Lucas and the Austrians

Though few would go as far as David Laidler—who once argued that Robert Lucas, Thomas Sargent and company should properly be called ‘neo-Austrians’—many writers have seen some degree of parallelism between the Austrian trade cycle theory of Mises and Hayek, and the New Classical macroeconomics. Dr van Zijp offers a critical examination of this relationship. Taking the lead of Karl Popper, he proposes that we focus not on the respective ‘theories’ as such, in abstracto, but on the respective problems to which these theories were addressed. Following an introductory chapter in which this general approach is set out, the book contains five chapters on the Austrians, emphasizing the development of what van Zijp calls ‘the Hayek Problem’ and ‘the Hayek programme’ for its solution, then four chapters on the New Classicals, with a parallel emphasis on ‘the Lucas Problem’ and ‘the Lucas programme’. Two concluding chapters then set out a comparison between these problems and programmes. The gist of the author’s conclusion is that while there are important resemblances between their respective theories, nonetheless “the Austrian School and the New Classical Economics study different problems” (p. 236) and employ substantially different (if overlapping) methodologies, so that the degree of commonality between the two programmes should not be overstated. Dr van Zijp’s discussion is broad-ranging and stimulating, but unsatisfactory in several ways. In elaborating on the points of interest and the problems, I shall shadow the structure of the book as outlined above. But first a brief comment on the language of the study: professional methodologists may applaud, but most practising economists are likely to be irritated by, the profusion of ‘methodologese’ ∗Department of Economics, Wake Forest University, Winston-Salem, NC 27109, USA. This piece is a review essay on Rudy van Zijp, Austrian and New Classical Business Cycle Theories: A Comparative Study Through the Method of Rational Reconstruction, Aldershot: Edward Elgar, 1993. It was published in History of Economics Review, No. 20, Summer 1993, pp. 190–203.