle. Economist Robert Heilbroner says,
No wonder it excited attention, for never was a book of sober analysis written with such pungency. One picked it up at random to chuckle over its wicked insights, its bared phrases, and its corrosive view of society in which elements of ridiculousness, cruelty, and barbarousness nestled in close juxtaposition with things taken for granted and worn smooth with custom and careless handling. The effect was electric, grotesque, shocking and amusing and the choice of words was nothing less than exquisite. (The Worldly Philosophers,1953)
This post is a collection of quotes from Veblen analyzing society.

Analysis of leisure

"In itself and in its consequences the life of leisure is beautiful and ennobling in all civilised men's eyes." (The Theory of the Leisure Class, 1899)

"In the modern industrial communities... the apparatus of living has grown so elaborate and cumbrous..." (The Theory of the Leisure Class, 1899)

"As increased industrial efficiency makes it possible to procure the means of livelihood with less labor, the energies of the industrious members of the community are bent to the compassing of a higher result in conspicuous expenditure, rather than slackened to a more comfortable pace." (The Theory of the Leisure Class, 1899)

Analysis of consumption

"Conspicuous consumption of valuable goods is a means of reputability to the gentleman of leisure." (The Theory of the Leisure Class, 1899)

"The superior gratification derived from the use and contemplation of costly and supposedly beautiful products is, commonly, in great measure a gratification of our sense of costliness masquerading under the name of beauty." (The Theory of the Leisure Class, 1899)

"In order to stand well in the eyes of the community, it is necessary to come up to a certain, somewhat indefinite, conventional standard of wealth." (The Theory of the Leisure Class, 1899)

Monday, April 24, 2017

Isaac Newton and the philosophy of science

Isaac Newton (1642-1726) is an influential physicist best known for discovering the laws of motion and shares credit with Gottfried Wilhelm Leibniz for developing calculus. Mathematician Gerald James Whitrow said,
Due to the genius and labours of Newton almost all the problems presented by the motions of the planets had been mastered. Newton had shown for all time that these motions could be completely accounted for if it were assumed that the same laws of nature, and in particular gravity, operated in the celestial realm as well as in the terrestrial. (The Structure of the Universe, 1949)
Regarding Newton's philosophy, historian Alistair Cameron Crombie said,
[Newton] achieved the clearest appreciation of the relation between the empirical elements in a scientific system and the hypothetical elements derived from a philosophy of nature. (Quoted in Before Galileo by John Freely)
The rest of this post is three quotes from Newton describing his philosophy of science.

Philosophy of science

"The best and safest method of philosophizing seems to be, first to enquire diligently into the properties of things, and to establish these properties by experiment, and then to proceed more slowly to hypothesis for the explanation of them. For hypotheses should be employed only in explaining the properties of things, but not assumed in determining them, unless so far as they may furnish experiments." (Letter to Ignatius Pardies, 1672)

"I keep the subject constantly before me, and wait 'till the first dawnings open slowly, by little and little, into a full and clear light." (Quoted in Biographia Britannica)

"I do not know what I may appear to the world, but to myself I seem to have been only like a boy playing on the sea-shore, and diverting myself in now and then finding a smoother pebble or a prettier shell than ordinary, whilst the great ocean of truth lay all undiscovered before me." (Quoted in Memoirs of the Life, Writings, and Discoveries of Sir Isaac Newton by David Brewster)

Sunday, April 23, 2017

Albert Einstein and the scientific method

Albert Einstein is a famous physicist best known for developing relativity theory and his contributions to quantum mechanics. Einstein is also known for his contributions to the philosophy of science. Physicist Eugen Wigner says,
For a man like Edward Teller, developing the details of a physics problem was passionately important. For Einstein, it was not. In all spheres of life, Einstein's greatest pleasure was in finding, and later expressing, basic principles. (The Recollections of Eugene P. Wigner)
This post is a collections of quotes from Einstein describing his philosophy of science.

What is the scientific method?

"Many people think that the progress of the human race is based on experiences of an empirical, critical nature, but I say that true knowledge is to be had only through a philosophy of deduction. For it is intuition that improves the world, not just following a trodden path of thought. Intuition makes us look at unrelated facts and then think about them until they can all be brought under one law. To look for related facts means holding onto what one has instead of searching for new facts. Intuition is the father of new knowledge, while empiricism is nothing but an accumulation of old knowledge." (Quoted in Einstein and the Poet by William Hermanns)

"There is no logical path to these laws; only intuition, resting on sympathetic understanding of experience, can reach them."(On the Method of Theoretical Physics, 1933)

Support for epistemology

"When I think about the ablest students whom I have encountered in my teaching - that is, those who distinguish themselves by their independence of judgment and not just their quick-wittedness - I can affirm that they had a vigorous interest in epistemology." (Obituary for physicist and philosopher Ernst Mach, 1916)

Science is infinite

"When I examine myself and my methods of thought I come to the conclusion that the gift of fantasy has meant more to me than my talent for absorbing positive knowledge." (Quoted in János : The Story of a Doctor by János Plesch)

"Nature shows us only the tail of the lion. But there is no doubt in my mind that the lion belongs with it even if he cannot reveal himself to the eye all at once because of his huge dimension." (Letter to Heinrich Zangger, 1914)


"Only a life lived for others is a life worthwhile." (Quoted in the New York Times)

"Although I am a typical loner in daily life, my consciousness of belonging to the invisible community of those who strive for truth, beauty, and justice has preserved me from feeling isolated." (My Credo, 1932)

"Besides agreeing with the aims of vegetarianism for aesthetic and moral reasons, it is my view that a vegetarian manner of living by its purely physical effect on the human temperament would most beneficially influence the lot of mankind." (From a letter to Hermann Huth, 1930)

Max Weber's analysis of social action

Max Weber (1864-1920) is an influential sociologist known for the analysis of social action through interpreting the meaning individuals attach to their actions. This process is known as methodological positivism. Along with Emile Durkheim and Karl Marx, Weber is widely regarded as one of the three founders of modern sociology. Political scientist Sung Ho Kim said,
Weber's wide-ranging contributions gave critical impetus to the birth of new academic disciplines such as sociology and public administration as well as to the significant reorientation in law, economics, political science, and religious studies. (Max Weber, 2012)
The rest of this post is three quotes from Weber describing his philosophy of society.

Analysis of society

"This striving becomes understood completely as an end in itself- to such an extent that it appears as fully outside the normal course of affairs and simply irrational, at least when viewed from the perspective of the 'happiness' or 'utility' of the single individual. Here, people are oriented to acquisition as the purpose of life; acquisition is no longer viewed as a means to the end of satisfying the substantive needs of life." (The Protestant Ethic and the Spirit of Capitalism, 1905)

"The fate of our times is characterized by rationalization and intellectualization and, above all, by the disenchantment of the world. Precisely the ultimate and most sublime values have retreated from public life either into the transcendental realm of mystic life or into the brotherliness of direct and personal human relations." (Science as a Vocation, 1917)

"Sociology is the science whose object is to interpret the meaning of social action and theryeby give a causal explanation of the way in which the action proceeds and the effects which it produces. By 'action' in this definition is meant the human behaviour when and to the extent that the agent or agents see it as subjectively meaningful" (The Nature of Social Action, 1922)

Georg Wilhelm Friedrich Hegel and the philosophy of history

Georg Wilhelm Friedrich Hegel (1770-1831) is an influential philosopher best know for his analysis of history, ideas and god. Librarian James Billington says,
[To Hegel] everything became relative to historical context because his own capacity for seeing the whole picture was assumed to be absolute... His method applied reason to precisely those phenomena that most interested the romantic mind: art, philosophy, and religion. (Fire in the Minds of Men, 1980)
This post is a collation of quotes from Hegel describing his philosophy of history.

Analysis of history

"History, is a conscious, self-meditating process - Spirit emptied out into Time." (The Phenomenology of Spirit, 1807)

"Reading the morning newspaper is the realist's morning prayer. One orients one's attitude toward the world either by God or by what the world is. The former gives as much security as the latter, in that one knows how one stands." (Quoted in Miscellaneous writings of G.W.F. Hegel by Jon Bartley Stewart)

Analysis of concepts

"The enquiry into the essential destiny of Reason as far as it is considered in reference to the World is identical with the question, what is the ultimate design of the World?" (Lectures on the Philosophy of History, 1832)

"Opinion considers the opposition of what is true and false quite rigid, and, confronted with a philosophical system, it expects agreement or contradiction." (The Phenomenology of Spirit, 1807)

"Any idea is a generalization, and generalization is a property of thinking. To generalize something means to think it." (Elements of the Philosophy of Right, 1820)

Econ Analysis Tools: blog posts

This post is an organized list of blog posts for this blog. The sociology and philosophy sections are organized by date of birth of the person. This list was last updated April 24rd, 2017.

My personal econ analysis

Testing economic statements
Predictive power and macroeconomics
Macroeconomic diagrams
Adam Smith's ontology
What can economists learn from hedge fund managers?



Philosophy of science quotes: famous philosophers and scientists

Aristotle (384 - 322 BC)
Roger Bacon (1219-1292)
Francis Bacon (1561-1626)
Rene Descartes (1596-1650)
Isaac Newton (1642-1726)
David Hume (1711-1776)
Immanuel Kant (1724-1804)
Georg Friedrich Hegel (1770-1831)
Søren Kierkegaard (1813-1855)
Friedrich Nietzsche (1844-1900)
Albert Einstein (1879-1955)
Karl Popper (1902-1994)


A collection of realism art
A collection of abstract art