Academic journal article The American Journal of Economics and Sociology

On Henry George, the Austrians, and Neoclassical Choice Theory: A New Look at the Similarities between George and the Austrians

Academic journal article The American Journal of Economics and Sociology

On Henry George, the Austrians, and Neoclassical Choice Theory: A New Look at the Similarities between George and the Austrians

Article excerpt

I

Introduction

A century ago, Henry George was the most widely read and debated economist in the history of the world. And yet, a scant five decades later, he had become a "forgotten man" (see Geiger, 1941). Many writers have since puzzled over George's fall from frame to obscurity.(1) Perhaps, as Gaffney (1994) and Harrison (1994) have argued, the very development of neoclassical economics was a purposeful stratagem against George, designed to make us forget him and his ideas.(2) At the very least, it hastened his fall.

In any case, to most academicians, the florid and yet strident tone of George's writings has long camouflaged his originally and brilliance. In academic circles, such confrontational style(3) elicits misgivings and suspicions of quackery, rousing hurried rebuttals rather than careful analysis. So, while those who actually study George's ideas understand that he was both "a profound and original economist" (Yeager, 1984, 157), his critics "more often than not, display a lamentable absence of real acquaintance with his thought" (Andelson, 1979, 15).

A steady trickle of Georgist writers notwithstanding, George's reputation among mainstream economists has now fallen to the point where he is "no longer even considered . . . worthy of vituperation or rebuttal" (Roll, 1992, 386). Most of the recent history-of-thought textbooks do not even mention his name (see for example Negishi, 1989; Niehans, 1990; and Dome, 1994). Others suggest that he "contributed little, if anything, to economic analysis" (Backhouse, 1985, 147) and mention him only in passing (see Landreth and Colander, 1994, 114). Even Schumpeter (1954, 865), who certainly gave him more credit than the current crop of textbooks does, suggests that George lacked originality.

In retrospect, George's estrangement from the academic economists of his day seems contrived rather than an inevitable consequence of fundamental differences. Gaffney (1994) has demonstrated that many of the leading economists of George's time went out of their way to distort his arguments and to rewrite their own arguments in a manner that was incompatible with his reasoning. At the same time, George himself was not willing to give credit to his contemporaries, even when they expressed ideas quite compatible with his own. To wit, while much of his own work had a remarkably Austrian flavor (Yeager, 1984), George consistently railed against Austrian economics.(4) This made it all too easy to overplay the fact that George had "failed to understand" (Schumpeter, 1954, 865) the Austrians.

This paper then focuses on the foundations of George's economics. While Yeager (1954; 1984) has outlined the similarities between George and the Austrians, this paper looks specifically at George's ideas on value and choice. Following Yeager, the paper argues that George's notions of value and choice are founded on economic subjectivism that has, in all that matters, a very Austrian flavor. This subjectivism is fundamental to all of George's writings and forms the theoretical underpinnings of his economic reasoning. The paper further argues that these subjectivist ideas had a richness that was lost in the birth of neoclassical economics, albeit much of it has been recovered by such writers as Becker (1976) and more recently Gilboa and Schmeidler (1995; 1996; 1997), who have rewritten choice theory in order to get a handle on some of the intrinsic complexities of consumer choice.

The next section of this paper offers a brief discussion of George's stated rejections of "Austrian" economics. Following Gaffney (1994) it is suggested that these had more to do with the questions asked than any inherent rejection of the Austrian approach. The third section then focuses on the underlying value theories of George and the Austrians. Here it is argued that George and the Austrians shared a subjective approach to choice that differed dramatically from the Walrasian neoclassical approach. …

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