Economics

Mises can save the world

If they had listened to Mises in 1927, the world might have been saved. There would have been no Holocaust, Gulag, bombing of civilians, prolonged Depression and vast human suffering.

That was then. What can we do now? We can revisit his great work Liberalism, drink deeply from its wisdom and apply it in our time. Liberalism is this week’s release in the Laissez Faire Club, with a new introduction by Toby Baxendale. If you are not a member, you can join now.

Using the word “liberalism” to mean genuine freedom takes some getting used to. Today’s self-described liberals push government power as the solution to all our economic and social woes.

But government is not liberal! Government is confiscation, coercion, the Taser, the jail cell!

Another use of the term occurs when self-described conservatives condemn liberalism as the cancer that is killing society. What? Thomas Jefferson was a liberal. So was John Locke. So was Alexis de Tocqueville. Their ideas built the world we love.

Most of all, there was Ludwig von Mises, who proudly called himself a liberal. He was the 20th century’s great defender of capitalism and the free society. He decided to settle the issue about what liberalism is once and for all.

This book is Mises’ classic statement in defense of a free society, one of the last statements of the old liberal school and a text from which we can continue to learn. It has been the conscience of a global movement for liberty for 80 years.

Liberalism first appeared in 1927 as a follow-up to both Mises’ devastating 1922 book showing that socialism would fail and his 1926 book criticizing interventionism. It was written to address the burning question: If not socialism, and if not fascism or interventionism, what form of social arrangement is most conducive to human flourishing? Mises’ answer, summed up in the title, is liberalism.

Even in these times, Mises was aware that the meaning of liberalism had changed from its common use in the 19th century. He had to clarify that his understanding not only included commercial freedom, but was rooted in it. Without economic freedom, no other form of freedom can have material meaning.

But Mises did not accept the idea that the term had been merely stolen from the proponents of free markets. He thought it had never been worked out scientifically, and therefore, the theory of liberalism became vulnerable to political manipulation.

Thus did Mises do more than restate classical liberal doctrine. He gave a thoroughly modern defense of freedom, one that corrected the errors of the old liberal school by rooting the idea of liberty in the institution of private property (the subject on which the classical school was sometimes unclear). That is the grand contribution of this volume:

The program of liberalism, therefore, if condensed into a single word, would have to read: property, that is, private ownership of the means of production… All the other demands of liberalism result from this fundamental demand.

But there are other insights. He demonstrates that the order inherent in a laissez-faire society stems not from a mystical source, but from the capacity of the price system to provide a means of rational coordination between independent actors. This rational pursuit of individual interest leads to the division of labor, the development of the money economy, the extended order of production and the coordinative signals of interest and profit. He argues that it is within man’s rational capacity to understand the reasons for the prosperity and orderliness of freedom.

He further shows that political decentralization and secession are the best means to peace and political liberty. As for religion, he recommends the complete separation of church and state, and a cultural conviction that favors tolerance. On immigration, he favors the freedom of movement. On education, state involvement must end — completely.

In some ways, this is the most political of Mises’ treatises, and also one of the most-inspiring books ever written on the idea of liberty. It remains a book that can set the world on fire for freedom, which is probably why it has been translated into more than a dozen languages.

Yet the concluding message here is something that every freedom lover needs to seriously contemplate and return to again and again. Consider his words:

Liberalism is no religion, no worldview, no party of special interests. It is no religion, because it demands neither faith nor devotion, because there is nothing mystical about it and because it has no dogmas. It is no worldview because it does not try to explain the cosmos, and because it says nothing and does not seek to say anything about the meaning and purpose of human existence. It is no party of special interests, because it does not provide or seek to provide any special advantage whatsoever to any individual or any group. It is something entirely different. It is an ideology, a doctrine of the mutual relationship among the members of society and, at the same time, the application of this doctrine to the conduct of men in actual society. It promises nothing that exceeds what can be accomplished in society and through society. It seeks to give men only one thing: the peaceful, undisturbed development of material well-being for all, in order thereby to shield them from the external causes of pain and suffering as far as it lies within the power of social institutions to do so at all. To diminish suffering, to increase happiness: That is its aim.

No sect and no political party has believed that it could afford to forgo advancing its cause by appealing to men’s senses. Rhetorical bombast, music and song resound, banners wave, flowers and colors serve as symbols and the leaders seek to attach their followers to their own person. Liberalism has nothing to do with all this. It has no party flower and no party color, no party song and no party idols, no symbols and no slogans. It has the substance and the arguments. These must lead it to victory.

This is more than a theory; it is a proposed strategy for achieving a dream. It is one that should attract anyone who is truly serious about making a contribution to the cause of freedom.

Economics

Economics by and for human beings

Economics puts parameters on people’s utopias.

Yes. That’s exactly it. That’s why the politicians hate economics. That’s why the media are so… selective in which economists they call on to talk about policy.

That’s why the economics departments in colleges are put down by the sociologists, philosophers, literature professors and just about everyone else who has romantic longings for a coerced utopia.

The teachings of the principles of economics should inform as much on what not to do, perhaps even more than providing a guide to public action.

That’s it again. Don’t control prices. Don’t socialize medicine. Don’t raise taxes. Don’t inflate the money supply. Don’t put up trade barriers. Don’t go to war. Economists just keep bursting people’s bubbles. And it’s because economists say these things that the ruling class wants them to shut up about.

It’s been going on for hundreds of years. Every generation for the past 500 years has seen the battle wage between those who want to use the power of the state to contort and distort the world to fit some daydream on one hand and the economists who have seen the futility in this manipulation and warn against it on the other.

The man who wrote those above words is Peter Boettke, economics professor at George Mason University. He is one of the nation’s leading producers of economists, having directed several dozen dissertations over 20 years and having spread his students to colleges and universities around the country and the world.

His new book, which ought to be read by every college student who secretly suspects that economics is not as dreary as they say, is Living Economics, just published by the Independent Institute. It’s a big book, but a luxurious read from Page 1 to 450.

The phrase “living economics” means two things: 1) economics is part of life whether we recognize it or not, and 2) economics is a living discipline, rooted in universal principles but always changing in nuance and application.

Professor Boettke’s purpose is to provide a guided tour through the profession as it is now and how he would like to see it changed. He does this by first explaining what got him interested in the science.

It turns out that he remembers the gas lines of the 1970s and recalls being amazed to discover that they were wholly manufactured by Washington policy. It was the price control of oil combined with inflationary pressures from bad monetary policy. Contrary to what the media mavens and politicians were saying at the time, it had nothing to do with producer greed, secret price manipulation or financial speculation.

That’s what did it for him. He realized that economics is woven into every aspect of our lives. It is inescapable. When the market is allowed to work, beauty and growth results. Humanity flourishes. When markets are truncated and hobbled, people suffer.

Then he realized how little public understanding there is of economics. And he realized that he could play a role in changing this. He has. His students are now teaching other students in six different Ph.D.-granting institutions, among dozens more institutions.

Here Boettke reflects on the decision to make economics his vocation. Economics as a reality in our world will exist whether there are people around to study and explain it or not. As a discipline, it was very late in developing, mostly during the High Middle Ages. And it came about precisely to elucidate the way the world works in order to prevent kings and other big shots from using force to interfere with its mechanisms.

As Boettke puts it,

We do not need to understand economics in order to experience the benefits of freedom of exchange and production. But we may very well need to understand economics in order to sustain and maintain the institutional framework that enables us to realize the benefits that flow from freedom of exchange and production.

What follows this beginning material is a plunge straight into the core of what economics teaches. Boettke chooses a very engaging path. He tells the story through a series of intellectual biographies of the economists he most admires. We read about his teacher Hans Sennholz, about Ludwig von Mises, F.A. Hayek and Murray Rothbard (his chapter on Rothbard is particularly celebratory). He covers James Buchanan and Gordon Tullock. Perhaps the most-interesting sections are the ones that find “Austrianness” in unusual places — in the work of Kenneth Boulding, for example.

In contrast to most books on economics, this book is very warm and humane. He goes all out to describe economics as the science of human choice in the real world. The prose matches his intellectual sense. We are spared the usual academic pomp and the absurdities of trying to cram people and their spontaneous decisions into mechanical models. He never talks down to his readers. This reader found no showing off, no strutting around, no defensiveness or bickering. The prose and line of thinking are open and generous.

It’s no surprise that the Austrian School is at the core of the narrative. This figures into his choice of biography, of course. And it informs the whole of his worldview, accounts for why he is able to write about real-world problems and explains the failure of planning in such lucid terms.

At the same time, Boettke cautions: “The main thing that makes someone an Austrian is not the willingness to identify one’s work with that label, but the substantive propositions in economics that an economist identifies with.” With this in mind, he shows that Austrian ideas are very more widespread that one might suppose.

In general, Boettke attempts to show that the profession has lost much of the arrogance that it practiced from the 1930s through the 1970s. While methodological positivism and mathematical hubris still exist in form, he attempts to show that the old ways have shifted toward a greater emphasis on institutions and human choice. He detects the rise of a certain humility in the profession, which has made way for a broader and more-eclectic approach that includes even radical libertarians like Boettke himself.

A book like this will provide anyone vast insight into what economics has to offer the world of ideas. It is an excellent overview about what is great and what is awful in the profession today. But even when he criticizes, there is no anger; instead, there is conviction that openness and frankness is the best path to finding truth. I can’t think of a better good for an economics major to have on hand when the lecture content begins to depart from reality.

As for the author himself, I can’t add to what Israel Kirzner has already said (and I’m almost certain that Kirzner has never written an endorsement this over-the-top):

Living Economics is in many ways a remarkable book. The volume luminously reflects the amazing breadth of professor Boettke’s reading, and the deep and careful thoughtfulness with which he reads. But the true distinction of this volume consists of more than the profound economic understanding and wealth of deeply perceptive doctrinal-history observations that fill its pages. Its distinction consists in the delightful circumstances that these riches arise from and express Peter Boettke’s extraordinary intellectual generosity and unmatched intellectual enthusiasm — rare qualities that have enabled him to discover nuggets of valuable theoretical insight in the work of a wide array of economists, many of whom are generally thought to be far away from the Austrian tradition, which Boettke himself splendidly represents. Boettke’s prolific pen is dipped, not in the all-too-common ink of professional one-upmanship, but in the inkwell of an earnest, utterly benevolent — and brilliant — scholar, seeking, with all his intellectual integrity, to learn and to understand.

Many others have said the same: Bruce Yandle, Richard Wagner, Steve Hanke, Randall Holcombe and dozens more. As you read through the tributes, you realize that these are more than coerced blurbs. Boettke has managed to make economists themselves re-excited about what they do. He will do the same for you, and help you appreciate the creativity, courage and sheer adventure associated with this grand craft that elucidates the workings of our world like no other.

This article was previously published at Laissez-Faire Books.