Ebeling on Machlup on Austrian Economics -- for Literature

There is an excellent interview of Richard Ebeling on his blog that will be appearing in Spanish in a volume entitled, Economistas Austríacos. Historias Personales e Ideas [The Austrian Economists: Personal Histories and Ideas] (Madrid: Unión Editorial, 2011), edited by Adrian Ravier, professor of economics at Universidad Francisco Marroquin in Guatemala.)

What I want to emphasize from it, however, is the point that the interviewer makes of an interview Ebeling himself did with Fritz Machlup, in which Ebeling asked “how did the Austrians distinguish their own economics from others in the 1920s.” Machlup answered with the following list:

1. Methodological individualism.
2. Methodological subjectivism.
3. Marginalism.
4. Individual tastes and preferences.
5. Opportunity costs.
6. The time structure of consumption and production.

Ebeling defines each (and I will follw each definition with a brief note on why this is important to understanding literature):

"Methodological individualism refers to the idea that all social and market analysis should start with the actions and interactions of individuals." In other words, "all tastes and preferences are individual and personal, as well. There are no “community” or “social” preferences"

If you are going to understand a work of literature with characters, it should be clear how this can be useful. How else can one really come to understand those characters except through their expressed tastes and preferences, looking at their actions and interactions? One could ask the same of each author -- are their works not an expression of their tastes and preferences of the time of writing? Is not a work of literature itself an action, with the intention that it be an interaction with its reader (or viewer, if a play)?

"Methodological subjectivism emphasizes that in the social world, we can only understand and interpret people’s actions in terms of the meanings they assign to their own activities in relations to others and the objects of the world."

This is almost the definition of what a good literary analyst does with a work's characters. Further, one could argue that this is also what any good literary analyst should be doing in regards to the author. The author has not died -- but is a real entity whose meanings need to be interpreted to be understood.

Marginalism, for Austrians, means "the weighing of choices and the making of trade-offs in terms of ordinal rankings of discrete alternatives. The focus has been on “margins of use” and not amounts or degrees of satisfaction or utility."

Each author weighs his/her choices and makes trade-offs in what they choose to represent. More, an author's characters are always doing this. One may even argue that it is the conflict between or among characters' choices and trade-offs that drive the plot in stories.

"Opportunity Cost refers to the next best alternative foregone in an act of choice. From the Austrian perspective, only individuals make choices and, hence, cost is always personal and “subjective.” Since choices only relate to possibilities that the individual still views as open to him in the future (whether that future is a moment from now or a month from now), the opportunities are those the individual imagines in his mind, as he sees and evaluates them."

Characters' internal conflicts can often be uderstood as their weighing of opportunity costs. Also, as the story unfolds, we see characters reevaluating and changing their minds and actions.

The last is self-explanatory. Neo-classical economics of the time ignored time. Yet all production and consumption necessarily takes place in time.

It should be obvious, too, that literary production takes place in time, as does literary consumption. This may be more important for longer works, such as novels -- which are so long that they require detailed long-term memory to either write them or to enjoy them -- or plays, but it is surely a factor for poems, which take up more time than one typically imagines.

Ebeling then adds two more elements:

"What I find interesting, looking over Machlup’s list of distinct aspects of the Austrian perspective, is the absence of any reference to “unintended consequences” and “spontaneous order.”"

I have written about literary production and spontaneous order, of course, throughout this blog, and in my article on the spontaneous orders of the arts. Much work on unintended consequences can already be found in literary studies, as this was also an emphasis in postmodernism. I think a more economic emphasis on this, particularly an Austrian economic emphasis, could expand on this idea.

There is of course much of interest in the rest of the interview with Ebeling, but I thought this was a great set of fundamentally distinct elements of Austrian economics that also helped explain why this approach has so much potential for analyzing literature.