Chapter ǵ: Henry George and Austrian Economics ȄȂprocess, and entrepreneurship. While not totally scornful of elaborate
analysis of the properties of imaginary equilibrium states and of compar-
ative-static analysis, they recognize how incomplete a contribution such
analyses can make to the understanding of how economic systems func-
tion. Ļey do not suppose, for example, that cost curves and demand
curves are somehow “given” to business decisionmakers. On the contrary,
one of the services of the competitive process is to press for discovery of
ways to get the costs curves down—if one adopts such terminology at all.
Austrians tend to accept the concept of X-efficiencyȁand to appreciate the
role of competition in promoting it. Far from being an ideal state of affairs
with which the real world is to be compared—unfavorably—competition
is seen as a process. Entrepreneurs play key roles in that process; they are
men and women alert to opportunities for advantageously undertaking
new activities or adopting new methods.
(v)As already implied, Austrians have certain methodological pre-
dilections. Ļey are unhappy with the tacit view of economic activity
as the resultant of interplay among objective conditions and impersonal
forces. Ļey are unhappy with theorizing in terms of aggregates and
averages (realGNP, the price level, and the like). Ļey take pains to
trace their analyses back to the perceptions, decisions, and actions of
individual persons: methodological individualism is a key aspect of their
approach. Austrians recognize introspection as one legitimate source of
the facts underpinning economic theory. Ļey emphasize subjectivism:
not only do personal tastes help determine the course of economic activ-
ity, but even the objective facts of resources and technology operate
only as they are filtered through the perceptions and evaluations of indi-
viduals. Insofar as Austrians recognize macroeconomics as a legitimate
topic at all, they are concerned to provide it with microeconomic under-
pinnings.
(vi)Although Austrians like to think of their economics as value-free
and although some of them, at least, emphasize that it is not logically
linked with any particular policy position, Austrian insights into positive
economics, coupled with plausible value judgments of a humanitarian
and individualistic nature, undeniably do tend toward a particular pol-
icy position—non-interventionistic, laissez-faire, libertarian. More about
this later.
ȁSee, in particular, LeibensteinȀȈȆȅ. (Leibenstein himself, however, is not usually
considered an Austrian.)