Money and Markets: Essays in Honor of Leland B. Yeager

4 Roger Kopplwords, “proscribe any technique of inquiry deemed useful by an honest and experiencedscholar” (Machlup 1956 as quoted in Yeager 1995: 28). In class Yeagerwould often quote Percy Bridgman’s remark that “the most vital feature of thescientist’s procedure has been merely to do his utmost with his mind, no holdsbarred” (Bridgman 1955 as quoted in Yeager 1995: 27). The trouble with thisadvice is that it strips you of all methodological props and ornaments. It throws younaked into the problem at hand. Yeager taught us by example to go thus naked intoeconomic theory.I suspect that Yeager’s impatience with bad methodology has been buildingsteadily for the past half century. His earliest explicit foray into the topic was in thesignal year of 1954. There, in his classic “The Methodology of Henry George andCarl Menger,” Yeager outlines a very sophisticated view from which, I believe, henever departed. Here we have a straightforward exposition of the good practices oftwo giants of the discipline, Henry George and Carl Menger. Today, when the“Hayek industry” has exploded and “Austrian economics” has been in “revival”for a generation, we are familiar with much of what Yeager said in 1954. But whenwe put his argument in the context of the times, it is startlingly original andpenetrating. And even today, many will be surprised by its demonstration thatHenry George was “a profound and original economist” (1954d: 233). In six scantpages, Yeager outlines Menger’s compositive method, which George arrived atindependently, methodological individualism, a Misesian emphasis on humanaction, a defense of “introspection” and “armchair theorizing,” the role of “mentalor imaginative experiment,” a recognition of “some limitations of statistics andother methods of historical research in establishing or testing laws of economics,”an exposition of the “‘organic’ conception of society,” a discussion of dispersedknowledge linked to a criticism of socialism, and a recognition of money and “newcommunities” as evolutionary phenomena.Yeager points out an important argument for the practice of methodologicalindividualism. “The methodological individualism of George and Menger stemsfrom a realization that economists’ ‘inside’ knowledge of human motives anddecision-making is a leading source of basic empirical generalizations” (p. 238).Methodological individualism is not a first principle arbitrarily imposed or somesort of ontological idea. The point, rather, is that we cut ourselves off from usefulinformation if we do not make use of our “inside knowledge of human motives.”In class, Yeager would explain methodological individualism as a kind of check.Let’s see what your argument, theory, or model says about “who does what.” If itimputes to real actors actions that are unreasonable or improbable, the argument,theory, or model has probably gone wrong somewhere. If the implied actions ofindividuals are reasonable, the argument, theory, or model has passed an importanttest and might be true.In 1954 Yeager restricted himself to similarities in the methodologies of Georgeand Menger. Later, in “Henry George and Austrian Economics,” he turned hisattention to other similarities. George “independently arrived at several of the mostcharacteristic insights of the ‘Austrian’ School” (2001a: 3). Yeager’s list of similaritiesand affinities is quite long. He finds points of contact in their value theories