'An Engine of Creativity Without a Clutch'

|Peter Boettke|

That is how my teacher Kenneth Boulding described his teacher Frank Knight.  I was simultaneously a student of 2 of Knight's students -- Boulding and James Buchanan -- one semester back in the mid-1980s.  Both spent a lot of time on Adam Smith's deer-beaver example, and what Buchanan referred to as the simple analytics of natural liberty.  I asked Boulding once while visiting with him at his townhouse for milk and cookies, why we were discussing the deer-beaver model so much in his and Buchanan's class, his answer ... Oh, Frank Knight did that, or he talked about world religion, so you are just being exposed to the long Knightian tradition of economic education.  He then laughed his wonderful laugh.  He paused, and then said with a smile on his face, 'Knight was an engine of creativity without a clutch.'

I have a strange intellectual relationship with Frank Knight.  See my paper with Karen Vaughn on Knight that was published in HOPE.  On the one hand, I often find him to be the most arrogant and frustrating major thinker in the history of economics, and on the other hand, I sometimes find him to be among the most philosophically deep, analytically penetrating, and brilliant economist and political economist to have ever worked in the field.  Which Knight I am encountering varies from piece to piece.  Risk, Uncertainty and Profit (1921) and Intelligence and Democratic Action (1960), as well as "'What is Truth' in Economics?" (1940), all fall in the deep, penetrating and brilliant category, whereas his book reviews, his critical essays on capital and on socialist calculation fall in the arrogant and frustrating category.

Today I stumbled upon his 1938 review from the JPE of Walter Lippmann's The Good Society.  This review, ironically, has both categories on display in full view for the reader.  Consider the following extended discussion of the shortcomings of the book after starting the review by stating "That Mr. Lippmann's book is brilliant goes without saying to any reader of serious current social and ethical discussion in the English language in the post-war years."  Two paragraphs later we read that Lippmann's "interpretation of recent and current history and his general thesis seem to the reviewer both entirely sound and fairly simple and obvious."

However, just a few pages into the review, Knight argues that: "The absence of analysis and of a scientific approach is noteworthy at every stage of the argument -- whatever that may or may not imply in the way of criticism, in view of the type of book the author was trying to write." There is, according to Knight, "no scientific inquiry" evident in the book as to why laissez faire capitalism fails nor why collectivism fails.  Instead, Knight insists we get treated to the plain dogma that "not merely that collectivism means tyranny but apparently that it is impossible, or at least theoretically incompatible with social life above the level of savagery."

And here things get 'interesting' --- Knight writes: "In another place reference is made to the 'discovery', by Professor Ludwig von Mises, that a collectivist economy in peace is incapable of planned and calculated organization of production.  It is true that Professor Mises argued for this 'impossibility', but the position is indefensible.  The essential fact is that government of a collectivist state would do anything it liked, within the limits of physical and human, i.e., political, possibility and its own competence.  It might 'theoretically' run economic society in substantially the way in which say, the United States of America is run today, as to the activities of men and their results, collective and individual. The establishment of governmental monopoly of enterprise with ownership of productive wealth would not necessarily change much, if any, of the concrete process.  Or, it might convert society into a model orphan asylum, or into a shambles."

Really?  Knight seems here to purposefully obfuscate the issue of economic cacluation under collectivism.  Will not rehash the Misesian position here -- see this essay for an overview -- but let us just say that an economists of Knight's knowledge and analytical skill should that prices without property are a 'grand illusion' and that prices and profit and loss are necessary guiding devices within the competitive order.  In other places throughout Knight's writings he provides brilliant and insightful economic analysis into the role of property, prices, and profit/loss so it is unclear why he is obscuring the issue here (and in other places as Vaughn and I discuss in the paper above -- though our point is to make it clear why he tied himself in such knots).  

There is, of course, another objection to collectivism strongly associated with Mises (read not only Socialism, but Omnipotent Government) and Hayek (read not only Collectivist Economic Planning but The Road to Serfdom) and that is the political consequences of collectivism.  Here Knight joins in -- "the view that collectivism means dictatorship is correct beyond reasonable doubt."  He continues, "The authorities of a collectivist state would have to have unlimited power, and security of tenure, and would have to exercise their power ruthlessly to keep the machinery of organized production and distribution running.  They would have to enforce orders ruthlessly and suppress all disputation and argument about politics; and as a condition of minimum efficiency, they would also have to do everything possible to remove grounds of differences of opinion, by giving the people the appropriate 'information' and conditioning of attitudes, i.e., 'propaganda.' They would have to do these things whether they wanted to or not; and the probability of the people in power being individuals who would dislike the possession and exercise of power is on a level with the probability that an extremely tender-hearted person would get the job of whipping-master on a slave plantation."

The review of Lippmann's The Good Society has both Knight's going on -- arrogant and frustrating in some passages, and deep, penetrating, and brilliant in others.  There is much to learn from such complex thinkers. Boulding, who actually was a lot like Knight in terms of being an engine of creativity without a clutch, used to say -- "The world is a muddle, it would be ashame if we were clear about it."  Followed, as all Bouldingisms were, with his characteristic laugh, smile and twinkle in his eye, as he invited your puzzled reaction.

What teachers of yours have sparked your curiosity and both enraged and enlightend you at the same time?  What thinkers do that for you when you read them?

 

Comments

[RossEmmett]

Pete: a wonderful, dare I say, brilliant, commentary on Knight. You captured what enthralls and infuriates both of us.

His position on collectivism in the late 1930s still gives me fits in trying to understand it. The paper you and Karen Vaughn wrote does a good job at getting at parts of it, but I still think there is more, and I'm not sure what the sources of his conflicted ideas are. Is this part of his working out what it means to comparative social science a la Weber? Is it just part of the functionalist background that gave us the first chapter of The Economic Organization? Is it influenced by his friendship with Edward Sapir and incommensurability?

I don't know. I need to figure this out, of course, so we should keep talking about it!

[Daniel Kuehn]

I'm not sure if you'll like this or not, but Stiglitz actually. He is in the top three most brilliant economists I've come across. But he also makes some very odd claims - his whole the invisible hand doesn't exist thing. And what's puzzling for me is just like with your description of Knight I know he is not that naive (he's no Naomi Klein or someone like that), because he's demonstrated it elsewhere.

I'm even less sure if you'll like this, but it also reminds me of you. Simultaneous brilliant insights and deep command of the science with claims that want to make me bang my head against he wall.

[Peter Boettke]

Daniel --

I agree with you about Stiglitz. He is the leading theorist of the generation I was brought up on of thinkers. I would actually place him above Lucas, but that would lead us into a very intriguing conversation beyond blogs. I am completely obsessed in many ways with Stiglitz.

I actually had the great honor of interacting with Stiglitz before he went to DC back in the fall of 1992 and we even went to dinner together as he sent me a manuscript of his Wicksell Lectures to discuss. I later would review the book from that manuscript for the JEL.

Pete

[Daniel Kuehn]

Oh yes I know the review.

And it should go without saying I don't mean anything bad by suggesting I feel along the same lines about you. I would assume being classed in the ranks of Stiglitz, Knight, and Boulding wouldn't bother you all that much...

[Thinkmarkets.wordpress.com]

Knight did not like Mises and therefore would give him as little credit as possible. I think Knight found Mises's intellectual style offensive -- many people did. So if Knight were confronted with Mises's ideas or points he would find a way to disagree.

But Knight himself was a contrarian (but much more so than Buchanan). He hated to agree with anyone, including himself!

Knight had complex views on capitalism. On the one hand, he was for it and knew that freedom depended on it. On the other hand, he saw that the reasons it was failing politically -- and maybe even economically -- are "valid." People just don't like the inequality it creates, the coarsening influence of commercial culture, the skepticism that liberalism creates about our treasured certainties is terrible to face, and so on.

So Knight's view was a pessimistic view of human nature and the future. Mises saw all the horrors Knight saw but retained an ultimate optimism. I don't think science alone gives us reason for optimism or pessimism. The universe is indifferent.

Mario Rizzo.

[Roger Koppl]

It can be hard to distinguish between 1) an agent in the system making a within-system calculation and 2) an imagined observer of system calculating where the whole system is headed. In "capitalism" you have the former, not the latter. When the lion chases the gazelle, both animals are doing a lot of calculating, but the chase will end well for only one of these calculating beasts. Something similar is true of the calculating entrepreneurs of capitalism. In theoretical socialism, you have 2) and not 1). In real socialism you get 1) partially correcting for the failures of 2), but also partially undermining 2). Maybe Knight had trouble distinguishing 1) form 2)? If you don't make the distinction, then the calculatory rationality of capitalism is a knockdown proof that there is no "calculation problem" of socialism.