Wednesday, December 12, 2007

A couple of thoughts on topics related to Austrian economic theory

Via Cafe Hayek, EconTalk hosts George Mason University's Pete Boettke in a discussion about Austrian economic theory. The snippets I have listened to seem very interesting and it is something that I will certainly download for my iPod.

This is good timing because the book I am currently reading, After War: The Political Economy of Exporting Democracy, a book that analyzes the complexities of nation building from the perspective of economics, was written by Chris Coyne, an Austrian School economist and is, among other things, chock full of these ideas. One critical idea is the role incentives play in determining whether or not informal institutions can complement the establishment of formal institutions such as central government.

For a discussion of incentives, we can look at the Page 99 Test that was done, which discusses the incentive problems amongst different agencies within the U.S. Government (coincidentally, it happens to cover this topic). The paragraph discussing David Phillips' observations, as brief as it is, is particularly revealing of the sort of pitfalls of central planning that get so widely overlooked. However, the fact that central planners can and do disagree is not an original idea (Hayek discusses this in The Road to Serfdom).

I am about 75 pages into the book (out of 180), and because the material is rather dense with heavy analytical content, it is something that will take me some time to finish. I am still working through some of the theoretical implications as they are applied to the two nation building "successes" we have had (West Germany and Japan). Iraq and Afghanistan are discussed later in the book.

In a political environment of supposed pre-surge, post-surge mentalities, the need for people (on both the Left and Right) to attempt to validate their views using the worst source available (public opinion) and the overall pisspoor practice of pointing to short-term situations as some reliable indicator of the actual long-term outcome (which could take years to figure out), it is refreshing to see an economist take on this project and lay out the framework for why these projects are far from a cakewalk.

The downside here, thus far, is that the book is rather dense and the indepth discussions of economic theory, game theory (i.e. the Prisoner's Dilemma), neighborhood effects, etc. could turn a lot of readers off who do not have an economics background. I do hope I am wrong about that.

The Cato Institute Book Forum can be found here (another addition to my iPod library)

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