European Contributions and Concepts
New Horizons in Institutional and Evolutionary Economics series
Edited by Jürgen G. Backhaus
Chapter 10: Austrian economics and 'the other canon': the Austrians between the activistic-idealistic and the passivistic-materialistic traditions of economics
10. Austrian economics and ‘the other canon’: the Austrians between the activistic-idealistic and the passivistic-materialistic traditions of economics Erik S. Reinert TYPOLOGIES OF ECONOMIC THEORY AND THE TWO CANONS We have recently argued that when focusing on very long-term longitudinal trends in economics, two ideal types of economic theory appear to have coexisted in parallel over an extended period of time.1 These ideal types can be seen as constituting two separate filiations2 – to use Schumpeter’s term – and they come into occasional methodological clashes. Werner Sombart fittingly calls the first tradition activistic-idealistic, a tradition born with the Renaissance. The second type of economic theory he calls passivistic-materialistic,3 a tradition having its origins with Mandeville and Adam Smith and solidifying as the ‘a priori method’ with David Ricardo. The purpose of this paper is to outline the characteristics of the two traditions – the tradition behind today’s mainstream and ‘the other canon’ – and to discuss the position of Austrian economics in this context. In most sciences, periodical and radical gestalt-switches terminate old theoretical trajectories and initiate new ones. In a Kuhnian paradigm shift the scientific world moves from a situation when everybody knows that the world is flat, to a new understanding when everybody knows that the world is round. This happens in a relatively short time. Lakatos’ idea of ‘degenerating scientific research programmes’ that gradually shift to ‘progressive’ ones conveys a similar conception. In this respect economics is different. In economics the theory that the world is flat has been living...
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