Has the World Gone Completely Mad (Again)?

When I am talking to my colleagues and students in economics who find Mises's writings to be too strident I often have to remind them of the context of the times in which Mises wrote.  The world, I say, had gone mad.  Communism was presumed to be not only morally superior in the ideal, but practically superior as an economic mode of production.  Prior to the Nazi experiment, fascism and its corporativist form of political economy was viewed with romantic possibilities for rationalization of the economy and peaceful social cooperation.  Even after fascism was eliminated from the menu of socially desirable systems, the allure of communism remained and even after the crimes of communism from the Stalin era were revealed many economists stood by the earlier assessment concerning the growth capacity of Soviet economic planning.  Predictions of the Soviet-style planning generating economic growth that would outpace the economic growth of capitalist economies were made well into the 1980s.  These predictions proved to be as inaccurate, and the theoretical perspective from which they were made proved to be misguided.

Not only that, but Keynesian economic theory and Keynesian policy dominated western economies.  The neo-Keynesian concensus entailed a commitment to macroeconomic fine-tuning and microeconomic regulation (or nationalization in the UK).  The results of this policy consensus were revealed to be disastrous for the economic health of the western economies.

By the 1970s, we had failing economies in the western democracies, we had the Soviet Bloc nations crumbling from within due to political corruption and an economic system that could neither meet the consumer demands of its population nor spur on technological innovation let alone incentivize state-owned firms to produce efficiently.

And we have to remember the 3rd world crises of the 1970s and 1980s --- Mexican debt, Latin American poverty and instability, African dictatorship, Indian brain drain, etc.  All of these economic realities were a consequence of the socialist aspirations and neo-Keynesian policies that dominated the world of economic affairs since WWII.

We have never really shaken off these intellectual blinders.  Hayek argued that the source of the intellectual error was an unhealthy alignment of statism and scientism, and I would just add that the alignment is self-reinforcing due to opportunistic behavior on the part of intellectuals, politicians and economic actors.

For a very short period of time, the intellectual error seemed to be exposed, but the unhealthy alignment persisted and in practical terms the policy consenus was maintained (though not in name).   As Milton Friedman often warned, classical liberal economists had won the battle of rhetoric, but lost the war of policy implementation.  Macroeconomic fine-tuning (through the fiscal and monetary policy instruments) and microeconomic regulation and control continued throughout the 1990s and into the 2000s.  We just had an era of conservative Keynesianism, as opposed to the liberal Keynesianism of the 1960s and 1970s.

So this morning I am listening to news discussions of Obama's fiscal stimulus as laid out this weekend, and listening to clowns like Chris Dodd and Carl Levin talking about the need for government oversight of private enterprise because we cannot trust for-profit businessmen to make the right decisions, and finally the head of the UAW talk about the reason why the US auto industry is suffering is due to our lack of universal health care, our lack of an industrial policy, and our failure to erect protections against foreign auto producers.  As Adam Smith might have put it, the sophistry of the special interests combine with the arrogance of the statesmen to produce much ruin.

Last week there was a nice op-ed by Oliver Hart and Luigi Zingales entitled "Have Economists Abandoned Principle".  The answer is of course. But there is a deeper problem, and that is they abandoned the discipline of economics in the 1930s and have never really reclaimed it.  There are no principles if you don't have the discipline of economics.  The scientific enterprise of economics was misdirected and the allocation of intellectual talent in the field was consequently distorted.   The false gods of formalism and empiricism substitued for the verbal logic of the economic way of thinking that was developed from the classical political economists and refined by the neoclassical economists prior to WWII.   Economics lost its way long before the curernt crisis.  In fact, the current crisis is a consequence of the fact that we have lost our way as a discipline.  Fiscal and monetary irresponsibility, government regulation and control, and special interest pleading have been our economic policy reality since for decades, and the number of economists who have consistently argued against this economic policy reality have been in the minority since the 1930s.

Strong and consistent voices against this policy reality were provided by Mises, Hayek, Friedman and Buchanan.  They were not strident, but they spoke truth to power and did so as loudly and clearly as they were able to at a time when the world of theoretical economics and the world of practical affairs with regard to economics had gone completely mad. 

We are still in that world -- though we have deluded ourselves into believing that politicians and intellectuals who freely adopted the language of the great economists were actually persuaded by the argument and ready to follow the advice of the great economists from Smith to Say and from Mises to Buchanan.  They were not ready, and still are not ready. What they are ready for it to constantly intervene in the economy either by forgetting principles or in the name of principles.  Instead of the discipline of the economic way of thinking, all that has been achieved is that our language has been corrupted and the great discipline of economics has been reduced to the political football of "mere opinion."  Rather than understanding that "the curious task of economics is to demonstrate to men how little the know about what they imagine they can design", or that the fate of the great economists from Smith onward has always been to be called upon to offer their advice only to have it discounted as soon as it is uttered, we have an economics which has not only abandoned its principles but lost its disciplinary way. No discipline of economics, no principles of economics.  It is that simple. 

Who are the economic voices today that are the equivalent to a Mises or Friedman?  And why so few that teach the discipline as it was rightly understood from Smith to Hayek?   Is Buchanan the last remaining GREAT economist?

Comments

[Rafael Guthmann]

"Is Buchanan the last remaining GREAT economist?"

Don't you consider Kirzner a great economist? Or the "great" means a combination of academic brilliance with the ability and will to influence political affairs?

[Richard Ebeling]

Those are moving and important words, Peter.

The fact is there are no more “great economists” of the Mises, Hayek or Buchanan types. The economics profession has extinguished them.

Years ago, in the old “Encounter” magazine, Samuel Brittan wrote a short piece, “Could Adam Smith Get a Research Grant?” His answer was, “No.” He humorously imagined a conversation between Adam Smith and a modern search grant officer asking Smith questions on what his time frame for completing would be for this new work that he had proposed with the working title, “The Wealth of Nations”? Fifteen years? (Hmmm, grantee unlikely to finish his project.) What where the empirically grounded hypotheses he hoped to offer tentative but refutable conclusions about? (Grantee unwilling to formulate his ideas in a systematic fashion; seems to meander off in many directions at once.) Why was there no formalized mathematical model attached to his grant proposal? (Grantee thinks in loose non-rigorous thought processes not easily open to review by colleagues.) How could he hope to derive any scientifically meaningful insights when he clearly was relying so heavily on qualitative, historical “anecdotal” information that were open to subjective interpretation? (Not a serious approach to social scientific research.)

Interdisciplinary reflection that looks at the human condition from a variety of perspectives that help in putting flesh and meat on the skeleton of the formal model of the logic of choice is considered “fluff” and just subjective “babble.” Concern with normative implications are scorned as inappropriate interjections of personal preferences (unless, of course, they are the hidden values of the social engineer who is “merely” shifting parameters in the model to deterministically derive outcomes from shifts in monetary, fiscal and regulatory policy).

Perhaps some people on this blog saw the recent attack on Mises by Brad Delong on his blog page. Selective quoting from a handful of passages at the end of “The Theory of Money and Credit”
where Mises is critically evaluating the premises and policies of Keynesian Economics and advocating “sound money” is ridiculed and made to seem ridiculous.

In my view, it showed Delong’s ignorance of the history of economic ideas in not understanding that Mises’ views on money, gold and inflation were seem by him and presented by him as an outgrowth of the controversies and conclusions over monetary policy in the 19th century. To attack Mises in the way and with the words used by Delong is to attack the insights and reasoning of Adam Smith, David Ricardo, Jean-Baptiste Say, John Stuart Mill, and many others among the great thinkers in economics at that time. Oh, but of course, I forgot! There is all of Classical Economics and then – Keynes.

The ghost of Keynes is all around us. There is no scarcity and no trade-offs; just pump in the bailout and stimulus packages to goose aggregate output and employment. There are no fiscal limits or concerns; just spend the trillions and worry about where the money is coming from some time in the future, after all in the long run we’re all dead – or we are no longer in office and it’s the next politicians problem.

Relative price and production imbalances, money (and real) wages too high? Don’t you know that micro and macro are separate fields subject to different “laws”? Unintended consequences, what is seen and what is unseen? What is in front of us is growing unemployment and failing businesses to big (or with too much political influence) to go under. We have to do something, now.

Interest rates are “real” market-based phenomena? No, they’re policy tools to manipulate borrowing and investment and therefore spending and employment. Savings and capital have nothing to do with interest rates – why you’re treating them as if they are, well, prices meant to inform market participants about scarcity and opportunity costs in a world with no free lunches. How “classical” and therefore out-of-date and irrelevant.

When you are surrounded by those who claim to be economists who seem to have lost or never had knowledge of the most elementary ideas, concepts, and relationships upon which one should think about policy issues. When the discipline has become so hyper-formalized that it has few links to the real world – including how the political “market” really works. Then the strident tone sometimes found in Mises (and even in Hayek in some of his essays in the years after getting the Nobel Prize on subjects like inflation and scientism) seem not only understandable but even called for.

(By the way, have my comments sounded too strident?)

Richard Ebeling

[sean andrews]

On the contrary, you are all too strident. The fact is that, whatever your Austrian fantasy might be, implementation of some Hayekian paradise will ultimately favor those who are currently in political/economic power. That we just went through a "conservative Keynesianism" is, of course, true to the degree that entrenched interests of corporate capitalism have been using the state for their own interests: but that is what they do and have done! These are ultimately political questions and they are ultimately answered by people, in struggles over their priorities, not by elitist economists (and the more I read this blog, the more I'm convinced you all believe you are the intellectual experts that should be in charge of implementing the next state/social policy--and you all believe you are singularly worthy, as opposed to all the other "clowns" who aren't as enlightened as you.)

You're argument seems to be that, if people don't vote to implement the political economy you declare is the *ONLY* option, they are simply of some false consciousness. You also seem to have no problem letting Mises, Hayek, et. al. off the hook for being too strident in an era of struggle, but you have no sense of what that struggle was except with the mainstream of Keynes. There were far more rigorous systems of thought from the left, also critiquing Keynes which you would readily dismiss out of hand as being ideological. Regulationist economists in France, neo-marxists at Amherst, not to mention the Cultural Studies you seem to have no use for.

It's fine if you want to engage in ideological warfare, but simply rallying the troops is not enough. Declaring that the deregulation wasn't deregulation is ridiculous at this point: how many thought pieces did you write declaring this to be the case during the previous ten years? Much more often your position was to mock and insult your opponents from the left who were pointing to the charade of deregulation. They were wrong because they were ideological enemies. The fact that what they were saying was true seems to have no impact on your continuing to insist that you are right and they are wrong. A little reflection on this might do you some good since as it is you often come off as a person who lives in his own reality, unable to communicate with anyone but your faithful apostles.

This was one of the good aspects of Steve Horowitz's piece in CATO unbound a few weeks ago. Though I disagree with many of his conclusions, the observation that this clique of self-righteous economists conflates corporations with the market--and sees no problem with it--is a bit of a problem. Though he'd never admit it, the policy decision, in the 1980s, to privilege retailers over manufacturers (a political decision) in trade policy is the real source of the success of Wal-Mart, Target and other enormous retailing chains. In the recent past, this has created a very uneven model of development, much of which is at least as responsible for the current crisis as some strictly monetary interpretation--low wages here and abroad with consumers placated by lower costs for essentials, increasingly bought on credit supplied indirectly by China. Leaving this out, making it seem like any consideration of this as a nutty leftist (or, evidently just as evil, Keynesian) conspiracy does little to lend credibility to your argument for anyone who is paying attention.

Since most of your US audience is totally ignorant of history, you can peddle your revisionism of the depression (and remain mostly silent on the 1970s--this post being a rare exception) with little problem. Your main complaint seems to be that, for the first time in a generation, you're really getting some competition on the historical narrative front within US culture. I'd ask what good it does any of us for you to win back the gains of your ideological supremacy if it ultimately goes to benefit only the entrenched interests. This has always been the leftist critique of libertarian ideology--and it was the critique leveled at the "deregulation" this time around.

It would be convenient for you to wish these arguments away, but it would probably be more constructive for you to have a sort of Hungary, '56 moment where you start to consider why you are so often so blinded by your ideological commitments that you can't see your rhetoric being hijacked for a cause you would not normally defend. Retrenchment, in other words, is a common position to take in a moment like this, but you won't be receiving my respect until I hear at least 1/2 a mea culpa for the rhetorical support you gave to the system which has given us this melt down. That the ideology didn't match the implementation seems a poor excuse at this point--and hardly lends support to the position that signing onto the ideology more fully will give us better policy.

All of that said, I honestly don't understand why anyone here is all that concerned. Obama and all his advisors are fairly committed to the mainstream version of your Austrian utopia--Larry Summers is hardly one to question the omnipotence and beauty of the market. In many ways, if you take off your rhetorical blinders, you'll probably be pleasantly surprised (as in the Clinton era) with how closely the policies hew to your fantasy of a completely commodified, privatized, Hobbesian universe. The corporate control of healthcare, trade and finance is so complete that the changes in rhetoric (and the possible "nudging" of policy--pace Sunstein's pro-Libertarian policy proscriptions) should do little to scare you. The real fear you should have is that more and more people will reject it because it simply does nothing to help them help themselves. On that, I'm afraid I can't help you since I would tend to agree with them. If popular pressure pushes Obama to the left, it won't be because they are infected with "German ideas;" it will be because the threat of social collapse is often seen as being greater than the ills of deviating from ideological purity. Since the Austrian doctrine seems to welcome destruction, it is obviously difficult for you to recognize the general aversion people have to it--GM and the possible loss of 5 million jobs being only the latest example of a social dislocation you are perfectly comfortable (from your state funded position in a public university) with accepting. All for the greater good, eh? Omelet, eggs, etc.

[Peter Boettke]

Sean,

That you somehow think the Clinton era policies relate to Austrian economics (or free market policy more generally) just shows how corrupt the langauge has become.

And I am not talking about ideoligical purity, I am talking about the main teachings of a discipline. You wouldn't say I was dogmatic or ideoligical if I told you there was a law of gravity. I imagine you believe economic reality can bend to the whim of those in power.

Nobody here is advocating the corporativist state and the pleading of special interests. Take time out for a second and realize just how deep the criticism goes of our cultural, political and economic system.

Pete

[Erik Berg]

Sean, you seem confused. Austrian Economics is about freedom of the individual, the market and society -- not about a corporate political partnership which you are inferring. It seems to me that the point the author of this blog makes is that economists have moved away from their historical roots in philosophy and reason and morphed into a more empirical discipline. The point is that this change has taken some some of the quality out of the profession.

[liberty]

"On the contrary, you are all too strident. The fact is that, whatever your Austrian fantasy might be, implementation of some Hayekian paradise will ultimately favor those who are currently in political/economic power."

Can you please explain how a "Hayekian paradise" could favor those in political power?

Hayek argues for a smaller state with limited powers. The limitation of powers is unlikely to favor those in political power (unless by favor you mean that they, along with everyone else, will have a higher standard of living, because of a general improvement in economic conditions).

[As a side note, the limitation of government also leads to an untangling of the state from business, which will tend to reduce business power as well. They won't be protected and supported by the state, and will have to face competition.]

[Steve Horwitz]

Better yet Sean.... you come around here and complain anytime any of us get normative (and misspell my name in your weak attempt to praise my one bit of normative analysis), but where are you when we are talking about actual issues in economic theory? I don't see you over on Dave's Scrabble-as-capital thread telling us why Austrian economic THEORY is all screwed up and how you have a better understanding of capital.

You complain that we are all so ideological and, by implication, not serious scholars. Funny how you only appear to throw your own ideological barbs, and then promptly disappear when the conversation turns to what you apparently think we should be talking about.

Or would you prefer that we just closed up shop and went home so you wouldn't have to listen to our idle ramblings?

[Steve Horwitz]

One more thing:

Sean wrote " how closely the policies hew to your fantasy of a completely commodified, privatized, Hobbesian universe."

And that's where I stopped reading. Seriously. You think any of us who blog here want such a world? Have you read any of my work on the family for one thing? Have you read any of the Austrian work on non-market institutions, especially in the context of Katrina recovery? You accuse our readers of historical ignorance, but that comment tops out the ignorance level pretty high.

[sean andrews]

Peter says, "That you somehow think the Clinton era policies relate to Austrian economics (or free market policy more generally) just shows how corrupt the langauge has become."

If you'd branch out and read some of the criticism of that era--for instance economist Robert Polin's work--this wouldn't be such a surprise. Reagan was actually still pretty protectionist in international trade and it wasn't until Clinton--who also did much to route labor and welfare laws in the interest of neoliberalism--that NAFTA and the WTO could be implemented on an international scale. Note here "implemented," which could seem un-Austrian, with all it's top down connotation, except that, when you're dealing with places that aren't already free market, and making them free market is a policy priority, forcing these policies on others is the only way to go. Not very anarchist, but, that's how Wal-Mart gets its goods. (I really don't have a thing with Wal-Mart but since Dr. Horwitz seems hung up on defending them...)

"And I am not talking about ideoligical purity, I am talking about the main teachings of a discipline. You wouldn't say I was dogmatic or ideoligical if I told you there was a law of gravity."

But most of your post deals with how the whole discipline has gone awry because it doesn't ascribe to the worldview you propose--otherwise known as the "main teachings," of which evidently every other economist other than the select few of the Austrian/Public Choice variety are innocent. The idea that there is only one true wing of the discipline, that all the others are corrupted, misled, or otherwise unwise seems clearly to be an ideology.

"Nobody here is advocating the corporativist state and the pleading of special interests. Take time out for a second and realize just how deep the criticism goes of our cultural, political and economic system."

This may be the case, but the fact of the matter is that material relationships are such that removing state protections, deregulating, etc. is really just a form of, as Dr. Horwitz almost says in the CATO unbound piece, regulation by the market, wherein the people with the most economic power are able to wield that power in their interests. Since this has been the primary criticism of the actual left in recent years, and since this supposedly enlightened wing of libertarian economics has been far more vigilant in trying to prove every criticism had no merit than trying to point out the ways these interests were gaming the system, it seems like a paltry post-game claim to say that you didn't support it. That your ideal would not necessarily include institutions with de facto control over the economy is not much reassurance when history shows this to be the most common trajectory.

Your basic assumption is that the problem of the 1930s was that there was a state to intervene. This may be true as far as it goes, but the larger social question is, once enormous corporations have de facto control over basic provision of resources, can the society afford to let them fail if it also means suddenly having no way for those resources to be offered? Your theory seems to be that the creative destruction, for instance, of all value the banks, creditors, debtors and pension holders would be okay if it meant that the state received no power. People would lose their jobs, their homes, their means of survival, possibly their health, their lives, etc. but at least they wouldn't lose their "freedom." I see the elegant logic to this but I really don't understand why you are surprised when the majority of people don't find it compelling--especially those who've been told for the past thirty years that adopting this model meant they needed to tighten their belts, ask for fewer wages and perks, but in the long run we'd all be better. That, in retrospect, you say we implemented neo-liberalism incorrectly, that the Austrians lost the policy battle, is not convincing: it's what the IMF and World Bank tell countries all the time when their policies don't work out--and it usually results in a similar bout of public protest. I realize you've been baptized in a deep anti-Communism that cannot imagine anything negative about capitalism in comparison, but the last few decades have hardly been a picnic for people interested in the "freedom" to pursue their sovereign national interests and/or to protect, even if only briefly, their populations from the gales of market discipline.

ERIC: "Sean, you seem confused. Austrian Economics is about freedom of the individual, the market and society"

No. Austrian Economics is about implementing a certain definition of freedom, enculturating people so that they understand the condition of capitalist modernity as natural and moral and to restrict them from using their political power to make any change they cannot accomplish through the market. This enculturation must--if we are moral and strong--be implemented at all costs, regardless of local culture, despite alternative views of society or the individual. Primary amongst those which must be dissolved are the atavsitic, archaic belief that we should look out for one another. In an environment where massive corporation control access to resources, where commodity consumption is total and working for someone else the most likely employment opportunity the "minimax" state will likely result in just such a corporate control--and the resulting state, responsible for only protecting private property, will eventually come to be only a protectionist wing of the corporate apparatus.

If economists moved away from the pure philosophy of Mises and Hayek it is because they realized that this is a fantasy; that populations will eventually not stand for the results of this and if the only role of the state is to protect the property of the entrenched interests; that no matter how hard you try to sell "natural law" arguments about the unequal division of wealth and in income, eventually people grow tired of this and rightly see little reason to support the state that is obviously not operating in their interests.

This, to answer liberty, is how "a "Hayekian paradise" could favor those in political power?" As Buchanan himself said, it favors the status quo. In the current moment, it basically says, do away with all forms of protections or attempts at "social justice:" accept the current political and economic distribution as it is. Your confusion at this statement stems from your belief that economic power isn't political and that, in so far as it does exist, it is always justified because it is mediated by the free market. The contradiction comes in part from projecting into the past your ideals about the market, forgetting that there were messy political battles that led to the current distribution. Believe me I understand the utility on this "control" in the scientific apparatus: it is much easier to just begin from the status quo. Instead of needing to evaluate how resources were allocated or political positions gained, it is much easier to assume that "liberty" has always been, yet argue for its necessary implementation.

As for business "facing competition" I recommend you complement your reading of Austrian econ with some Marxist ones. It is certainly more complicated than either allows and I think both have valuable insights. But in any case, there are only isolated examples of where "competition" has been left to a purely economic means. It almost always results in either collusion between corporate interests (at the expense of the public) and/or the security and protection of the syndicate by the state.

And, finally, Dr. Horwitz (apologies for the misspelling) I don't say anything when people on this list try to apply their theories to broader contexts because I generally find them fairly insular, often silly, and rarely threatening. This is because there are plenty of people OUTSIDE of economics (and definitely outside of Austrian economics) that speculate on social and cultural interaction in much more nuanced and diverse ways. When the only interesting point of analysis is, "It's like the market: How?" there isn't much to say. And, in general, people here don't seem all that open to conversations with people who have different frameworks of analysis--hence the derision heaped on cultural theory a few weeks ago with little to no understanding of what that even was. In instances like this, piping in seems hopeless and mostly useless. People here are obviously uninterested in differing perspectives so the cost benefit ratio mitigates against any action. If I can't frame the response in the appropriate jargon it will be ignored or derided so why bother. I'd prefer to spend my energy on posts that seem particularly problematic--or in the case of Dr. Boettke, particularly self-righteous in their indignation about how not everyone on the planet isn't flocking to the fount of Austrian genius this time (and downplaying the extent to which they drank the cool aid in the 70s.)

Dave wants to try to talk about Scrabble as a metaphor for the capital structure, yet 1) make almost no mention of the fact that it is a game based on language, along with all the political and theoretical problems that semioticians and cultural theorists would discuss here; and 2) make one of the prerequisites of the game that letters can be shifted easily even once fixed on the board, i.e. as a metaphor for how capital can get shuffled around--an image of capital based on the faulty assumption of Mises that resources are somehow infinitely fungible. Now if he'd also recommend that, every few turns, we put all the "capital" back in the bag, shake it up and draw again, that might be interesting; otherwise, it seems like a thought experiment that he's trying on the true believers not something that he would be interested in hearing broader views on. Otherwise it just seems like he's farming ideas from the only fields of his already established knowledge.

As for whether you want a "fantasy of a completely commodified, privatized, Hobbesian universe" I admit I can't comment on your writings on family but the work of the center on Katrina seems only interested in proving one point: that there is only one method of human organization that is good and virtuous. This is private cooperation through the market. The image of the sparky entrepreneur is the only one that you focus on in your essays, none of the work on broader social movements such as those AGAINST privatization of their local resources.

The focus you provide is useful and interesting, but I don't see it as anything more or less ideological than organizations that have headed down to NOLA to prove the good deeds Jesus does for the faithful. I admit that, in browsing that work, I have yet to find something that is "non-market" in its purity. The conclusion always drawn from any non-market community interaction is that it *should* be non-state. In other words, in an environment where there was a massive failure of disaster relief, your answer is that there shouldn't have been any. When the ultimate answer to any question of government accountability is "drown it in the bathtub" it's hard to get a sense of the nuances.

Still, if you think there's an exceptional piece that I should look up in the Mercatus site or elsewhere I'd be willing to take a look at it.

In the end, my real problem is that you seem to have a real sporting approach yourself to throwing ideological barbs out about "THe Left." Since there isn't any sense that you are actually engaging with the serious political economic writers on left--people like Giovanni Arrigi, David Harvey, Robert Brenner, Robert Pollin, Leo Panitch, Sam Grandin, Michael Perelman, Jim Divine, Doug Henwood and many, many others--much of your critique of that paradigm seems totally vacuous. All of the above--in so far as I've seen statements they've made of the bailout, etc.--see little that is "leftist" about the current president except for his neo-progressive rhetoric. Further, all of them made much more vocal and rigorous critiques of the "actually-existing deregulation" than Austrian or Libertarians in general. My experience was that, while the serious left was raising the alarm, the libertarians were trying to silence this critique as crazed, luddite romanticism. Now that most of their predictions have come to pass, Peter is acting as if this was what he meant to say all along. Maybe I'm being petty, but I take offense to that.

[Rafe Champion]

Sean, I will leave the economists to defend themselves and rise to the bait on cultural theory. Not in a confrontational way, but just to ask where you think cultural theory is going. Who should we be reading to get a grip on the growing points in this area?
The best people who I know about in this business belong to a previous generation, (a bit like myself) - Barzun, Wellek, Edmund Wilson for example. Another of interest is Jeffrey C Alexander who made a long Marxist journey from Talcott Parsons to strong cultural theory.
http://www.the-rathouse.com/EvenMoreAustrianProgram/EMACulturevsGMProg.html
At the end of Alexander's trek is the question: what sort of research is this cultural studies project sponsoring to compare with the fieldwork of the "GMU program" and cognate studies eleswhere under Austrian and quasi-Austrian sponsorship?

[Casey Khan]

Prof. Boettke, excellent essay. I wonder if Prof. Becker might be able to profit from your analysis. In his latest post, he reluctantly admits the epistemological crisis that the vast number of macroeconomists are facing in their complete failure to both coherently explain and provide solutions to the problem.

http://www.becker-posner-blog.com/archives/2008/12/central_bank_co.html

As Alasdair MacIntyre observed, when an intellectual tradition faces an epistemological crisis, one of two things either occurs: 1. the tradition is able to innovate and move forward, or 2. it fails to innovate, bringing about the tradition's capitualtion and replacement by another intellectual tradition.

It would seem that the incoherence by much of mainstream macroeconomics is laying the foundation for an outsider to take the helm. For the "classical" and Austrian tradition, "Who are the economic voices today that are the equivalent to a Mises or Friedman" who will lead the tradition's charge into dominance? I say the best we can hope for right now is for faith in spontaneous order. He, or she, might not even be born yet.

[Unit]

Sean,

"...and to restrict them from using their political power to make any change they cannot accomplish through the market."

You make some good points but this sentence is revealing. Political power is a means to a goal. For me, at least, the freedom of people to interact, associate and exchange, i.e. the market, is a goal. What the best way to get there is nobody knows.

Now, you do recognize quite well that the political process is inherently corrupt and unreliable. Yet, you still idealize the political process over the market, the means over the goal.

[sean andrews]

UNIT: "Now, you do recognize quite well that the political process is inherently corrupt and unreliable. Yet, you still idealize the political process over the market, the means over the goal."

The difference, of course, is that for politics, all you need is your body, your voice, your will. To affect change through the market, you need capital. The notion that markets collate preferences along the same lines as votes (which Mises seems most guilty of) ignores that we aren't all born with a bundle of cash under the bed.

I agree that the goal should be, as you say, the "freedom of people to interact, associate, and exchange," but there are a variety of ways to do this that don't involve the actual sale of something through the market--and many of them involve collective, collaborative sorts of endeavors in which the individual qua individual is secondary. In other words the sorting of individual preferences according to some monetary calculus is not the ultimate goal. I've read plenty of Mises and Hayek (as well as a little Rothbard, Nozak and Coase.)

Their principled, methodological individualism and focus on the market and price theories certainly throw a lot of interesting things into relief. But they do not, for me, explain all of social interaction--nor can they. They also willfully overlook the history of the social formations they idealize. Taken together, this makes me see them as inadequate for being the *SOLE* framework we should adopt in constructing our politics or political processes. The latter seems to be the basic contention of every post Dr. Boettke makes.

I also certainly realize that both the political process and the market are and can be corrupted and, perhaps, where we can agree is that this process should, and in some ways must continue. The basic premise of the Austrian school is that their framework is somehow the outgrowth of a basic human nature: self help, freedom of choice, rationality, etc. I will leave this psychological essentialism to one side and say, instead, that in practical terms, in so far as this is true, the basic motivation of the average person is to just get by. This leads to a sort of principled inertia on the part of most of the population of a society which, though their bodies and voices are presumed to be part of the polity; though their resources and energy may serve to reproduce the market; they remain, overall, content with whatever regularity they can carve out of the chaotic potential of society. In a democracy, this seems to be exacerbated. Buchanan's premise that politics is corrupt because of politicians and the answer is to incentivize it because the market doesn't lie and disciplines accordingly overlooks the foundation of that system in the people. If the government is corrupt, if politics, like the market, is corrupt it is because people have either stopped watching or are so overwhelmed by their daily lives; so cowed by intellectuals who claim to know more about the functioning of economics and power than the people who live it everyday; so prone to blaming the most visible outsider, in the most reactionary way, for their troubles; that they have no time to parse the facts and, more importantly, the representative system provides little way to pressure the government.

Making the latter operate more like a market has done little to help this. US Contractors in Iraq operate completely outside the law of either country, reaping profits not from the rational process of the competative market but through no bid contracts that are then subcontracted more cheaply and with even less oversight. It is a reasonable expectation that this is how the privatized political process will work. To say that the "political process is corrupt" assumes that the market process would look dramatically different. I don't see them as distinct in any way and the families of Iraqis killed by US contractors would likely by much happier having them operate in some political jurisdiction rather than letting the operate as some contemporary contingent of the Knights Templar.

In any case, the average American, who's tax dollars go to fund this adventure, is told by the earstwhile critics of the "political process" that they need to be most afraid of an economic stimulus package equal to a few weeks in Iraq--that bailing out GM is just throwing money down the tubes, as if we were getting some marvelous return on our investments in Mess-o-potamia of late.

As for Rafe's modest request, you've actually really stumped me. I can name quite a few people who are doing cultural theory, but I don't know if I can tell you anyone who's doing it particularly well in this time. I was intrigued by your account of Alexander and can see why the 2002 article you linked to could be useful. I am partial to the actual Birmingham school, which, incidentally, is the OTHER GMU method (i.e. in addition to the economics departent, GMU also has one of the only PhD programs in Cultural Studies--in fact, when you mentioned GMU it took me a second to remember the context in which we were speaking. (on this, if you were interested in a more recent book on the subject of cultural studies, Paul Smith, a professor in that program, has a very lively text called, "Primitive America: The Ideology of Capitalist Democracy." Readers here may not agree with some of his conclusions, but reading it would certainly provoke.)

I would contend that Birmingham--and especially Stuart Hall and Raymond Williams, not to mention the next generation of scholars--perform just the sort of "strong" method Alexander is interested in espousing: the fact that there is contingency and issues of articulation and power does not point to some sort of waffling on their part, just an awareness that even the concept of culture is itself shifting. On this, I'd also recommend Bourdieu--a new book just released called "The Social Structures of the Economy" might be of great use. Alexander seems to want to create a sort of transhistorical understanding of Culture, which Bourdieu plays with some, though always reflecting on the way he utilizes concepts gleaned from one period or social system to another. I'd also say that Alexander doesn't really understand Bourdieu's key concepts--focusing as he does, only on habitus, ignoring "field" and "capital," each of which are essential to the determination and definition of habitus.

As a side note, I'd point out that Khan's understanding of the current potential within the field of economics

(" when an intellectual tradition faces an epistemological crisis, one of two things either occurs: 1. the tradition is able to innovate and move forward, or 2. it fails to innovate, bringing about the tradition's capitualtion and replacement by another intellectual tradition.")

is a perfect example of how these concepts could be used--his essays on science and the arts clarifying this and his book "Homo Academicus" being of great interest. The subject--the French intellectual field in the 1960s--may be somewhat insular but his method is quite striking. I know Alexander doesn't have much good to say about sociology of culture in the 1960s, but a lot of good work was done, on which the more recent work is building.

Giddins early work on structuration would probably be useful for Austrians and the more recent work by Ulf Hannertz (and the issues of Theory and Society) on "complexity" and "vitality." These seem more focused on the issue you want to get at with Alexander (on "cultural autonomy") though I'd argue that the autonomy issue is less in need of explanation than the structuration--a point on which I've taken recent theorists like Nick Cauldry (/Inside Culture/) to task. In any case, my main point here is that there are a lot of non-economic people working on issues of culture and cultural thoery--and there are many aspects of society and culture that cannot be considered, yet anyway, in strictly economic terms. My belief is that is a good thing, but, perhaps tellingly, my fear is that this lacunae in economic theories will not be overcome by expanding the theories in scope or complexity: instead, it will be to attempt to increase the power and intensity of the economic logic, making it ever more total so that those previously marginal spaces can also be mapped using this finally universal logic.

[LisaMarie]

Sean,
Are you honestly saying you don't need money to succeed in politics? How many poor people get elected to political office?

[sean andrews]

"Are you honestly saying you don't need money to succeed in politics? How many poor people get elected to political office?"

True enough, but politics isn't just political office. My thinking here is akin to Chantel Mouffe's understanding of "politics" in "The Return of the Political." It is also social movements which put pressure on politicians. And these have and do succeed rather starkly, though never with the blessings of those with money, hence the tall barriers to getting into office.

That said, at local and even state levels in the US it is possible to get into office. For instance, I don't think Sarah Palin had much money when she started. And a little more than a month ago it was still possible for her to be a heartbeat away from the most powerful political position in the country and arguably the world. For some, she's still just waiting in the wings for 2012.

[Sheldon Richman]

Sean writes, "how capital can get shuffled around--an image of capital based on the faulty assumption of Mises that resources are somehow infinitely fungible."

This is Mises's assumption? Okay, I think I've read enough from Sean.

[liberty]

Sean, your comments are intriguing and thought provoking, if ultimately, I think, mistaken.

You argue that Austrian

"theory seems to be that the creative destruction...would be okay if it meant that the state received no power. People would lose their jobs...their lives, etc. but at least they wouldn't lose their "freedom.""

Now, first of all, Austrian theory [with the exception, perhaps, of Rothbard] is positive (even if you think it is ideological) so the theory is never about whether people would have to give up their freedom. That was not the argument of Mises or Hayek when they spoke of things like creative destruction, entrepreneurship, the problems with bailouts and subsidies, etc.

You continue:

"I see the elegant logic to this but I really don't understand why you are surprised when the majority of people don't find it compelling--especially those who've been told for the past thirty years that adopting this model meant they needed to tighten their belts, ask for fewer wages and perks, but in the long run we'd all be better. "

oooh, this is very clever. You've taken the communist platform and accused Austrians of it. The communists asked the people to tighten their belts, ask less in wages and perks, and hold out for the day when communism would make everyone better off. The people did and waited and it never came. However, this is not the Austrian argument.

For 30 years people would have to wait, with lower wages, in a free market? Only if you believe that business stuffs profits into mattresses, and that unions and government subsidies can create wealth and prosperity out of whole cloth. It is true that if you want higher wages TODAY then forcing a firm to give it to you will prevent a wait; but what will occur tomorrow? One possibility: unemployment for those unlucky enough to be axed at that wage rate. In addition, yes, over the longer term this also means no growth in wages, no new jobs, no new technology and lower prices.

You also say:

"but the last few decades have hardly been a picnic for people interested in the "freedom" to pursue their sovereign national interests and/or to protect, even if only briefly, their populations from the gales of market discipline."

But here you are using "people" to mean "state." PEOPLE don't have sovereign national interests. PEOPLE don't have populations. States have those things. You want to ensure the rights of the STATE not the PEOPLE.

[sean andrews]

liberty writes: "For 30 years people would have to wait, with lower wages, in a free market? Only if you believe that business stuffs profits into mattresses, and that unions and government subsidies can create wealth and prosperity out of whole cloth."

I appreciate your engagement and assure you I don't believe the latter--though most Austrians seem to believe that entrepreneurs can create wealth and prosperity without workers or regulations so I suppose it's all about where we punctuate the cycle. On your first point, I don't believe that they stuff profits into matresses, but moving capital overseas does about the same amount of good: it's called the wealth of NATIONS not the wealth of multinational businesses. stagnant wages for thirty years are not a figment of my imagination:

http://www.iir.berkeley.edu/events/spring08/feller/

And...

"But here you are using "people" to mean "state." PEOPLE don't have sovereign national interests. PEOPLE don't have populations. States have those things. You want to ensure the rights of the STATE not the PEOPLE."

Liberty, do you travel internationally? Do you use a passport? Is it a passport that says "Earthling"? Not yet? Well then I guess you still live in a world of states with populations. Did the country you live in have elections this year? Mine did. How many non-US citizen-earthlings voted for Obama? How many voted directly for their representatives to the United Nations? The WTO? The answer to the last three questions is "n=0." I realize you're being theoretically provocative when you throw down this gauntlet of radical libertarian philosophy, i.e. people do not = the state. But the fact of the matter is that the only nominally democratic political institutions we have are still based on local-state-and federal governments. I realize that, even though many people in the world would still like to have democratic governments, Austrians would like to pretend like states can never represent the interests of their populations. It is a convenient position to take, particularly since most of them work in the Anglo-American context where they enjoy the basic enfranchisement others might wish for. How they must pity those poor souls in the former Yugoslavia who keep breaking apart bigger states--only to get trapped in even smaller states. So misled are they about what a state is good for...

[sean andrews]

Also, how do you propose ensuring the rights of people without at least a minimalist state? What are those rights? How did we discover them? Who is to say those rights are right and defensible? If we all do agree on them, what do we do when outsiders come in? Do we make them agree or do we change the rules? Or maybe we don't let outsiders in? How do we stop them? Funny how "civil society" and "people" start bleeding (sometimes literally) over into "the state" the moment anything other than a chatroom argument is at stake.