Bill Easterly reviews both. The hot thing in development economics is to account for irrational behavior, and engaged in controlled experiments.
The tragic policy problem to be solved in efforts to provide assistance is that (a) so little effort has been made to assess the impact of policies introduced to alleviate poverty and improve health and well-being, and (b) in those instances when efforts to measure policy effectiveness were made they are more often than not extremely dubious. The claim is that modern economics by accounting for irrational behavior, and introducing the method of controlled experiments is fixing the tragic problem of the failure of humanitarian assistance for poverty alleviation.
I am less persuaded than these authors that the poor are irrational and self-defeating, and instead think analysts have not completely identified the incentives that the poor face. The behavior is self-defeating, but the cause is to be found not in their inability to weigh costs and benefits, but the context they operate in that produces myopia and self-defeating strategies for poverty alleviation. Context matters; history matters; ideas and beliefs matter; institutions matter; INCENTIVES MATTER.
But that doesn't distract from the idea that the questions studied remain the central to the discipline of economics, and that our inquiries into the nature and causes of the wealth of nations remain the most important contributions we can make to science and to humanity.
Below the fold is an interview with me that appears in the brand new Spanish language volume LA ESCUELA AUSTRIACA DESDE ADENTRO (Vol. I) edited by Adrian Ravier. The volume contains interviews with a variety of Austrian economists, past and present. (As the description says: "from Ludwig von Mises to Steven Horwitz!") The second volume will be available in June and it will compile interviews with Henry Hazlitt, Leonard Read, Fritz Machlup, Hans Sennholz, George Reisman, Robert Higgs, Richard Ebeling, Peter Boettke, Larry White, Joe Salerno, Peter Klein and others.
Here it is. Complete with Mike Munger in a speaking role and cameos by Joe Salerno and Ed Stringham, and a whole bunch of great lines. My contribution to the Hayek-Keynes debate is here. Great work by John Papola and Russ Roberts once again!
Richard Cornuelle passed away in the early morning of Tuesday April 26, 2011. He was one of the true princes of the modern classical liberal movement. And I use that term -- "prince" -- in full knowledge that Dick rejected all forms of aristocracy and authoritarianism and in all walks of life --- between citizen and politician; between worker and boss; between student and teacher; between wife and husband, etc. He would be the first to deny any princely status to himself. His book De-Managing America (1975) is a radical denunciation of the "front office" view of society as requiring management by an educated technocratic elite and any idea of a natural aristocracy. But Dick understood as well that in real democratic ways of relating with one another that granted authority did play an essential role in social progress. Earned authority was real and in fact vital, but imposed authority was pretend and destructive. Dick's critique of modern US policy was that we had lost sight of the power of individuals and communities to mobilize and effectively address even the most pressing social issues, and instead we were derailed into thinking that we needed politicians and the state to realize the good society.
In Healing America (1983) Cornuelle argued that what was required was a radical reconsideration of the scope of government responsibility. Public policy had come to a dead end. We had come to believe that we cannot make society habitable without making government bigger, and yet we cannot pay the cost of the bigger government without creating more problems that add to the cost of government. A vicious cycle ensued following the Great Depression --- "Government is growing as it fails, and, to a chilling degree, it is growing because it is failing."
By the late 1960s and 1970s, the failure of government programs was recognized even by those who were entrusted with their management. By the 1980s, the extent of the failures of the bureaucratic attempt to address the social ills of poverty had intensified. We don't have much of a choice, Cornuelle tells us, when our policy options are humanity or solvency. To solve the crisis we didn't need to starve the state of resources (this is not ultimately a tax and spend issue), we needed to starve the state of responsibility (it is a question of scope and fundamentally about political theory). In other words, if we can theoretically and empirically demonstrate that the voluntary sector can outperform the state sector in the delivery of basic social services, then we can avoid the crisis of the fiscal state (and the inhumanity of bureaucratic 'solutions') and unleash the power of people and the communities they live within, and actively participate in, to tackle the social ills of poverty, unemployment, health and education. The American Dream is of a society that is at once free, prosperous and caring. The "good society" Cornuelle argued did not result from grand designs, but from "millions upon millions of caring acts, repeated day after day, until direct mutual action becomes second nature."
Dick's most well-known work was Reclaiming the American Dream (1965, reprinted in 1993). The subtitle for that book is: "The Role of Private Individuals and Voluntary Associations." His argument builds on Tocqueville and as stated above, Dick saw the American Dream as a society of free and responsible individuals, who prosper in a vibrant commercial life, and live and participate in caring communities.
But Dick preferred the subtitle for his book to have been: "A Handbook for an Unfinished Revolution." He took this task of continually pursuing the unfinished revolution very seriously. Dick was personally a life-long learner and a compassionate activist, and he was always looking out for those who were pushing out the intellectual envelope and he sought to learn from everyone he crossed paths with that was actively solving problems and helping others live better lives in small or big ways. This intellectual curiosity and compassionate social action was true from his early work with the Volker Fund to later work with United Student Aid, Center for Independent Action, Critical Review Foundation and the Fund for the Study of Spontaneous Order. There is no denying his intellectual roots in the Austrian School of Economics and classical liberalism. In the acknowledgments to Healing America, Dick was explicit about his theoretical framework: Mises, his teacher was indespensible; Hayek, provides the intellectual foundation; Ropke, provides the humane vision; and Nisbet; saw the central role of community in social order.
Cornuelle's quest for a society that successfully combines freedom and community is an inspiring vision, and does build from these acknowledged intellectual roots but was never content to stay there. He sought to combine commitment to principle with a humane concern, and to always stress that what ultimately mattered was what worked to raise the welfare for the least advantaged. To realize the unfinished revolution, we need to mix theory and praxis; to be inspired by a vision of a just society, yet focus on solving problems that real people face in their daily lives; to critically examine the failures that modern industrial society must confront, yet to bear witness to the amazing energy of a free people and communities to effectively address these problems.
Please read Dick's books and articles and join the unfinished revolution. The world is a little less intellectually curious and compassionate tonight than it was these past 84 years. But Dick left us with such an inspiring vision of a society of a free, prosperous and caring people that if we pick up the challenge and complete the revolution a humane society will be within our grasp.
Dick was my mentor, an intellectual role model, a close friend, and a father-figure in my life. I loved this man. He was a Prince among men. May he rest in peace, and may his vision of a principled and compassionate libertarian society capture the imaginations of generations of students and inspire their activism now and forever.
The most recent issue of the RAE (subscribers can find it here) includes a very nice symposium on pluralism in economics featuring Rob Garnett, Roger Koppl, Randy Holcombe, and Pete Boettke. Andy Young also has a nice paper on how we might do quantitative work on the Austrian cycle theory. Check it out or get your university library to subscribe.