The Review of Austrian Economics, 18:1, 121–124, 2005.
2005 Springer Science + Business Media, Inc. Manufactured in The Netherlands.
(2002) Big Players and the Economic Theory of Expectations, Basingstoke,
Roger Koppl’s book is a major contribution to the Austrian theory of expectations and
markets. It is insightful in its theoretical approach, erudite, and grounded in a solid method-
ological discussion. In addition, it deals with important issues and leads us to a frontier that
is just beginning to be explored. Although economists have paid a lot more of attention to
institutions and to cognition in recent decades, only a small minority has worked where
these two lines of research cross. This book, which puts together work done over several
years, marks Koppl’s presence in this frontier.
The book is very well organized. Part I introduces and summarizes the main arguments.
Part II deals with methodology, devoting a chapter each to Mises, Hayek, and Schutz. Part
III is theoretical. It opens with a chapter that develops the language-games framework
formulated by Koppl with Richard Langlois. It then applies this framework to the issue of
expectations, on which Koppl had already published very interesting work with William
Butos. The last theoretical chapter contains the theory of Big Players, again beneﬁting from
previous joint work, namely with Leland Yeager. Part IV applies the theory of expectations
and Big Players to monetary and ﬁnancial markets. It includes a chapter on the ruble market
in Czarist Russia, another chapter on the angular distribution of asset returns, and a third one
on money demand in the United States. A coda closes the book, relating it to an emerging
new orthodoxy and indicating directions for further work.
I cannot hope to do justice to the broadness and richness of Koppl’s book in such a
short space. I shall therefore highlight only a few points that are, in my opinion, especially
interesting for future debate and research.
Regarding methodology, one of the main points made in the book is about methodological
individualism. Although Koppl uses this expression, he recognizes that it often makes com-
munication difﬁcult. More importantly, Koppl’s version of methodological individualism
does not imply that individuals are prior to society, but rather acknowledges that they are
shaped by it. This view should facilitate an agreement with other heterodox approaches in
economics, particularly the ‘old’ institutional economics, as currently represented by Geoff
Hodgson and others.
This methodological stance is reﬂected in important parts of Koppl’s theoretical analysis
of language games. A language game is a set of rules that tell us how to talk, how to
think, and what to do in different situations. Agents thus have a rhetoric, a theory, and a
practice of the language game. The rules of a language game constrain individuals, but go
beyond this. In particular, Koppl argues that these rules have a cognitive function, guiding
our thinking through categories and hierarchies, a set of typical thoughts, like what Arthur
Denzau and Douglass North call a shared mental model. I take this to imply that these