I’m now taking my second PhD-level class with Dr. Robert Wagner. This class is Theory of the Market Process II and it focuses on the so-called non-equilibrium theory found in radical subjectivism. Radical subjectivism, typified by Ludwig Lachmann and George Shackle, is regarded as a peculiar offshoot of the Austrian School. Here’s the syllabus for more info about the class.
For a while I have seen agent based modelling as a rigorous approach to make Austrian economics more computationally rigorous and perhaps more useful as a business tool, without compromising core values. I also think it’s a point of possible synthesis with the Neoclassical School and burgeoning behavioral literature.
I asked Wagner whether he thought ABM would be viable as a modelling technique for Austrian market process theory and he said it would be suitable if done properly.
Keep in mind that Wagner is a radical subjectivist. My line of thinking, perhaps incorrect but I don’t think so, is that if a radical subjectivist would ascent to ABM then a typical Austrian would agree all the more. In other words I am considered the radical subjectivist to be a limiting case, a hard case, and a more difficult person to convince compared to someone else such as Coyne or Boettke who I might consider a bit more moderate.
Come to think of it, I may have to eat those words as I’ve yet to ask Coyne or Boettke about their thoughts on radical subjectivism. I know they are both mainline (big tent? contra Salerno) Austrians and at least ordinary subjectivists.
Wagner and I also discussed the undecidability problem in particular. The undecidability problem has an Austrian and mainline flavor:
- Mainline: an individual is indifferent between A and B. Does he consume A, B, a combination, or neither?
- Typical answer is some of each because we have a taste for variety, but consider lumpy goods such that you only get one or the other. Typical answer is a coin toss.
- Austrian: an individual is uncertain that either action A or B will bring about desired end C. Does the individual act?
- One answer is that the individual may have relatively different uncertainties and expected values and may therefore select a superior case, but suppose these factors are even between each choice.
- Another answer is that an individual does not act unless there is a reason to do so, but this can be rebutted by considering non-action as action B and positing that individuals act by necessity.
- The last answer I can think of is the one Wagner gave: The individual will eventually choose A or B although we have no reason to think he will prefer either one. I asked if it would be appropriate to use a coin toss simulation as a modelling mechanism for this decision and he said yes, if a problem was undecidable then over the course of time (perhaps modeled by several ticks or iterations of processing logic) a random selection might be fine as a modelling technique.
It was that final point which surprised me and I think is noteworthy. On those grounds there may be room to develop an applied Austrian ABM.
More on undecidability in economics is here.