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« What is Wrong With This Picture? Soros pledges $50million to fund new economic think tank in Hungary | Main | Economists, The Public, and Popular Culture »


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I am a new comer to most ideas on liberty, but, I read Hayek´s Individualism: True and False. This essay makes a very important case on how social scientist view man/woman. This important ideological ¨bias¨ helps sometimes understand how divergent methodological approximations to a problem are in social sciences.

I see the debate circling around an essay by F. A. Hayek: Individualism: true and false. When reading this essay I thought how social scientist are ¨bias¨ to there own ideological views. Is in how you see man/woman from the get go in your analysis, is how you will attribute the capacity to act.

I work in Human Development, and the capacity or agancy debate is central to how you develop solutions to many of the research problems. I am still new at research but my guess is that social sciences have a long road to overcoming ideological bias.

"what led social scientists to present such a fragile model of freedom?"

1. Ignore contrary evidence.

2. Uncritically build on bad data and studies.

3. Redo bad studies using #2 as, now, good, peer-reviewed data.

4. Ignore criticism or claim it's been addressed by step #3.


I think the problem is that freedom is fragile politically, and there's a variety of reasons for this.

I think that the most important one (or simply the more general) is that liberty is a public good and power is a public evil: the benefits of liberty can't be privatized and the costs of power are quite always socialized. So there will always be an oversupply of coercion and an undersupply of liberty, unless special conditions, cultural or institutional, which in the last century have systematically failed except in fighting totalitarian dictatorships, hold power in check.

I would add that, from a more economic point of view, the paucity of definitive empirical evidence in social sciences makes indulging in wishful theorizing much easier in economics than it is in physics. Bad ideas can last very long, maybe forever, and convergence toward a common theory is rarely achieved because priors, often of ideological origin, always matter.

While one needs to be blind to reject the theory of relativity and prefer newtonian physics, there's no need to close one's own eyes to keep on being keynesian, austrian, neoclassical, sraffian or what else (oh, well, in certain cases maybe some sight problems may be necessary :-D).

There's no conspiracy against free market theorizing, like some comments suggest: it is just that antimarket biases can rarely be overcome by fact checking, exactly as promarket biases.

What led social scientists to such a "fragile model of freedom" was most certainly not the preoccupation with such non-problems as whether markets and people have perfect or imperfect information, or are rational or irrational (whatever that means), or whether students in lab experiments trade coffee mugs efficiently or not, or worse yet, how the 15th century villagers somewhere in the Alps or in Japan or in Timbuktu or in Papua New Guinea managed to tend their meadows, preserve their fisheries and other such things.

The "model of freedom" was challenged long before these fancy modes of theorizing colonialized thoughts and publications of modern academics. And that challenge, I dare to say, still remains by far the most important and unresolved one but which was not and frankly cannot be even approached in any meaningful way by the kind of studies and theorizing Stossel writes about.

The modern, i.e. CAPITALIST "freedom" continues to be challenged on the all-defining question if it indeed diminishes (or multiplies) both freedom in its formal legalistic sense and freedom in its economic sense.

Freedom in its economic sense – or more precisely, the problems of exploitation (conflict of economic self-interest), employment, economic security etc. – is by far the more important of the two. Granting more or less freedom on these or that supposedly "a priori" or "self-evident" or "natural" grounds, is an empty play with words. The recognition, implementation and survival of freedom-enhancing rules and institutions will only be possible, and therefore should, start from the analysis what works and what doesn't work.

So, does capitalism work or not? Does it contribute to BOTH the legal and the "real" freedom or not? Does capitalism, by the very nature of its economic organization, create conflicts of interest or is it about a closest possible link between legal freedom to own, hire and trade, on the one hand, and the "freedom" from poverty, unemployment and economic insecurity, on the other?

Everybody understands that these are the key questions for research and debates.

The problem is to find the most fruitful research path to demonstrate (or refute) the fundamental and all-defining claim that capitalism is indeed about harmony of economic self-interest of all.

Call me as a die-hard skeptic but I don't see precisely how the studies of long-gone societies, which have nothing to do with capitalism as a system governed by a set of historically unique set of institutions, can ever be relevant to the study of capitalism as it has historically developed.

To illustrate the problems involved, take the attacks of the enemies of capitalism on the hated wages system and inequities it generates. Or, take the current problems of the business cycle, the unemployment, the widespread economic insecurity and decline. These are all problems relating to complex problems of organization, utilization, distribution of societies' resources (factors of production) in a modern highly complex monetary-exchange economic mechanism. It is obvious that in the present this highly complex monetary-exchange mechanism is seriously disturbed and not functioning well. Problems created by its failure (whatever the cause) threaten the very fabric of our modern economies, the very livelihoods of its inhabitants, their very political institutions that (still) preserve individual liberty. We are witnessing that capitalism – the system without which individual liberty is impossible, is under siege.

Now I want to ask. What insights into how the modern monetary-exchange economic system works, do the studies so eloquently described by Stossel actually offer? Or let me be even more blunt: are they even relevant to the study of economic (and other) institutions of CAPITALISM?

Here are my guesses, in no particular order:

1)Freedom leads to solutions often unanticipated by a single mind or several minds focused on a single ideology.

2)Robust solutions arrived at in the absence of a central planner or planning committee contradict the existence of such planners and committees. Solutions developed through free association are offensive to the intellect that imagines a "better way."

3)Politicization of the social sciences and mainstream education led teachers, students and theorists to assume that community is actively created by political power rather than passively emergent through the free association of cooperative individuals.

Wladimir Kraus:

"Call me as a die-hard skeptic but I don't see precisely how the studies of long-gone societies, which have nothing to do with capitalism as a system governed by a set of historically unique set of institutions, can ever be relevant to the study of capitalism as it has historically developed."

Schmoller would have agreed, but the relevant problem of human coordination are the same throughout histories and continents, and past solutions may contain insights into possible present solutions.


you misunderstood my argument as well as apparently Schmoller's. To point out unique characteristics of capitalism in *abstract* is not at all the same as gathering useless material of Germany's shoemakers compared to England's.

Wouldn't you agree that the analysis of a business cycle of a modern economy is of an entirely different character than the coordination problem faced by cannibals of Papua New Guinea? If so, then you are a Misesian, if not your position is rather that of Friedrich von Wieser.

"...past solutions may contain insights into possible present solutions."

Would you please give me some specific references, some evidence instead of the indefinite "may contain"? I would love to learn how to solve the problem of the credit crunch and the related problem of capital inadequacy of the banking sector using some insights and examples of human coordination from "throughout histories and continents".


Wladimir Kraus:

¨Now I want to ask. What insights into how the modern monetary-exchange economic system works, do the studies so eloquently described by Stossel actually offer? Or let me be even more blunt: are they even relevant to the study of economic (and other) institutions of CAPITALISM?¨

How does a book like George Selgin´s, ¨Good Money(¨ add up, if the monetary system back then wasn't as complex as the one we now have?


I think we have had this discussion before. The critical issue you are looking at is the explanation of the "mechanism" as work which enables social cooperation under the division of labor without central command.

There is, of course, a scholarly quest simply to understand a phenomena. How is operates, what it achieves, and why it has (or does not have) importance for understanding human societies.

But if we get the picture right and explain the principle, we may (I would say) ask about the scalability of the solution. Some arguments are scalable, others are not. Good to know which ones and why or why not.

So I think your skepticism may be healthy, but your dismissal might be premature.


P.S.: David Friedman teaches a course at Santa Clara University School of Law on "Legal Systems Different From Our Own." If you listen to him, it is fascinating stuff. Is a comparative analysis always obvious? No. But does David excite the curious mind? Of course.


I think we need to recognize the sense in which economics is unnatural. You mentioned Vernon Smith’s “Two Faces of Adam Smith.” In that article he relies on evolutionary psychology. I think that same evolutionary perspective supports the conjecture that we are programmed with ideas and intuitions on society that were functional for life in the Pleistocene, but of limited applicability to the great society. It would probably be an overstatement to say we are programmed with one intuitive theory of economics the way we seem to be programmed with one intuitive theory of physics. But I think something close to that idea is probably true. I would suspect, for example, that the “fear of goods” (as indentified by Mises) is related to an innate Us vs. Them psychology that was appropriate to band-level society. (We are programmed to code for “coalitional alliances.” Inter-group conflict is one of the essential facts of our biological beginnings as a species. We’re programmed for that. Trade overcomes that programming and turns enemies into friend. But that transformation is literally unnatural.

If economics is unnatural, then we should not be surprised that we have a long and robust tradition of anti-economics and that even the economists’ models of social cooperation often misrepresent freedom as fragile.

I often think in political terms. In the case of this question, as well as other questions of economics, how does one pursuade the public of one's position? Their is no doubt in my mind that explaining things in general terms and referencing economists who said "X", does not do the trick---ever.

When I first became exposed to the work of F.A. Hayek my reaction was "yes". I had confusedly struggled with this notion of dispersed and incomplete knowledge versus expert opinon, but it was not until I read of Hayek, that it became very clear to me. does one prove/pursuade others his methods get better results than what we in the US do? We know that at the extremes, Cuban Socialism is worse than Hong Kong Capitalism, and that East German Communism is worse than West German social democracy and the central Soviets worse than the center right quasi-free market US economy.

But our politics exist inside a tighter band than that. I love ideas, but I prefer some empirical evidence. Maybe inside a narrow range of policy choices such has traditionally been the case in the US, the improvement "on the margin" for more free market is small.

My only point is, I would love to see more empirical analysis--perhaps at the State levels in the US? There is not enough persuasion generally in the economics profession--at least as it relates to politics---that's what it seems like to me.


I do not think trade is an unnatural as you suggest.

Human conduct is sensitive the seen and the unseen. When the victims of a policy are far removed in time and place from supporters, and the costs are so distributed as to be difficult to attribute to the policy, human moral instincts -- which depend on close proximity and obvious causal relationships -- fail to guide moral conduct. The ordinary emotional responses that help preserve social cooperation and peaceful coexistence (e.g. sympathy, guilt, shame, etc.) are not reliably triggered in the indirect world of politics. The media perverts our moral instincts from their original function -- it finds loopholes. Thus one heart rending story of an elderly couple's struggle to afford medical treatment can generate support for a policy which subsidises the healthcare of one of the wealthiest groups in the country.

I think people are more built for trade than you seem to suggest, but I also think the emotional triggers that maintain the system do not function reliably in the extended order. This is something civilisation and tradition has evolved to deal with.


I did say, "Trade . . . turns enemies into friend. But that transformation is literally unnatural." And I think I will stand by that. I don't think that's quite the same as saying trade is unnatural. Trade with strangers is unnatural. Anyway, that's not the really central point in this context. The point is not that *trade* is unnatural, but that *economics* is unnatural. We have Stone Age minds in our modern skulls. And cave man is not suited to think about the extended order. Economic theory is unnatural in very much the way physics is unnatural. If that's true, it helps explain why even economists often model freedom as fragile, the observation puzzling Pete in his original post.

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