Subjectivism, Psychology, and the Modern Austrians: A Comment
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Joseph Schumpeter once maintained that the pure “theory of economic equilibrium,” except for some minor phraseological influence, had no dependence on what he called “professional psychology.” He insisted that equilibrium economics did not inquire into the facts that shaped choices; it had no brief to investigate the psychological bases of valuation, for example, it accepted scales of demand price as ultimate facts (1954, pp. 27–28, 796–798, 1057–1059). In Menger’s (1871/1976) Grundsätze, where the concept of general economic equilibrium is absent, we find that Menger asked how and why people with less than full relevant knowledge come to choose as they do. He answered by constructing a theory of the lexicographic ordering of wants, based on certain psychical observations about individuals as well as on observations of their physiological and social nature (Georgescu-Roegen, 1968, pp. 250–252; see also section 3 in the next chapter). In the context of Menger’s growing or “progressing” economy, the notion of an individual’s stable and consistent preference ordering is frequently violated — as is pointed out in further discussion of Alter (1982) in Endres (1984) (cf. the incorrect assertion by Lachmann, 1978, p. 58, that Menger allowed “little scope for changes of taste or fashion”).
KeywordsIdeal Type Personal Construct Knowledge Dynamic Demand Price Ultimate Fact
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