Is the “Austrian School” a lie?

austrian-school-of-economicsDo those of us who use the word Austrian in its modern libertarian context misrepresent an intellectual tradition?

We trace our roots back through the 20th century's F.A. Hayek and Ludwig von Mises (both served as advisors to FEE) to Carl Menger in late 19th-century Vienna, and even further back to such "proto-Austrians" as Frédéric Bastiat and Jean-Baptiste Say in the earlier 19th century and Richard Cantillon in the 18th. Sometimes we trace our heritage all the way back to the late-Scholastic School of Salamanca.

Nonsense, says Janek Wasserman in his article "Austrian Economics: Made in the USA":

"Austrian Economics, as it is commonly understood today," Wasserman claims, "was born seventy years ago this month."

As his title implies, Wasserman is not talking about the publication of Principles of Economics by Carl Menger, the founder of the Austrian school. That occurred 144 years ago in Vienna. What happened 70 years ago in the United States was the publication of F.A. Hayek's Road to Serfdom.

What about everything that took place — most of it in Austria — in the 74 years before Hayek's most famous book? According to Wasserman, the Austrian period of "Austrian Economics" produced a "robust intellectual heritage," but the largely American period that followed was merely a "dogmatic political program," one that "does a disservice to the eclectic intellectual history" of the true Austrian school.

Where modern Austrianism is "associated with laissez-faire economics and libertarianism," the real representatives of the more politically diverse tradition — economists from the University of Vienna, such as Fritz Machlup, Joseph Schumpeter, and Oskar Morgenstern — were embarrassed by their association with Hayek's bestseller and its capitalistic supporters.

These "native-born Austrians ceased to be 'Austrian,'" writes Wasserman, "when Mises and a simplified Hayek captured the imagination of a small group of businessmen and radicals in the US."

Wasserman describes the popular reception of the as "the birth of a movement — and the reduction of a tradition."

Are we guilty of Wasserman's charges? Do modern Austrians misunderstand our own tradition, or worse yet, misrepresent our history?

In fact, Wasserman himself is guilty of a profound misunderstanding of the Austrian label, as well as the tradition it refers to.

The "Austrian school" is not a name our school of thought took for itself. Rather it was an insult hurled against Carl Menger and his followers by the adherents of the dominant German Historical School.

The Methodenstreit was a more-than-decade-long debate in the late 19th century among German-speaking social scientists about the status of economic laws. The Germans advocated methodological collectivism, espoused the efficacy of government intervention to improve the economy, and, according Jörg Guido Hülsmann, "rejected economic 'theory' altogether."

The Mengerians, in contrast, argued for methodological individualism and the scientific validity of economic law. The collectivist Germans labeled their opponents the "Austrian school" as a put-down. It was like calling Menger and company the "backwater school" of economic thought.

"Austrian," in our context, is a reclaimed word.

But more important, modern Austrian economics is not the dogmatic ideology that Wasserman describes. In his blog post, he provides no actual information about the work being done by the dozens of active Austrian economists in academia, with tenured positions at colleges and universities whose names are recognizable.

He tells his readers nothing about the books they have produced that have been published by top university presses. He does not mention that they have published in top peer-reviewed journals in the economics discipline, as well as in philosophy and political science, or that the Society for the Development of Austrian Economics consistently packs meeting rooms at the Southern Economic Association meetings.

Have all of these university presses, top journals, and long-standing professional societies, not to mention tenure committees at dozens of universities, simply lost their collective minds and allowed themselves to be snookered by an ideological sleeper cell?

Or perhaps in his zeal to score ideological points of his own, Wasserman chose to take his understanding of Austrian economics from those who consume it on the Internet and elsewhere rather than doing the hard work of finding out what professional economists associated with the school are producing. Full of confirmation bias, he found what he “knew” was out there, and he ends up offering a caricature of the robust intellectual movement that is the contemporary version of the school.

The modern Austrian school, which has now returned to the Continent and spread across the globe after decades in America, is not the dogmatic monolith Wasserman contends. The school is alive with both internal debates about its methodology and theoretical propositions and debates about its relationship to the rest of the economics discipline, not to mention the size of the state.

Modern Austrian economists are constantly finding new ideas to mix in with the work of Menger, Böhm-Bawerk, Mises, and Hayek. The most interesting work done by Austrians right now is bringing in insights from Nobelists like James Buchanan, Elinor Ostrom, and Vernon Smith, and letting those marinate with their long-standing intellectual tradition. That is hardly the behavior of a "dogmatic political program," but is rather a sign of precisely the robust intellectual tradition that has been at the core of Austrian economics from Menger onward.

That said, Wasserman is right to suggest that economic science is not the same thing as political philosophy — and it's true that many self-described Austrians aren't always careful to communicate the distinction. Again, Wasserman could have seen this point made by more thoughtful Austrians if he had gone to a basic academic source like the Concise Encyclopedia of Economics and read the entry on the Austrian school of economics.

Even a little bit of actual research motivated by actual curiosity about what contemporary professional economists working in the Austrian tradition are doing would have given Wasserman a very different picture of modern Austrian economics. That more accurate picture is one very much consistent with our Viennese predecessors.

To suggest that we do a disservice to our tradition — or worse, that we have appropriated a history that doesn't belong to us — is to malign not just modern Austrians but also the Austrian-born antecedents within our tradition.


This article is coauthored with Steven Horwitz and originally appeared on FEE.org’s Anything Peaceful.

This week in the Freeman: the black tradition of armed self-defense

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Armed and Black

The history of African-American self-defense

FEBRUARY 03, 2015 by B.K. MARCUS

A lot of people believe that blacks march in lockstep behind calls for gun control. But while the civil rights movement was largely about nonviolent resistance, many blacks exercised a legitimate right of self-defense. Many still do today.

Hayek’s “Rejuvenating Event”

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Today is the 40th anniversary of F.A. Hayek’s Nobel Prize. My article in The Freeman tells the story behind the so-called Nobel, the controversy around Hayek’s winning it (and sharing it with a socialist economist), and what the prize did for Hayek’s personal life, his reputation, and his impact on the fall of European communism.

If you enjoy the article, please consider sharing it.

Class War in the Time of Robin Hood

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A couple of offhand comments from historian Simon Schama in A History of Britain (one in the book and one on TV) prompted me to write about classical-liberal class-conflict theory and the legend of the western world’s most famous bandit-hero:

“Class War in the Time of Robin Hood” in today’s Freeman.

If you enjoy the article, please consider sharing it with your network.

My latest Freeman article: “Check Your History”

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Feature

Check Your History

MARCH 11, 2014

Those who use the word “privilege” as a bludgeon don’t understand the word’s history any better than they do the complexity of power dynamics. [FULL ARTICLE]

The latest from InvisibleOrder.com: Are We Good Enough for Liberty?

Over on InvisibleOrder.com/blog, Mike Reid announces the latest ebook from IO:

20130918_AreWeGoodEnoughforLibertyCoverWe’re delighted to reveal the ebook version of Lawrence Reed’s new Are We Good Enough for Liberty?

Download the MOBI ebook (for Kindle)
Download the EPUB ebook (for everything else)

Lawrence Reed is of course the president of the Foundation for Economic Education, the author of innumerable articles, and a very prominent speaker for radio, TV, and conferences around the world.

This beautiful book includes, not only Dr. Reed’s own writing on character and liberty, but also the famous “I, Pencil,” by Leonard Read, the founder of FEE.

It’s available for free in ebook form here, and in PDF and print form here.

Yes, We Have No Bananas

YesWeHaveNoBananasIn a recent post ("Is mediocrity intelligent?"), I talked about the importance of a diversity of strategies — even apparently "wrong" ones — to the long-term survival of a species. The corollary of course is that overinvestment in any single strategy can be catastrophic.

We see this issue at play in modern agribusiness.

As Popular Science informs us,

The 1923 musical hit "Yes! We Have No Bananas" is said to have been written after songwriters Frank Silver and Irving Cohn were denied in an attempt to purchase their favorite fruit by a syntactically colorful, out-of-stock neighborhood grocer.

It seems that an early infestation of Panama disease was already causing shortages in 1923. But the out-of-stock bananas in question were not the Cavendish variety we all eat today; they were Gros Michel ("Big Mike") bananas, and they were all that American banana lovers ate until the 1950s, when the disease finally finished them off.

I would love to know what a Gros Michel banana tastes like. I’m a big fan of bananas and eat them every day. (Actually, I drink them, blended into smoothies.) But the reason I only know the taste of Cavendish — and the reason you do too, unless you’re old enough to have had some Gros Michel mixed into your pablum — is that Cavendish bananas are resistant to the strain of disease that wiped out our original bananas. We have to assume that the Plan B bananas we now enjoy are only second best as far as flavor goes. They may not even be first best at survival, because the banana industry is searching for a Plan C banana to take the place of the Cavendish once the inevitable crop disease sends it the way of the Gros Michel — something that they predict will happen in the next decade or two. (See Banana: The Fate of the Fruit That Changed the World by Dan Koeppel.)

Why are bananas so vulnerable to these blights? Why aren’t agricultural scientists worried about our other favorite fruits — apples, for example?

Because there are many different types of apples. I’m dizzied by the variety at our local produce warehouse.

But not only is there just the one type of banana at the green grocers and in supermarkets; each banana you’ve probably every eaten is a clone of every other banana you’ve eaten. One genetic pattern manifested billions of times over, across millions of households in the past half century. And each Gros Michel was a clone of every other one, too. That’s because bananas reproduce asexually (as do potatoes, another food that’s especially vulnerable to disease — remember the Irish potato famine?).

Cavendish DNA is different enough from Gros Michel DNA that the disease that targeted the one species was no threat to the other. But any infection that can kill one Cavendish plant can wipe out the worldwide supply.

There are many reasons food activists attack Big Agribusiness — some good, some bad, and some wacky. One criticism that seems eminently reasonable to me is a concern that Big Agra puts all its billions of eggs in one giant basket.

Once upon a time, genetic diversity in farm products was built into how farming took place. Farmers farmed local land with local genetic strains of plants and animals. Chickens may have come from Asia, and Europe never saw a tomato until the Spanish brought some back from the New World, but even as trade began to go global several centuries ago, the limits of transportation and technology meant that gene pools could be local and diverse in a way that is much harder in our era of global overnight shipping and transnational corporate bureaucracies.

If an infestation wipes out the Golden Delicious, I can eat Fugi apples instead. But if the Cavendish disappears tomorrow, there isn’t yet a different banana to take its place.

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Do you remember in my earlier post when my professor presented to the "artificial life" department at Bell Labs? In the context of a communications-research lab, artificial life was about using the lessons of biology, ecology, and evolution to make telephone networks more robust.

You may think that agriculture is more "natural" than phone switches and fiberoptics, but farming often short-circuits nature’s mechanisms to suit our short-term goals. One of the main such strategies of nature is diversity. And as I tried to illustrate with the concept of the genetic deme and the relativity of fitness, diversity means that what looks like an inferior strategy today could turn out to be the salvation of the species tomorrow.

As Larry Reed wrote recently in the Freeman,

Statists those who prefer force-based political action over spontaneous, peaceful, and voluntary initiatives — excel at distilling their views into slogans. ("A Slogan Worth Your Bumper?")

But what I find revealing is the contradictions at play in the juxtaposition of different bumper stickers on the same car. (And when you see a whole bunch of bumper stickers on the same car, odds are you’re driving behind a left-wing statist.)

CelebrateDiversity

This past weekend, at a red light, I was behind a minivan that brandished three bumper stickers:

One said, "Women for Obama."

If that wasn’t enough to declare the driver’s politics, the next bumper sticker made the claim that strong public schools create strong communities.

The last bumper sticker advised us in rainbow colors to "Celebrate Diversity!"

(Pop quiz: Are bumper stickers #2 and #3 in accord or at odds?)

Now, it’s a standard complaint against leftists that they talk diversity while pushing ideological conformity. Political correctness, and all that.

But to me the greater irony is that the Left consistently pushes centralization. Eat local, buy local, but decide everything in Washington DC.

I know that there are left-wing decentralists, and perhaps they genuinely do see the important parallels between genetic diversity and political federalism, between local communities and local authority. But I keep thinking of a story Tom Woods tells of his attending a decentralist conference back in the 1990s, where he happily discovered like-minded activists from both Left and Right. But to the apparent delight of the left-wing so-called decentralists, the highlight of the event was the keynote speaker: Vice President Al Gore.

BananaBookNo, in my experience, the vast majority of people with Buy Local bumper stickers, as with the Celebrate Diversity crowd, are also often, e.g., Women for Obama — that is to say, champions of ever-more-centralized authority. I’m confident that the driver in front of me at the intersection saw no irony in celebrating diversity while advocating strong public schools — and an even stronger central government.

But in the biosphere, where diversity rules, order is spontaneous. That spontaneous order is both the cause of and the result from overwhelming diversity. There are no central strategies in evolution, only in the human world, and only in recent human history. Evolution gave the natural world hundreds of varieties of banana. The United Fruit Company (hardly a free-market firm, by the way) gave us only one.

[Cross-posted at LibertarianStandard.com]