April 2014

Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30      
Blog powered by Typepad

« Double Hat-Tip to Tyler Cowen | Main | Publishing Houses Are Needed to Put Books on the Shelves, What Happens When the Shelves Disappear? »

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83451eb0069e2013485bbe7a4970c

Listed below are links to weblogs that reference The "Austroliberal" Response to the Great Depression:

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

I am pessimistic like Mises.

Mario,

To say a situation is hopeless is to say it is ideal. We know we are in a situation that is less than ideal, so there remains hope.

Key lesson of James M. Buchanan --- the political economist can (and should) find a way for mutually agreed reforms that will yield improvements.

Pete

Pete, I think Mises is correct. Civilizations never reverse course once belief in their central sustaining myths (and I don't mean myths as in falsehoods, but in the sense of fundamental images of the world) have lost their guiding force.

We certainly should not resist his conclusion simply because we don't like it -- if it is true, we ought to face reality and do what we can to preserve the fragments of order that remain.

"Key lesson of James M. Buchanan --- the political economist can (and should) find a way for mutually agreed reforms that will yield improvements."

Unanimity in the legislature? U among the voters? The entire public?

Or standard majority rule?


I think there are two issues:

1. The education or enlightenment of the public, to the degree that they can fight for good change - they are currently wildly mistaken about economic policy.

2. The entrenchment of the political class, bureaucracy, and rent-seekers, who must be uprooted for change to occur.

The two are of course intertwined--because of #2 there are many fallacies promoted which the public believes, worsening #1; because of #1, #2 has been allowed to occur.

I have some optimism about #1 -- despite everything, we __as a society__ are better educated than we were 200 years ago. Yes, enlightenment thinkers were in many ways better educated about politics and economics--but the masses were largely illiterate. Just as - as a society - we are in many ways more free: once you remember to count women and blacks, for example. Similarly, we are far better educated today, even if our heads are also filled with half-truths and fallacies too.

And then there is the information revolution. Not only do we have masses reading newspapers, watching cable news and listening to talk radio, we now have them reading blogs and googling primary sources. Yes, some will still listen to one zealot and get everything wrong, but others will read 3 different viewpoints, google sources that they cite, and figure out the truth MINUS all the spin. This gives me hope.

In the short term the Internet can make public opinion seem even less rational - more based on partisan or conspiracy zealotry - but in the long term it can only make us a smarter society. One day we may actually start to get policy right--this time for all people, not just a minority.

If Mises is correct about his history of the Roman Empire, then these same policies caused the demise of the Western Empire. I'm as pessimistic as he is about the future. It seems that only disaster will force Americans to give up their love of socialism. China offers hope. Few Chinese are in love with socialism. But the US must go through a similar disaster in order to cleanse them of socialism.

This is pretty much off topic, but I wanted to get y'all's opinion on my brief satire:

"Well, since keeping my paycheck in my wallet for five minutes/five days/five weeks/five months/five years instead of spending it immediately (and by immediately I mean instantaneously, in no longer than one Planck time) is of course by the standard Keynesian definitionless definition considered hoarding, we should immediately implement a universal policy of forcing all employers to spend their employees' paychecks upon issuance, thereby creating the maximum possible aggregate demand and preventing 'leaky savings,' an immediate cure to our depression! Now, I'm not going take the underhanded Austrian tack and ridiculously make the crude mischaracterization of Keynesianism by saying that it is irrelevant on what such money is spent; no, au contraire, all such spending will be channeled to paying people to dig holes and fill them back up again, the most productive line of work, thereby also solving our unemployment problem! All those who insist on remaining unemployed after this measure has gone into effect (since of course this measure, like those very unemployed, won't work) will of course, in the collective national interest, be summarily executed as punishment for what amounts to hoarding of present and future unearned income by not allowing such income to come into existence. Keynes would be proud..."

A good start would be to calibrate your theories to reality - meaning present observable economic phenomena. There's no credit expansion instead a contraction. Deflation is on the menu not inflation. The most important currencies are free-floating on the market. And beside some minor protectionist measures there's no overall drive to shut down trade.

And please this self-pitying "we the guardians of civilization are ignored by uninitiated savages beside our benevolent endeavours" is only embarrassing.

Pete,

Interesting how a lot of the "sayings" of Buchanan are variations of the sayings of Frank Knight. Now I guess I understand what Knight meant when he argued that there is no difference for action between a state that is perfect and a state that is hopeless.

The Buchanan point is strangely unhinged from a particular actor or set of actors, as "Hayek Admirer" suggests above. It is insufficiently subjectivist. *Who* will find it in his interests to change the current course?

However, I do think the welfare state is coming to a sustainability crisis. The paralysis that prevents change toward liberty will likely prevent the welfare state from adequately reforming itself. The interest-groups will be unable to reach any consensus.

In the rubble may emerge some scope for liberty.

But none of this affects what intellectuals should now be doing: Tell the truth, analyze situations in the hope that this might be found to be useful at some point. But there is also independent value to knowing the truth for its own sake.

This will frustrate the "man of action".

Aha. This is the Austrian $§& dream. The welfare state goes down and from the rubble emerges some scope of liberty. Dream on!

There was another guy who published a book almost the same time F.A. Hayek pestered the world with "The Road to Serfdom". His name is Karl Polanyi and the book is "The Great transformation". I bet that once push comes to shove the Polanyi vision how society reacts to unfettered capitalist markets and libertarian utopias holds up 100%.

A few years ago, when I was FEE president, I did a piece for my monthly column in the June 2006 issue of "The Freeman" on 'Freedom and the Pitfalls of Predicting the Future.'

At one point in the piece I quoted from an article by Robert Nisbet, in which he said:

"“How easy it is, as we look back over the past—that is, of course, the ‘past’ that has been selected for us by historians and social scientists—to see in it trends and tendencies that appear to possess the iron necessity and clear directionality of growth in a plant or organism. . . . But the relation between the past, present, and future is chronological, not causal.”

Merely because "B" followed "A" and "C" followed "B," does not mean that it is causally inescapable.

Human events are the result of human action. Our actions are an outgrowth of our ideas. The stranglehold of Big Government will persist only for as long as we allow it, for as long as we accept the arguments of our ideological opponents that the interventionist welfare state is “inevitable” and “irreversible.”

That is, the present trend will continue only for as long as we accept that the chronologically observed increase in government power over the last decades is somehow causally determined and inescapable in the stream of human affairs.

I also quoted from Karl Popper's preface to his "The Poverty of Historicism," where it he argues that, “If there is such a thing as growing human knowledge, then we cannot anticipate today what we shall only know tomorrow.”

This is why there is always an inherently unpredictable element to the future, and why we are unable to anticipate all that tomorrow holds in store for us.

I concluded my column with the following words, including a quote from Mises:

"We cannot know today what arguments friends of freedom will imagine and successfully articulate tomorrow to end government control of our lives. But those arguments are out there, waiting to be discovered and presented, just as earlier friends of freedom succeeded in making the case against slavery and mercantilism.

"As Austrian economist Ludwig von Mises pointed out in 'The Freeman" in 1951, 'Now trends of [social] evolution can change, and hitherto they almost always have changed. But they changed only because they met firm opposition. The prevailing trend toward what Hilaire Belloc called the servile state will certainly not be reversed if nobody has the courage to attack its underlying dogmas.'

"There is one thing, therefore, that we can predict: patience, persistence, and belief in the power of ideas will provide the best chance we have to achieve the free society we so much desire."

Richard Ebeling

"There is one thing, therefore, that we can predict: patience, persistence, and belief in the power of ideas will provide the best chance we have to achieve the free society we so much desire."

This begs only one question. What sort of cognitive dissonance ails Austrians? Last time I've checked there are no GULAGS in the US?

Stephan,

I said that out of the rubble MAY come some scope for liberty. What do you predict after the bankruptcy of the welfare state?

I like to think that I'm writing for Nock's Remnant. That helps explain my citation count and book sales figures.

Mario,

If the welfare state collapses which I think is not very probable but can of course happen I think society will be on crucial crossroad.

Personally I side with the Polanyi and Schumpeter view that some sort of socialism will be the choice of the day. On the other hand the alternative might be the vision of a Louis O. Kelso who published 1958 his "The Capitalist Manifesto". This sort of capitalist revolution might resonate with US citizens. At least I can subscribe to this sort of capitalism. Strangely nobody in the US is talking about this guy as far as I'm aware of? But he's on the point: The problem is the diffussion of ownership in a capitalist society.

Stephan,

Let's have a look at your points one by one...

> A good start would be to calibrate your theories to
> reality - meaning present observable economic
> phenomena. There's no credit expansion instead a
> contraction.

Who exactly has said that there was? Where on this blog have folks being complaining about the expansion of credit?

The direction of credit is a quite different question.

> Deflation is on the menu not inflation.

That depends on which economy you are discussing. Both can be problematic of course. I don't see anyone around here screaming about the problem of inflation, this isn't Rob Murphy's blog.

> The most important currencies are free-floating on
> the market.

Yes, of course they are, who said they weren't?

> And beside some minor protectionist measures
> there's no overall drive to shut down trade.

No, but there have been some important interventions.

> "There is one thing, therefore, that we can predict:
> patience, persistence, and belief in the power of
> ideas will provide the best chance we have to achieve
> the free society we so much desire."
>
> This begs only one question. What sort of cognitive
> dissonance ails Austrians? Last time I've checked
> there are no GULAGS in the US?

In my view too much has been said recently about the "Road to Serfdom", I wish Beck had promoted "The Constitution of Liberty" instead. Anyway, there are plenty of other reasons besides the prospect of future social crises to be concerned about the current Social Democrat policies of Western governments.

Each of us pay continuously for the costs of ineffective and inefficient state interventions. Over time the loss is economic development is inevitably huge. Similar losses are incurred by the state's encouragement of business cycles and risk.

This evening I'm going to go and meet a bunch of friends who are quite able and qualified to do lots of jobs. But, thanks to the Irish state's decision to pay them 195 euros a week for not doing any work that's what they do. Welfare may cause a crisis in the future by creating expectations that cannot be met, but it's descructive even if it doesn't.

Eventually some 'entrepreneurs' will find the appropriate marketing for a very powerful 'product', that so far has been unable to determine both the motivations of different market segments, and how to sell the very counterintitive thinking and overcome the many interests created.
Another possibility is when the 'horses' of human action and technology cannot overcome the stupid government horse. Then, crisis may awaken a sufficient 'mass' of human actors to the possibility that society is the result of an emerging order.

Before we assume that the end of the market order is facing us, let us remember that this has all been seen before in the 20th century during times of serious economic crisis and radical collectivism.

And while the world did not return to the relatively laissez-faire environment before 1914 and the First World War, the U.S. and many Western nations stepped back from the abyss, and retained or restored degrees of market freedom and individual liberty after 1945.

Communism seemed like the inescapable "wave of the future," supported intellectuals and many well-intentioned friends of humanity. But it is communism that ended up in the dustbin of history.

Fascism and National Socialism (Nazism) seemed to foretell the end of democratic government and a return to barbarism in the 1930s and the early 1940s. It, too, passed into history.

Even the worst predictions about the growth of "democratic despotism" with the coming of FDR's New Deal did not fully materialize. And somewhat free markets gave us the prosperity of the post-World War II period and the "German Miracle" in Europe.

What we are passing through will likely also pass away to a great extent.

If I may, let me quote Wilhelm Ropke's words written in the dark years of the Great Depression in the mid-1930s, in his book, "Crises and Cycles," at a time when economic planning was all the rage, and political totalitarianism seemed to be engulfing the "civilized world":

"Let us not be too hasty in expressing the opinion that Providence is doing us a special favor by allowing us to witness (or even to be instrumental in introducing) a new epoch in world history, let us remember that world history is no ephemeral growth. . . In a word, let us not be affected by the prevailing nervousness which in certain individuals borders already in hysteria. . .

"It would be well if we at the present time were to keep cool and collected, and to behave in such a way that when in days to come we look back upon the vortex of this crisis we need not blush at the recollection of any hysteria.

"We may venture, without due optimism to predict that those who have not let the outcry of loud-mouthed prophets and reformers turn them from their belief in the lasting validity of the principles which have given the economic social and economic system of the West all its greatness will be proved right in the end.

"We must at least reckon with the possibility that after this devastating crisis, as after the [first world] war, most of what today is so loudly decried and reviled will come into its own again."

For those who believe that there are no fundamental threats to our liberty -- no threatened GULAGs in our future -- they should remember that there can be many forms of tyranny and diminished individual freedom.

The most serious, it seems to be, is that type warned about by de Tocqueville in "Democracy in America," which he considered a serious danger in democratic society. One in which the regulating, controlling hand of the State takes the form of a benevolent paternalism -- caring for us, bending us to its will -- with kindness and welfare statist generosity. The end result of which is that we are obedient and submissive sheep to the political Shepard who plans and guides very detail of our life -- and seems to offer us a "higher" and "better" freedom than the negative liberty of individual choice and personal responsibility.

But as Mises pointed out in "Human Action," there are limits to the "reserve fund" of private sector generated wealth from which the State can draw to fund its redistributive paternalism.

And as Western societies reach some of those limits and the State cannot deliver on its promises, the stage may be set for a rebirth of classical liberalism and a return to the wisdom of what Adam Smith taught us about the nature and origin of the wealth of nations.

What is our task? We should recall Arthur Schopenhauer's words in the preface to his "The World as Will and Idea":

"But life is short and truth works far and lives long: let us speak the truth."

If we take the long view and remain true to what we know to be true, we all will have done all we can do to hopefully bring about the restoration of classical liberalism and the freedom and dignity of man.

Richard Ebeling

Your use of 'policy community' made me think of the ubiquitous term 'policy maker' which is one no libertarian should use without scare quotes or a sneer.

The term is used of those who come up with or implement policy, whether in commerce, academia or government. The implication being that they're just ordinary guys doing the same kind of thing.

Politics and bureaucratic command is not a matter of voluntary exchanges or private institutions considering how best to organize their activities.

A truly free market society knows nothing of commands, only requests and payments for meeting them. What next? 'Stalin: the Great Policy Maker'


Sounds a bit like the situation reported in Vienna: "In Berlin, the situation is serious but not hopeless; in Vienna, the situation is hopeless, but not serious. ...

http://www.everyculture.com/wc/Afghanistan-to-Bosnia-Herzegovina/Austrians.html

the extract comes from the section on Recreation

check out the recipe for chocolate cookies

I agree with "Current" that The Road to Serfdom has little of relevance for taday. It is a critique of state ownership of the means of production, which no-one now advocates.

I'm worried about welfare expenditure, but not for exactly the same reasons as other folks here.

I don't know if it's the same in the US or elsewhere, but the current generation of young people seem to me quite different to the old.

When I meet the current generation of welfare claimants I notice the following:
* They rely on welfare remaining the way it is forever, they don't consider the possibility of change.
* They mostly aren't politically engaged.
* There not that well educated, though they may have spent a long time at school and college little has sunken in.
* They spend a lot of time on hobbies such as music and little in any on finding a job. But they're not very committed to any path of work they pick whether it's paid or a hobby.

The old working lower-class weren't like that. They were frequently quite well educated and committed to their hobbies and work.

The problem I see is that the welfare-dependent lower-class that have replaced the old working-class are easier to dismiss. In Britain most of the advocates of Social Democrat government are middle-class or upper-class. I think this is due to four factors. Firstly, because of the characteristics I mention above there are few suitable candidates from the lower classes. Secondly, the emphasis on political correctness seriously hampers lower class people from getting into politics, they aren't politically correct. Thirdly, few would have had a private life that was "clean" enough by the exacting standards of older more conservative voters. Fourthly, the success of the upper and lower class run Labour party in Blair's time has allowed that group to entrench itself.

Those who rely on welfare aren't represented themselves at the nation level, they're represented through supporters from elsewhere.

What concerns me is that a crisis may lead in a fascist direction. Those in government who see themselves as guardians may take the view that the lower classes need "looking after" in a much more active way than just paying them money. For example, having special designated areas in cities where they are placed has already being discussed and happens informally anyway. If this happens that group may not have the political clout to fight back.

The current Labor (social democrat) administration in Australia has stepped boldly down the road of looking after the lower classes by placing restrictions on the things that welfare dependents can buy with the money. This started with the outback Aboriginal communities which under progressive policies over 30 years have become some of the most dysfunctional communities in the world. The aim was to stop them blowing their dole money on alcohol and there was a case to be made in this special situation. However before the election campaign started they were talking about extending the scheme to other welfare dependents.


Some people here are talking about a tipping point of government spending that is driven by the "rights" mentality towards welfare (including middle class welfare) and the non-saving habits of younger people, not just the lower orders but the professional middle class. They live at home for years but don't save, then they form two-income partnerships and don't save, then they want government assistance with their first home, then employer-funded maternity and paternity leave and then subsidised child care etc etc.

The comments to this entry are closed.