Desperately Seeking Ludwig, F. A., and Milton

Despite rhetorical differences, the most important market oriented thinkers of the 20th century were Ludwig von Mises, F. A. Hayek and Milton Friedman.  During their respective careers they witnessed the rise of socialism, the hegemony of Keynesianism, and the reversal of the laissez faire principle to one that favored state intervention in the economy.  Each of these towering intellectual figures tackled the theoretical and empirical arguments that were responsible for this ascendency of economic statism.  They were forceful minds and articulate spokesman in written and spoken word for the position they put forth to counter the cultural and scientific transformation they were witnessing.

Unfortunately, the pendulum has swung back since 2001 and with the current financial crisis timed with a Presidential election we hear of the instability of unregulated markets and the need for regulation and control once again.  Statism is on the rise again in rhetoric, and this rhetoric will soon be followed by policy action.  With the consequences that we very well may destroy the US economy --- and I am not using the world "destroy" lightly and just for rhetorical flare.

We academics who see our purpose as including not just scientific truth-tracking and quality teaching, but also as being engaged in the policy discourse of our age, believe in the proposition that ideas do indeed have consequences.  A change in ideas, will change the language we use; a change in language, will change the rhetoric; a change in the rhetoric, will change the actions taken; and the change in actions, will result in policy consequnces.  So we who toil in academics invest primarily in the first and perhaps second stage, while journalists and policy makers more or less engage in the third and fourth stages.

Right now the economics profession has not had a clear intellectual leader step forward to challenge the emerging statist hegemony in the wake of our current financial situation.  We are in a state of desparately seeking the next Ludwig, F. A., and Milton.  No disrespect to the great economists amongst us, e.g., Andrei Shleifer, or my colleagues at GMU, e.g., Tyler Cowen and Russ Roberts, but the arguments emerging from these talented men do not have the 'force' of those presented by Mises, Hayek and Friedman. And without that intellectual force, our future in the US is potentially very bleak as statism will crowd out market creativity, and wealth creation.  Where is the next intellectual figure that will explain the impossibility of socialism, why the worst get on top, and why government policies are counter-productive?

How do we find these type of economists and how do we cultivate them?  And without them can we survive the statist onslaught on our economic freedom?

Comments

[DPrychitko]

"And without that intellectual force, our future in the US is potentially very bleak as statism will crowd out market creativity, and wealth creation. Where is the next intellectual figure that will explain the impossibility of socialism, why the worst get on top, and why government policies are counter-productive?

How do we find these type of economists and how do we cultivate them? And without them can we survive the statist onslaught on our economic freedom?"

Some time ago, Pete, both you and Steve were claiming "It's getting better all the time," combined with such extraordinary statements as "I'm glad to be living in this generation than any other one in human history," and so on. (Not exact quotes, as I don't have time to search your archives this fine Sunday morning.) I challenged the former claim, I said statism is on the rise, blah blah blah. My argument was, quite obviously, so weak not to convince. But, I'm glad to hear that you've become convinced by other means, though I'm not as optimistic as you in believing economists will save us from this problem.

[Steven Horwitz]

Hey, I haven't changed my tune. No doubt we can and will hit short-run bumps in the road, and I do agree that the ideological atmosphere has changed, but I also believe that the underlying forces of human creativity and markets (which, as someone once said, are like weeds and can't ever totally be eliminated) will outweigh the bad ideas, leading to ongoing human improvement over the medium and long run.

I still think I'd rather be alive now than any other time in human history, and increasing statism is not incompatible with ongoing human improvement (though at a slower rate!) if one thinks other factors are stronger than the negative effects of growing statism.

[Gabriel]

Prof. Boettke, before winning the public at large, shouldn't one win over the profession?

If one believes with certainty that current events do not undermine laissez-faire policy prescription, in any way, then yes, the problem is simply one of spreading the same old ideas. Clearly, the profession at large does not believe that, hence its uneasiness with universal, time-invariant policy prescriptions.

Why that is and why 95% of the profession failed to converge to your beliefs after decades are, I suspect, far more important questions in the grander scheme of things.

Lastly, if the old theory and rhetoric lack the "force" they once had, why should we still support their policy prescriptions as if they didn't? Maybe, simply put, those guys back then were wrong.

[Kevin Hilferty]

Gabriel,
I disagree with your last point. Just because the theory of Mises, Hayek, and Friedman may lack the force that they orignally carried does not mean that their "policy prescriptions" are wrong or not applicable for today. The reason, in my opinion, that their rhetoric lacks the same force is merely because socialists have had time now since these mens' deaths to work on counter-arguments, and these have captured the minds of many in the profession and the public.

After Mises gave the great criticism of socialist calculation in the 1920s, socialists like Oskar Lange then had time to counter with new ideas like surplus-shortage based control systems. Hayek and Mises were able to respond well to these new forms of socialism, but their recommendations for prosperity and freedom stayed the same.

Years have now gone by and again the arguments for statism have evolved, arguing that they will bring not only stability but moral superiority. Despite the changes in arguement, the results of statism and regulation remain the same: retardation of growth and decline of freedom. The answer to remedy these effects is to have market oriented solutions just as Mises, Hayek, and Friedman called for long ago.

The next great thinkers must do the same, continuing to argue for the moral and economic superiority of free markets, while at the same time responding well to the ever changing arguments for statism that arise. The issue is and will always be not of spreading the same old ideas, but of spreading new convincing arguements for the using the "same old" solutions.

[Ian Dunois]

Gabriel,
A change in the profession is important, but by winning the public, we can have authors, reporters, musicians helping to spread the word on harmful governmental policies.
Most of the public does not enjoy listening to an academic lecture on what is the right or wrong policy, but if a musician, a writer, an artist begins depicting what are the wonders of capitalism, we would see a rise in the public's knowledge of good economics which would affect the profession as more students would wish to study capitalism.
As for proof of many academics joining the Free Market beliefs, look at Sach's explanation of the housing market; that is just one, but one is always the beginning. http://commentisfree.guardian.co.uk/jeffrey_sachs/2008/03/the_roots_of_crisis.html

[Rafe]

It is not hard to see where Pete is coming from, every sports fan wants their team to have a game breaker, a quarterback who can call the big plays, a batter who can step up to the plate and hit a homer in a clutch, a man who can sink big three-pointers to tie up the game with a few seconds on the clock. However, this is a battle of ideas and we need to follow the lead of Great Ideas, not Great Men. Every one of us can contribute to the distribution, defence and application of great ideas. We can all aim to lift the intensity and effectiveness of our game by (say) 10% and we need to get the ideas into those nooks and crannies of the intellectual world (actually the mainsteam) where for many people what we regard as the Great Ideas ideas are barely a distant rumour. Quite likely the game breaker you are looking for is somewhere around the place, training in some other lines of thought and has not even found the great ideas.

[Rafe]

PS. Maybe if we had got to Samuelson and Krugman first!

[MikeGiberson]

There is not yet an audience and so no reason for the auteur. Maybe things will become so bad, or maybe statist ideas will re-assume the primacy that they had during the mid-20th century, but I don't think we are there yet on either front.

Despite the flurry of anti-market rhetoric in the current U.S. presidential campaign, despite the big government growth during wasted so-called conservative administration of the last nearly eight years, I don't think times are nearly so bad as to call forth a Mises or Hayek or Friedman.

[Ryan]

Nice post. I've pondered this very issue recently as I've been reading many of Mises' works. Though they both came from different schools and backgrounds, it's remarkable how similar Mises' and Friedman's views regarding the economy and its central importance to human liberty and freedom were. I hope someone answers the call and steps in as the foremost proponent of free-market economics.

[Jacob]

Rafe, although the strength of ideas is indeed important in deciding what ideas will be dominant, I tend to agree with Mises's view that the deciding factor will always be "mainstream" acceptance by university academics and among the "intellectuals".

It is really hard to overestimate the effect of Milton Friedman on laissez-faire ideas; it gives credence to any lay person in a culture where Science (with a capital S) is an undeniable truth, not a continuous process.

Selectively running my mind through history it appears that catastrophes have to happen in order for the best ideas to come to light. Keynes's ideas began to be challenged the most during the stagflation 70s, the fall of the Soviet Union really gave credence to Hayeks ideas, ect. Reading Mises's biography was pretty funny; every time there was a new inflation there was suddenly a reprinting of Mises's Money and Credit. Of course, we can't always rely upon catastrophes to bring to light the theories we regard as correct; for a long time the great depression was seen as the 'failure' of the capitalist system (and it is sometimes seen that way today).

Government provided public education only exasterbates the problem. In a world of regulations, curriculum, decisions of what books to be 'banned' from discussion, ect ect of course the regulations provide what should be taught; one idea, one Science, to be learned and memorized, not criticaly discussed. I really knew what Pete said in a post a couple of weeks ago that ANY book can be used in a classroom- The Communist Manifesto, The Fountainhead, ect.

Hmm this has gone on a bit too long. Basically government education makes even more of the public intellectuals to give credence to ideas.

[Steven Stipulkoski]

Not being an economist, I am appalled from a moral viewpoint that banks and the Federal Reserve can create money from thin air (or fractional reserves). If enough Americans knew of this dishonest practice it would be abolished or at least not backed up by the government or Federal Reserve.

[Peter Boettke]

Gabriel,

Have you read Andrei Shleifer's The Age of Milton Friedman? I think your interpretation of 95% of the economics profession is in favor of statism is either way too broad a definition of statism (one that would say anyone but an anarcho-capitalist is a statist) or you have way to narrow a reading of the economics profession.

I do believe the economics profession lacks a serious intellectual force for laissez faire, but I do not believe we lack forceful arguments for it. Instead what we lack is a set of preventative arguments against the alignment of interest groups and ideologues that thwart freedom.

But it is time to go on the aggressive offensive against statist interpretations of history and current affairs in our writings and in the classrooms.

95% would be an awful hard hill to climb, the 60% figure I would give is hard enough. The bottom line --- economic science needs smart and articulate individuals practicing it, and a subset of which needs to be bold and publically engaged. Recently the only really bold and publically engaged economists from my perspective has been Bill Easterly. But the voices of Sachs, Stiglitz and Krugman are louder. Shleifer's appeal to the facts against Stiglitz in the Age of Milton Friedman is devastating to Stiglitz, and Easterly has been very effective countering Sachs, and Krugman is often the best antidote to Krugman!

But we need figures like Mises, Hayek and Friedman (and Bastiat and Hazlitt as well) to counter the modern resurgence of statism. If we fail, I do fear we will enter into a new dark age of economic unfreedom and with that loss of economic liberties the material progress we so often take for granted. If the economics profession was already at 95%, I'd fear that the battle was already lost.

Pete

[matthew mueller]

This is a phenomenal post. It is remarkably honest and heartfelt. Thanks to Pete for sharing his thoughts. His commitment to liberty (as I have always understood it) is encouraging; indeed, I think Pete has answered his own question with this post --- what is required are pleas for individual freedom stated like this.

Let me share my take on laissez faire. First of all, this is a philosophy that is easy to attack and extremely difficult to defend. However, I do think the advocates of market capitalism make a mistake in insisting that free market economics is absolutely necessary for personal fulfillment. The very foundations upon which this theory is based is flawed for several reasons, ranging everywhere from its 'ideals' to the motives it incites in human behavior. In an uncertain and complex world, there is no reason to believe that, absent government regulation, markets will be self-adjusting in a salutary way.

However, this insight does nothing (in my view) to provide scope for government control and centralization. It is incorrect to believe that governments can "rationally" control expectations and human action --- and it is undesirable even if it could be achieved.

This battle against centralization should not (in my view) be waged by economists. It should be fought by social philosophers. The Road to Serfdom Hayek has done far more on this score than the Hayek in Individualism and Economic Order (Individualism: true and false notwithstanding). This is a moral battle, it is not a pragmatic one. And our decision to make it pragmatic may prove to be our own undoing.

[Rafe]

Thanks Jacob, we do not disagree, one of my points was the need to get to students and intellectuals who are not exposed to our ideas in the normal course of their training (if only it was education, that means being introduced to the best thoughts in the field). We have to get to them, for the most part they are not going to come to us or read our house literature. For that reason I concede Pete's point that we need strong and audible representation to speak over the heads of their teachers and their texts and their house journals, and this applies across the full range of the policy sciences and the humanities as well, not just economics.

[Justin Bowen]

This is just my opinion, so if I'm off, I'm certainly open to new ideas and criticism.

The problem as I see it, which is definitely coming from a lay person who studies economics in my own time, is that economists as a whole are generally not approachable by the average person. The arguments that I sometimes see are unintelligible (though I try to spend the time reading what I can so that I can at least understand the arguments) by the average person. I read a recent story on the application of game theory to finding a good guy (a Slate.com article) and went on and tried to read the paper which the article was based on and found myself way out of my league (forget about understanding the math, I had to use a dictionary just to understand some of the sentences). The average person needs an interpreter for economists in the same way that they would need one for someone who is speaking in Chinese, and unfortunately, interpreters seem to be in short supply.

I realize that some of you are doing your best to help the rest of us non-economists understand the important issues that affect us. I do my best to steer people towards the sites where they can read (and listen to) arguments that favor freedom over statism and tyranny. I'm just not sure what else can be done in the mean time to combat the bad information that's out there.

[Ludwig van den Hauwe]

What about you?

[Dvorak]

Just give Pete Leeson a stadium tour and two or three hours to rant and I think you may have a revolution on your hands. It would be kind of like the evangelical churches only he could inspire through insight and preach fact instead of fiction.

[Jeffrey Friedman]

Pete--You overlook (rhetorically, at least) a few possibilities. Here are two of them.

1. Please, readers of this site, don't attack me for saying this. But there may be no savior from the free-market team forthcoming, because the free-market team could be wrong in this case.

It's possible, isn't it?

Perhaps it's obvious to everyone on this site, but it's not obvious to me, exactly how government is responsible for the financial crisis, at least in a politically relevant way (relevant, that is, to Hayek-, Mises-, and Milton-Friedman-like assessments of capitalism vs. interventionism that would lead us toward "laissez faire").

There are several different free-market-friendly narratives (Greenspan is at fault, subsidization of homeownership is at fault, the Basel rules are at fault, etc.), and they seem individually plausible to this non-economist. And maybe they all add up to being the sole causes of the crisis now unfolding. It's an empirical question, obviously, and the data are not yet in.

But the key thing that market critics are seizing on--the bundling of mortgages into securities that investors had every incentive to vet, but didn't--does seem to be a *possibly* disastrous problem, if not in 2008, then in some other scenario. And it's a problem that seems peculiarly compatible with standard "animal-spirits" criticisms of the "irrationality" of markets.

2. There may be an answer to the above: Namely, that, while markets and animal spirits aren't perfect, and therefore either were, or could be, responsible for the crisis, interventionism would *tend to be worse overall.* Why? Because the public at large, and the "experts" advising the legislators and running the regulatory state, are even more imperfect, overall.

However: that is not an argument that economists are well equipped to make, because economists don't study *politics.* (Economists *theorize* about politics by trying to reduce it to the interactions of rational and/or self-interested beings. But these theories happen to be, for the most part, empirically false. Economists would know this if they had taken some empirically oriented political-science courses, but most haven't.)

People who are familiar with my work might think that since I'm a political scientist and have often made the above arguments, I'm nominating myself as the free-market team's clutch hitter. But I know enough about my own ignornace of *economics* to realize that I can't intelligently judge whether, on economic issues, the public plus the "experts" get it wrong more often than they get it right.

(Larry White, however, has an excellent Cato Policy Report article on the historical record of central banking vs. the gold standard/Canadian free banking--meaning, which one gets it right more often than the other.)

Jeff

[Rafe]

Jeffrey, I don't think it is just the lending crisis that Pete is talking about, it is the bipartisan acceptance of big government and interventionist policies as the automatic reaction to any problem at all. And it is not just the US, it is also the European Union and most other places. And that approach is in principle supported by the most visible economists (at least from a distance) like Stiglitz and Krugman. Check out Klein with Bartlett on Krugman in Econ Journal Watch Jan 2008.

[Grant]

Jeff,

Coming from a complete outsider to the world of professional sociology, I think you hit on what separates Austrian and public choice economics from the rest: they actually analyze and critique the ability of governments to make good on their promises. Compare that to say, the policy recommendations of a Joe Stiglitz, who assumes government will do whatever he wants it to do for his models to work as advertised. Models of how governments work just don't seem to be in the bag of tricks of most economists that I've read.

Even if the true cause of the housing bubble was "animal spirits" and nothing more, would any economists take that as a serious case for more government involvement? The incidence and cost of "animal" behavior in politics (e.g., the Iraq war) is obviously much greater than in the marketplace (I think for Caplan-esque reasons).

[Steve Miller]

Jeff wrote:

"whether, on economic issues, the public plus the 'experts' get it wrong more often than they get it right."

Why must it be "public *plus* experts"? The problem, to my Buchanan-Caplan synthesizing brain, is that economists are generally right, or far less wrong than the public, but they have little influence over policy -- while "every man his own economist" does.

[Don]

The underlying problem is the cognitive dissonance between what Bastiat clearly understood when he stated "Government is the great fiction whereby everyone tries to live at the expense of everyone else," [or something like that] and the realization that all of us are part of the "market." People in general need to realize the value of their liberty and learn to respect the liberty of others as individuals. Our school system, particularly in higher education, does not even attempt to inculcate such a view of the world; rather, the arrogance of the "chosen elite" (whether they be in the Ivory Tower or Beltway) and their know-it-all "social-" agenda bullies the feebler-minded to buy into their euphonious malarkey; all the while, economists sit around playing with their beloved models that engineers from NASA would probably have difficulty understanding. Economics should not require anything more that high school level algebra; to argue otherwise is to flatter one's self that his superior mathematic skills justify his perception of people as nothing more than lego-pieces to be put together at his whim...

That is a breathless rant...

[Vedran]

You know, there are these cult websites Mises.org and lewrockwell.com that put out about a dozen easily understandable economics articles everyday. Oh yeah there's also that Ron Paul kook that keeps telling everyone about economics and free markets plus the federal reserve.

And then there are those other wierdos at the Mises Institute like Tom Woods and Tom DiLorenzo who have sold thousands and thousands of books. How dare they publish in non-academic journals and do so well! We must do all we can to condemn and ignore those Mises Institute racists.

These are strictly cults and we should in no way associate ourselves with their efforts to bring free market economics into more simplified formats understandable by the public.. Let's just continue to publish in academic journals, inflate our egos, and keep telling ourselves that we're accomplishing something.

[John V]

Why not you, Dr. Boettke?

You're a prolific writer and reader, why not YOU?

How about a book that examines the last 20-30 years through the writings of these 3 men vis a vis their intellectual rivals...and yours of the say?

[ralph emmers]

I think the problem is that people in general are tribalists. The message of a free market is anti-tribalist. I'm not sure a new super-economist would help us much. The ideas are out there, people who are inclined to agree will stumble upon them. What we need then is a political figure who is able to express the ideas of liberty in terms that satisfy the tribal instincts of the voters. Reagan was good at that with the instinctive, honest image of liberty he projected; although some of his policies were surely ambiguous in practice.

Unfortunately, individual liberty doesn't really unite easily in groups, although opposition against authoritarians of all sorts (including the rise of uber-authoritarian Islam) might stimulate a sort of unity and direct more people to investigate the roots of Western individualism, and thus towards economic liberty also.