Moral sentiments and Material Interests

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Not by Genes Alone, Peter Richerson and Robert Boyd, eds., Chicago, 2005.
Moral sentiments and Material Interests, Herbert Gintis, Samuel Bowles, Robert Boyd, and Ernst Fehr, eds., MIT, 2005.

Moral sentiments and Material Interests is, from my point of view, an enormous advance on all the orthodox economics I’ve ever read. My primary complaint is “What took so long?” For decades now economics has been spreading disinformation, and it’s about time that they started looking at reality. (The ev psych ideas found in the Gintis book are more fully developed in Not by Genes Alone. I should note that both books include a lot of technical argument which I haven’t even touched upon. What I’ve written here is only a summary of the conclusions, written from the point of view of a non-biologist and a non-economist).

The book’s starting point is an empirical look at the actual economic behavior of individuals, in order to see whether it matches the rational-self-interest assumed by economic theory. It is found that it doesn’t, and the actual behavior observed is next interpreted in terms of evolutionary psychology. Finally, the political and social significance of these new observations is sketched.

The empirical studies are standard cash-incentive psych lab tests designed to find out where people actually stand on the altruism / self-interest scale. In general, the tests find that people behave more altruistically than they would if they decided according to rational self-interest. (The tests also find that the degree of altruism varies according to culture, and is not a universal).

The results of these experiments square with my own convictions, but I’ve always felt that this kind of artificial, low-payoff game-playing is of only moderate scientific value — there’s even some evidence that the authors themselves think this way. To me the real story is that there’s never been any evidence at all that economics’ assumption of individual economic rationality is valid, and a lot of evidence that it isn’t. The rationalizations found in Friedman’s Positive Economics have allowed economists to rely thoughtlessly on these unproven assumptions for about five decades, and if a few little experiments are required to convince them to drop this inaccurate and unproven default, that’s cool with me. But it’s a little like someone cherry-picking Bible verses to make their point to the Vatican.

The authors define three mechanisms leading to altruism and social cohesion: strong reciprocity, conformity, and “costly signaling”. These are made possible by innate dispositions evolved in two steps — simple reciprocity first at the early primate small group level, and the more complex behaviors next at the early human. Altogether they make possible genetic selection for altruism, via net fertility advantages for all members of organized social groups (not simply biological groups or kinship groups) which are successful because their members behave altruistically. Biological competition within the group is suppressed by non-innate social and cultural mechanisms, giving an advantage to members of the group on the average, but not to every individual. This way, with gene-culture coevolution and mutualism, there can be genetic selection for a degree of innate altruism in a way that there could not be without culture and society, which form a kind of artificial environment.

“Strong reciprocity” is what replaces “rational self-interest”. It consists of the weak reciprocity described by Axelrod (initial cooperation, continued until the partner defects) plus an additional altruistic propensity to punish defectors even if there’s no personal advantage in doing so. In a society of strong reciprocators (altruists both in giving and in punishment), defectors do not have an advantage, whereas in a society of non-punishing altruists, the defectors have an advantage which causes the defector gene to drive out the altruist gene.

Two other behaviors are mentioned. “Conformity” is a weaker principle explaining social uniformity in the absence of the threat of punishment, and mostly applies to cases in which there is no clearly-perceptible advantage or disadvantage for the individual, so he just does what everyone else does. “Costly signaling” only appears in one chapter, which uses the biological concept to explain generosity of the potlatch / largesse / big man type. To me these are less immediately interesting than strong reciprocity, though “costly signaling” is a step on the way toward defining a more complex heirarchal society extending beyond the face-to-face level.

A significant advantage of this book is that it describes a social world which, like the world observed and described by historians, has “multiple equilibria and tipping points” and is thus less stable and less predictable than the imaginary world of equilibrium economics.

In the final chapter Bowles and Gintis point out that local community is always grounded on a fundamental ethic of strong reciprocity. They describe it as a positive force which is usually wrongly maligned by the partisans of the market, the state, and elite culture. This brings them close to the communitarians, for whom the local community is a valid and necessary third leg of society, distinguishable (and sometimes at odds with) both pure market behavior and the state. (A lot of liberationist and libertarian ideology is hostile to the naive sorts of strong retribution that make small-group community possible).

The three innate principles described by these authors can be thought of as a ground for ethics, and the authors speak openly of “trust” and “fairness”. However, all actual ethics involves further cultural processing, beyond the innate foundation. For one example, one of the great advances making civilization possible was the suppression of vendetta and feud, which are completely natural developments of “strong reciprocity”. For another, the mechanisms of natural ethics described here work best at the face-to-face level. The description, much less the attainment, of fairness (the goal of strong reciprocity) within a large, complex, multi-level society is an extremely tricky and difficult task indeed. (The authors do touch on these questions, and they cite Fried’s Evolution of Political Society, which sketches a general view of the move toward complex society).

Anyway, after about fifty years, economics seems to be returning to the real world.

(Slightly revised Sept 29)


My post got a bit of attention from Donald Luskin:

If the nature of selfishness is more complicated that economics typically assumes, if it is indeed tied up in considerations of family, friends, nation, species — whatever — then let the science of economics try to adopt itself to those complexities.

I have trouble thinking of this as a useful addition to the theory of rationality. It reminds me of the Chinese philosopher Chuang Tzu’s humorous mysticism: “Yes, I’m selfish! But I’m selfish for the whole universe, not just for me!”

I also have a new piece up at


  1. Nice one, tks. You probably already have, but if not, you might also enjoy exploring the Post-Autistic Econ crowd: Tony Lawson, Marc Blaug, Steve Keen, Hugh Stretton, etc. (I especially like Stretton and Keen.) The behavioral econ crowd seems to want to take note of how people actually behave too.

  2. Yeah, I have an anthology by Fullbrook of mostly post-aut stuff, and I’ve read Keen’s book. Max at Maxspeak can be good too. 
    The bothersome thing is that no matter how many dissident economists there are, and no matter how many good points they make, the orthodox guys are oblivious. Basically, they’ve got the monopoly and they don’t have to care. 
    I’ll be doing more econ stuff over at my Idiocentrism site.

  3. David Barash points out in Biology Lurks Beneath: Bioliterary Explorations of the Individual versus Society that (some) people are likely to walk a fine line between (obvious) self-interest and group conformance … after all, we all need the benefits of the group.

  4. Hmm… I haven’t read the book. But here is the thing. What is meant by self interest in this setting. In financial markets, people still tend to maxomize profit. Plus as trading becomes more and more computerized this will be the case more and more, though markets were fairly “efficient” (i.e. profit maximizing) even before computers. 
    Interesting behaviour occurs in electronic markets with different rules. Thus, where participants are anonymous, people tend to maximize profit on each transaction, by for example, lying about size of total transaction involved, etc. In one-to-one deals with brokers, this tends not to happen as the broker would remember about the lie, and blacklist the liar. Even this is profit maximizing in a repeated game framework. 
    The exact behaviour you see in economic situations depends a great deal on the exact “micro-structure” of the market: who knows what, at what cost, who is informed/uninformed, what are the exact settlement rules, is one of the participants a market maker and so on. Most mainstream analyses tends to ignore this information. 
    Good references: Harris’s Trading and Market Microstructures, which is a practitioner’s gem. and O’Hara’s Market Micro-structure model which approaches things from a theoretical perspective. She has extensive work on the subject, do check that out. 
    The real question is, can these “non-optimal” behaviour be more simply be explained by market-micro-structure, rather than psychology? (Yeah I know about Kahnemann/Tverski, but I haven’t seen mathematical models incorporating these. They seem like real toy examples. But economics is not my direct field, so maybe I have missed something here)

  5. You ought to read the book. In general, it would not apply to people working in finance, which is what I think you’re talking about, because financial markets are organized entirely around rational self-interest with no altruism, or pure market behavior. What’s in question is the degree to which all human behavior is (or should be) organized around rational self-interest with no altruism (i.e., whether all human behavior is like pure market behavior).  
    One of the major conclusions of the book is that most people do not, in fact, act that way, even in fairly artificial game-playing situations where you might expect them to. A consequence is that thinking about social questions does not have to, and in fact cannot, assume a rationally self-interested actor. It makes social thinking much more difficult but also much more realistic. 
    The stuff you are talking about seems more like standard economics, satisficing vs. maximizing, different results coming from different ways of organizing markets, etc., and not really related to the topic of the book.

  6. Yeah finance was what I was talking about, but the micro-structure stuff happens in regular economics as well. It’s just that economists, particularly macro-economists, don’t pay much attention to them. For them everything just magically goes to equilibrium. All systems are integrable (I think this has improved a bit now) and by implication, all homology groups are trivial.. (different homology btw) 
    enough rant. I’ll put it on my list and probably read it in the next year or so.thanks

  7. The behavioral econ crowd seems to want to take note of how people actually behave too. 
    All the guys in this crowd are mainstream economists at major departments.

  8. I think that one conclsuion of the book (not spelled out) is that even a lot of economic behavior is not analyzable as market behavior. It’s exchange and involves money and value, but it doesn’t follow strict market principles.  
    Beyond that, in recent decades economics has been reaching to apply economic analysis to all forms of behavior (for example, marital and family relations), interpreted as rational self-interest, and this book’s analysis would strike that kind of thinking very hard. 
    At my URL is a thing I wrote about an economist’s analysis of the family.

  9. Just taking a look at the names, behavioral economics might be a lot closer to what Serf was talking about — actual behavior in pure market situations.

  10. By the way, Bowles and Gintis have been publishing in major econ journal for decades. I’m a grad student in economics at a major university and these concepts are taught and discussed in classes. Sure homo economicus is dominant but Friedman hasn’t exactly put these guys and their ideas on the fringe.

  11. EG — I have a reasonable idea of how the field sorts out, and the Colander / Holt / Rosser anthology includes a bunch of the more respectable non-orthodox economists, including Gintis. (Rosser is also on the net at Maxspeak). I get the impression that they’re not quite outcasts, but still on the fringe. (The PAE people still are outcasts, and like it that way). 
    Just in the last few days Brad DeLong attacked Duncan Foley (in the Colander book) quite viciously. And DeLong. while completely orthodox, is on the left wing of the profession politically. I’m convinced that the orthodox still have a stranglehold. 
    Sometimes I think that every academic department has its Washington Wizards and Hamilton Burgers, to play the orthodox and always lose. Hopefully that’s not Gintis et al.

  12. There is future value in punishment. 
    The basic idea is that you want to manipulate your opponent strategy into one that is more advantageous for you.  
    Never forget that the strategy chosen by your adversaries will often be a function of the strategy he knows that you will select.  
    So if the game isn’t sum zero, picking the “worse” solution is often useful. Your goal isn’t the immediate reward, but to manipulate your opponent into a cooperative strategy. 
    Also consider the way other players will behave if they notice that you do not punish, they will change their strategy too into non-cooperative behavior. 
    Your strategy doesn’t just determine the result of the current round, but also the way other players will play against you.

  13. Paul R, what you’re talking about is presumably a kind of game theory, still individualistic and not altruistic.  
    The Gintis book is, among other things, about the evolution or development of altruism. His conclusion is that weak altruism (without punishment) will disappear from the gene pool, but that strong altruism which punishes defectors can, if it organizes a social group, be genetically favorible for the group on the average, even though individuals sacrifice.

  14. The conceit that economics depends on actors who are self-interested, rather than altruistic (“Homo oeconomicus”) is a logical fallacy. The “behavioral economics” researchers who have made their name by puncturing it are shooting fish in a barrel. 
    GNXP readers are, of course, aware that the story of human biodiversity that most of us got from the Western postwar university-press information system was remarkably inaccurate. Hopefully this predisposes them to a little skepticism in other departments. 
    Actual economics, which some people call “Austrian economics,” got it in the neck around the same time, and from more or less the same people, as physical anthropology. Both fields painted a picture of reality that did not match the Progressives’ post-Calvinist vision of a perfect world. Fortunately, physical anthropology has mostly recovered from ’30s Lysenkoism. Economics is a lot farther behind. 
    For comparison, here is what actual economics says about self-interest and altruism. As a short summary, economics can be entirely understood without depending in any way on the psychological motivations of economic actors. 
    Notice that there are no recondite formulas, Greek letters, or strange astrological symbols on this page. The purpose of actual economics is to enable humans to understand the patterns that emerge in networks of conscious, autonomous actors in a shared environment of scarce resources. Math is a hindrance, rather than a help, to this task. Neither the input nor the output to the problem are quantitative or quantifiable. The main effect of math in economics is to conceal sloppy thinking. 
    This was generally well-understood until the 20th century. But then the strange concept of “social science” emerged. Weird as it may seem now, a century ago it was the general belief among most intelligent people that in the future, social scientists would manage entire countries with the same quantitative tools they used to understand and control chemistry or physics. 
    Obviously, we now all know this is horsepuckey. (Witness Truman’s famous plea for a “one-armed economist.”) At the time, though, it sparked a craze for statistics and models. Clearly, economic scientists would be much in demand as advisors to our new white-coated leaders. The familiar political role of the court astrologer was revived, and astrology only works if it’s arcane. So the math lived on. 
    These days, mathematical economics mostly serves as a full-employment program for smart people who might otherwise be tempted to undermine the state, and a seminary for clerics in the national and international institutions of state finance. And, of course, a lot of smart people work very hard to succeed in it. But the same could be said of Marxist-Leninist studies. 
    It’s true that these mathematical games tend to depend on Homo oeconomicus – as well as a lot of other spurious assumptions. “Behavioral economics” is hardly a check to the ludic vatisms of these authorized onanists, however. It just gives them another term or six they can drop into their equations. The research will, we can all be sure, continue. 
    If you have a few spare minutes and you want to clear your head of this weird artifact of 20th-century history, read this or this.

  15. Austrian economics is interesting and worth your attention, but what Gintis is talking about is something different.

  16. Paul R, what you’re talking about is presumably a kind of game theory, still individualistic and not altruistic.  
    I mean really, what Paul wrote is classic game theory – taughted in first semester game theory classes.

  17. John, 
    I agree – I think the evolutionary psychology of group behavior and the dynamics of selfishness and altruism is very interesting.  
    I just disagree that it is especially relevant to our understanding of money, prices, production, and all that great stuff.

  18. By the way, Fehr was on my campus this week and gave a series of lectures on his research. Quite interesting…All of the economists in attendance seem quite receptive to his findings.  
    Fehr is a visiting professor at MIT and has had numerous offers from top econ department including Harvard and NYU.

  19. Gintis’ work is especially relevant to the expansionist proghram of economics, which tries to interpret all human behavior as exchange between selfish rational agents. It’s also relevant to some of the systematic claims of economics, for whom the rationally selfish agent is a formal assumption necessray for the perfection of the formal structure. As I said, financial markets or commodities markets are probably the places where the orthodox assumption of rationality works best. There are difficulties with applying the same analysis to the labor market various sorts of difficulties. 
    My perspective is deifferent than that of many of my readers. I’ve been following econ and philosophy as a spectator for almost 40 years, and I think that I’m seeing the orthodoxies finally cracking. So I aske why it took so long. Young people in the field often assure me that econ and phil are not as bad and monolithic as I say, and they may be right.  
    But I suspect that the old orthodoxies are still effectively dominant, whether or not the top schools are starting to change. Some critics have noted that change seems to be occurring at the top, which the median, mean, and modal economist all continue to be orthodox neoclassical marginalists.  
    One of the major effects of the economics profession, perhaps the most important one, is the production of tens or hundreds of thousands of econ BSs every year, or other students who have had a few econ courses. Usually what they have learned is neoclassical marginalism, and to the considerable extent they take the science seriously, they tend toward freemarketism and libertarianism.

  20. Well, isn’t the real prob with freemarketism when it becomes doctrinaire and the only game in town? I’ve learned a bunch (I think, anyway) from Friedman and others, and I have no trouble with them so long as I think of them as making-a-contribution rather than the-only-game-in-town.  
    I’m not sure that in a field like econ there ever should be any one fundamentalism, are you? There are just too many human factors involved. On the other hand, as an academic economist once told me when I ran a few of these notions past him: All the criticisms of neoclassical economics are true and valid. But it’s teachable. It’s an effective academic package.  
    Hey, a survey/look at why some narratives succeed in academia and some don’t would be interesting, no? I’ve often quarreled with the standard account of art history, for instance. There’s ‘way too much that it doesn’t acknowledge or take into account. But at the same time I have to recognize that it’s an effective academic product. People take it … They feel educated … They go on with life. 
    Too bad about the real-world consquences of these orthodoxies, of course. 
    On the other hand, maybe the web is helping crack open some of these discussions. Movie critics have been acting very shaken in the last year or so. I’m hoping the architecture world will open up to many people’s feelings that they do a lot of destructive things. Maybe the same will happen with econ …

  21. One factor favoring certain orthodoxies is whether it is exciting to teach to young people, and a certain degree of contrarianism helps with that. (Economics is contrarian with regard to common sense, e.g. describing a family as “a small factory for producing commodoties such as children”.) 
    In recent decades, the more mathematical, more scientistic forms had a big advantage. To a degree this was the result of centralized policy followed by funders and others, as Reisch, Mirowski, and McCumber have argued and, to a degree, documented. 
    And academic-bureaucratic politics controlling licensing, hiring and promotion can be controlled by coalitions and old boy networks. Philosophy seems to have been locked up tight as a drum by now. The best schools are ranked every year and no one ever hires except from them.

  22. Michael, 
    Speaking, if I may, as a huge 2Blowhards fan –  
    Thinking of Friedman as a “free-market economist” is itself a consequence of the narratives of economics that won in the 20th-century academic power struggles. In fact, the Chicago School which Friedman stems from was once considered a progressive narrative. Look up Friedman’s guru, Irving Fisher, sometime. A lot of the Friedmanites’ success has come from their definition of themselves as the only acceptable alternative to socialism, everyone else being, it is none too gently suggested, a nutcase. 
    For example, Friedman blackballed (future) Nobel Prize winner Friedrich Hayek, preventing him from being hired in Chicago’s econ department. It wasn’t because Hayek was a Commie. 
    It’s interesting to hear you and Emerson criticizing the scientism of neoclassical economics from the left. I hadn’t known that this critique (by people like Keen) existed, and I’m pretty sure the Keens of the world have never read writers like Mises, who was saying exactly the same thing before World War I. 
    Your discouragement over ever getting economics to make sense, and your concept of “fundamentalism,” are, I think, unwarranted.  
    Economics, at least as practiced by the Austrians, is neither an ethical judgment nor an empirical science. It’s a branch of natural philosophy, and its method is entirely deductive.  
    For example, economics will tell you that if you fix the price of some good, you will get either a surplus or a shortage. This is not a consequence of empirical observation, but of logic. And it says nothing about whether the result is good or bad. A surplus or a shortage can be ethically desirable or undesirable for all sorts of reasons. For example, if a country has some military need to build up a surplus of some good, fixing the price above market levels may be exactly the right policy. 
    What’s interesting, for GNXP readers, is the parallel to evolutionary theory. Natural selection, like economics, is not dependent on empirical observation. The statement that inherited variation in the presence of selective competition will produce evolution is apodictically true – it would be just as valid if there was no fossil record, if God created the world in 1900, or if DNA repair was perfect and all our genomes were the same. The only way to deny it is to deny reason itself. 
    Imagine if the church had succeeded in suppressing Darwin. You’d probably still have heard of him, as one of those wacky evolutionists, like Haeckel and Lamarck. He might be remembered for the voyage of the Beagle, or his work on worms. The parallel to Mises is, again, remarkable. 
    [Moderator - thanks. You guys rock.]

  23. Well, evolution does rely on empirical observation. 
    One of my big problems with many or most economists is that they believe that their science is apodictically true. So while I’m mildly pro-Austrian, your latest post did not help any.

  24. Mencius: 
    Thanks for pitching in–I need the break. But you scare ‘em off when you try to explain that neither mathematical representation nor calculation are either appropriate or effective. They’re mostly programmed to experience vertigo and/or nausea immediately such argument is encountered. 
    By the way, I watch you regularly on Comedy Channel’s “Mind of Mencius.”

  25. David Barash, the author of the page linked to by Richard Sharpe, seems really harsh on Ayn Rand. Not only does he not think that her books are “great” or even “good” literature, he doesn’t think they present worthwhile philosophy or social policy. I guess reading this it’s not surprising that libertarianism is so unpopular in academia.

  26. I have also noticed the only thing many of heterodox folks have in common is their dislike for the mainstream stuff taught in today’s programs. 
    Austrians don’t like the math and estimations. 
    The objections of the evo guys like Bowles and Gintis stem from empirical observations. 
    These two groups can’t get along when they get pass their initial dislike of orthrodox econ. 
    Not even sure what the objections of the PAE guys are. I really don’t think these guys have a coherent alternative to the mainstream material.

  27. “Heterodox” is really a residual class defined by not being neoclassiciasts or marginalists. Some are survusirs of older schools (Marxist, Austrian, and Instituionalist) and some are new. 
    Some orthodox or mainstream economists are touchy about being called neo-classical or marginalist. In the intro to the Colander book there are extensive discussions of the various categories. 
    Bowles and Gintis have a broad range of disagreements, including political. I believe that they also question the centrality of equilibrium.

  28. Damn. What do I have to do to get my name defaulted back in?

    Damn. What do I have to do to get my name defaulted back in?
    uh, not suck! 
    though seriously, cookies seem to be having problems on my comp too.

  30. John, 
    Your positivist fundamentalism does you a disservice. (See, two can play this game.) 
    It is difficult to reason with someone who doesn’t believe in reason. But let me try for a moment. 
    What is science? Why do we believe in its results? Is it just the latest version of religion, or does it actually make sense? 
    Once upon a time, it was thought that science worked because science was reasonable. After all, it is difficult for a reasonable person to disbelieve a theory that makes objective statements about reality which can be confirmed by independent experiments, especially if (as Karl Popper taught us) an experiment could be defined which could disprove it. Science was considered a branch, albeit the newest branch, of the Aristotelian tradition of rational philosophy. 
    The nice thing about this view is that it allowed for a whole world of reason that had nothing to do with dropping iron balls off the leaning tower of Pisa. Science was certainly important to the Enlightenment, but to say it was all about inductive experiment rewrites history to a considerable extent. 
    Then something strange happened. Science was no longer the domain of aristocratic gentlemen puttering about. Sometime in the 19th century, even the densest Old Etonian started to realize that a new world was being born, that this was not just a restoration of classical civilization. What did we have that the Greeks and Romans didn’t? In a word – science. 
    If I may deconstruct for a minute, this is the cultural trope that gave us positivism and scientism. People no longer believed that science worked because science was reasonable. They decided that if reason worked, it had to be because reason was scientific. 
    What the positivists, empiricists, pragmatists, progressives, etc, who came up with this view didn’t realize is that by rejecting reason, they were surrendering the vast majority of reality and human experience, which is (like economics) not amenable to inductive experiment, to exactly those forces of violence and superstition that they all assumed were a thing of the past. 
    Reread William James’ essay The Moral Equivalent of War sometime. In 1906, the apex of the belle epoque, James – the founder of a major science, and the epitome of a forward-thinking pragmatist – seriously proposes replacing the entire American economy with a program of forced labor run on military lines. Is it really so unfair to blame the disaster of the 20th century on this ideology?

  31. Also, for a more in-depth look at the philosophical foundations of Austrian economics, I recommend this book by Hans-Hermann Hoppe. (It’s unfortunate that so many Austrian scholars have names that make them sound like retired Oberstuermfuehrers in the Waffen SS.) 
    The Austrian perspective certainly stands or falls on its philosophy. But so does everything else. Disdain for philosophy, which is no more than the art of thinking without assumptions, has been a hallmark of every dark age since Khufu was a little boy.

  32. [Darn it - the form got my email address again! Moderator, if you could be so kind...] 
    [dude, you put your email address in the post asking to remove your email address!!!]

  33. The defaults seem faulty today.

  34. Gene, Mencius — as I said, there are six or eight schools of heterodox economics, and furthermore, economics is only one of my interests. So I might get to Mises, or I might not. But there are non-positivist reasons for being suspicious of apodictic a prioris.

  35. John, 
    I don’t mean to badger you – the Web would be a poorer place without idiocentrism, small i or big. The grantsmen have yet to feel the power of the fully armed and operational generalist. 
    There are non-positivist reasons for being suspicious of everything, apodictic a prioris certainly included. I was certainly very surprised to find that the Austrians are readable and make sense. I had previously assumed they were more in the Ayn Rand category. Now there’s some apodictic a prioris for you.  
    (About which I can’t avoid including another link.)

  36. [Moderator - I know, and I just did it again. It's not the site, it's my browser. This is the last time, I swear by the fish-god Dagon.] 
    [i changed it to a fake email address]

  37. Whew, it’s going to take a few minutes before my head stops spinning … One of the things I love GNXP for is the ol’ college-bull-session highs of it. (And thanks, Mencius, for your comment about 2Blowards. I had no idea you were visiting. Comment over there sometimes, will you? We need some fresh voices.)  
    I’m sure it doesn’t show but I’ve read some Austrian econ. Enjoyed it. Gotta love ‘em for their dislike of math, for one thing. And they certainly score some points. I recoil, though, when the radar screen starts picking up “everything can be deduced” signals, which does happen on a regular basis over in Austrian-land, no? Am I wrong or does life in Mises-ville get a little dogmatic? Not that that can’t be helpful, provided you know how to take it … 
    The Post-Austistics seem to me to range from snoozy to great. There are some boring ol’ ’60s-lefties saying nothing new. But there are a bunch of people kicking ass too. They’ve even run and featured some Austrians, and even a flat-out Conservative or two. I like the general attitude of “human behavior is complicated and unpredictable, by and large, and we’ll never be done tryign to make sense out of it, and if someone observes or thinks something that has something to it or even seems useful, then why the hell not?” But I guess that means I like econ the more it approaches the old moral-philosophy thing than anything technical and specialized.  
    Is it a science at all? And if so, how hard or soft is it? I’m all for hard facts and such, but when it comes to studying human behavior it seems wise to me to be modest and open. Even “the market” can be defined in more-open and more-limited ways. So what exactly is being studied? Exchanges of value between humans, and how they go about it? And how metaphorical do we let ourselves get? Come to think of it, isn’t one of the probs with current/standard-issue econ the fact that it’s too damn macho — too determined to be hard, firm, imposing, tough, etc? Is that any way to approach life? Well, maybe sometimes. But always?  
    I like John’s idea that subjects need to seem exciting to be a hit with students. The youth market, eh? It’s such a burden on the rest of us.

  38. Michael, 
    The term I think you’re looking for, over in Austrian-land, is ceteris paribus
    The problem is that when you’re writing a book of Austrian economics, you can’t say this too much. It is typographically impossible. After a while your eyes would blur and you think you’d been reading De Bello Gallico. It would help if there was an abbreviation, like c.p.. But then it would look like the troff driver was on the fritz again. 
    The Austrians do not predict anything. Their work has no predictive power. It cannot tell you whether any event is, or is not, going to happen, at any time in the future. 
    They say this, openly and repeatedly. But since they cannot say it every two seconds, since when they communicate with each other they get tired of saying it and inevitably become lazy, and since mainstream or neoclassical or whatever you want to call it economists are constantly making claims of predictive power, it is very easy to produce texts in which most intelligent readers will assume that the writer is making some claim that he isn’t.  
    Basically the same goes for their system of ethics. Austrian economics isn’t mixed up in any meaningful way with libertarian ethics. People who practice both have no confusion whatsoever about where the line is. No one over there thinks for a minute that they have somehow derived a new universal system of ethics from pure deductive energy, the way the Randians have. Or at least, if he or she does think so, they are openly deviating from a well-defined body of mainstream thought. 
    Which would make them, I guess, deviationists! Sorry, I was confused, I thought I was liquidating Trotskyists and other double dealers. No, the odor of dogmatic orthodoxy that Austrian economics gives off is totally false and a distraction. Presumably it serves the interests of those who chose to apply it. (Probably members of a certain ethnic group.)

  39. [Moderator, you are a god. An absolute golden god.]

  40. Perhaps altruism plays less of a role in the economic decisionmaking of middleman minorities than it does in the decisionmaking of merchants who emerge from the dominant group and thus are constantly faced with customers whom they are distantly related to, and thus are under social pressure to behave toward in a less than purely profit-maximizing manner.. Lots of contemporary economists are from a middleman minority, so perhaps they are generalizing too much based on their own ethnicity’s experience.

  41. Quite large areas of our present economy are organized around purely selfish activity, above all finance. Anyone in such fields will be selfish and think selfishly, regardless of ethnicity. I think that economics has a considerable tendency to take the point of view of finance and other areas (mostly in the greater, non-local economy) where altruism drops out. There’s probably a correlation with ethnicity but I think that’s a poor way to go at the question. 
    What you said does explain why the middlemen, bankers, and retailers are so often minorities (Jews, Lebanese, Chinese, Parsis, Lombards, etc.)

  42. An interesting perspective. Although not exactly toward the dexter end, I’d say, of our vexillological scale. 
    Another possibility is that middlemen tend to be minorities because people of shared backgrounds, especially when there are a small number of them in a large and often subtly hostile matrix, tend to form communal trust relationships. And business is easier when you trust each other. 
    But that’s probably simplistic of me. Someone should do a study. Investigate the matter empirically, you know.

  43. “Moral sentiments and Material Interests” can be browsed on google books. 

  44. You want trust between cooperating middlemen, and distance between them and those from whom /to whom they buy and sell.

  45. True.  
    Distance, however, you get for free – it is a trivial consequence of self-interest. And where it is not (for example, in the traditional warm relationship between small businesses and their local customers, which for reasons I’m sure we’d disagree about is rapidly becoming a thing of the past) self-interest handles that too. 
    Trust, as I’m sure Bowles and Gintis observe in considerable detail, is a lot more complicated. Multiple equilibria abound.

  46. “Traditional warm relationship between small businesses and their local customers”. 
    This relationship is always a real tightrope, and in poor communities it can’t exist because the only way a retailer in those communities can stay solvent is to refuse credit to old customers who’ve had financial reverses. Thus, the task is usually performed by strangers who are usually ethnically other. 
    In rural Minnesota, and Japan until recently, consumers were willing to pay higher prices in order to keep a local business going. But a businessman couldn’t afford to be seen as too successful. In my own home town, a local businessman named became very successful and his son started a fairsized multi-state retailing chain, but the family was not well-liked in the town. Essentially they had to choose between national and local. 
    There was something in the Scientific American 10-15 years ago revealing that almost none of the basic transactions (retailing, investment, subcontacting, buying supplies) was done rationally from the point of view of return, though there was a discernable rationality (I thought) in terms of security, loyalty and relationship-building. The article didn’t spell it out, but I read it between the lines.  
    Japan started to have its financial problems shortly after than — this was at the end of the period when Japan looked unbeatable. But in any case, Japan 1850-1980/90 was a very successful capitalist nation within which nobody did what economists said they were supposed to do.

  47. Hello, “a reader.” Now, you’re an example `of someone who has everything figured out and has his shit together, to boot. 
    If the “minority middleman” charges what you consider a “high” price–why, he’s just naturally trying to screw over his customer–a member of the “dominant group.” If, on the other hand, he whispers “For you, I got such a deal” and gives the customer a really good (low) price, why the SOB is just trying to screw his (“dominant group”) competitor! When you make it that easy to understand, you’ll understand if we really understand.  
    One slight correction, though. I think you meant “majority” when you used the word “dominant.” Because, if those minority middlemen (mostly gay and trangendered Aleuts, I’m presuming) are even half as devilishly clever as you seem to think, why, they’re the dominant ones, don’tchathink? And probably run damn near everything from behind the scenes. 
    And, of course, they dominate economics, too, so cleverly that they’ve managed to grab the top spots even on opposite sides of every question. Next thing you know, they’ll be after the news media and maybe Hollywood.

  48. John, 
    You’re right that extending credit to customers is a traditional aspect of “warmth.” But, as you note, it is hardly without risk. In any case, there are a lot of other ways of forging this social bond. 
    It is always treacherous to associate perceived success in the present time with the validity of economic reasoning. Success can have many causes. It’s ceteris paribus again. 
    For example, I think that if you combined 20th-century technology with the medieval English system of law and government, the result would be a bang-up success. A reasonable person can disagree with this hypothesis. But not, I think, with the proposition that if you combined medieval English technology with 20th-century law and government, the result would be an unmitigated disaster. Does this analysis tell us that law and government have, on balance, degraded since Magna Carta? No, but it suggests that the proposition is worth considering. 
    Japan 1850-1980 combines a number of very distinct periods in the history of that country into a proposition which is too large, I feel, to be interesting. Japan 1980-1990, on the other hand, is a different matter. This is a classic case of an inflationary boom followed by a deflationary depression, and it is described very well by the Austrian model.

  49. I don’t see the point about largeness and interestingness.  
    A. Look at Japan 1850-1980/90: from the opening-up up to the beginning of its problems. Not an enormous chunk of time. 
    B. Note that Japan was amazingly and uniquely successful during this whole period, becoming a prosperous, productive modern economy starting from scratch. This is self-evident, I think.  
    C. Look at Japan’s financial, industrial, and economic organization during this uniquely successful period.  
    If the answers to D.) violate economic laws, change the laws of economics. As far as I know, throughout that period everything was done differently in Japan. I’m reluctant to believe that Japan was a typical capitalist economy in 1930, for example, but had developed all sorts of strange irrationalities by 1980. 
    This would be interesting. I don’t have enough data top say that my conclusion is right, but it’s the impression I was left with by the SA article.

  50. I think that credit is the clincher. If you’re denying credit, you can’t fake the warmth. This dynamic is pretty well-known in poor communities. 
    In a rich community the dynamic would be different — good customer service and asskissing, perhaps in return doe higher prices.

  51. John — You might enjoy this Hugh Stretton econ textbook. He makes some of the same arguments you do and supplies a lot in the way of historical context. Treats a variety of case histories — Japan and other places. How’d they get rich? And makes the point that there are many different paths.  
    (Once in a blue moon at my blog I like to make the point that France — the only foreign country I ever knew semi-well — managed to get rich without taking a lot of Anglo-American economic advice. Whoooie, is there a certain kind of person who doesn’t like hearing that!)

  52. Mencius: 
    As much as I enjoy your “Mind of Mencius” show, I’ve got to differ with you very slightly–but importantly. 
    Above, you’ve said something to the effect that  
    “Austrians don’t predict” and that their work or theories “have no predictive power.” 
    No Austrian economist ever believed such a thing. Nor do I, who have been studying Mises for nearly 35 years. Rather (with Mises), I am convinced that such theoretical knowledge enables “apodictic certainty” regarding the future effect of certain actions (and with the implication, as you’ve noted, of “ceteris paribus”). What economic theory cannot provide, however, is precisely that for which all economists (except Austrians) seek with the fervor and energy formerly associated with quest for the “Holy Grail”: formulae or quantitative methods for the prediction of future economic relationships through precisely-defined periods (of time).  
    Ronald Reagan achieved a certain popular fame for “bringing down the Soviet Union.” And, though he used his position to maintain certain pressures on that ideological enemy of freedom, he would have been far more modest and would certainly have protested that that very future, a “collapse like a house of cards,” had, indeed, been precisely what Mises had foretold of the future of the USSR–circa 1920, nearly 70 years from the event he (Mises) wouldn’t live to see. Reagan himself read Mises frequently over a period of many years, especially after becoming California’s governor. (This is from a 1976 interview of which I only learned about 5 years ago.)  
    That’s the real stuff; the rest is useless trash, insofar as I can determine.

  53. Michael, we’re on a roll. I’ve bought that book, but it’s not exactly the kind of thing you whiz through in an afternoon. On my list.

  54. Gene, 
    Ceteris paribus: exactly. Austrian economics makes all kinds of predictions, but all of them are ceteris paribus. 
    Of course, if you believe that all things are, in fact, basically equal, you can translate those predictions into reality. But you must abandon all claims to apodictic certainty. 
    You’re right that I’m spinning this a bit. It is what Austrians believe, but they don’t emphasize the difference between ceteris paribus predictions and real-world predictions nearly enough, in my opinion. 
    Of course your point about qualitative versus quantitative predictions also applies, but it is separate. 
    I had no idea Reagan was a Mises reader. It makes a lot of sense, although I think the alliance with traditionalist conservatives has generally been a disaster. Do you by any chance have a pointer to that interview?

  55. Michael, 
    The name Jacques Rueff might ring a bell for you. Rueff, and his German contemporary Wilhelm Röpke, were largely responsible for the postwar European “miracle.” These men, who indeed rejected a lot of the Anglo-American advice coming their way, are largely forgotten. So, sadly, are their policies, and their miracle as well. Both, natch, were acolytes of Mises (who himself ran the economy of Austria for a few years in the ’20s). 
    In honor of his 150th birthday, the people just posted Rothbard’s short biography of Mises. Either this is one of the most fascinating intellectual stories of the 20th century, or I’m on crack. 
    If extending credit to your customers is a custom, denying it is hard. If not, it’s easy. Cultural variables do exist. 
    Why is Japan 1850-1980 too big to be interesting? Um, maybe because it purports to compare four distinct systems of government that share little more than a national identity: the Tokugawa shogunate, Meiji liberalism, the militarist period and the war, and the postwar rule of the LDP. You can certainly identify some common threads through all these periods, but you can identify common threads between Tsarist Russia and the Soviet Union, too. That doesn’t mean it makes a lot of sense to compare them. 
    And in addition, you have a range of technology platforms from a commercial but mostly preindustrial economy, to semiconductors and robots. This is not a case of apples and oranges. It’s a case of apples and elephants. 
    Basically, what you have in Japan 1850-1980 is a situation where any kind of deductive economic analysis, whether Austrian, Kazakh or Tanzanian, will tell you nothing at all. Because its results must always be ceteris paribus, and no comparison across long time scales in this place and era can be even remotely equal in any sense of the word. 
    So one is free to observe all kinds of correlations. Some of which may be spurious, and some of which may reflect universal patterns that might hold in other times and places. Perhaps the patterns you observe are genuinely universal. But since, if I disagree, there is no rational basis for either of us to argue on, the subject is not, I feel interesting.

  56. Gene, 
    Like most Chinese philosophers from the Warring States period, I’m a remarkably unworldly person. But fortunately, I have Google. So I can tell you that there actually is a Mind of Mencius

  57. I wanted to add that economics in major departments (especially in microeconomics) is not a field where empirical research completely trails theory). What this means is that the points raised above (on trust, loyalty, etc) are well knowned and documented within the profession. Quite a number of the theory papers in major journals nowadays are written in attempts at modelling phenomena that are not explained by predictions from traditional models. 
    My question is – what are some of the achievements/milestones/etc we could have expected to see today in economics had field tilted in a different direction different from its current orientation?

  58. But I guess that means I like econ the more it approaches the old moral-philosophy thing than anything technical and specialized.  
    Is it a science at all? And if so, how hard or soft is it? I’m all for hard facts and such, but when it comes to studying human behavior it seems wise to me to be modest and open.  
    I think econ has the misfortune of being a field where a lot of folks believe that the level of analysis should never be beyond the lay person. If something is obvious, of course nothing is gained by making it hard – and there are large areas of economics that are accessible to anyone. If a field as vast as economics doesn’t get specialization, it would mean there hasn’t been much progress in it. 
    Michael, what is fundamentally wrong with the field being specialized?  
    I can’t understand the displeasure that folks have with the level of math in modern economics. But intuition or “running narratives in ones head” can only get you so far.

  59. Michael, 
    Also, a general point: your ecumenical attitude toward economics, and your skepticism of the scientistic claims of the neoclassicals, serves you well in general and is very consistent with what I think (I haven’t been reading 2Blowhards long enough to be sure of this) of as your general intellectual attitude, which I take as that of the amateur in the best sense of the word. 
    But –  
    Think of what you’d get if you applied the same attitude to 17th-century astronomy, 18th-century chemistry or 19th-century biology. In all these cases, several potential versions of the same field competed for intellectual dominance. An ecumenical, generalist, and synthetic perspective would have tried to find a way in which everyone could be at least partly right. But in fact, what turned out to be the case is that one version (often one that was not the most politically attuned) was just right, and the others were just wrong. 
    I don’t pretend to have made a convincing case for the Austrians here. Don’t read me, read Mises. (And don’t read Hayek, who despite his Nobel is very much a second-rate Austrian.) But I think it is intellectually imprudent to discount, when considering multiple heterodoxies, the chance that one of them is astronomy and all the rest are astrology. 
    In fact, that might be a nice name for “mainstream economics.” We could just call it “econogy.” Which would make its practitioners “econogers.”  
    So, for example, the New York Times could tell us that President Bush, after consulting his econogers, has decided that gasoline prices are too high and must come down. Meaning 2007 will be an auspicious year to buy a Humvee. And so on…

  60. In places where credit is not extended, the warmth between small retailers and customers is smaller. And these are areas where the retailers tend to be of a different ethnic group. But especially in very poor areas, where a high enough proportion of customers need credit from time to time, and often are unable to repay, that a.) retailers could not offer credit and stay in business and b.) the number of those denied credit will be significant. (I’m not really talking about the kind of convenience credit where everyone reliably pays up at the end of each month, but the kind when you carry someone who isn’t able to pay.) 
    Mencius, I think that you’re being evasive. By the method you’re using, every question can be shown to be too big to handle. What all four periods shared, I claim, (besides Japaneseness) was an absence. An absence of the various kinds of economic relationships thought of as normal in the west, and by economists.  
    I was making a fairly simple point: that Japan was uniquely successful, and the way it attained its success was also unique and unorthodox at all points. I’ve always wondered about th incuriosity people have about how Japan did it. It seems to be a bigger story than it gets credit for, esopecially given what I know about the peculiarity of Japanese economic organization. 
    EG, as I understand, the best economists (perhaps Gintis and Bowles) are changing things, but I don’t know how far it’s penetrating. My guess is that the median and the modal economists are still neoclassical marginalists.  
    I have something new up at my own site: 

  61. EG: Speaking for myself, I don’t object to math per se. Critics of economics who understand the math better than I do say that the relationship of the formulae to the data is sometimes weak, so that the math is just mystification or pointless virtuosity. One described Samuelsons’s breakthrough book a 300+ pages of formulae with no data, and apparently using the formulae to interpret actual data is sometimes impossible. I could find more specific statements of this claim, which I will never be able to judge but which has been made by competent people.

  62. EG, 
    Try Rothbard’s Toward a Reconstruction of Utility and Welfare Economics
    To understand the reason we have so much math in economics, we need to understand why (as John Emerson once put it) we have economics at all.  
    Let’s treat this as an economics question. Why do economists do economics? And what strategies are likely to be successful in the field of economics? 
    I think there’s a good analogy in physics: string theory. Anyone who’s involved in any kind of science should read at least one of the recent books by Lee Smolin and Peter Woit. The pathologies they discover in physics are not, in any sense, the result of physics itself. They are economic problems. They are the result of how physics is funded and organized. Because I am not a physicist or a mathematician, I can’t speak to Smolin and Woit’s conclusions, but I’ve certainly seen the same effect in my own specialty (computer science). 
    What Smolin and Woit tell us is that (in Woit’s words) physicists think string theory is math, whereas mathematicians think it’s physics. What it is, if you trust Smolin and Woit, is a giant pile of enormous mathematical models of tremendous esoteric complexity, none of which has any rational basis for declaring itself superior to any of the others. 
    Consider the strategies for success in the economics profession. Why has the math used in economics been growing steadily more and more high-powered over the last 50 years? Because, as an economist, bumping up the voltage on your math is an almost sure path to career success. If even your professors can barely follow you, you’re probably on the right track. The smaller the number of people who could even have a chance of arguing with you, the better. 
    Economics has not reached the point of string theory, which is actually at the point where it’s doing work that might be acceptable as cutting-edge math even if it had no physical implications. But surely that’s the only endpoint to its current trajectory. In fact, I’d argue, it’s well on its way to becoming simply a full-employment program for mathematicians. 
    Now to play the devil’s advocate for a moment, this isn’t necessarily a bad thing. In fact, historically, most social unrest has been the result of an oversupply of bored intellectuals. Many societies have achieved long-term stability by funneling young men with clerical aptitudes into absorbing but irrelevant pursuits. Consider the scholastic monks of medieval Europe, the Islamic scholars of al-Azhar and Qom, the students of sutras and scriptures in Sanskrit and Pali, the Chinese mandarins, the Greek mystics from Sophists to Neoplatonists to Byzantines, and so forth. Admittedly most of these movements have been devoted to textual exegesis and astrology, rather than mathematics, but there are exceptions, such as the Pythagoreans. 
    So from the standpoint of either personal or societal welfare, there’s nothing really wrong with mathematical economics. It’s a good job with high status. It pays well and the profession is, if anything, expanding. And you may even be called to advise, even serve on, the Board of Rites. 
    From the standpoint of natural philosophy and history, though, the function of math in economics is essentially to add, rather than to penetrate, obscurity. My objection, and I suspect John’s as well, to most of the results of mathematical economics, has nothing to do with the math. It is all about the mapping from reality to the model.  
    Obviously the meaningfulness of the result cannot exceed the meaningfulness of the model. This in turn cannot exceed the meaningfulness of the mapping.  
    And in many cases this mapping cannot be questioned on the approved grounds of empirical or mathematical error. From the perspective of deductive philosophy, history, or (yes, Gintis et al) evolutionary psychology, it may be a load of horsecream. But since most mathematical economists have no particular reason to learn philosophy, history, psychology, etc, they can carry on. The result is that assumptions that are ridiculous errors from these perspectives are maintained and even compounded, in a most un-science-like manner. 
    This is why I equate 20th-century mathematical economics to astrology. It was born in the Progressive Era as an explicit adjunct to a specific political movement. (Look at Richard Ely and the history of the American Economic Association.) It was used, from day one, to lend unchallengeable esoteric authority to the policies of this faction. It has demonstrated no predictive power whatsoever. It is not in any Popperian sense falsifiable.  
    Most of the smart people who have ever lived wound up wasting their lives on specialized fields which, as we can see quite clearly, were no more than formalized nonsense. Why mathematical economics should get the benefit of the doubt is quite beyond me.

  63. John, 
    You’re right. I am evading your question. I don’t think it’s meaningful and I don’t want to answer it. 
    Trying to derive economic principles by looking at economic history, especially in such an ultra-heterogeneous case, is like trying to figure out how an internal combustion engine works by watching traffic on the freeway.  
    Clearly, if your theory of the motor predicts that cars should be able to fly, you have some questions to answer. But maybe flying just happens to be against the law on this stretch of road. You can construct an almost arbitrary set of economic models that match the past perfectly. It does not mean that any of them have any predictive or descriptive power. 
    This is exactly what Feynman meant, I think, in his famous essay on cargo cult science
    And the problem, in economics, is not solvable, because economics is not amenable to controlled experiment. (Though virtual worlds may offer some interesting possibilities.) 
    This is why I believe it’s most effective to forget about inductive methods, and treat economics as natural philosophy, rather than as science in the strict Popperian sense of the word.  
    (Granted, Mises does use the word “science” in his writing, but he is thinking Wissenschaft, which I believe (though I’m not a German speaker) has a broader meaning, or at least used to.)

  64. I have no idea why you don’t think the question is meaningful.

  65. John, 
    Also, I question your claim that Japan had nothing resembling a capitalist economic system. Read, for example, this discussion of Japanese commerce in the Tokugawa through Meiji periods. I have no idea who wrote it, but it certainly matches my recollection from a Japanese history class 15 years ago.

  66. John: 
    What Mencius had in mind, I think, in expressing disinterest in that entire period, was actually more an expression of a lack of confidence in the knowledge available that would enable anything but the most gross analysis. We don’t know much very precisely about many of the economic variables throughout that relatively lengthy period. We know that Japan achieved things like relative scientific, industrial, and military modernity quite rapidly. But we also know that enormous numbers starved at various times (and for varying reasons) during that period. We also know that, not long before the beginning of the 20th century, the Japanese were powerless to prevent the colonization of Hokkaido by Russian (military-supported) intruders and needed to implore the British to threaten force on their behalf (not too many years before their victory at Port Arthur). 
    Originally, Japan traded in mostly the cheapest and insubstantial of manufactures (except for some ceramics, furniture, and artwork sold into higher-end markets).  
    Their first breakthrough area was in optics and optical instruments. But for years, their diligent, cheap labor was employed chiefly by English and German firms who job-shopped the components out to different shops in Japan but imported and assembled domestically (essentially to prevent Japanese businessmen from knowing exactly what it was they were making) until some put 2 and 2 together and began to compete. The people themselves could only afford the poorest of the product grades they themselves made–extending well past WW II. “Grade A” went to the scientific market, the U.S., Canada, and W. Europe; “Grade B” went to the rest of the world; “Grade C” was for themselves–at least into the ’70s, when I had some knowledge. Even at that late date, “precision” in their optical components was achieved, not by precision in methods of manufacture but by making many and discarding those that fell outside the required dimensional tolerances. Plenty effective if the material (sand) and labor are cheap enough. There’s no economic analysis necessary to know that smart, resourceful, diligent effort applied to available resources, however meager, will, at least sometimes, do better than less strenuous performance by others, even others whose nature-given endowments are greater. 
    That the Japanese are superior in their dedication and effort becomes even more apparent when the achievements of their emigrants is seen, especially when compared to those of the populations into which they came. These are not achievements of some “Japanese economic system” but of individual Japanese. We can impute such achievement to racial and cultural factors without much argument but, in the main, an excellent case could be made that the economic policies practiced almost throughout Japan’s modern history have been such as to render her citizens poorer and worse off than otherwise.

  67. John, 
    Because, according to my philosophy, there’s no such thing as a set of events that violate economic laws.  
    You are operating under the progressive/pragmatist belief that economics is a natural science, like physics and chemistry, and that it can be falsified by observation in classic Popperian style.  
    I believe, for the reasons I’ve set out, that this belief of yours is wrong. In my view of the world, which of course you are free to take or leave, economic “laws” are not like the “laws” of physics, any more than these are like the “laws” passed by Congress. 
    To me, economic “laws” are derived entirely by deductive philosophy, and they apply strictly ceteris paribus. If events seem to violate these “laws,” there are two possibilities. Either (a) the laws were fallaciously stated in the first place, or (b) they have been applied incorrectly to reality, and ceteris is not, in fact, paribus. 
    In the first case, no empirical evidence is needed in order to show a fallacy. In the second case, no “law” is being violated. In either case, Japan is not relevant. 
    If you don’t see how economics can be derived deductively, you should read the Austrians and have a look at how they do it. If you find what you think is a logical fallacy, there is certainly a large and active community of smart people that will be ready to discuss it with you. Be assured, they are not afraid of either philosophy or history. 
    I hope this makes my perspective clearer.

  68. BTW, anyone who’s followed this all the way down should check out John’s Lazear post – I agree with all of it.

  69. John, 
    Perhaps this simple example of deductive economics will help. 
    One easily deducible fact about finance – an economic law, if you will – is that an option (a right to either execute, or not execute, some transaction in the future) cannot have negative value. 
    From this, we can deduce that ceteris paribus, if someone offers you an option for free – any option, of any kind – you’ll take it. 
    So what does it mean if we see people giving away free options, and getting no takers? It means that ceteris is not paribus. It could be more trouble than it’s worth to take the option. You might not want to deal with this individual. Accepting the free gift might involve you in some kind of liability. Et cetera. 
    No empirical evidence can disprove the law that a free option will always be accepted. If we see free options not being accepted, it does not disprove the law. It means that the options aren’t really free.

  70. I think that it is rather interesting that no theoretical biologist that i’ve ever met takes Gintis et al. seriously. When i asked some of them why gintis and bowles etc then are being published in JTB etc they said it was more a matter of a not rejecting policy. After having been to the nature of human cooperation symposium in lausanne, where you really had the whole gintis crew, i think that the empirical biologists also are really sceptic. And you also have guys in econ like Ken Binmore who agrees with Trivers on more or less everything.

  71. Anna, if you can’t give more detail than that, why bother? I doubt that any journal has a not-rejecting policy.  
    I don’t think that Gintis et al were trying to make a contribution to theoretical biology. They were trying to bring insights from theoretical biology into economics. One of the Gintis authors was one of the authors of “Not by Genes Alone”, and that’s where the fire should be directed.

  72. Critics of economics who understand the math better than I do say that the relationship of the formulae to the data is sometimes weak, so that the math is just mystification or pointless virtuosity. 
    This is a rather weak criticism. Understanding and explaining human actions is an ongoing process. Some economist who first thinks about a process will attempt to model it. First attempts rarely characterize the problem completely. Subsequent researchers improve upon it. Empirical works are done to test the predictions of models. Some models are rejected and some are not. So on and so forth. 
    I have seen these kinds of criticisms and I think they are just misguided. Your critism of Becker is a case in point. By the way, you make a key mistake by assuming there is one definition of rationality in the whole field of economics. Becker is respected in the field mainly because his research introduced household production, marriage, etc into the field in a formal way. Nowadays, models that are used and tested have advanced well ahead of his simple models written in the 60s and 70s. They are still not perfect but their predictions are much better. For example, Becker’s models are almost all static and ignore intra-household dynamics. Virtually no paper on household analysis would be accepted in a serious journal with such deficiencies. So I just find it unfair to just use such a wide brush to dismiss economic analysis of household in particular and economics in general just from a reading of a synthesis of Becker’s work (A Treatise of Family). Yeah, I know you have read others but you seem to conclude a lot about the field from your interpretation of Becker’s work.

  73. EG, as I understand, the best economists (perhaps Gintis and Bowles) are changing things, but I don’t know how far it’s penetrating. My guess is that the median and the modal economists are still neoclassical marginalists.  
    Institutions and intellectual communities are naturally conservative. I think it’s good that a whole field doesn’t swiftly change directions in response to the newest findings.  
    One described Samuelsons’s breakthrough book a 300+ pages of formulae with no data, and apparently using the formulae to interpret actual data is sometimes impossible. I could find more specific statements of this claim, which I will never be able to judge but which has been made by competent people. 
    That description of Samuelson work is completely without merit. Anyone who criticizes Samuelson’s work in those broad terms is not doing an honest assessment of the man’s contributions. 
    As for the general point of using “formulae with no data”…Look there are economists whose goal is to model. The idea behind the resulting models is to understand certain phenomena. None of those models are considered the field’s final word on those problems. And the biggest critics of these models are other mainstream economists. There is no field in social science with people better trained than economists in use of statistical analysis – generally the best way to test the predictions of models. Many of the criticisms of economic models that I see out there from non-economists are generally more acknowledged and understood within the field itself. Incentives abound for other researchers within the field to find faults with conventional wisdom. It is surest route to recognition and stardom. 
    Your criticism and those of others seem to imply that the whole field is just plodding along with what Samuelson, Becker and other pioneers introduced. That’s just not the case.

  74. My criticism is weak coming from me because it’s second hand and because I don’t understand the math well enough to say. I made that clear.  
    Physicists have asked, “Why do you use so much math for so little data?” Others, who understand the math, have suggested that there’s an element of mystification, intended to gain advantage over non-mathematicians. Mirowski says that the assumption of equilibrium is delusory, something that is consistent with a lot of criticism of conservative or equilibrium science in other fields. I can only point to these criticisms and reference them. 
    Becker got a Nobel prize in large part because of his work on the family, which, taking it as it is, looks ludicrous. This does not speak well for economics. 
    This is one case when I think that my criticism cuts pretty deep in a technical economic way. What is the relationship between the child as a commodity produced in a household, the child as a unit of human capital, and the emancipated child as a new economic agent? In what sense is the “family” (rather than the father/husband as an individual, or the man and wife as two individuals, ot the man/wife/child as three) an actual economic unit which maximizes or optimizes anything, or behaves rationally? Is the family like a corporation or a partnership? Who owns it? Is the child a partner or property? 
    When Becker cpoke of the child as a commodity, what did he mean? Because children are not much like commodities in any intelligible way. I really think that Becker was being snarky and trying to shock, rather than actually trying to udnerstand the family. 
    His book I reviewed was written in 1981. It hardly could not be improved by now, but as it stands it is ludicrous (not just imperfect). The fact that it was better than earlier economic descriptions of the family also speaks ill of economics. There are whole areas of life which economics has not really tried to understand, and economists have never let this bother them much.

  75. RG, I have a bibliography on my site. Those are the critics for you to respond to. All are trained economists.  
    You cannot assume that “And the biggest critics of these models are other mainstream economists.” Non-mainstream economists make sharper criticisms. Do you read the non-mainstream economists? Because ineconomics, as in most of academia, students are often told that certain authors do not need to be read, or in fact, should not be read.

  76. Mencius, Gene Berman, if you’re still there, I ran out of gas last night and I can’t respond right now. Basically we’ve gotten to the place where I want to be, in the sense that we’re speaking concretely. I’ll try ot get back to this.

  77. This is one case when I think that my criticism cuts pretty deep in a technical economic way. What is the relationship between the child as a commodity produced in a household, the child as a unit of human capital, and the emancipated child as a new economic agent? In what sense is the “family” (rather than the father/husband as an individual, or the man and wife as two individuals, ot the man/wife/child as three) an actual economic unit which maximizes or optimizes anything, or behaves rationally? Is the family like a corporation or a partnership? Who owns it? Is the child a partner or property? 
    The first thing I want to quibble about is definition. Your definition of human capital is different from Becker’s and the field of economics. This does not invalidate your concerns but it’s still a key point.  
    I cannot answer all those questions in this space. All I can say is that many economists have written on this. And just because they are not published in accessible books doesn’t mean that they don’t exist. And your criticisms of Becker continue to assume a single, narrow definition of rationality
    When Becker cpoke of the child as a commodity, what did he mean? Because children are not much like commodities in any intelligible way. I really think that Becker was being snarky and trying to shock, rather than actually trying to udnerstand the family. 
    I don’t know if snarkiness is typical of most economist but Becker certainly is. He even uses “quality” of children as a way of indicating how much human capital (e.g. education, health, etc.) is embodied in that child. My understanding is that he’s using “commodity” in a limited sense. Children are “produced” by a household and since a couple enjoys the presence of their child (well, most anyway) they are consuming the utility that flows from having that child. I think part of reason for this style is Becker’s way of saying that I understand that this issue has been studied by other fields and my use of terms like “commodity”, “quality”, etc. is way of saying that the present analysis is being carried out by an economist. I think you are getting too hang-up on some minor details. 
    His book I reviewed was written in 1981. It hardly could not be improved by now, but as it stands it is ludicrous (not just imperfect). 
    I think this is one danger of making sweeping generalizations about a whole field from the outside, because there has been a tremendous amounts of work done on intra-household economics. People like Chiappori, Bergstrom, D. Thomas, Grossbard and numerous others have made many contributions years after Becker wrote his papers. It’s just not correct to assume that the totality of what economics has to say on a household is covered in a book which condenses some of Becker’s work (the man himself has done quite a bit of work since 1981).

  78. Look, RG, are you admitting that we now know that the book is just crap? Because I’ll shut up then.  
    Sorry you don’t have time to answer the questions. No surprise that a lot of people have written about this — what did they come up with? Because what Becker said is incoherent. 
    I scarcely have a definition of “human capital”, except that it seems to me not to be a commodity. And not to be a new, independent agent, potentially competing with the father and mother, either. Again, if there’s an answer bring it forth.  
    And again: on “rationality” tell me the other definition, different than mine, which makes Becker makes sense. I know that he does talk somewhere (but not in this book) of “child services”, and seemingly he regarded the family as a three cornered exchange between the mother, the father, and the child, with the parents apparently holdign proxies for the minor child, but I have trouble making sense of that.  
    “Child services” are pretty intangible, and while of course you can prove rationality by asserting that the value of expected child services is equal to or greater than the expected costs, making the investment in a child rational, I don’t think that makes sense in terms of what actually happens, or why parents actually choose to have children. 
    As I said, by alleging intangible services which can never go on any market, it would be possible to make Hoxha’s Albania look like the richest country in the world.

  79. Oh, and by the way, EG (or is it RG?) would you enumerate just one of Paul Samuelson’s major achievements, something of permanent value preferably? Not two, not three, just one? I await. . .

  80. Gene, I’m puzzled. Were you trying to prove “a readers” point for him?

  81. The Guyland: 
    If you have to ask, you’re not only not “a reader”–you’re not a reader. NTTAWWT, of course.

  82. Mencius:P 
    Totally ignorant, I was, that there was actually something around called “The Mind of Mencius,” (referring to a book about a Chinese sage of yore). I meant to be at least slightly funny by ID-ing you as Carlos Mencia, a raucous (and very funny–nearly 40% of the time, which is a great average in either comedy or baseball)–stand-up comic with a Comedy Channel show called “The Mind of Mencia.” I guess we could both stand to get out more.

  83. Mencius: 
    Your illustration to John (concerned with the value of an option) is correct insofar as it goes in making a certain logical case (and, incidentally, in limning the importance of terminology). But, technically speaking, it is seriously flawed (and especially in the context of trying to introduce someone–John, in this case–to some alleged superiority of Austrian economic analysis). John and many others are keenly interested in why Austrians seem so dismissive of the quantitative methods so favored by other economists: it’s at the very heart of why Austrians have been (and continue to be) marginalized as kooks and cranks, quite despite the recent rise in popularity of libertarian attitudes generally.  
    I prize the potential of intellect to improve conditions of the future–both individually and in the aggregate (in the main, that’s “what it’s for.”). And I respect not only the intellect continually exercised and on display here (at GNXP) but also the relatively high level of intellectual and moral honesty. For that reason, I want to outline, as simply and as thoroughly as I’m able, the fundamental (and, I believe, incontrovertible) “Austrian view”–especially designed to impress those with the standard, mathematically-oriented, and data-driven approach to all subjects claiming the descriptor “scientific.” I can’t offer this at the moment but will be working on it. 
    Returning to your example, I’d simply point out that you’ve introduced quantitation into the analysis–in the form of the term “negative,” with its implication that magnitudes of value are, somehow, determined and compared in the making of choices. For the Austrian analyst, the choice (any choice) made by an actor is the proof-positive of its “highest” ranking among the many (and unknown) candidates for such placement. Of the other (potential choices) we know nothing whatever except that they exist. (Those things that seem to involve or admit of no choice we call “reflexes” or “life processes,” etc. and study under biological subdivisions.) Though men very generally, for the same expenditure (time, money, etc.) prefer to receive more than less, the reverse is frequently true. All we can know from any particular action is that its exercise was, at that time, at the “top” of the actor’s “list.” Absence of action tells us nothing whatever about the comparative values attached by a potential actor to the values of actions considered–and certainly not that “indifference ” is expressed. (Inaction, where action is possible, is an expressed action itself, revealing not indifference but a preference for inaction.) In dealing with economic (and other human) activity in this way, the Austrian insists that we deal only with what we know (as differentiated from what we might conjecture, suppose, or presume). We know it a priori–by our definition of the words concerned. If we act, we choose; and if this is not true, we (and everything observable about us, including the minutest detail of thought and behavior) are, ultimately, determined according to other–presumably mechanistic–principles. And, if that latter is true, nothing we say or (seem to) think means anything whatever: history (including the history of the future) is, for all time, set and foreordained, quite as Muslims (and Presbyterians) would have us believe.

  84. Gene, 
    Of course you’re quite right – I was oversimplifying, and I used a cardinal concept of value. And yes, this is precisely the same error that leads you down the slippery slope of mathematical economics. I apologize to GNXP readers for this small distortion. 
    What I really meant is that given the choice between nothing and an option, a reasonable Austrian actor will always accept the option, because it strictly increases the set of actions he can take in order to change the state of the world to one that satisfies him more. 
    Note that this is the same reasoning that gives us the concept of time preference. It is not really that Billy must prefer a week in which he eats his candybar on Tuesday to one in which he eats it on Thursday. It is that he must prefer a week in which he has the option to eat it on Tuesday or Thursday, to one in which he may eat it only on Thursday. 
    Note also the suspicious appearance of the word “reasonable” in the discussion. This will probably worry the John Emersons of the world, but it shouldn’t. 
    A reasonable actor is not the same as the common stereotype of “homo oeconomicus, the rational actor.” The supposed rational actor is a fallacy because it assumes a universal notion of utility. Austrian logic is different because it admits no such concept. 
    For example, you might say that an atheistic suicide bomber is not a rational actor, because the laws of the universe at least as she understands them do not allow her to profit from her act. This model could then be challenged empirically by the plentiful historical evidence of generally, if not prima facie, suicidal actions in the age of anarchist terrorism. And so on. The debate could prove quite fruitful as a clerical full-employment measure. 
    To an Austrian, all of this means no more than the price of plums in Persia. The suicide bomber is a reasonable actor because she forms a prediction of a world she believes would satisfy her more: one in which her bomb has gone off, presumably with the expected political effects, and she is dead. The fact that in this world, she does not exist, does not strike me as satisfying when I empathize with her condition. But if she cared what I think, she wouldn’t be doing what she does.

  85. Gene, 
    I didn’t know of Carlos Mencia, but fortunately Google is very forgiving when it comes to spelling. Serves me right for reading 80-year-old books instead of watching TV, like a normal person. (But if he’s as good as Dave Chappelle, I’m there.) 
    The patience of the Austrians is legendary and terrifying.

  86. “The task of developing an alternate Austrian paradigm has largely failed, producing an abundance of meta-economics (philosophy, methodology, and history of thought), but few substantive results.” 
    - why i am not an austrian economist

  87. Razib, you’re quite the troublemaker.  
    That author shares the Austrians’ hostility to math and econometrics, oddly enough; perhaps for this reason he has to defend himself against the charge of Austrianism. 
    Back to Japan and Mencius.  
    To begin with, I always read econ and other social sciences as normative and policy-oriented.To me the claim to be objective and value-free is just a way to gain an advantage for your policy philosophy by claiming universality. There may be genuinely objective-detached human sciences, but I’m not interested in them. 
    A normative policy philosophy isn’t worked out in detail. It consists of a hodgepodge of basic principles of various types, variously ranked. These very basic principles are pretty simple. For example, economics has a strong preference for market organization over competing forms of organization. It customarily values production consumption, and exchange as such, as opposed to frugality and idleness. And it has various policy prejudice, for example egainst government interference with the economy. 
    So for me, while I do not share all the fundamental values of econ, I don’t blame econ for having the value slant. Everyone does, I just don’t entirely shar the economist’s slant. 
    The reason I harp about Japan is that over a longish period starting in 1850 it seems to have succeeded in economic terms, while not generally following the advice economists would have given them if asked. The thing that struck me about the article in the Scientific American is that it seemed to be just an enumeration of the irrationalities of the Japanese economy, but it was describing an extremely successful economy.  
    So my conclusion was that economists’ advice and policy philosophy are less powerful than they think. (You could say much the same about the Scandinavian socialist economies — they do the wrong thing, and it works.) 
    For the last 10-20 years Japan has been slumping, of course, but Japan is still one of the world’s most successful economies (#16 in GDP/cap PPP, and four of the countries ahead of it are mini-countries.) 
    In short, I’m interested in economics because of the policy guidelines economics gives, and it doesn’t seem to me that these are as good as economists think.

  88. I am late to this discussion, and though I share many of the criticisms Mencious mentions of the high decadence of what passes for economics in our leading universities,I would like to put a few good words in for the discipline. 
    In a world of scarcity it is good to know something about the laws of supply and demand. And while they may not be the be all and the end all in human economic relationships, they do assume some real importance once we have passed from Germeinschaft to Gessellschaft, that is, from the small face-to-face local communities that characterised the premodern age, to the impersonal and highly specialized world of corporations and government bureacracies that regulate how and where and what we do to make a living nowadays. 
    The major achievement in the field over the last half century has got to be the revolution in macro-economics that was initiated by Keynes and completed by Friedman: thanks to their insights into the ways government policies can influence unemployment, inflation, and economic growth, we have largely tamed the business cycle as it used to be. Both of these men were highly critical of the inappropriate overuse of higher mathematics in the field, by the way, even though Keynes himself was a higly accomplished mathematician in the field of inductive logic, as the first book he ever published testifies. 
    Unfortunately, there is no guarantee that the lessons and the wisdom which these two men brought to bare on the problem of economic instability will last. For what they produced was an art as much as a science, the successful practice of which requires a broad range of talents as well as a lot of training and knowledge, not only in basic neoclassical economic theory — yes,I stick up for that — but also in 200 years of economic and political history; plus you’ve got to have some practical experience in the ways of Wall St. and Washington D.C.. Guys with the qualifications and the temperament of an Allen Greenspan or Paul Volker don’t come along every day, and when they do our elected leaders may not have the good sense to appoint them. Who’s that guy George W., just appointed as the new chairman of the federal reserve? Looks like a pig in a poke to me. Hope I’m wrong.

  89. Razib: 
    What you’ve quoted is a pretty powerful “diss,” I suppose–until you begin to think about what it means (and I’ve read that particular criticism of Caplan’s before). 
    Basically, the good prof faults the Austrians for not offering a nostrum-list to compete with other, more mainstream practitioners–those whose services attract the patronage of authority both for hands-on “management” and for the indoctrination of a rising generation of those comprising the elites in social thought. 
    I don’t want to oversimplify but cannot but observe that the advice likely to be given to any government by an Austrian would be that far fewer economists on its payroll would be better; not only would taxpayers save the burden of their salaries but far greater amounts–not to mention moral hazards–sunk as costs of the inevitable unintended conseqences of their recommended policies. 
    My suspicion is that Caplan, like many others, is uninterested in a profession in which the attainment of distinction and acclaim is highly unlikely.* Economics (per se, as distinct from economic history or descriptive explanation of economic practice in various countries) does not admit of the “specialist” approach characteristic of the empirical sciences for the reasons that, firstly, it deals with the entirety of economic choices made by men and secondly, that every such choice is not only conditioned by all other choices effected but, in turn, effects its scintilla of conditioning on others.  
    The most complete understanding of economics cannot assure profit nor prevent loss in business operations. It can confidently predict that, unless forcibly restrained, people will use part of their lives to produce such goods and services as they are capable and exchange some for the goods and services of others they deem more desirable; but it cannot foretell, except in the broadest of terms, which people will desire which goods`nor with what degree of intensity. 
    Where the market is supreme, the efforts and actions (including inaction)of all participants not only inform and condition the actions of others but do so to the advantage of all. The market harmonizes (or arbitrages, if you prefer) competing interests without conflict, allowing the absolute maximum individual autonomy possible, consistent with those unavoidable restraints imposed by nature. Though human society might certainly exist without the market, nothing resembling the modern, western concept of peaceful, prosperous civilization is remotely possible in its absence. Though the words “markets,” “freedom,” and “civilization” have distinct, different meanings, the three are essentially coterminous and inextricably, causally linked: increase or decrease in one necessarily affects those others in like wise.  
    The understanding and explication of such matters (in wholly scientific fashion) is the achievement of economics–Austrian economics–and no other. But each must decide for himself whether the acquisition, understanding, and sharing of such knowledge is valuable to him and even, I’d add, whether the security of descendent generations might not be at stake. That is why I run on so.  
    And that is also why I hasten to add: fuck Caplan and the horse he rode in on.

  90. A few points and comments: 
    “For example, economics has a strong preference for market organization over competing forms of organization.” 
    Currently, yes. Historically? Mixed bag. After all, state economic planning in various flavors was all the rage not too long ago among mainstream economists (remember that Keynes guy*?).  
    Also, free-marketeers have (in my estimation) recently been overrepresented among prominent economists compared to their frequency among the rank-n-file, distorting your impression somewhat. 
    “It customarily values production consumption, and exchange as such, as opposed to frugality and idleness.”  
    Probably more true with regards to frugality than idleness – the difficulty of monetizing free time is pretty widely discussed, the value of virtue less so (though it does go on more and more).  
    Economics also puts a lot of faith in the power of free will to create desirable outcomes, but that’s more of an empirical assumption. (My take is that it is a decent one in the majority of cases) 
    “To begin with, I always read econ and other social sciences as normative and policy-oriented.To me the claim to be objective and value-free is just a way to gain an advantage for your policy philosophy by claiming universality.” 
    Overly categorical. Much in the social sciences is indeed steeped in normativity – but there are large mostly descriptive chunks as well. It is hard to pigeonhole much of empirical economics as very normative, for instance.  
    “The reason I harp about Japan is that over a longish period starting in 1850 it seems to have succeeded in economic terms, while not generally following the advice economists would have given them if asked.” 
    …though it did not deviate too radically from them. (I.e. – advice from free-ish-marketeer economists) either, as many other nations did during that time, with disasterous results. (Re: any communist country) Hell, while certainly having being far more dirigiste than the US, Japan still sports lower tax rates than the United States. (2001 figures) 
    The same goes for Scandinavia, which maintaned a strong free enterprise system, free trade and for quite some time low-ish taxes. (The Scandinavian welfare system reached its apex in the late 1970-ies, not the 50-as is often assumed.) 
    It should be noted that there is plenty to indicate that scandinavians currently are considerably more wealthy in more free-market environments. (I.e. – Scandinavian immigrants in the United States.) I am unaware of similar data for Japanese Americans, but it wouldn’t really surprise me. Hell, Sweden is still some 11 000 bucks behind the US in PPP/Capita, despite the states having some pretty spectacular social deficiencies compared to well-ordered Scandinavia.  
    Also, when it comes to comparative economics, there is a lot of sobering empirical work which is very helpful in highlighting the difficulties in prescribing cookie-cutter-solutions across countries.  
    “In short, I’m interested in economics because of the policy guidelines economics gives, and it doesn’t seem to me that these are as good as economists think.” 
    That’s a pretty harsh standard for any field of study – Compared to any other social studies area with similarily broad perspectives, I’d go with economics any day.  
    Also, people seem to forget just how far out there the views of how an economy works used to be among the literati, not to mention the general population.  
    * Keynes is still around, but in refined form.  
    You all discuss Becker et al way too much above – Becker is certainly big, but he’s big in a limited field, on the edge of Economics as a social studies dicipline. 

  91. Dobeln: You can’t be effective in policy advice if you don’t have any descriptive power. I wasn’t denying the descriptive power at all, and I wasn’t deploring the ideological core either; I was just saying what kind of thing I take econ to be. (My ideological POV is shared by few economists, so I disagree on a lot, but I don’t say that that they should be ideology-free, because that’s impossible and undesirable.) 
    I discuss Becker because a.) he got the Bank of Sweden “Nobel” prize, and b.) his ideas seem really unbelievably loony. Recent decades have seen economists moving into new areas and giving them market explanations, and in Becker’s case the result seems to have been disastrous — but the profession didn’t notice. 
    My understanding is that all the non-freemarketer schools (institutionalist, Keynesian, historicist, Marxist) are now embattled “heterodox” minorities. What I’m talking about is my understanding of the profession’s center of gravity (mean and modal economist) in the world of today, especially as it impacts policy and also public opinion. (One of the main products of the econ biz is millions of people who have taken one econ course, and hundreds of thousands of econ BSs.)  
    I really am not denying the very possibility of economics, or condemning every economist there ever was.

  92. Also, when it comes to comparative economics, there is a lot of sobering empirical work which is very helpful in highlighting the difficulties in prescribing cookie-cutter-solutions across countries. 
    Are you referring to the “shock therapy” experiment, or the Argentine bankruptcy?

  93. “Are you referring to the “shock therapy” experiment, or the Argentine bankruptcy?” 
    Neither – rather this kind of thing: 

  94. Those other two experiments should have changed some minds too.

  95. John, 
    No one can be sure that anyone’s reasoning is infallible. Everyone has a personal history, which is different from everyone else’s. The task of separating reason from prejudice is immense, and no one has ever succeeded or will ever succeed in it perfectly. 
    But to jump from these plain and obvious facts to the Marxian conclusion that reason is not a worthwhile goal, that all disagreements are disagreements over values, and since all our values are conditioned by our class consciousness or whatever, it is no use in talking at all, and the only way we can settle our disagreements is by appealing to the ballot box or the mitrailleuse, is a remarkable and utterly fallacious leap. 
    It is a mystery to me how anyone who follows this tradition can pretend to engage in any kind of reasoned discussion. It would seem much easier for us to just take it outside. 
    To put it differently, the laws of thermodynamics inform us that absolute zero is an unreachable temperature. Nothing in the universe can be reduced to 0 Kelvin. But this doesn’t mean there’s no such thing as a fridge.

    What you’ve quoted is a pretty powerful “diss,” I suppose–until you begin to think about what it means (and I’ve read that particular criticism of Caplan’s before).
    my point is that this is an interesting and erudite discussion…but seems to support the contention that austrian econ sure spawns a lot of verbiage and dialogue and argument really easily :)

  97. “But to jump from these plain and obvious facts to the Marxian conclusion that reason is not a worthwhile goal, that all disagreements are disagreements over values, and since all our values are conditioned by our class consciousness or whatever, it is no use in talking at all, and the only way we can settle our disagreements is by appealing to the ballot box or the mitrailleuse, is a remarkable and utterly fallacious leap.” 
    It certainly would be. Who is this terrible person you’re thinking of who made that leap? I’d like to give him a piece of my mind! 
    My opinion is that “ideology” (values) is a normal and inescapable part of the way we understand the world. Not a bad thing, and not an optional thing. It’s part of reason. It’s the self-described wertfrei people who want to exclude values from reason, and then afterwards claim triumph for their own values because their discourse is wertfrei. On topics about which an ethical opinion is possible, all discourse should be mixed or “thick”.

  98. Razib, 
    I can certainly understand your attraction to what we can almost start calling the “George Mason School” of economics (Caplan, Cowen, Tabarrok, etc). I read Marginal Revolution pretty regularly and find it generally intelligent and interesting. 
    So when I explain why I think the Masonites are a gang of unscrupulous, Lysenkoist intellectual prostitutes, I hope you won’t take it the wrong way. 
    Caplan published a paper in the QJAE around the same time he wrote this piece, which explored many of the same themes. If you are interested in responses, there were quite a few – for example, this one by Walter Block. 
    However, one problem with the responses I’ve read is that they are all quite gentlemanly. As anyone who’s followed the human biodiversity debate must know, heterodoxy is not without obligations, and one of them is to respond to extraordinary levels of invective and slander in dulcet tones of the utmost calmness and restraint.  
    Since I am not Walter Block, however, but a nobody writing under a pseudonym deep in the guts of a comment thread on an unrelated board, perhaps I can speak my mind. 
    The essential problem with Austrian economics is that if the Austrians are right, “mainstream economics” is a criminal pseudoscience.  
    The comparison to Lysenkoism actually puts it mildly. Besides, of course, the murder of authentic biologists such as Vavilov, the worst impact of Lysenko was a few crop failures. If the Austrians are right, non-Austrian economics is (a) responsible for many of the tragedies of the 20th century, and (b) about to be responsible for the collapse of the global financial system, which is imminent, and shows every sign of making the Great Depression look like a hangnail. 
    Luke Lea has stated, briefly and eloquently, a moderate and conventional Whiggish history of economics in the 20th century. Let me try and step back and state an Austrian perspective. 
    The two most important findings of 19th-century deductive economics, which the Austrian tradition continued, and which “mainstream” economics rejected as “literary” and “unscientific,” were (a) that since everyone is both a producer and a consumer, it is impossible to favor producers over consumers; and that (b) any quantity of money is sufficient, and creating money does not create wealth, nor is it necessary in order to “keep up” with “economic growth.” 
    (a) is generally known as Say’s Law. (b) has no name that I’m aware of, but certainly it deserves to be called Mises’ Law, although it would not be unfair to cite Hume. 
    [This comment is too big for Haloscan - I'm splitting it up.]

  99. [continuing the previous comment] 
    Let’s look at how “mainstream economics” abandoned these two laws. 
    Essentially, “mainstream economics” is war economics. Its intellectual roots are in the American version of national socialism that developed from Civil War Unionism, and which gave us folks like the Bellamies. It is not unreasonable to say that this movement produced World War I, rather than the other way around. But the specific movement toward central coordination of the economy was an intentional reproduction of the war planning regime. At the time this idea transcended party lines: it is just as prominent in the rhetoric of Hoover as of Roosevelt. 
    War economics is productionist economics. It cares nothing for consumption, which in a war simply means destruction. Its goal is to produce as much as possible and to pay the workers as much as possible. (The fact that history books make so much of the idea that war cured the Depression is evidence of the strange beliefs that can arise from trusting mathematical hocus-pocus over common sense.) 
    In the 1930s, then, Say’s Law had to go. It was an obstacle to every movement that competed for power in that brutal age. To succeed politically you had to promise to use all the forces at your command to plan your way out of the disaster, that meant treating the Depression as a war, and that meant war economics. Read, for example, Roosevelt’s terrifying first inaugural address
    The Austrian view – that war economics was not the solution to the problem but its cause, that the “return to normalcy” had failed not because it returned us to the discredited regime of laissez-faire, but because it had not gone far enough – was politically unmentionable. Steve Sailer would have an easier time running for President. 
    Therefore, the doctrine of “underconsumptionism” appeared. The depression, citizens of the West were informed, was the result of greedy rich people who hoarded their money instead of spending it. The solution was any kind of measure that promoted spending. 
    Note that this makes no sense at all. Since everyone is both a producer and a consumer, if an economy is producing too much, it is simply producing too much, and it needs to readjust itself to produce less. Otherwise you will get production gluts and bankrupt producers. 
    In fact, this kind of overproduction, and corresponding undersaving, is exactly what you’d expect from productionist economics. Corporatism (central coordination and promotion of business), socialism, and war production are all basically the same thing. They’re just marketed under different brands, as it were. 
    To give underconsumptionism its due, it is certainly not theoretically impossible for “animal spirits” – psychological factors – to cause cycles of boom and bust. For example, if you introduced cocaine into the water supply one year and Haldol the next, you certainly (c.p.) would see one year of Colombian largesse and another of Scottish frugality, which would force considerable readjustments in the structure of production. 
    But if these exogenous cycles exist, they can only be resolved by what essentially amounts to a nationwide plan of mind control. This is in fact what the underconsumptionist fallacy promotes. It suggests that, if the central planners and statistical astrologers think people are being too Scottish this year [I get to say this because of my Scottish descent], they can “stabilize” the economy by putting some cocaine in the water. Conversely, if Latin ebullience is out of hand, they can apply Haldol. 
    Indeed, if you assume that these exogenous cycles of animal spirits exist, and you treat government as a divine force, there is nothing at all wrong with this thinking. 
    [continued below]

  100. [continued from above] 
    In reality, of course, politics being politics, nobody ever got elected by putting Haldol in the water. Your Haldol stash does not dwindle at all. It’s all about the cocaine. Some years there is more cocaine, and some years there is less. But generally the trend is upward. In fact, you can simulate the effects of Haldol just by cutting back on the cocaine a little. 
    In fact, the cause of the Depression was the orgy of spending and asset overvaluation that the Fed drove in the 1920s. One of its primary mechanisms for doing so was inflation, in the sense of monetary expansion (creation of guaranteed credit). 
    If you are running a government and you want to make your citizens less frugal, inflation is the perfect weapon. First, since creating new money is equivalent to redenomination plus redistribution, inflation lets you take money from some people and give it to others, without the mess of tax forms. Second, the fact that you are silently draining peoples’ bank accounts gives them a very good incentive to spend rather than save. Third, debasing the money supply inflates the value of assets such as stocks and housing, as people try to pull their savings out of monetary instruments which are being silently devalued. 
    It is fair to describe these schemes as criminal, even when they are pursued by democratic governments, who under our current value system can do no wrong. If democratic governments want money to spend as they choose, they should raise that money by taxation. When they opt instead for inflation, they do so primarily on account of its surreptitious nature. Even if you are, as I am not, a fanatical believer in democracy, this should violate your sense of ethics. 
    The schools of economics that displaced the Austrians in the 1930s were two: Keynesians and Fisherites. (Friedman is a Fisherite.) Both these schools, which are the ancestors of today’s “mainstream” economics, were underconsumptionist and inflationist. 
    Keynes argued that consumption (“aggregate demand”) could be stimulated by deficit spending, which in a fiat currency regime is inflation under another name. We are all familiar with the results of too much Keynes: it’s called the ’70s. 
    Today’s econogers are generally Fisherite, rather than Keynesian. Fisher realized something very interesting: that since the monotonic advance of technological productivity tends to make relative prices fall over time (Moore’s Law is today’s most impressive example), an equivalent level of monetary expansion would generally escape public awareness. 
    For example, if all we consumed was transistors, since the cost of producing a transistor tends to fall by about 1/2 every 18 months, the Fed could probably get away with doubling the money supply on about the same period. This would provide an impressive slush fund which could be directed to all sorts of politically valuable purposes. Of course, there is no quantitative way to predict this effect, just as we can’t really predict Moore’s Law (it is not a law in the same sense as Say’s Law). So it has to be tuned all the time. But this is no harm, because it creates a substantial and indefinite demand for economists. 
    One means to this end is a sustained public information campaign to convince citizens that “inflation” means, not the confiscation of wealth through counterfeiting, but the rise in consumer prices that is a symptom of this practice. Since no one sees how much prices would have fallen if it had not been going on, voters need be none the wiser. 
    The result of these policies, in the 20th century, was simply a massive destruction of public prosperity. It is impossible to quantitatively compare wealth between any two worlds that cannot trade with each other, whether those worlds are past and present on one timeline, or alternate worlds on different forks of history. But here’s a way to think about what happened. 
    Suppose we suddenly introduced the technology of 2006 to the world of 1906. Laptops, iPods, buckyballs, and all the rest of it. Certainly some people would lose their jobs – the makers of everything from buggies to slide rules. A lot of prices would have dropped quite precipitously. But I think there’s very little doubt that the result would have been an astounding and entirely sustainable boom. 
    Now suppose we took the world of 2006 and reduced it to the technology of 1906. I think there’s very little doubt that we’d be gnawing each others’ bones in the street. Moreover, I think that it would be very difficult for us to regain the level of prosperity and stability of the “belle epoque” world of 1906. For me, at least – of course, everyone’s judgments of these counterfactuals may vary – this is a measure of how far our legal, political, financial, and commercial systems have declined. All under the benign tutelage, of course, of “mainstream economics.” 
    So when Caplan tells us that Mises and Rothbard were right in many ways when “mainstream economics” was wrong, but that now it’s caught up and surpassed them, we should recognize the astounding intellectual precedent he’s trying to set. 
    What Caplan is saying is that even though the Austrians were dismissed for political reasons, even though the “mainstreamers” were, at that time, basically wrong and the Austrians were basically right, and even though the quantitative pretensions under which they were dismissed are fallacious, economics from here on out should follow the mainstream rather than the Austrian line. 
    In other words, what Caplan is proposing is reformist Lysenkoism. Yes, there were some excesses, yes, natural selection is right and dialectical materialism doesn’t really have much to do with crop biology. But we all have moved on, we understand the issues, so full speed ahead. 
    This violates all the traditions of Western thought that Caplan is pretending to defend. If Rothbard was right in 1962 and his opponents, such as Samuelson and Friedman, only won the debate because of their political connections, then it is Rothbard, not Samuelson and Friedman, who should be considered “mainstream.”  
    And if Caplan has revisions to Rothbard, great. Austrian economics is not a cult, and Caplan is a very smart guy. I’m sure he has plenty of stuff to add. But science does not build upon error. 
    Which is exactly why I’m going to second Gene Berman’s recommendation.

  101. John, 
    It’s certainly possible to use wertfrei thinking as a surreptitious way to impose one’s own value system. I won’t even dispute the proposition that many people do this. 
    To say that this fallacy is a necessary corollary of Wertfreiheit, however, is nothing but a strawman. I reject it vigorously. 
    The proper way for a reasonable person to think is to apply first reason, then values. Reason tells you what’s going on. Values tell you whether this is good or bad. 
    Of course, anyone can fail to apply either of these steps properly, skip the first, or skip the second. But no one’s errors can invalidate the procedure. 
    Austrian economics is a system of reason. Many people, including many leading Austrian economists (such as Rothbard, and to a much lesser extent even Mises) have produced a unified body of work that applies first reason, then values. Anyone is perfectly free to reject Rothbard’s value system, simply on the basis of disagreeing with it. I reject many aspects of it myself. 
    But if you want to reject his logic, you need reasons of your own.

  102. You are still assuming that values are outside reason and undiscussible. I think that the separation you suggest, which is quite widely accepted, is part of the problem.

  103. Who moved my cookies?

  104. No. I think that value systems can be evaluated quite profitably by the aid of reason. I don’t think that there exists, or should exist, any value system that cannot be examined rationally. 
    For example, a value system that says it is not all right to kill, but it is all right to kill blue-eyed people on Sundays, is open to question. If it has some system of thinking that allows it to define blue-eyed people as not people, exactly, at least if it is Sunday, it may wriggle off the hook. If it just includes this obvious irrationality, without any sort of justification, we may label it as hypocritical. 
    But I believe that there exists a subset of reasoning that is value-independent. For example, there are facts. The World Trade Centers fell down. The Nazis invaded France. A ripe Cavendish banana is soft on the inside and yellow on the outside. 
    There is also logic. An orange is an orange. Just because Socrates has two legs, that does not make him a kangaroo. But since he does not have four, he is definitely not a cat. 
    People used to be taught this stuff at the age of seven. But since the advent of technology and democracy, suddenly it is shrouded in a cloud of bogosity and nonsense. This peculiar material is called logical positivism, and it is to common sense as novocain is to wine tasting. 
    The contention of the Austrians is that the subject of economics can be adequately described in ways that ordinary, civilized humans can understand, using only these tools. They have presented a solution that purports to be correct. Obviously, the nature of the problem is such that any human of the aforementioned intellectual stature can evaluate it for themselves. 
    And obviously, if you cannot accept the tools, the question is not accessible to you. You may have to retune your elvis and return at a later date, when the whingamabobs are in full rotational position, the bible is locked and the kingpin is correctly clamped.

  105. OK, at this point what I’m objecting to is the idea that the value-independent part is primary and can be introduced first, and that values should be plugged in later. (Your example of a value is not a good one; it’s more like a ritual practice or a traditional prejudice, and more irrational than most.) 
    I see more of a circular process, where the values are checked against the logical system and the logical system is checked against the value system. To me wert-frei thinking is useful as a checking function since normativity can go crazy too. But the wert-frei system shouldn’t have permanent priority. 
    Likewise, the idea that the basic ideas of economics are like basic common-sense principles that used to be taught to seven-year-olds — I sympathize with the anti-esoteric intention, but the principles taught to seven-year-olds historically are often false. 
    I recently came across an example of a logical system which, once accepted, stacked the cards in an unfavorable way. Carl Schmitt said something like “Esthetics is based on the distinction of beautiful and ugly, ethics is based on the distinction of good and bad, and politics is based on the distinction of friend and enemy”.  
    By his framing his logic in terms of absolute binary oppositions, and also by giving ultimacy to politics (common in German thought, it seems) he slanted his politics toward conflict. If my logic tells me that everyone is a friend or an enemy, and someone gives no positive sign of being a friend and gives even a snall indication that he is not a friend (some small slight), does that make him an enemy? In Schmitt’s system, yes, and in a grievance-collector’s psychological system or a warlord’s system of honor, yes, but in reality, no. Not unless you have committed to Carl Schmitt’s fundamental logic and hierarchy, which he presents as eminently wert-frei and realistic. 
    I have gone through and bookmarked your links, and hopefully I’ll read some of them later on in my econ project. I wasn’t originally planning to do that, so you’ve scored a point.

  106. Mencius: “Reread William James’ essay The Moral Equivalent of War sometime. In 1906, the apex of the belle epoque, James – the founder of a major science, and the epitome of a forward-thinking pragmatist – seriously proposes replacing the entire American economy with a program of forced labor run on military lines. Is it really so unfair to blame the disaster of the 20th century on this ideology?” 
    This is a fairly Americo-centric view, as was the reference to the Bellamies. By the time America joined in, all of Europe was at war. 1914 is the place to look, and America was tying to stay out then. 
    James did perceive that way that the political world was skewed toward collective action, and saw that war was the default form (“War gives meaning to our lives”). He accepted the politics as given, which perhaps was wrong, but tried to substitute something else for war. I remember thinking that his substitute (“War against nature” — something like the WPA) was highly susceptible to environmentalist criticism. 
    EG: “By the way, you make a key mistake by assuming there is one definition of rationality in the whole field of economics.”  
    I will read the Tyler Cowen piece. However, making rationality into a moving target while placing rationality at the center of your system seems pretty decadent to me. The rationality claim has always been an important part of economics’ claims to precedence among the social sciences.

  107. John, 
    I wasn’t arguing that the principles of economics could or should be taught to seven-year-olds – just the principles of classical logic. Admittedly, it probably depends on your seven-year-old. 
    Once you distinguish between ethics and “ritual prejudices,” I’d say you’ve already lost something important. We probably disagree in that I think people with arbitrary and distinct ethics, or prejudices, or whatever you want to call them, can communicate intelligibly on a wertfrei level. Obviously this opinion is not popular in the West these days, and I welcome even your slightly diluted version of it. 
    Carl Schmitt is indeed a good example of bogus Wertfreiheit. That said, I did recently enjoy his Theory of the Partisan, although it has to be taken with a whole dumptruck of salt. 
    I think you may be remembering what you were taught about James’ essay, not what it says. Scroll down to the bottom where the meat is. I think most readers of 1906 would understand him as endorsing the Nationalist program of Bellamy, which means converting the US economy into a system of forced labor run on military lines. The WPA, CCC, etc, are to this as Schlitz is to Everclear. (Although Wolfgang Schivelbusch’s new book Three New Deals is kind of fun, especially as Schivelbusch is more of a cultural critic than an economist.) 
    [broken for Haloscan's link count limit - grr.]

  108. And remember: one of the merits of James’ essay is that it is addressed to a specific audience that disagrees with him in a very specific way. He does not seem to expect this audience to be a pacifist one.  
    I suspect that if you read that Rothbard piece on WWI you’ll come out with a rather different perspective. Many Americans indeed wanted to stay out of WWI, but many didn’t, and many found it quite exciting when we didn’t. Rothbard is only looking at the US roots of nationalist militarism, but of course the intellectual culture that produced the war was by no means restricted to the US. Blame Hegel, Rousseau, and ultimately Calvin. 
    If you find it easier to accept this perspective (Progressivism as American national socialism) from writers whose commitment to democratic socialism is unquestionable, try Arthur Lipow (a student of Michael Harrington) or Gabriel Kolko
    [four links is too many? Haloscan, what art thou thinking?]

  109. But if you really want to question reality, read some Erik von Kuehnelt-Leddihn. One of his books is online, albeit in a really nasty scan. And don’t forget one of the 20th century’s great forgotten writers – the original Superfluous Man: Albert Jay Nock
    I hope I don’t need to say what a pleasure it is to argue with someone who’s not afraid of philosophy. For all its herds of subsidized scritterati, ours is quite the anti-intellectual age.

  110. Nonetheless and regardless, if you’re trying to explain WWI you have to look at Austria-Hungary, Russia, Germany, France, and England. Going to the US and looking at James and Bellamy seems silly. 
    The ethical example you gave was so quaint that I could only call it a ritual practice or traditional prejudice. I don’t think that all ethics can be so described. 
    I’m moderately sympathetic to a description of Progressives, Pragmatists, and New Dealers as statist militarists. However, the difficulty for me is finding a non-wishful alternative — the State scarcely seems like a variable any more. And granted their statism and militarism, they really do not approach Hitler, Stalin, or as far as that goes, probably not even Kaiser Wilhelm or the various other WWI leaders. To me 1914 (not Hitler or Lenin) was the turning point of history.

  111. James and Bellamy were examples of the intellectual trope, which was worldwide. The precedent was set by Napoleon. Hazlitt’s Bonapartism adumbrated all the disasters that were to follow. If you’re looking for European ancestors of 1914, try 1848. 
    I consider nationalism, plain and simple, to be the murderous ideology of the last 200 years. And I follow Kuehnelt-Leddihn in holding that democracy is a branch of nationalism. I am a liberal, and I believe that the definition of liberal government should be based on what the state does, not whatever process it uses to select its leaders. 
    The common term “right-wing” incorporates many of the confusions on this issue. The ancien regime of Louis XIV, absolutist though it seemed in its time, would be the most liberal state on the planet today. The Sun King never dreamed that he could regulate his citizens’ diets, plan their children’s education, or conscript them as involuntary soldiers. Though no doubt if he had found a way to gain such power he would have embraced it with great gusto.  
    When you look at later 19th-century and even 20th-century survivals of the ancien regime, like Kaiser Bill, the Hapsburgs and so on, you have to see them as products of their own time, not the often-phony historical traditionalisms they promoted. The French Revolution established that no monarchy could afford to ignore the popular will, and the later monarchical regimes became, in fact, quite democratic. Not only did they install various parliaments and so on, but they worked very hard to appeal to the soccer-hooligan demographic. And they borrowed many institutions, such as secret police, from Napoleon. 
    This period is what has left us with the unfortunate association of monarchism, traditionalism, and aggressive militant nationalism. In fact, this “top-down” nationalism was entirely bogus – the European monarchical families were the epitome of cosmopolitan, being as their ethnic relationship to the countries they ruled tended to be, except in the Balkans, minimal. The private letters of Nicholas II and his wife are generally in English.  
    The monarchists were just going with the intellectual fashions of the time, with disastrous results. No doubt if they had won the wars the same general if incomplete repudiation of nationalism would have occurred, and we would have learned in school to despise parliamentary democracy as a military and nationalist regime, just as we learned instead to despise monarchy and dictatorship. 
    Alternatives are non-wishful if you make them so. To the vast majority of people in the Soviet Union, it hardly seemed a variable. Ditto the Roman Empire. Ditto the Church before Luther. The present always seems gigantic and absolute. Dispelling this illusion is the task of the philosopher. 
    One obvious alternative that we can see clearly today is the system of government practiced in microstates like Dubai, Hong Kong, and to some extent Singapore, which is apolitical and treats its residents as customers, rather than subjects or wards. The one advantage of democracy is its supposed, and in my opinion greatly exaggerated, ability to correct the known tendency of large hierarchical social networks to succumb to mass delusion. A global system of microstates with free emigration, in which people in mismanaged states simply leave, strikes me as simpler and more efficient. And unlike most of today’s utopian visions, it does not require imposing a single system of ethics on the entire planet. There is plenty of room for Talibanistan. 
    It also lets us think of states as normal human organizations, rather than as mystical institutions. Whether security should be provided by charitable trusts or by shareholder-governed corporations is not clear to me. The question is probably best settled by competition. But we have a clear understanding of how such organizations should work, in both cases, and the system of state worship that we inherited from the wreck of feudal Europe bears very little relationship to it. 
    I have my own sense of ethics, which is very universalist and conventional. It is basically the same ethics you get if you listen to NPR, which is no surprise, because I grew up listening to NPR. I wish everyone in the world would adopt this ethical perspective. However, since they do not, in general, seem about to, I like the idea that we can reason about reality without fighting over ethics.

  112. You completely lost me with Singapore, based on what I know of Singapore. It’s a somewhat freakish entrepot state with a minimal hinterland, and quite bothersomely authoritarian to boot.

  113. That’s why I said “to some extent.” 
    Postcolonial Singapore evolved in an era of considerable political turmoil and its managers have been a little paranoid about preventing the development of politics. They also have a strong quasi-religious paternalistic streak. Hong Kong and Dubai are better examples, though hardly perfect. 
    The key to understanding feudalism is that it defines the right to govern a territory as a normal property right, not an ancient mystical trust conferred by the ancestor-gods. Late European monarchism, with its demotic pandering and its hocus-pocus absolutism, obscured this simple and practical legal principle, which arose originally out of the intersection of Germanic and Roman law. In fact, divine right theory is best understood as a predecessor to democracy: both are mysterious principles which place the state above the law and justify its omnipotence. Democracy is the natural reflection of the pietist Christian system of ethics which evolved into our own, just as divine right makes sense if you believe in miracles. 
    Everything of Nick Szabo’s is worth reading, but see this
    Dubai, for example, is essentially the private property of the al-Maktoum family. Think of it as a family-owned company. If they could take the next step and list it on the Nasdaq, the rule of law in Dubai would probably be even more stable and trustworthy, because no one would have to worry about dynastic politics. Not that any of the al-Maktoums wants to kill the goose that lays the golden eggs, but like the Singaporean government, they do have to worry about the possibility of demotic politics spontaneously developing, which makes Dubai a somewhat less open and stable place than it otherwise might become. 
    I’m not sure what hinterlands have to do with anything.

  114. I just can’t see Singapore’s model being extended over all of Indonesia or all of China, for just two examples. Singapore is highly exceptional in Asia. In Singapore the middle class has a preponderance, and even the lower classes are better off than they would be in Malaysia, Indonesia, or China.  
    And the Singapore government is worse than any government in the developed world, as far as I can tell.

  115. I’m really not sure by what standards you think, say, Italy is better governed than Singapore. 
    Perhaps your measure of good government is compliance with some definition of proper democratic rites. Mine is efficiency, transparency, financial stability, rule of law, and personal liberty. Singapore is not perfect on the last point, but it does pretty well on all the others. And in some ways it is actually more liberal than the US: prostitution, for example, is legal. 
    I certainly respect your democratic faith, but I hope you can understand why others might believe a state is best categorized by its actions, rather than its decision-making process. As a customer, for example, I am not concerned with how Starbucks chooses its CEO or how it decides what beans to buy. If I choose not to patronize Starbucks, it is only because its espresso is bitter, burned and overextracted. I hope you can imagine how, perhaps, at some distant date in the future, a civilized person might select a domain of residence on the same general principle. 
    Obviously the more choices the better, which is why a world of microstates is preferable to today’s byzantine monsters. As a Bay Area resident, for example, I think said conurbation would make a fine country, and I have no idea why we have to be managed from the swamps of the Potomac. 
    Perhaps the imminent collapse of Bretton Woods 2 will offer some kind of opportunity to consider this sort of structural change.

  116. Singapore is pretty bad on the personal liberty end, the political participation end, and the social equality end. I have no interest in free market technocracy.

  117. I suppose you haven’t read Popper’s Open Society and Its Enemies. (I mean vol. 1, Plato.) 
    It is interesting to consider the evolutionary position of the philosopher. Advising Dionysius has always been a good gig. It gets those alleles flowing. And who really runs the show in Syracuse? Dionysius, or the men who write his laws and speeches? 
    The trahison des clercs is the rule, not the exception. Every society in human history that has ever given itself over to government by intellectuals has lived to regret it. Ours will be no different. Ask yourself: why should anyone who isn’t an intellectual care about “political participation?” Or even anyone who is an intellectual, but doesn’t have any personal desire for status or importance? 
    What matters about government, to everyone in the world besides people like us, is that the law is simple, fair, and fairly applied. It always amazes me that people who are so intelligent and so genuinely sincere in their intimate concern for the demos can be so utterly unaware of this. 
    The entire ritual of consulting public opinion exists simply to create a level playing field for factions of contending philosophers. The history of ideas since 1789 is an endless record of mass murder in the name of the people. The relative peace of the last 60 years has been achieved only at the price of creating a university system which is an established church in all but name, and which suppresses any thought it finds even remotely disturbing. 
    And how anyone in 2006 can still believe in the power of military force to produce “social equality” is utterly beyond me. I suppose you think things are better in Malaysia, with that bumiputra stuff. 
    Government is a wonderful and essential service. It works best when it’s provided by dull, sticklerish people, with no imagination at all. Merchants, judges, policemen, and if necessary, generals. The 20th century had two world leaders who were genuinely original thinkers: Lenin and Hitler. I’m afraid pulling out the evolutionary psychology is not very nice of me, but it’s the only explanation I can imagine as to why these visions of ant-farm societies still flood the hearts of intelligent and independent philosophers such as yourself. 
    The great novel of the century is, I think, Tolkien’s. And his masterstroke was to never admit that what any fool can tell is an allegory was anything of the sort.  
    The ring is not the A-bomb or anything like it. It’s just what it says it is. It is just power. Tolkien’s lesson is simply Acton’s, and his genius was just to wrap it in a book that people will be reading for the next five hundred years.  
    The right thing to do with power is not to use it, but to destroy it. If one thousandth of the talented and energetic people I see “working for social change” realized this, the human race would have some tiny chance at an actual, lasting peace.  
    But no. Nobody wants to be Frodo. Everyone wants to be Boromir. (Or Luke Skywalker, I guess.) I find it very sad that a thinker as original and perceptive as yourself cannot escape this trap.

  118. Well, my Utopian period was 1965-1983. It was immediately followed by my cynical period, and then (starting in 2002) my anti-Bush period. You may be thinking of me as young because I’m new to you, but I’m 60 now. I used to be willing to be on the political vanguard just on spec and take my chances on how things turned out, but I’ve lost that ability. 
    I’ve become increasingly doubtful about institutional liberalism and the state over the last few years, but nothing at the libertarian end ever appealed to me because I’m not a lover of the market. In terms of actual societies I’m one of those who thinks that the Scandinavian countries do pretty well, but I grant that they’ve been pretty sheltered since 1945.  
    Knowing what I do historically and philosophically, the war-making power and police power are in some sense definitive of or fundamental to the state. However, the Swedish state hasn’t been a serious military factor since about 1709, and yet their state remained strong and, as far as I’m concerned, has done a good job. Libertarians tend to mush categories so that the Swedish state is more or less the same as Mussolini’s state, but to me that’s special pleading.

  119. I don’t think of you as young at all. Your ideas are considerably older than you are, as you know. 
    On Sweden, read Roland Huntford’s The New Totalitarians. Huntford was the Observer (the UK one, not the New York one) correspondent in Sweden in the early ’70s, when he wrote the book. He makes a lot of the analogy to Huxley, and rightly, I think. Many of the innovations he noted in Sweden are now routine throughout Europe, even in the UK.  
    It always bemuses me that people expect there to be some kind of third way between the “market” and central planning. Either people do whatever the heck they want and you have a legal system in which everything which is not prohibited is permitted – in which case you have a “market” – or you have an official authority which can give anyone any order.  
    The former system is called liberalism, or at least it used to be called that. (I hate the word “libertarian” and think the alliance with “conservatives” has been nothing but a fiasco.) The latter system is called totalitarianism. It’s as simple as that. 
    Of course one can construct various intermediates. Neither perfect liberalism nor perfect totalitarianism has ever existed. But human history gives us no reason to think that there is any third dimension of benign, fatherly rule. 
    This point is made with considerable vigor in Thomas Sowell’s Vision of the Anointed, a book whose perspective would, I think, be quite a valuable addition to your idiocentric arsenal.

  120. I am a very big advocate of intermediates and mixed systems in general. I think that the search for clarity causes lots of trouble. For example, someone said that Carl Scmitt took Max Weber’s theory of the Satate to it’s logical conclusion. To me that was the problem, pretty much. If you take anything to its logical conclusion, it will be awful.  
    Let us assume that in the realm of morality the final distinctions are between good and evil, in aesthetics beautiful and ugly, in economics profitable and unprofitable.  
    He goes on to say that “friend and enemy” is the final distinction in politics.  
    Well, he started off by choosing to express his ideas in binary oppositons, which wasn’t necessary, and then he put the harshest spin he could on the political distinction. It’s all logically presented, but what he’s doing is stacking the cards.

  121. To me Sweden just seems much prefereble to Singapore in most ways.

  122. Or, at least, what you’ve read about Sweden seems preferable to what you’ve read about Singapore. (I’m assuming that, like me, you’ve never lived in either place.) 
    If there’s any way this conversation has augmented your perspective, I hope I’ve convinced you to consider the possibility that the information sphere that well-educated citizens of the West such as ourselves grew up inside is neither perfectly accurate, nor random in its errors, but in fact is the sprawling carcass of a nontheistic, utopian political religion from the 1930s: that is, the New Deal. 
    This analysis does not tell you whether “Newdealism” is good or bad. But I hope it makes a reasonable case for systematically analyzing your philosophy to remove received political and economic assumptions, then adding them back in if and only if you can reconstruct them from scratch to your own satisfaction. 
    As for reason and clarity, bogus clarity is bogus and non-bogus clarity is, well, not. I think I’ve made my views on this instinctive distrust of philosophy, which I think is one of the most pernicious aspects of the present intellectual regime, quite clear.

  123. John: 
    There’s a point of deep disagreement between you and us (Mencius and me) which I’d like to illuminate. 
    On our side, we see a plethora of unsatisfactory conditions institutionalized (or, most frequently 
    made worse) by non-market attempts at solutions to those problems. You are unconvinced that the market actually offers acceptable solutions; it’s somewhat stronger–you’ve expressed discomfort or antipathy toward the market with its position most acceptable when constrained within a “mixed” system–some unspecified variant of what’s been called the “third way” (a term traceable at least as far back as the 1920s in the rhetoric of socialist political propaganda). 
    Mencius and I share the same view on this particular subject and I only intrude here because he has overlooked (or been reticent about) calling a spade a digging instrument. 
    Of the various contributions made by Mises to economic science and understanding, one of the very most important but most frequently overlooked is his theoretical analysis (and refutation) of the ability for melioration of any sort to result from coercive intervention in the market. In Human Action, he has proved that such intervention always has results which are contrary to those intended by the interventionists themselves. (This is not to say that the net effects are always negative from such view but simply that the effects are always less positive than intended and frequently, even from such view, a “net loss.”) Such result is not caused by ordinary stupidity or failure to appreciate human nature (though the temptation is strong to impute extra-ordinary stupidity) but, rather, from plain ignorance of what has been discovered by economic science (and, from this, you must understand, I refer to Austrian economics– frankly, all the rest are, literally, “anti-economics.”) 
    An inescapable corollary to the (preceding) insight is that the interventionist is always confronted (whether as a result of his own recognition or a clamor of supporters’ disappointment) with an imperative to abandon the intervention by repealing the law (or frequently by desultoriness in its enforcement) or by further, previously-unanticipated, intervention. By far the most frequent such attempts are called “closing loopholes” in the existing law but they range much further afield, whether in federal interference (under the “commerce clause”) in the production of grain for consumption on the very same hog farm to diplomatic, trade, and “aid” pressures exerted on foreign entities to “harmonize” various–especially tax–policies with our own (or those of some supranational organization).  
    The “gist” to be recognized is that every society which is neither totalitarian nor totally “free” is, nevertheless, moving, step by step, in the one direction or the other: there is no “third way” even thinkable as a permanent arrangement. And, unless (and here, this is my own “take,” rather than a logical extension of theory–but I suspect a “take” shared by Mencius) those “in charge” of economic policy are thoroughly knowlegeable of the (again, preceding) theory and unqualifiedly committed to the cause of human freedom and self-determination, the vagaries of political conflicts and contituency-formation, especially as characterized in democratic nations, skew the to-and-fro oscillation decidedly toward the authoritarian end of the spectrum, no matter how chimerical and unrealizable may be its goals. (Funny. I’ve not read Hayek’s The Road to Serfdom but have no doubt that it’s a work devoted to elaboration of just what I’ve set forth in these paragraphs.)  
    Think about it, John. Even better, read Mises.

  124. I am not completely closed to philosophical approaches, but I do think empirically too. Sweden and Singapore can count as two actual experiments. I’ve had friends who lived in both places, and neither really seems to be a hellhole — they’re both very successful societies by most standards. By and large, though, I’d prefer by far to live in Sweden, based on what I know (and that’s even though Singapore has a special attraction to me, since I study Chinese). And the Singapore state may have a light hand as far as economic intervention goes, but in other respects it’s a soft one-party technocratic police state.  
    The Mainland Chinese are thinking seriously about “The Singapore Model” of economic liberalization with limited political liberalization and limited political participation, and that doesn’t encourage me, and it shouldn’t encourage you. 
    Hayek’s “Road to Serfdom” (and Mises’ similiar argument) may have had plausibility when written, but that was about fifty years ago. Predictions of the Second Coming and Armageddon have a short shelflife. In order to accept that argumnent now, you have to think that Sweden is a Communist totalitarian state already, right now, and I can’t accept that based on what I know. 
    To me, The State is the problem all right, but anarcho-capitalism is not the solution. At this point I think of the State as one of the inescapable realities, like Death and Original Sin, and something more to be managed and tempered than to be eliminated or perfected. So while I’ve become less Statist (only over the last few years), I haven’t gone far enough for you hguys, and am not really likely to. 
    Trivia: John Hospers was my late mother’s distant (second or third) cousin.

  125. Gene, it’s been a while since I read Road to Serfdom, but I do recall it featuring much these same points.  
    Possibly with a little less stress on the inevitable counterproductiveness of intervention. I don’t disagree with Mises on this, exactly, but strictly from a tactical perspective I don’t think it is his simplest and most precisely stated point: it is almost as much an aesthetic and intuitive conclusion as a deductive one. Perhaps the best way to sell it (to “young people these days”) is the analogy to environmentalism, which thinks about the problem of managing systems of independent actors in a surprisingly similar way. 
    Sweden is certainly not a Communist-style totalitarian state. It is something much, much more interesting, and more frightening in its own way. 
    What is totalitarianism, anyway? As I think most people would agree, the essential ingredient of totalitarianism is intellectual convergence. It’s very hard to call a society totalitarian if it includes many different subcultures with their own beliefs and perspectives. We all need to think the same things at the same time in the morning. In other words, a reasonable definition of totalitarianism is the absence of intellectual diversity. 
    The important problem is: how do we get from here to there? How can the State get everyone to think in step? 
    Well, we know one way, which is to send all the intellectuals to the camps. Let’s call this the Orwell approach. And you can’t say it doesn’t work. Or can’t you? Intellectuals, as the Soviets found out, can be irritatingly persistent.  
    But as Huntford points out, there’s another way. Let’s call it the Huxley approach. 
    For Huxleyist totalitarianism, you need to start with the perspective that’s already the most fashionable view among the intelligentsia. The natural flow of intellectual fashions, just as in clothing, is from hieratic to demotic: from high-status people to low-status people. When you try to reverse this, you get things like Nazism, which (ethical judgments aside) was hardly a success. 
    Marxism should not be mistaken for a demotic movement, and it was indeed fashionable with many intellectuals. It still is. But when it actually gains power, it tends to alienate them quickly. If you want your totalitarian system to work smoothly, you need an intellectual framework that people of considerable intelligence and creativity can live their whole lives inside, without ever feeling the need to violate its bounds. More, they should consider it an ethical requirement to condemn anyone who is tempted to deviate. 
    Marxism and Nazism, although they certainly had their Huxleyist moments, are not good examples of this kind of successful totalitarianism. Catholicism, Judaism, and Islam are much better. 
    Huntford, writing in the early ’70s, makes a couple of very interesting and insightful observations about Sweden. First, he notices that the Social Democrats (who at that time had ruled the country continuously for about 50 years) had achieved a level of intellectual conformity unique in the Western world, and that their mechanism for doing so was what we now call “political correctness.” He clearly expects his readers to find this system novel and shocking. 
    Second, he notes that managed intellectual conformity is really nothing new in Sweden. It is simply a continuation of the close ties between Church and State that have been a Swedish phenomenon since the Reformation. Protestantism, and specifically Lutheranism, have always been political religions with a strong collectivist bent. The only change is a doctrinal shift away from belief in a supernatural entity, and an institutional shift from the church proper to the universities. 
    Huxley is not the only author that modern Sweden recalls. There is also Wells. There are now two cultures in Sweden. One is Swedish and the other is Euro-Islamic, and they relate to each other in much the same way as the Eloi and Morlocks. This was not true in Huntford’s time, of course, and it is interesting to see how completely and successfully the Swedish state religion has suppressed the innate human talent for xenophobia. I seriously doubt that either the Soviets or the Nazis could ever have gotten this far toward creating the new socialist man. 
    I’ll leave the parallels to American intellectual history as an exercise for the reader. Suffice it to say that, at least in my opinion, the set of opinions that a fashionable person could hold in 1906 is considerably larger than that of 2006. In fact, I think that this set has diminished considerably even since 1986. (Since I was born around when Huntford was writing and I live in San Francisco, I’d like to think I have a fair perspective on this.) 
    So, John, when you say Mises is a dinosaur, I certainly understand (especially considering the generation you’re from) how you could think that. In fact, the idea that liberalism in the 19th-century sense of the word is old-fashioned and outdated was the predominant mechanism for deprecating it before the rise of political correctness. (Now we know it was an evil pretext for white male domination and social injustice.) 
    But I hope you can also see Gene’s perspective and mine, which is that far from being a dinosaur, Mises was way ahead of his time. The system of thought he opposed is much older – it has a bad habit of changing its name, but it certainly goes back to Calvin and Luther, and I think it is perfectly legitimate to regard even Christianity itself as a sect of collectivism.

  126. I’m afraid that if this thread lasts much longer, it may, in fact, become the State. But there’s another point I wanted to add. 
    Mises (unlike Rothbard) was not an anarcho-capitalist. He was just an old-fashioned liberal. Being as I consider myself an old-fashioned liberal, too, I can speak to the difference. 
    For me, the natural-rights libertarianism of Rothbard et al, which goes back to John Locke, fails because of its adherence to the Christian tradition of trying to derive a universal system of ethics, law and government from first principles. Even though my ethical views are much the same as Rothbard’s, or Locke’s for that matter, I don’t consider them universal. 
    This is why I’m a decentralist, not a libertarian. I am perfectly willing to admit that governing a city and providing its basic services, such as security, sewers, water, electricity, roads, Internet, and so on, may be a job that is best performed by a single institution. And even regulatory services, such as ensuring that restaurants don’t put rat poison or Crisco in your food, may work best when they’re insourced rather than outsourced. 
    What strikes me as a barbaric survival from an age of mystical nonsense, however, is the giant nation-state. I think that if there is any justice in history, future generations will regard the difference between government and the State as the difference between liver and liver cancer. The tendency of both cancer and the State is to grow. And you don’t cure cancer by reforming it. 
    And I think one of the key checkpoints, to continue the biological metaphor, is that there has to be a strict separation between law enforcement and education. Both are absolutely necessary, but if you connect them you get the theocratic state. Which is exactly what we live in now, although it worships humanity rather than anthropomorphized supernatural entities.

  127. Well, this has been interesting, and I appreciate your willingness to argue. Thanks for coming.

  128. My pleasure…

  129. Mencius: 
    I agree that the exchange of views has been lengthy–far beyond original intent and has amounted to ltttle more than an exchange of views between us (as opposed to an effort on the part of each of us to “reach” John via force of argument.) On that score, I’d rate the entire effort a failure; John seems to have elevated “pragmatism” to the intellectual level of a theoretical underpinning. 
    Insofar as is concerned your relegation of the inevitability of interventionism to the realm of “aesthetic” or “intuitive,” I’d express vehement disagreement: such recognition is virtually central to whatever “useful” can be gleaned from economic study. Science makes no normative statements but cannot avoid classifying attempts to achieve certain results according to their potential to achieve such as are desired by their promulgators. As to the importance of such recognition (“centrality,” as I’d tagged it), it is part and parcel of the recognition that there are political and economic measures doomed to failure of their proponents’ intent. Though it must be admitted that the intent of some intervention all of the time and all intervention at least some of the time to achieve conditions other than those publicly proclaimed, it is also beyond question that significant instances of intervention (and its popularization) would never be advanced were such proponents aware of science (inevitability) in the matter.  
    As long as there exists belief (on our side) that the positions of opponents are not grounded primarily in malice and further, that progress toward a better integration of scientific knowledge with sociopolitical economic practice holds any promise for melioration, those interested in such melioration are obligated to make their most powerful arguments known both to their opponents and to the wider audience of the electorate. There are many reasons why people (of any sort) tend not to change their minds, especially on matters of importance, and, therefore, for the persistence of error. But people (of all sorts) do recognize their error on some occasions and do change their minds–sometimes about quite important matters. It took 70 years for a socialistically-inclined majority (everywhere) to change their minds about communism and to, quite commonly, cite impossibilty of calculation without ever quite grasping that concept theoretically. 
    You can bet your bottom dollar that a generalized aversion to intervention, if even possible, will take even longer, as most of those believing themselves “conservative” are almost as enamored of intervention as their opponents–as long as it’s the sort of intervention they hasppen to favor. (I wrote a piece regarding this in the comments section following the most previous item–on the “sociobiology” of something or other.)

  130. Gene, 
    Sorry to disappear – I went on vacation. Hopefully you’ll check back and see this… 
    We agree, I think, on the substance; we disagree on tactics.  
    The faith in pragmatism, “social science,” etc, is very strong. Since I don’t see any reason to construct a categorical difference between theistic and nontheistic philosophies, I think the word “faith” is entirely appropriate. The problem is not qualitatively different from trying to explain 20th-century cosmology to a 16th-century Jesuit. It’s probably slightly easier, but only just. 
    My view is that the only way to even conceivably succeed in shaking someone’s faith by reasoned discourse is to make the subject do almost all of the work. I think you have to appeal to curiosity – you have to lay a little trail of cognitive M&Ms, so to speak. Each step along the way is a resolution of some paradox which is perplexing, a source of “cognitive dissonance” if you will, until the subject applies the intended lesson and clarity is achieved. People in our heavily indoctrinated intellectual universe are very used to living with a high level of cognitive dissonance – pragmatism just tells them that there are no simple answers. The reflex of seeing something under one’s nose, as Orwell put it, and instantly looking away, is deeply ingrained. 
    If you can convince someone that intervention always has harmful effects, you have solved the problem in one step. But it is a very big step. I think it is easier to try to synchronize with the perspective of whoever you are trying to convince, and present small steps with simple answers.  
    Rather than just writing out the tensor equations for general relativity. That stuff is all there in the books if they want to read it. The challenge is making the horse realize that he’s thirsty. 
    For example, I like to point out the contrast between Iraq and Dubai – one of which is prosperous and peaceful, and one of which is a democracy. If they can agree that they’d rather live in Dubai than Iraq, and that democracy shows no signs of turning Iraq into Dubai any time soon, that may get them ready to think that “liberal democracy” is not a tautology, and that a country can be liberal without being democratic or vice versa. Then they can think about what it means to be liberal but not democratic. Then, and only then, you can bring out the Hoppe or Kuehnelt-Leddihn. Obviously not quite the same thing as explaining Misesian economics, but you get the picture. 
    I am actually rather glad that my first exposure to Mises (about a year ago) was Theory of Money and Credit, which is also of course his first major work. It is more modest in scope that Human Action, and it shows the power of the method more simply and clearly. If it had been his last book I still think it would have established him as one of the great minds of the century. I was prepared for Misesian philosophy once I’d followed Theory all the way through and decided that I believed it. I’m not sure that my response the other way around would have been as good. Pragmatism has a strong hold.