Re: Participatory Planning

["Mark S. Knell" <mknell@xxxxxxxxxxxxx>]

On Mon, 28 Feb 1994, HERBERT GINTIS wrote:

> 	I think the early Hayek was Austrian in the Menger/von Mises
> sense, but the later Hayek, with his stress on information asymmetry
> and biological/evolutionary concepts, was quite different. Of course
> Hayek and Lange did not acknowledge that they were both neoclassical
> in that debate, but we now can see that they were, in the sense of
> ignoring informational asymmetries, never treating the problem of
> incentive compatibility, and treating contract enforcement as
> completely unproblematic ("just tell the managers to maximize
> profits...") And while Lange won the debate, Hayek was correct, as
> history (and modern theory) were to show!

Herb, thank you for the nice e-mail message. I would like to make two
short remarks and then address them later. First, I do not think that
Hayek departed from the Austrian tradition in any significant way. What
he did do is integrate in certain biological and evolutionary ideas, but
he continued to maintain his belief in the 'pure theory of choice'. In
fact I think that both ideas are embodied in his notion of intertemporal
equilbirium [as opposed to the mathematical version advocated by Arrow
and Debreu]. Second, I do not believe that Hayek's evolutionary approach
captures the essance of industrial innovation. It is the production
approach taken by recent contributor such as Arthur, Nelson, Dosi, and
Baumol that provide the basis for a much better explanation for why the
system collapsed. For example, entrepreneurs arbitrage in the 'Austrian'
approach and they innovate in the Schumpeterian approach. [Note: there are
at least three strands of thought that can be traced to Vienna!] So I
would not say that Hayek was correct.

Anybody else want to put there two cents worth in!

Mark Knell
University of Vermont