Mark Blaug (1927-2011), fellow traveller of Austrian economics

http://www.coordinationproblem.org/2011/11/mark-blaug-1927-2011-fellow-traveller-of-austrian-economics.html

It is not my intention to specialize in obituaries in this blog, but I would like to say a few words about Mark Blaug who just passed away and was a very important historian of economic thought (a dying subject in itself, but nonetheless vital to the understanding of the discipline of economics). Professor Blaug was a true scholar and gentleman (see Tyler Cowen’s post). His book, Economic Theory in Retrospect (ETR) is one of the best books on the history of economic doctrines out there. If one wants to understand the works of Alfred Marshall and Léon Walras, this is the place to go to.
Like many great minds, Mark Blaug never stopped learning and teaching. ETR came out in at least five editions over the years, and each new edition was extensively revised. He was skeptical of Austrian ideas at first, but then became more familiar with the works of Friedrich Hayek, Israel Kirzner (whom he met at several conferences, if my memory is correct), and other Austrian economists. While it has a whole chapter on the pre-WWII Austrian theory of capital and interest, it is true that ETR doesn’t make much room for more modern Austrian theories. Nevertheless, I believe Mark Blaug was an honest fellow traveller of Austrian economics, as the following passage in the 1996 edition of ETR reflects:

“I contend that perfect competition is a grossly misleading concept whose only value is to generate an endless series of examination questions. Economics would be a better subject if we discarded it once and for all. Having expunged perfect competition, we ought to follow it by also discarding Walrasian existence proofs and the Invisible Hand Theorem of welfare economics. First of all, everyone admits that these beautiful theorems are mental exercises without the slightest possibility of ever being practically relevant: first-best optima are never actually observed and in a second-best world, it is not in general desirable to fulfill any of the first-best optimum conditions; in other words, piecemeal welfare policies may be based on good or bad qualitative judgments but they are not based on rigorous analytical theorems. But once first-best, end-state competition is discarded as irrelevant, as precisely and rigorously wrong, and replaced by process-competition as imprecisely and loosely right, what are we left with? We are left with the content of every chapter in every textbook on imperfect or monopolistic competition, on oligopoly, duopoly and monopoly, in short, on industrial organization as a sub-discipline in economics. In those chapters, firms jostle for advantage by price and nonprice competition, undercutting and out-bidding rivals in the market place by advertising outlays and promotional expenses, launching new differentiated products, new technical processes, new methods of marketing and new organizational forms, and even new reward structures for their employees, all for the sake of head-start profits that they know will soon be eroded. In these chapters, there is never any doubt that competition is an active process, of discovery, of knowledge formation, of ‘creative destruction’. I call this ‘the Austrian view of competition’ because it is most firmly enshrined in the writings of such Austrian economists as Hayek, Schumpeter and, more recently, Kirzner.” (pp. 594-595)

Professor Blaug, thank you for your work. Rest in peace.