Phil Mirowski

[Michael Perelman <michael@xxxxxxxxxxxxxxxxx>]

Some of you may know that I'm a great admirer of the work of Phil
Mirowsky, notwithstanding his incorrect critique of the labor.
Yesterday I posted something from this article regarding Lange.  Here
are some more notes about the article.  I think it's a devastating
critique of microeconomics.  I didn't describe how Samuelson's attempt
to salvage the thing failed in my notes.

Mirowski, Philip and D. Wade Hands. 1998. "A Paradox of Budgets: The
Postwar Stabilization of American Neoclassical Demand Theory." in From
Interwar Pluralism to Postwar Neoclassicism, eds. Morgan Mary S. and
Malcolm Rutherford. Annual Supplement to Volume 30. History of Political
Economy (Durham: Duke University Press): pp. 260-92.
 263: Hotelling hoped to be able to use mathematical theory to be able
to solve the problems of the great Depression.  In 1932, he published an
article in the Journal of Political Economy regarding the Edgeworth
taxation paradox, which showed that the imposition of a tax on a
particular good could actually lower both its price and the price of a
related good.  It seemed to offer a serious challenge to the theory of
demand.
 267-8: "The pivotal figure in this wartime regime was Oskar Lange.
Joining the department in 1938, he quickly found himself the senior
advocate of the Walrasian approach to price theory and the sole local
partisan of econometrics.  It is not irrelevant to our story that by
1938 he was the prime defender of planning in the socialist calculation
debate, an early interpreter of Keynesianism, and a Marxist.  His
initial impact on the Chicago scene was to polarize conceptions of
formal economics in even starker terms than one might find elsewhere.
In the minds of many at Chicago, Walrasian mathematical theory became
conflated with socialism, crude numerical empiricism, and politically
na?ve welfare economics.  Knight assumed proprietary rights over
graduate price theory during the latter part of the war, but it was
Lange who taught John Hicks's Value and Capital. As Patinkin (1995, 372)
notes, "it was the socialist Oskar Lange who extolled the beauties of
the Paretian optimum achieved by a perfectly competitive market."
Patinkin, Donald. 1995. The Training of an Economist. Banca Nazionale
del Lavoro Quarterly Review, 48: pp. 359-95.
 276-7: The Cowles foundation attempted to get funding from the
Rockefeller foundation.  The institutionalists at the National Bureau of
Economic Research helped to prevent the funding, creating bad blood,
which later led to the measurement without theory controversy.
 270: Frank Knight feared that going too far with price theory was
dangerous.  Considerations of the income effect would open up the door
to Keynes's General Theory.
 270: Milton Friedman, following Frank Knight, took the position that
the demand curve was the central part of economics  there was no need to
go beyond the demand curve and deal with the complexities of utility and
trying to sort out income effects from substitution effects.
 280: They argue that the Cowles foundation moved in the direction of
Keynesian macroeconomic because two and three equation change in models
were much more amenable to structural estimation than full-blown
Walrasian systems.
 280: "The forging of the unholy alliance between Slutsky and Keynes at
Cowles was of course Knight's worst nightmare, and it was Friedman who
took it upon himself to carry the war back home to the commission.
Friedman felt that the entire Cowles program of structural estimation
was a vast waste of time.  Time and time again, he told Marschak and
Koopmans to their faces that their intricate statistical procedures
failed to solve any real scientific problems.  Friedman admitted later:
"I was a major critic of the kind of thing they were doing in Chicago.
I introduced the idea of testing their work against naive models, na?ve
hypotheses, and so on.  So I was very unsympathetic to Koopmans from the
beginning. Hammond, J. Daniel. 1993. "An Interview with Milton
Friedman." In Philosophy and Methodology of Economics. Vol. 1. ed. B. J.
Caldwell (Aldershot: Edward Elgar): p. 231.
 281: Samuelson rejected the econometric methods of Shultz and the
Cowles foundation as well as the a priori analysis of Frank Knight and
the Chicago school.  In 1938, he attempted to create his preferred
approach of revealed preference.


--
Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael@xxxxxxxxxxxxxxxxx