In Kenneth Boulding's Economic Analysis (New York, NY: Harper, 1941) in his chapter The Task and Method of Economic Analysis he has a section entitled "The Task of Interpretation" where he argues: We have now indicated the broad field of fact within which economic analysis functions. We have yet to define the specific task of economic analysis itself. The purpose of any analytical treatment of material is to provide a body of principles according to which facts can be selected and interpreted. The complaint is frequently heard that people want "facts", not "theories". The complaint may be justified in protest against theories which have no basis in fact, but usually it arises from a misunderstanding of the true relationships of facts and theories. Theories without facts may be
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In Kenneth Boulding's Economic Analysis (New York, NY: Harper, 1941) in his chapter The Task and Method of Economic Analysis he has a section entitled "The Task of Interpretation" where he argues:
We have now indicated the broad field of fact within which economic analysis functions. We have yet to define the specific task of economic analysis itself. The purpose of any analytical treatment of material is to provide a body of principles according to which facts can be selected and interpreted. The complaint is frequently heard that people want "facts", not "theories". The complaint may be justified in protest against theories which have no basis in fact, but usually it arises from a misunderstanding of the true relationships of facts and theories. Theories without facts may be barren, but facts without theories are meaningless. It is only "theory"- i.e., a body of principles - which enables us to approach the bewildering complexity and chaos of fact, select the facts significant for our purposes, and interpret the significance.
Indeed, it is hardly too much to claim that without a theory to interpret it there is no such thing as a "fact" at all. It is a "fact", for instance, that Oliver Cromwell had a wart on his nose. But what constitutes this supposed "fact"? To the chemist it is a certain conglomeration of atoms and molecules. To the physicist it is a dizzy mass of unpredictably excitable electrons. To the biologist it is a certain impropriety in the behavior of cells. To the psychologist it may be the key to the interpretation of Cromwell's character, and a fact of overwhelming importance. The historian may consider it an insignificant detail or an important causative factor, according to whether he follows economic or psychological interpretations of history. To the economist the wart may be of negligible importance unless Cromwell were prepared to pay a good round sum for its removal. What, then, is the "fact" about the wart? It may be any or all of the above, depending on the particular scheme of interpretation into which it is placed. (p. 5)
I had the great privilege of studying with Boulding along with my good friend Dave Prychitko. Because of the fact that we were among his last students, we were asked separately and jointly to write about him for a few years -- this is our main paper about his relationship with the Austrian school of economics -- "Mr. Boulding and the Austrians."
I sometimes get accused on defining Austrian economics so broadly that everyone and anyone I happen to find intellectually interesting gets captured in my intellectual web. This criticism never bothered me because what I care about is not preserving a "school of thought" but doing good economics, political economy and social philosophy. I'd be foolish to turn my back on thinkers I find interesting, illuminating and insightful for addressing the questions I am asking. But I think there is another greater problem that is going on with those that criticize me --- they actually don't understand the history of 20th century economic thought and the varied lines of influence that thinkers such as Menger, Bohm-Bawerk, and Wieser had, or the influences that Schumpeter, Mises, Hayek, Robbins, Machlup, Morgenstern, Haberler had in economics during the 1900-1950s period. The contributions of the Austrian economists were simply part of the common-knowledge of every trained economist as can be seen by an examination of syllabi and test questions, and even JEL classification codes -- the contributions of the Austrian school in the early part of the 20th century according to the classification system are part of neoclassical microeconomics, but post 1950 they are classified as part of heterodox economics. Someone still needs to write this paper explaining that shift in a persuasive manner. But as it is, both friend and foe of the Austrian school would have difficulty processing Samuelson's listing of the all the Nobel Prizes that should have gone to Austrian economists, or Samuelson's letter to Henry Hazlitt thanking him for turning him on to economics by reading his article in Viner's class in the early 1930s.
In a joint paper with Rosolino Candela dealing with the development of modern price theory we make this point about common-knowledge in economic education.
Ultimately, my approach isn't a "sky is blue" capturing of all good economics under the label of Austrian economics, in fact, the argument probably runs the other way --- Good economics -- what I often call MAINLINE economics, includes the ideas, concepts, attitudes that are reflected in the contributions of the Austrian school of economics, but are not limited to those thinkers trained at the University of Vienna in the 1870-1930 period. The post-1950 Austrian school, I would contend was part of the rediscovery and reconstruction of MAINLINE economics alongside of developments such as property rights economics, law-and-economics, public choice economics, new institutional economics, and the varieties of market process economics. Lets take an extreme example of unexpected common ground -- read George Stigler's "Economics - The Imperial Science?", Scandinavian Journal of Economics (1984) -- do you see an indictment of Mises and his systems, or a modification and endorsement of Mises? How you answer that question, I contend will determine how you think about the relationship of the Austrian school to the rest of economic science.
Back to Boulding -- and keep in mind that this is the 2nd Clark Medalist (after Samuelson) -- and he was known for his incorporation of ideas, concepts and tools from the natural sciences into social scientific analysis, yet look at his argument in the passages above, or read his review essay on Samuelson's Foundations in the JPE. Prychitko and I weren't the only ones to note the connection to the Austrians --- our title is actually cribbed from a much more famous article that made Boulding's career by Frank Knight, and our title actually reflects many long conversations with Boulding precisely on this topic, who wrote several articles in his career on knowledge processing, subjectivism, and dynamic market adjustment and the evolution of systems.
So my advice to young economist -- let your curiosity guide you, allow yourself to be intellectually seduced by the beauty of economic reasoning, look out the window, and work on topics where history seems to defy what logic dictates. Don't worry about fidelity to a "school of thought", but understand and respect what the "grand tradition" of the Austrian school of economics and its methodological, analytical and practical implications for what it means to do "good" economics, political economy and social philosophy. I am wiling to bet that you will find that in order to do "good" work you will turn to the writings of Menger, Bohm-Bawerk, Mises, Schumpter, Hayek, and Kirzner and build them into YOUR system of thought as you try to make your way as a social thinker and teacher.