How Corrupt is Our Language in Economic Discourse?

The vast majority has no clue what economic science is.  To them economics is about political ideology or practical business.  There are no laws of economics.  We economists have permitted this to occur.  We have allowed politicians and the public to demand of our discipline results which the discipline cannot produce but which nevertheless if we pretend we can produce those results will provide power and prestige.  Hayek argued in the early 1930s that the fate of the economist was to be called upon to address questions of pressing political concern only to have his advice discounted as soon as it was uttered.  Why? Because economics as a discipline puts parameters on people's utopias.  It gives us primarily "negative" knowledge --- we live in a scarce world, there is no such thing as a free lunch, we cannot assume what it is we hope to prove, ought cannot presuppose can, and can doesn't mean we ought, etc.  In the 1980s, Hayek wrote that: "The curious task of economics is to demonstrate to men how little they know about what they imagine they can design."

But that is not the "economics" we heard about last night from President Obama.  The economics is a POLITICAL economics.  It is an economics that at the service of political parties in power --- either right or left.  Conservative Keynesianism and Liberal Keynesianism, but it is still Keynesianism however you slice it. And as Deirdre McCloskey has put it, when your intellectual range is from M-N you think you are being open minded when you look at M and you look at N, but you certainly don't see A or Z.  President Obama actually argued that no serious economist has argued against the need for government action with respect to the stimulus package. The leading economists, he argued, for Bush I and Bush II, as well as his team of economists all agree that only government can break the economy out of this vicious spiral downward.  He must not have read the Christian Science Monitor yesterday.  Robert Higgs's op-ed is best on his historical research, which is among the best on the subject, dealing with the 1920s-1940s.

President Obama presents himself as a pragmatist who wants us to get beyond the stale ideological debates of the past.  But he is simply trapped in the conventional wisdom of Keynesian economics.  Why not take a few minutes --- since we are talking about actions which will transform the economic landscape of the US --- and think in a "non-Whig" fashion about economic ideas.  Consider once again the arguments that "lost" due not to intellectual defeat, but political expediency.  What were those pre-Keynesian ideas regarding the economy and the proper role of monetary and fiscal policy?  President Obama said he cannot take seriously criticisms of fiscal irresponsibility from politicians that when they were in power doubled the national debt.  Good point. But does that mean that fiscal irresponsibility is off the table as a concern? How pragmatic is thtat, as opposed to how politically convenient is that excuse?  If President Obama wants to break from the stale ideology of the past, then he should start with breaking with the policy path of the past. NOTHING he is doing is radically different from what President Bush did before him.  It is the same strategy being pursued just on "steroids" (and he is disappointed with A-Rod?!).  No answer has yet been given as to why President Bush's bailout package didn't work while his stimulus package will. In fact, when pushed on that question President Obama really just said, we might even need to spend more down the road when this doesn't give us the result we want.  And the claim is just that confidence has to be restored to the market and only government can do that.

The belief that only government can do this is the real stale ideology of the past.  What is really causing the problems in this economists opinion, is that government action has produced an uncertain investment environment. The rules of ownership and control are unclear, or clear but counter-productive for indiviudual initiative; monetary policy guided by the rhetoric of fighting inflation, but fearing deflation has been so loose that long term inflation that threatens the viability of the dollar should be a real concern to investors; and fiscal policy which is so out of control that US public debt will bankrupt the future generations with an astronomical tax burden and/or a monetization that will destroy the currency through hyper-inflation.  Whatever way you slice it, our current policy path is the PROBLEM not the SOLUTION.  But if your intellectual range is from M-N (lets say Larry Summers to Paul Krugman), then don't be surprised when in being "rational", examining the "evidence",  weighing the "arguments" and assessing the "theories", you fail to consider the fiscal arguments of a James Buchanan, the monetary and capital theories of F. A. Hayek, the comparative institutional analysis of law and politics in Ronald Coase, and the monetary and fiscal policy arguments of Milton Friedman.  Each of these gentlemen, President Obama, won the Nobel Prize in Economic Science.  Their ideas may have been used by politicians in rhetoric, but none have been political appointees (well Friedman served as an economist during WWII, Hayek and Buchanan fought for their countries in WWI and WWII respectively) and their ideas have not been used in political practice --- no denationalization of money; no balanced budget ammendment; no full scale school voucher program, drug legalization, monetary rule, etc..  Friedman had more success than the others in carrying the day, but compare the policy prescriptions in Capitalism and Freedom and Free to Choose with the reality of public policy that we got even under Ronald Reagan, and compare the policy prescriptions in Hayek's The Constitution of Liberty with what was achieved under Margaret Thatcher.  There is a far distance from the ideas in these books to the reality of the policy world.  A really radical notion of hope and change might be to get government out of the business of attempting to manage the economy, stop demanding of economics results that it as a discipline cannot produce, and lets depoliticize political economy. 

Economics is NOT social engineering, it is instead a phiosophical science.  Political economy is the best label for it, but at its best it is not political in the ordinary meaning of that term.  And the intellectual range is not limited to M-N, but instead travels at least from A-Z.  Because President Obama has failed to grasp this, to him economics disagreements are inherently political, economics science is Keynesian, and economic policy is pro-active.

Comments

[Steve Horwitz]

Wow. Home run Pete. What's even better is that in my senior seminar this morning, one student asked "is what Obama said really true - that no economists deny the need for government intervention?" Part of my reply was "well in the world of people he and his advisors listen to, I'm sure that's true." I am going to forward this on to the class as a much better answer!

[Steve Horwitz]

One more thing: what's funny is that I *almost* used the McCloskey M-N example too, but didn't. Scary sometimes, really.

[Ivan Pongracic, Jr.]

That was phenomenal, Pete. I'm also distributing this to all my students. Thank you.

[Peter Boettke]

Watching CNN right now, President Obama is speaking in Fort Myers, Florida. He just claimed again that "economists across the spectrum" agree that immediate action is required, and he insisted that his plan is a break from the failed ideas of the past that got us into this mess. REALLY?

I just don't see the consensus in economic research and teaching that he is assuming, and I just don't see how his spending efforts are going to any different than the spending efforts of Bush. He wraps his spending in populist rhetoric, while Bush wrapped his in conservative rhetoric. But ultimately both were about BIG GOVERNMENT.

I have always understood intellectually Higgs's argument about "participatory fascism", but in my heart I always thought the "American spirit" was robust enough to fight this and maintain the uniquely American ideology. But listening to President Obama and hearing the applause, and seeing near zero resistence among the intellectual elite and general populace, my heart as well as my mind is now completely aligned with Higgs's --- it reminds me of the scene from Star Wars when Palpatine is made Emperor and Padme says, so this is how liberty dies --- with thundering applause.

Pete

[Greg Ransom]

"President Obama actually argued that no serious economist has argued against the need for government action with respect to the stimulus package."

Note well. This wasn't an argument.

It was literal BS, in the sense of Harry Frankfurt in his famous essay "Bullshit".

Frankfurt distinguishes a BSer from a liar or disengenuous advocate. A BSer simply has no regard and no care for the truth, one way or the other -- e.g. Obama doesn't care that what he says isn't true. He knows it's not true, and he doesn't care who else knows it's not true. (Compare his false claim he didn't know what Biden was talking about when Biden said "there's a 30% chance we'll fail" with the stimulus plan.)

A liar senses a moral distinction between truth and falsehood -- and seeks to conceal the truth. A BSer couldn't care less what the truth is, and will say whatever advances his cause, with no notice of truthhood or falsehood.

[Greg Ransom]

Note well that Obama has shown a consistent disregard for the truth across the whole of his life.

His own memoir if replete of instance after instance in which Obama tells us he was lying to other people.

We're not dealing with "Honest Abe" here.

And much if not most of Obama's "memoir" is itself a fabrication -- invented character, falsely attributed personalities are view (e.g Obama repeatedly attributed views and emotions other people in the memoir which were actually Obama's own -- according to the people involved.)

And google "Nice Deb" and "Obama" and "lies" or "false" or "not true" for dozens and dozens of false claims made by Obama during the 2008 campaign.

Politicians are dishonest. Yes. But Obama is giving us a new kind of dishonest.

[Rafe Champion]

Is there any significant broadcaster apart from Fox News where you can find people talking sense on these things?

A typical example of the problem, Etzioni holding forth on the danger of individualism, Reagan/Thatcherism and the need for "balance" a la Obama. http://www.jpost.com/servlet/Satellite?pagename=JPost/JPArticle/ShowFull&cid=1233304687464

In defence of social engineering, that is what von Mises practiced daily when he worked as an adviser to the Government in Vienna. It is about looking for policies that work by using the best available information and checking what happens when you try something. That is Popperian self-critical social engineering but the term has been picked up to apply to the holistic planning that Popper demolished in the OSE and The Poverty of Historicism.

[Rafe Champion]

How helpful was Deirdre McCloskey with the idea that it is rhetoric that counts rather than sound arguments regulated by respect for old-fashioned truth and logic?

[Joe Strummer]

I have always understood intellectually Higgs's argument about "participatory fascism", but in my heart I always thought the "American spirit" was robust enough to fight this and maintain the uniquely American ideology. But listening to President Obama and hearing the applause, and seeing near zero resistence among the intellectual elite and general populace, my heart as well as my mind is now completely aligned with Higgs's --- it reminds me of the scene from Star Wars when Palpatine is made Emperor and Padme says, so this is how liberty dies --- with thundering applause.

I think on the one hand this is all incredibly disheartening to have cherished beliefs about your world exploded. But I think a lot of people in this society who don't come from a comfortably middle class existence may not have ever had the same delusions. So, join the club, I'd say.

The most intellectually and psychological jarring experience in my life was when I first began to explore libertarianism, and came to the realization that much of what I had been told about the world was, generously, untrue. That was profoundly disturbing to me in ways that made me emotionally depressed for about 3 months. And I've spent the last 16 years or so understanding and being ok with the fact that vast swathes of the world do not agree with me. It gets easier over time.

It's part of being an adult, too.

One comforting thought is that, even though you never realized it, it's always been thus. Or at least since the 1930s. It's just that many of us have enjoyed a certain kind of existence that has insulated us from the harsh realities of the world. It's just that the whole system is getting more fascistic, and less participatory. But it's a matter of degree.

Another comforting thought is that there may still be residual commitment to due process and civil liberties that will prevent really nasty policies for most of us. But I wouldn't guarantee that either, in a country that has a fairly extensive detention center for "illegal" immigrants and fairly intrusive police powers in the name of the War on Drugs

[Richard Ebeling]

Alfred Marshall once said that any economist who is able to sell newspapers on the basis of what he says should rethink his premises -- since anything that popular must have serious economic errors in its reasoning.

In my capacity as "senior fellow" at the American Institute for Economic Research, I am on average doing between 6 and 10 radio interviews every day about the stimulus package, about the causes of and cures for recession (including with NPR stations around the country and AP radio).

At first people -- talk show hosts and listeners calling in with questions -- are often "shocked" and "surprised" that someone is challenging the analysis coming out of Washington about how we got into this fix, and arguing what the government SHOULD NOT DO to get the economy out of the recession.

But once the facts about the "boom years" are explained and the need for real rebalance and correction in markets is presented, I find that many hosts and listeners think twice about what they've heard from the mainstream media and the talking heads out of Washington.

Part of this is explaining "what is seen and what is not seen," and asking the simple question: where is all these hundreds of billions of dollars going to come from?

It is not an easy battle, but it can be won. It will not stop the momentum of the legislation passing through Congress, but it can make people have second thoughts before they believe everything they hear out of the mouth of the president. And it makes them ask what government can and cannot do. And be more watchful about all the smoke and mirrors they are bombarded with.

Richard Ebeling

[Bob]

Telling it like it is, Austrian Style via Jersey! I have an idea of how to show our protest of the potential debasement of our currency. Fly "Old Glory" upside down as a sign of distress for "Obama's Folly" !

[RickC]

I come here everyday for some sanity. I also visit Cafe Hayek, Dr. Ebeling's site, Dr. Rizzo's site, The Beacon, Mises.org and a couple of others. I've passed along all of these sites to as many other people as I could. I hope this is happening all over the country, but I see a lot of people cheering for Obama's plans.

I wrote my Senator and Congressman today to inform them if they vote for the stimulus bill they will not get my vote in the next election. And if they support the stimulus with those health care provisions intact, I will make it my personal mission to see they are drummed out in the next cycle by advocating for whatever conservative/libertarian candidate runs against them.

I watched Geithner today and some of his statements seemed eerily reminiscent of FDR's speeches when he was pushing for the New Deal. Some of his language could have been lifted directly from FDR's speeches in fact. So no, this is nothing new, just the same old statist arguments. Watching people react as if its all fresh and new gives you an idea how ignorant a great number of people are concerning their own history. With a whimper not a roar.

[Islam Hussein]

Thank you for the wonderful article. I am spreading this among my facebook friends.

BTW, is there a way to share articles on this blog directly to facebook?

Islam

[Liya P.]

Nicely said, Professor Boettke. I enjoyed this very much, thank you.

[Eric H]

Shared this across all my social-networking apps. Very well-said, and now I will shamelessly share the sentence I used to plug the article, because while inherently biased, I think it's useful and it fits.

Society must learn to differentiate science-based 'ideologies' from ideology-based 'science'.

[Jeremy]

I think that the basic difference between people who see "laws of economics" and people who don't, see the market economy as a means to an end. It is something to be managed to produce better results for society, equality; fill in your policy goal. You all know the arguments.

People who see laws of economics take a more abstract view of the world and the economy in general. A free market economy is the end goal. It is something fundamental and natural; something that belongs to the individual and not society.

I actually have a degree in economics and a masters degree in political science. As an undergraduate, I studied some Austrian texts and found them to be clear, concise and illuminating.

Now let's contrast that to what our Political Scientists call "Political Economy." Political Economy takes, as a prior, the role for Government in the economy. There are no microeconomic conditions; Keynsianism is the starting point (if there is a theoretical basis at all), and frequently it is just somebody throwing together some numbers that relates government performance to economic output. And to be quite honest, I have never read one of these papers that find a negative relationship between government involvement (whatever it may be) and economic performance. The first day in a political economy class, do you know what I heard? I heard nothing but talk about the OECD. "What is the OECD?" I wondered. We never talked about that in the econ department at my school! I have about 80 hours of undergrad/grad credit in economics under my belt and I never heard a thing about the OECD. Another popular discussion item in these circles are "international institutions." I was once a Ph.D. student in a political science department. I hated it. I hated most of the professors there. One of the professors at my school studied (and continues to study) quantitative international relations. She was famous for developing and analyzing a database of national alliances from, I don't remember, the post-Napoleonic period until today. Like most Ph.D. programs, we would have a weekly brown-bag seminar lunch, where the students and faculty meet for a little brown-nosing grab-ass or whatever. At one of these lunches, I will never forget, she started getting emotional about her work, and proclaimed that "what (she) does will one day change the world!" And all she did was write econometric functions which related economic performance to whether or not somebody had an alliance agreement with one another. Of course she found that they did (never mind all of the problems associated with her findings...just accept for a minute the fact that she did), and now, all of the sudden, more government is really good economics! In fact, we would all be fools to not have more government! This is from a woman who never took a day of microeconomics in her life.

Obama is part of this. It is intellectually elite. It runs amok at Harvard and Columbia and even places like University of Missouri.

What is the solution? You've got to get the word out. Writing op-eds is good. That add that CATO ran in newspapers last week was good.

[Fascist Nation]

It seems to me that this is simply using two (or more) credit cards; one to pay off the other(s). Obama is just assuring his voters that this Ponzi scheme will work. Use the China card one month and the India card the next. It works great until one or the other finally realizes that it will never be possible to pay off the ever increasing loans, and closes the account taking the loss.

Then things will get interesting.

[A Conservative Teacher]

Great post. I just commented on my blog about the very fact- that teachers in high schools teach a corrupted version of economics- they teach global warming, saving gas, anti-big business, tax the rich, etc, and pass it off as economics.