In his 1936 book The General Theory of Employment, Keynes declared:
The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else…Madmen in authority, who hear voices in the air are distilling their frenzy from some academic scribbler of a few years back (1)
In less than two weeks, I will attend a seminar at the Mercatus Center called “Advanced Austrian Economics”. I urge you to become more familiar with the Mercatus Center – their scholars are leaders in the cause of freedom and Mercatus is one of America’s most important “Liberty Projects”. Just as the American Revolution needed the intellectual foundation of Locke, Hamilton, Madison, Jefferson and others, the restoration and advancement of our founding ideals will require the intellectual foundation of groups like the Mercatus center, Cato Institute, Independent Institute and FEE – among others.
That said, I’ve been re-reading Austrian economic scholars (Menger, Mises, Hayek, Kirzner, et al) in preparation for a great conference. I started with an audio version of Israel Kirzner’s Early Austrian Economics. Kirzner provides an excellent overview of the founders of Austrian Economics including Carl Menger (1840-1921) and Eugen von Bohm-Bawerk (1851-1914). (The audible version allows me to absorb a lot of material while I exercise every morning – very useful for books without mathematics or graphs). For those interested in Austrian economics, what Mises called “logical economics”, I highly recommend Kirzner over others – as a student of Mises while at NYU during the 1950s, Kirzner has an inside perspective that’s hard to beat. I then re-read Mises’ Science of Human Action – the Scholar’s Edition (2). The great economist Robert Higgs once told me that most graduate students in economics don’t understand the first 140 pages (Part I) of Human Action – but they should. It’s difficult to get through, but well worth the effort. Mises is brilliant and his insights are profoundly important.
For example, in the Introduction for Human Action, Mises makes an important observation about human progress. This observation is so important that Mises claims that, “What is wrong with our age the widespread ignorance of which…policies of economic freedom played in the technological evolution of the last two hundred years”. That’s quite a claim, but accurate once one thinks it through. Everyone can see the results of “technological evolution”. Every morning, I come downstairs to find my Starbucks coffee, expertly roasted from the Sumatra island of Indonesia, already made and waiting for me – something even King Henry VIII couldn’t make happen. The “Top 1%” protestor in Central Park coordinates her activity using a cell phone – something that John Rockefeller – the wealthiest of the “robber barons” could never do. In 1836, Nathan Mayer Rothschild – part of a family worth over $300 billion – died of an infected abscess. Today, WebMD suggests many abscesses can be treated at home, but if you have to see a doctor, he or she will drain the abscess then:
- You will be given instructions about home care.
- Most people feel better immediately after the abscess is drained.
- If still experiencing pain, doctor may prescribe pain pills for home use over next 1-2 days.
Sounds simple enough, but that was beyond the reach of the richest man on earth in the 19th century. It is now within the reach of most Americans in the 21st century – in other words, almost all Americans are better off than the top 1% 200 years ago. This kind of progress was unthinkable back then – what changed? Who or what changed it? I have several points – a) life has gotten much, much better, b) most people don’t appreciate that and c) most who do, attribute it to improvements in “technology” or “natural science”. Mises claims these improvements would not be possible without first changing the laws or “political economy” in the centuries preceding these technological changes. Most are unaware of the contributions of folks like John Locke, Adam Smith, David Ricardo and Francois Quesnay but Mises wants to make sure we understand the impact these men had on laws that held us back for centuries:
- That it is unfair and unjust to outdo a competitor by producing better and cheaper goods
- That it is iniquitous to deviate from the traditional methods of production
- That machines are an evil because they bring about unemployment
- That it is the task of civil government to prevent efficient businessmen from getting rich and to protect the less efficient against the competition of the more efficient
- That to restrict the freedom of entrepreneurs by government compulsion or by coercion on the part of other social powers is an appropriate means to promote the nation’s wellbeing
Mises then asserts that “British political economy and French Physiocracy (3)(the economists & les économistes) were the pacemakers of modern capitalism. It is they that made possible the progress of applied natural sciences that has heaped benefits on the masses”(3).
Further, on Mises original point, that “what’s wrong with our age” is that so many are ignorant of how the ideas of the political economists changed everything. If their contributions were recognized, if people gave credit to Locke and the Marquis de Condorcet for creating the intellectual environment that allows people around the world to read these words instantly – they’d seek to preserve the freedom that led to those innovations. Instead, our colleges sometimes teach that the contributions of the Economists and les économistes were coincident with, not a cause of, technological innovations. In fact, some argue that if you could just set up a more fair distribution scheme, then everyone could enjoy the benefits of technology – that’s got it backward. Contrast that with what I’ve been taught over and over, especially from two leaders at the Mercatus Center – Dr. Chris Coyne & Dr. Jayme Lemke:
“The truth is – if you really care about the well-being of others, you’ll argue for free markets.”
By MC, published February 15, 2016
Note: This is the first in a series of articles on Austrian economics – the theories of the historical leaders and of the people who articulate and advance Austrian economics today.
1 – White, Lawrence H. In The Clash of Economic Ideas: The Great Policy Debates and Experiments of the Last Hundred Years, New York, NY: Cambridge University Press, 2012. Page 5. Print.
2 – Mises, Ludwig. Human Action: The Scholar’s Edition. Hillsdale, MI: Hillsdale College, 2000. Print.
3 – More on French Physiocrats @ http://www.economist.com/blogs/freeexchange/2013/10/economic-history-0