Coordination Problem

A Simple Attempt to Clear Up Some Confusions About the "Austrian" Perspective and Economic SCIENCE

|Peter Boettke|

A lot of folks hold, what I believe, to be erroneous views about the Austrian School of Economics, and the status of economics as a science.  My own position is that economics has the same ontological status as physics in terms of being a science, but has different epistemological procedures.  In other words, there should be no doubt that economics is a science, but the practice of that science is different from the natural science practice due to three things: (a) we are what we study [knowledge from the inside], (b) economics is the study of complex phenomena, and (c) even physics isn't practices the way naive philosophy of science depicts [think Duhem/Quine] and is better captured by the depictions found in growth of knowledge literature such as Michael Polanyi.

So Friedman's "Essay in Positive Economics" just doesn't cut it for me, and never has from the time I was an undergraduate.  [Important historical accident, I had a philosophy professor at Grove City College introduce us to Michael Polanyi's small books -- Science, Faith and Society and The Study of Man -- prior to me even getting excited about economics.] But I believe strongly in science of economics and also progress in that science.  I am, of course, influenced by Menger, Mises and Hayek, but also Bohm-Bawerk and Machlup, in my understanding of that nature and significance of the "Austrian" perspective on economics as a science.  As Machlup once put it, what if matter could talk, now what would that scientific endeavor look like?

Coming out of the grand debate of the 19th century over methods, one can divide the discipline of ECONOMICS into three distinct areas of research: economic theory, economic history, and economic sociology.  And, each area has its own standards of critical assessment.  This is where the cause for confusion, I believe, enters into the discourse.  Many of the statements that Austrians make about "testing" and "empirical analysis" are related to the realm of economic theory, though they are read as making blanket claims about ECONOMICS.   They are not.  Theory can indeed be tested, for its logical coherence and for its relevance to the situation under investigations.  And, theories can be rejected due to incoherence and irrelevance.

But it is vital to understand that from the Austrian perspective, the purpose of theory is to aid in the doing of history.  Empirical analysis is not undervalued in the Austrian school, it is the purpose of the theoretical efforts.  And, to refine the theory into a working framework for productive use in empirical investigations one must move from the realm of pure theory into the realm of applied theory -- or what was dubbed economic sociology by Max Weber and then Joseph Schumpeter.  Economic sociology recognizes that economic life is played out embedded in various institutional context, and that context matters, so the theorist must transform the logic of choice into situational logic by incorporating law, politics, religion, etc. into their analysis.  The economic process must be studied as exchange and the institutions within which exchange relations are formed, function, and conclude.  This is how progress is made in ECONOMIC SCIENCE.  Not necessarily by refinements in the tools -- though nothing I am arguing precludes refinement in tools as being extremely valuable to our enterprise, but they must be remembered as tools and not the purpose of the exercise. Progress will be made through a better integration of economic theory with social institutions to forge a framework that yields richer and more meaningful depictions of the human condition as experienced through historical time.  We get a deeper understanding of the history of human societies and the conditions conducive to human flourishing and those that fall short.  From Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations to Daron Acemoglu and James Robinson's Why Nations Fail, this is how our discipline marches forward as a scientific enterprise.

It is for this reason, as well as others, that I find the integration of the Austrian School of Economics, the Virginia School of Political Economy, and the Bloomington School of Institutional Analysis such a productive endeavor in contemporary economics, political economy, and social philosophy.

The Power and Prestige of Economics -- Time for a Reboot in Thinking, Not a Replacement

|Peter Boettke|

NYT published this weekend an opinion piece by Binyamin Appelbaum entitled "Blame Economists for the Mess We're In."  I am 100% in favor of economists being knocked off their pedestal.  Read Hayek's Nobel banquet speech.

Your Majesty, Your Royal Highnesses, Ladies and Gentlemen,

Now that the Nobel Memorial Prize for economic science has been created, one can only be profoundly grateful for having been selected as one of its joint recipients, and the economists certainly have every reason for being grateful to the Swedish Riksbank for regarding their subject as worthy of this high honour.

Yet I must confess that if I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it.

One reason was that I feared that such a prize, as I believe is true of the activities of some of the great scientific foundations, would tend to accentuate the swings of scientific fashion.

This apprehension the selection committee has brilliantly refuted by awarding the prize to one whose views are as unfashionable as mine are.

I do not yet feel equally reassured concerning my second cause of apprehension.

It is that the Nobel Prize confers on an individual an authority which in economics no man ought to possess.

This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence.

But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally.

There is no reason why a man who has made a distinctive contribution to economic science should be omnicompetent on all problems of society – as the press tends to treat him till in the end he may himself be persuaded to believe.

One is even made to feel it a public duty to pronounce on problems to which one may not have devoted special attention.

I am not sure that it is desirable to strengthen the influence of a few individual economists by such a ceremonial and eye-catching recognition of achievements, perhaps of the distant past.

I am therefore almost inclined to suggest that you require from your laureates an oath of humility, a sort of hippocratic oath, never to exceed in public pronouncements the limits of their competence.

Or you ought at least, on confering the prize, remind the recipient of the sage counsel of one of the great men in our subject, Alfred Marshall, who wrote:

“Students of social science, must fear popular approval: Evil is with them when all men speak well of them”.

But the problem is deeper than economists, it is ANYBODY put in this position of power and prestige, and to do so is fundamentally anti-democratic as was argued by Frank Knight in various writings, and then by Vincent Ostrom in The Intellectual Crisis of American Public Administration, and more recently in David Levy and Sandra Peart's Escape from Democracy.  We cannot fix this problem by replacing one set of "experts" with another set.  We have to stop thinking of the relationship between economics and public administration along these lines altogether.

I try to lay out the argument in my SEA address on "Economics and Public Administration", which also served as an attempt to summarize two decades of research that several of us have undertaken in this spirit.  The critical argument in that text for this issue is that I argue that economics is a derived demand, if we conceive of the task of public administration one way, that will shape not only shape the supply and demand of economists, but dictate what it means to produce an economist -- and thus, what is means to be an economist.

The problem with narratives like Appelbaum's isn't that he is suspicious of the pretensions of economists, it is that he is blaming the wrong culprit for the mess we're in.  Here it is important that everyone of these critics read Gregory Mankiw's very important piece, published BEFORE the financial crisis, on the macroeconomist as scientists (read Chicago New Classical and Monetarists) and the macroeconomists as engineers (read MIT/Harvard Keynesian and New Keynesians).   The Chicago folks -- and the Austrian, Virginia, UCLA, etc. folks -- did not go to DC, did not write laws, didn't attempt to orchestrate economic miracles abroad, or stimulate growth at home.  They taught, they lectured, the researched and wrote papers in journals and published books, and a subset of them wrote opinion editorials and did interviews in various forms of popular media.  In short, they were teachers and students of society.  They did not get paid to be experts for the government in general.  They were not advisors.  But others were -- from Keynes to Larry Summers -- the line is long.  Just look at the number of central bankers that were PhD students under Stan Fischer at MIT.  Can you trace that same lineage to Milton Friedman?  How about to F. A. Hayek?  Mises?  Right, I didn't think so.

"Neo-liberalism" is actually little more than an effort to bring neoclassical models of efficiency into the operation of governmental agencies -- that in another era was called "market socialism" -- just look at Abba Lerner's The Economics of Control.  He actually thought he had found the right way to combine socialist aspirations with the teachings of economics so he could ensure microeconomic efficiency and macroeconomic stability and provide economists with the tools to successfully steer the economic ship.  That basic idea from mid-20th century to today has never disappeared in those halls of power -- what has appeared is a waffling between liberal (in the American sense) Keynesianism, and conservative Keynesianism, but Keynesianism exists throughout. The Samuelsonian Neo-classical synthesis achieved the status he hoped for it ... and provides the meaning behind his statement in the teachers manual “I don’t care who writes a nation’s laws … if I can write its economics textbooks.”  Samuelson knew that if he could wrest control of the tacit presuppositions of public policy functionaries, then there thoughts and actions would be guided by what he taught about market failure, macroeconomic instability, and government as a corrective to our economic woes.  It's an amazing achievement what he did.  For at least a generation, perhaps two, he controlled both the introduction to economics market, and the advanced training of PhD students in economics market.

Thinkers rose up in opposition to this hegemony from the older generation such as Knight, Mises and Hayek, but also among his contemporaries such as Alchian, Coase and Friedman, and of course a younger generation such as Becker and Lucas, but also Demsetz, Kirzner, etc.  But, look at those names ... they did not go to Washington DC to work for domestic policy agencies or the international agencies in economic policy. They were content in their jobs as economic scholars/teachers.  They were humble students of society, and some among them rose to the status of social critics and intellectuals.  But again none were master manipulators of the organs of power to try to shape the economy into the image of their ideal.

The second problem with Applebaum, besides aiming at the wrong target, is that narratives such as his tend to just suggest if only "better people" were in power and were heaped with such esteem and prestige, then we would have a great system.  As Keynes wrote to Hayek about The Road to Serfdom:

In my opinion it is a grand book [...] Morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement.

I should therefore conclude your theme rather differently. I should say that what we want is not no planning, or even less planning, indeed I should say that we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers, wholly share your moral position. Moderate planning will be safe if those carrying it out are rightly orientated in their own minds and hearts to the moral issue. This is in fact already true of some of them. But the curse is that there is also an important section who could almost be said to want planning not in order to enjoy its fruits but because morally they hold ideas exactly the opposite of yours, and wish to serve not God but the devil. [...] What we need is the restoration of right moral thinking - a return to proper moral values in our social philosophy. If only you could turn your crusade in that direction you would not feel quite so much like Don Quixote.

As long as the right public spirited economists were in charge, Keynes thought, all would be fine.  As Samuelson put it in the 1948 edition of Economics "Where the complex economic conditions of life necessitate social coordination and planning, there can sensible men of good will be expected to invoke the authority and creativity of government."

Thinking along these lines is a missed opportunity for the needed intellectual reboot.  It is not a matter of replacing economist A with economist B, it is a matter of rethinking what economists should do.  I have argued based on my reading from Adam Smith to Vernon Smith, that we economists should be content in our role as students of society, teachers of a scientific discipline, and as social critics.  In short, we must come to grips with our role as lowly philosophers, and eschew our claim to being high priests.

Mises on Liberalism, Socialism and Democracy

|Peter Boettke|

I reread Mises's classic work Socialism this summer.  Fun historical fact -- this was the first book of Mises's that I read, followed by Theory of Money and Credit, before I read Human Action.  The book had a huge impact on me when I read it, and it still does.  In many ways, I consider it Mises's best book in terms of argument, tone, and urgency -- though of course Human Action is his most magisterial work.  Mises's commitment to liberal cosmopolitanism leaps off the pages for those who will read carefully, and this means a commitment to peaceful social cooperation.  Let's look closely at some passages from the section on Liberalism and Socialism.

In the Liberal Social Philosophy the human mind becomes aware of the overcoming of the principle of violence by the principle of peace. In this philosophy for the first time humanity gives itself an account of its actions. It tears away the romantic nimbus with which the exercise of power had been surrounded. War, it teaches, is harmful, not only to the conquered but to the conqueror. Society has arisen out of the works of peace; the essence of society is peacemaking. Peace and not war is the father of all things. Only economic action has created the wealth around us; labour, not the profession of arms, brings happiness. Peace builds, war destroys. Nations are fundamentally peaceful because they recognize the predominant utility of peace. They accept war only in self-defence; wars of aggression they do not desire. It is the princes who want war, because thus they hope to get money, goods, and power. It is the business of the nations to prevent them from achieving their desire by denying them the means necessary for making war.

The love of peace of the liberal does not spring from philanthropic considerations, as does the pacifism of Bertha Suttner and of others of that category. It has none of the woebegone spirit which attempts to combat the romanticism of blood lust with the sobriety of international congresses. Its predilection for peace is not a pastime which is otherwise compatible with all possible convictions. It is the social theory of Liberalism. Whoever maintains the solidarity of the economic interests of all nations, and remains indifferent to the extent of national territories and national frontiers, whoever has so far overcome collectivist notions that such an expression as “Honour of the State” sounds incomprehensible to him, that man will nowhere find a valid cause for wars of aggression. Liberal pacificism is the offspring of the Liberal Social Philosophy. That Liberalism aims at the protection of property and that it rejects war are two expressions of one and the same principle.

Prior to this, Mises had argued that the very idea of social science was born in the recognition of an undesigned social order, and the disposal of the perceived conflict between Individualism and Collectivism.  The doctrine of the harmony of interest enabled theorists to grasp how out of the purpose behavior of individuals and the pursuit of beneficial exchange, a social order could emerge which served the common interest of society.  It is the recognition of Adam Smith's invisible hand thesis that led to the development of what Mises termed at that time "sociological thought".  The social philosophy of liberalism flows from this knowledge of sociology.

And, this teaching places liberalism at the core of the emancipation of individuals from serfdom, from dogma, from oppression, from poverty.  And, it is committed, Mises argues to democratic government -- the primary function of which is to ensure peace. "Liberalism demands the fullest freedom for the expression of political opinion and it demands that the State shall be constituted according to the will of the majority;" Mises states clearly, "it demands legislation through representatives of the people, and that the government, which is a committee of the people’s representatives, shall be bound by the Laws."  To Mises, "Political democracy necessarily follows from Liberalism."  But he elaborates, that treating one another as dignified equals is not the same as saying that all are equal.  Human beings come in all shapes and sizes, and with various talents and abilities.  We are all unique in this respect.  For the social purposes of the law, however, this is not the relevant argument. 

Society is best served when the means of production are in the possession of those who know how to use them best. The gradation of legal rights according to accident of birth keeps production goods from the best managers. We all know what role this argument has played in liberal struggles, above all in the emancipation of the serfs. The soberest reasons of expediency recommend equality to Liberalism. Liberalism is fully conscious, of course, that equality before the Law can become extremely oppressive for the individual under certain circumstances, because what benefits one may injure another; the liberal idea of equality is however based on social considerations, and where these are to be served the susceptibilities of individuals must give way. Like all other social institutions, the Law exists for social purposes. The individual must bow to it, because his own aims can be served only in and with society.

To conceive of the law differently, Mises argued, is to misunderstand its social function. "The equality Liberalism creates is equality before the Law; it has never sought any other. From the liberal point of view, therefore, criticism which condemns this equality as inadequate—maintaining that true equality is full equality of income through equal distribution of commodities—is unjustified." But it was just this tension that socialist sought to exploit in promoting their ideas.

Reading Mises is a great antidote to the current discussion that puts so much stress on Democratic Socialism, because you realize that this actually was the argument ever since 1848.  The question that must be asked is the social scientific one of whether the two ideas -- democracy and socialism -- are in fact compatible with each other.  The conclusion for Mises -- just as for Hayek -- is a resounding no; not without draining democracy of its social function completely.  At least the Marxist revolutionaries understood this which is why they defended the dictatorship of the proletariat during the transition period.  "Obviously," Mises concludes, the socialist community will have no room for democracy for centuries to come."

Now contrast that with the true radical liberal.  As Mises makes clear:

Always and everywhere Liberalism demands democracy at once, for it believes that the function which it has to fulfil in society permits of no postponement. Without democracy the peaceful development of the state is impossible. The demand for democracy is not the result of a policy of compromise or of a pandering to relativism in questions of world-philosophy, for Liberalism asserts the absolute validity of its doctrine. Rather, it is the consequence of the Liberal belief that power depends upon a mastery over mind alone and that to gain such a mastery only spiritual weapons are effective. Even where for an indefinite time to come it may expect to reap only disadvantages from democracy, Liberalism still advocates democracy. Liberalism believes that it cannot maintain itself against the will of the majority; and that in any case the advantages which might accrue from a liberal regime maintained artificially and against the feeling of the people would be infinitesimal compared to the disturbances that would stay the quiet course of state development if the people’s will were violated.

Read that passage carefully -- Liberalism affirms its commitment to democracy even when it is inconvenient, perhaps especially when it is inconvenient, and seeks only to influence the structure of government through ideas.  The economists is not a privileged expert immune from democratic processes of deliberation, but another citizen freely expressing their ideas, drawing on the accumulated knowledge from science and scholarship, in an effort to persuade fellow citizens of the power of those ideas and how those ideas can promote the common welfare.

Anyway, worth reading Mises's Socialism -- remember it was published in 1922, but also consider how much of his argument is so relevant to our current discussions. But above all, take his message about the priority of democratic institutions for the true radical liberal seriously.  As Hayek would argue later in The Constitution of Liberty, Mises does argue that "only within the framework of Liberalism does democracy fulfill a social function."  The critical point to stress, however, is this deep commitment to liberalism means also democratic ways of relating to one another as dignified equals before the law.  Mises insists that to forget that is to corrupt and abandon not only democratic institutions but the liberal order itself, and thus peaceful social cooperation. Instead, we will devolve into the violence trap of a war of all against all.

Hayek Was Crystal Clear -- the true liberal embraces change even when it is uncomfortable

|Peter Boettke|

Hayek famously penned an essay "Why I am Not a Conservative".  I have often argued that folks need to read that essay in conjunction with his "Errors of Constructivism" to get a good sense of his position on why as true radical liberals we must be wiling to question all of societies values, and submit them to critical evaluation, but why epistemologically we cannot do so be assuming any 'Archimedean point' from which to commence our evaluation.  We must always question within specific contexts, and criticize on the margin while holding other values as given at that moment if we are to avoid serious errors in our reasoning about society.  Root and branch constructivism is merely an illusion of the revolutionary, and a dangerous illusion at that. But that doesn't mean we are trapped in the status quo either.  Hayek is giving us a framework for engaging in social criticism from a radical liberal perspective that is within our epistemological boundaries of the humanly possible.  Think about that.  Now think long and hard about this passage from the essay "Why I am Not a Conservative."

But the main point about liberalism is that it wants to go elsewhere, not to stand still. Though today the contrary impression may sometimes be caused by the fact that there was a time when liberalism was more widely accepted and some of its objectives closer to being achieved, it has never been a backward-looking doctrine.  There has never been a time when liberal ideas were fully realized and liberalism did not look forward to further improvement of institutions. Liberalism is not averse to evolution and change; and where spontaneous change has been smothered by government control, it wants a great deal of change of policy.  So far as much of current governmental action is concerned, there is in the present world very little reason for the liberal to wish to preserve things as they are.  It would seem to the liberal, indeed, that what is most urgently needed in most parts of the world is a thorough sweeping-away of the obstacles to free growth. p. 399 in The Constitution of Liberty (Chicago, 1960), emphasis added

This sense of excitement about the voyage into the unknown future, and the embrace of the possibility of discovery and creativity that the liberal society makes possible is one -- among many -- reason I am excited to get my hands on Deirdre McCloskey's forthcoming book, Why Liberalism Works (Yale, 2019).  Liberalism is a social philosophy that is grounded in the recognition of its constant need for renewal and reconstruction.  It is never a fixed doctrine standing still and telling the context of history -- STOP.  It is, instead, a welcoming of the new and novel, of the fulfillment of its ideals, and the greater recognition that we are one another's dignified equals.  Liberalism says YES and the cosmopolitan liberal order turns strangers into friends and enemies into partners.  It is an emancipation doctrine -- from dogma of the altar, from repression by the crown, from violence from the sword, and from exploitation from the privileged mercantilist class. it is an ongoing project, and will always fall short of complete fulfillment of its vision of peaceful social cooperation; change is ceaseless, and the effort to improve institutions is constant.  Hayek's great intellectual gift isn't a completed system, but an intellectual framework which can aid future generations is their unique effort to reconstruct the principles of justice and political economy. As Hayek told his readers in the first paragraph of The Constitution of Liberty: 

If old truths are to retain their hold on men's minds, they must be restated in the language and concepts of successive generations. What at one time are their most effective expressions gradually become so worn with use that they cease to carry a definite meaning. The underlying ideas may be as valid as ever, but the words, even when they refer to problems that are still with us, no longer convey the same conviction; the arguments do not move in a context familiar to us; and they rarely give us direct answers to the questions we are asking. This may be inevitable because no statement of an ideal that is likely to sway men's minds can be complete: it must be adapted to a given climate of opinion, presuppose much that is accepted by all men of the time, and illustrate general principles in terms of issues with which they are concerned.

It had been a long time, Hayek continued, since the ideals of liberalism had been effectively restated.  He made that judgment close to 60 years ago.  He himself took several stabs at providing that restatement -- The Road to Serfdom; The Constitution of Liberty; and Law, Legislation and Liberty -- each with great strengths and some glaring weaknesses.  Our times, I would call, does not need naysayers, but the articulation of a vision of the rights and dignity of all individuals, and invitation (in fact a welcoming hand) to all who seek to escape the oppression of dogma, of violence, of crushing poverty.

As Hayek wrote in the concluding paragraphs of his essay "The Intellectuals and Socialism" (1949):

We must make the building of a free society once more an intellectual adventure, a deed of courage. What we lack is a liberal Utopia, a program which seems neither a mere defense of things as they are nor a diluted kind of socialism, but a truly liberal radicalism which does not spare the susceptibilities of the mighty (including the trade unions), which is not too severely practical, and which does not confine itself to what appears today as politically possible. We need intellectual leaders who are willing to work for an ideal, however small may be the prospects of its early realization. They must be men who are willing to stick to principles and to fight for their full realization, however remote. The practical compromises they must leave to the politicians. Free trade and freedom of opportunity are ideals which still may arouse the imaginations of large numbers, but a mere "reasonable freedom of trade" or a mere "relaxation of controls" is neither intellectually respectable nor likely to inspire any enthusiasm.

The main lesson which the true liberal must learn from the success of the socialists is that it was their courage to be Utopian which gained them the support of the intellectuals and therefore an influence on public opinion which is daily making possible what only recently seemed utterly remote. Those who have concerned themselves exclusively with what seemed practicable in the existing state of opinion have constantly found that even this had rapidly become politically impossible as the result of changes in a public opinion which they have done nothing to guide. Unless we can make the philosophic foundations of a free society once more a living intellectual issue, and its implementation a task which challenges the ingenuity and imagination of our liveliest minds. But if we can regain that belief in the power of ideas which was the mark of liberalism at its best, the battle is not lost.

CEVRO Institute PPE program

|Peter Boettke|

I am currently at the Prague Airport heading home after giving a series of 10 lectures, a talk to ESFL chapter in Prague, and listening to MA thesis proposals. What Josef Sima has built here is a wonderful educational and life experience for the next generation of potential thought leaders. I highly recommend students considering a career in ideas (not just academics) to spend a year in Prague in this program, learn from the international consortium of lecturers, from fellow students, from the beautiful city of Prague, and from the opportunity for easy travel throughout East and Central Europe.  Just a phenomenal opportunity to live learning.

Watch this short video.

The Role of the Economist in a Free Society

|Peter Boettke|

In May the MPS Regional meeting was hosted in Texas, and I gave one of the lunch talks on the theme of "Lessons for MPS from 'The Pretense of Knowledge'."  It was a tour through the ideas of various major thinkers in the history of MPS and their cautions against the economists as orchestrator of social betterment.  Obviously my title for that talk draws on Hayek's Nobel lecture.

EconLib has published my essay into parts for posting online under the title "The Role of the Economist in a Free Society".  The first part focused on my discussion of Mises and Knight. The second part focuses on my discussion of Friedman, Stigler, Buchanan and Coase.

What is currently missing is my extended discussion of Hayek's Nobel address, which I highly recommend to everyone to read very closely.  So let me just give a few passages here from that lecture that I would highlight.

• We have indeed at the moment little cause for pride: as a profession we have made a mess of things.
• It seems to me that this failure of the economists to guide policy more successfully is closely connected with their propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences – an attempt which in our field may lead to outright error. It is an approach which has come to be described as the “scientistic” attitude – an attitude which, as I defined it some thirty years ago, “is decidedly unscientific in the true sense of the word, since it involves a mechanical and uncritical application of habits of thought to fields different from those in which they have been formed.”1 I want today to begin by explaining how some of the gravest errors of recent economic policy are a direct consequence of this scientistic error.
• If we are to safeguard the reputation of science, and to prevent the arrogation of knowledge based on a superficial similarity of procedure with that of the physical sciences, much effort will have to be directed toward debunking such arrogations, some of which have by now become the vested interests of established university departments.
• If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants. There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try, “dizzy with success”, to use a characteristic phrase of early communism, to subject not only our natural but also our human environment to the control of a human will. The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society – a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.

Get the point?!  Hayek wasn't that subtle about what he was arguing.  Read Bruce Caldwell's wonderful account of Hayek's experience associated with the Nobel Prize.

 

A Fictional Conversation Between Emma Goldman and John Reed --- a must watch for anyone thinking about the history of socialism

|Peter Boettke|

John Reed, author of Ten Days That Shock the World, was an American journalist who worked on behalf of the socialist cause, and he was buried at the Kremlin Wall.  Warren Beatty wrote, directed, starred and produced the 1981 film Reds that depicted John Reed's life as an American Communist and supporter of the Russian Revolution.  In my favorite scene in this movie, he is confronted by the great American anarchist thinker who was deported to Communist Russia in 1919, Emma Goldman (played by Maureen Stapleton).

Goldman wrote My Disillusionment with Russia in the early 1920s after witnessing the betrayal of the socialist dream in theory through the day to day practice of socialism in reality.  In this scene she points out to Reed that "my understanding of revolution is not the continual extermination of political dissenters, and I want no part of it."  Reed will respond, "You sound a little confused, E.G., with the revolution in action, up till now you only dealt with the revolution in theory."  But, Goldman persists and explains to her good friend that 4 million people died last year in a militaristic police state where nothing works.  Reed counters with the standard claims placing the blame on the frustrations and disappointments first on counter-revolutionary forces, and also on the ignorance of the people who do not YET know how to carry out the revolution.

Everything about this discussion captures so much of the difficulties in the debate over this bold idea of socialism, and the repeated frustrations experienced by the people who are led down this path.  In short, Hayek's The Road to Serfdom details the logic behind this tragic tale, and we must honestly never forget the details of the argument and the history of the diverse circumstances under which this tragedy has been played out over the last 100 years in Europe, in Latin America, in Asia and in Africa.

 

Bruce Caldwell's paper on the 75th anniversary of The Road to Serfdom is, as expected, is an exemplar of high quality scholarship and careful exposition of the argument.  Watch, read, watch and read, and form your own judgment on the debate between Goldman and Reed.  Love to hear your views.

Prague, CZ: Then and Now

|Peter Boettke|

I am back in Prague teaching at the CEVRO Institute PPE program.  This will be 3rd year teaching in this program. But I have been coming to Prague for almost 30 years.  I came here first at the invitation of Central European University and the Center for Research and Graduate Education (they shared the same building at the time), I later came as part of a joint program between Charles University and TFAS that provided a summer institute for students throughout the former communist economies, then I came as part of the faculty and even as a Fulbright scholar to the Prague University of Economics, and now at CEVRO.  And, I was here for the MPS meetings as well.  I have spent more time in Prague than any other East or Central European country, though I have had the good fortune through the years to be a fellow at the Academy of Sciences in Moscow, and to be a visiting professor or present my research at universities in former Austria, former East Germany, Poland, Romania, Serbia, and Slovakia.  I have very much enjoyed my visits and sough to learn much from both formal interactions with scholars and students, and with informal interactions with the culture and everyday life of the citizens.

I am a big believer in social history done right, and I will write a blog entry on this in the not so distant future, and travel and observation is a prelude in many ways to doing social history correctly (emphasis on the use of the word prelude).  But what strikes me in my almost annual visits to Prague through the years is how much has changed since my first visits all those years ago.  Slow subtle changes have followed the seismic changes of 1989 and then again December 31, 1992 when the Czech Republic and Slovakia went separate ways with the final dissolution of Czechoslovakia.

But, one of the things that is most striking to me isn't from my visits here, but in my returns from here back home to the US and the conversations currently popular in the US about socialism.  This region of the world had to escape from consequences of socialism, and still has in many ways scars from that social experiment.  We should not forget what 1989 meant to the people in this region, and how despite the difficulties of post-communism, the freedom here has unleashed creative energies and led to vibrancy and flourishing that could only be imagined under the previous regime.

First image is riot police blocking the bridge in 1989 to prevent protests at the Prague Castle, the second image is the Charles Bridge in recent times full of tourists enjoying the beauty of the city. It wasn't all that long ago that armed police were deployed to stop students from expressing their voice in favor of freedom and democratic representation which were absent under socialism -- a socialism I should add that was supposed to represent that true democratic freedoms of the people.

 

 

Cultural Innovators and the GMU PhD Program

|Peter Boettke|

Listen to Tyler Cowen at the 50 min mark and following discuss his own personal situation at GMU and why our PhD program is so AWESOME.

 

The entire episode is self-recommending with Glenn Loury and Tyler Cowen, so after you speed ahead go back and listen to the entire thing.  Also, it was amazing that Glenn gave the shout out to David Skarbek and Daniel D'Amico and the work they are doing at Brown, and how well they reflect the breadth and depth of our program at GMU.  Both Dave and Dan wrote their PhD thesis under my supervision, and I am thrilled to see them get this recognition by a senior scholar as distinguished and accomplished at Glenn Loury. Keep up the great work Dave and Dan, continue to make Political Theory Project great, and to reflect so strongly the scholarly values and the diverse methodological perspectives and analytical tools you were trained in ... and above all continue to be cultural innovators in social sciences and social theory.

Socialism Sucks by Robert Lawson and Ben Powell

|Peter Boettke|

I just finished watching Bob and Ben do an interview about their new book that is released today.  Socialism Sucks is timely and entertaining tour through the ruins left behind by an ideology that has both been poorly understood and devastating for humanity in its practice.  They provide a tour guide through the socialist world, and focus on the everyday pleasure of enjoying a good beer.  It turns out, that is quite hard to do in many regions of the world.  As Ben put it in the interview I just watched, that is because capitalism provides.  Socialism on the other hand, as Mises taught, lives off the accumulated production of the previous capitalist stage, and thus is in essence destructivism. 

Bob and Ben are the perfect authors for this book.  Bob has been involved and in fact lead researcher on the Economic Freedom Index for decades building on the ideas of Milton Friedman and the operationalizing of that project by James Gwartney.  And, Ben is the author of Out of Poverty, a great study of the development process.  Both are crystal clear economic thinkers and writers, and both like to drink beer and travel. And, best of all, both know how to laugh and have a good time, as well as know when to be deadly serious and communicate a sense of urgency.

Socialism does indeed suck. It has produced in practice a legacy of lies and lost souls.  But, here is a reality, none of the 18-21 years olds in college today were alive when communism collapsed in 1989.  They have no knowledge of the lived reality of this political and economic system.  And the promises are so comforting.  In essence Lawson and Powell are giving us an updated  "traveler's tale" of socialism in practice for us to learn from.  Steve Pejovich provided such an insider's account with Life in the Soviet Union: A Report Card on Socialism (1978), but such harsh realities of everyday life under this ideology are lost in the enthusiastic presentations of the promises of a better future for all.  But economics logic is a harsh mistress, and the dysfunctional operation of socialism stems from basic incentive incompatibilities, serious knowledge problems, and public choice issues of opportunism.  The dream crashes against the hard rocks of reality.

Such a sober message can often times be presented in too dry a manner for the intended audience, and thus does not penetrate the psyche.  Well, Lawson and Powell are not dry!!!

Read Socialism Sucks, preferably with a flight of samples from the multitude of craft brewers that the capitalist economy has provided in front of you, and see the difference, feel the difference, and taste the difference.  The message could not be communicated more clearly or more definitively.