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Richard Ebeling
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Pete, I wish I could share your implication of "mere intellectual error" about those on "the left" suffering from a memory lapse. Unfortunately, I believe it is deeper. They have never forgone their belief in some form of socialism. The collapse of the Soviet Union shattered the "dream" of a world successfully managed without private property and the profit motive. Especially, since they finally had to admit that it resulted in some much "unpleasantness" (read: tens of millions of innocent people killed in the name of building socialism). But the core idea had not left their soul -- the evilness of capitalism. As I have suggested in some things I've written in the past, the "specter of communism" still haunts the world. No longer in the form of Soviet-style central planning. But in the form of the socialist and Marxist critique of capitalism. Left to its own designs, unregulated capitalism exploits workers, concentrates wealth in the hands of "the few," converges on monopoly, produces for profit (i.e., unnecessary things) instead of for need (what the critic of capitalism would want to be produced for the supposed good of society), etc. The appeal of Piketty right now is that his book seems to vindicate their implicit fears and dislikes about the relatively free market. And justifies, anew, the need for paternalistic government to confiscate concentrated wealth to bring about a "Juster" (a more materially equal) society. In the video interview you've link to Piketty says that he has no equation specifying what is or is not a "socially necessary" and acceptable degree of inequality to maintain a minimum amount of incentives for work and effort. But like pornography, he knows excessive income inequality when he sees it. Which is like every other "leftist": they know "social injustice" when they see it, and a confidence that a people's "democracy" freed from the influence and control of the "one percent" will know how to rectify it. Notice also, and which is typical of many on "the left," he did does not expect that his 80 percent tax on income and wealth above $500,000 or one million dollars will generate permanent redistributive income year-after-year. No, it is punitive. It would be nice if Peter could continuously be plundered to give more to Paul. But it is enough to guarantee that Peter permanently cannot rise above the average income earnings of the Pauls of society. Here is the psychology and ideology of envy and resentment of those who have done better than others. They must be punished by not being allowed to have what their efforts may have produced. How is freedom compatible with a political-economic system in which all are monitor, controlled and restricted to only earn and enjoy what the "wealth police" have decided they should have based on "social usefulness"? Need I add that here is, also, the politics of the "tribe" which asserts ownership over each individual member and what he produces? If this gains traction, even darker days are once more ahead of us.
These biases are present, to some extent, even in the natural sciences. Our daughter earned her graduate degree in physics from CalTech, out in Pasadena. So much research money for physicists flows from the government, that she soon found out that the theoretical and applied research undertaken was strongly influenced by what the governmental agencies were willing and interested in bestowing huge sums of money. This not only affected on what physicists at CalTech did research, but their view that "only government" could supply such vast sums on so many things, and, therefore, an attitude that the role of government in "science" was essential and not even to be questioned. And the university was most (though not exclusively) interested in hiring faculty and researchers who could most likely bring in the big government bucks. And the prestige that professor "So-and-So" had worked at some government research facility, and had useful "contacts" for future access to those who could advise on where the government money should go in the future. Might this "bias" possibly "influence" some scientists about the "reality" of global warming and the degree of human "impact" on "causing" it?
Joe Stiglitz clearly lives in an alternative universe. One in which repeated incantations obviously are substitutes for history or reasoning. "Markets don't work." "Markets don't work." "Markets don't work." And how many times do historians have to demonstrate that the Great Depression was not a "failure" of unregulated capitalism before this lie is put to rest. As for having "vested interests" -- in a free (or at least a lot freer) market, economists, primarily, either teach or offer "forecasts" to businesses, or amuse themselves with "models." It is the Stiglitz's of the world who have the vested interest in getting people to believe that "market's don't work," so they can be employed by governments to play Adam Smith's "man of system" who gets to move us all about on the "great chessboard of society" according to how they think we should be directed and arranged. That with his own personal, imperfect "asymmetric" information, he might generate huge "government failures" that disrupt and ruin multitudes of lives impacted by his regulatory and interventionist designs, well, I guess he forgot to include that possibility in the video. It shows the bankruptcy of too much of the "mainstream" economics profession that hucksters and conmen like him get taken so seriously. It is a disgrace to any level of economic honesty. Richard Ebeling
I have not seen the new edition of "Institutional Economics." But I did read the first edition when it came out. And I can highly recommend the book. It is an excellent exposition of the ideas of the "new institutionalism," which in the first edition already had a heavy "Austrian" aspect to it. I'm sure that in this revised edition it is even better. Richard Ebeling
One of the most disturbing elements when faced with criticism of the free market approach is precisely this insistence that "capitalism" or "laissez-faire" implies a disinterest and most likely a disdain and "hatred" of the poor and less well-off. Anyone who reads Adam Smith, or Thomas Malthus, or David Ricardo, or Jean-Baptiste Say, or . . . soon discovers their deep and sincere desire for unearthing the "laws" of the market precisely to see what institutional arrangements would be most likely of offering avenues and opportunities to raise up the material standards and qualities of the human condition. And most especially for "the poor." Anyone who reads, say, Herbert Spencer, soon realizes that he, too, is searching for an understanding of the social order and how it influences and can improve the human condition. Many point to Herbert Spencer's phrase, "the survival of the fittest," but they seem rarely to have actually read his discussion of the processes of social evolution in his "Principles of Sociology." One discovers his distinction between the "militant" and "industrial" type societies. In militant societies, the human characteristics most useful for survival are brutal strength and force, cunning, and power for conquest. The physically weak and mentally gentle have little ability to survival in such societies. Survival goes to the "strong." But in "industrial" society -- the society of peaceful commerce, complex division of labor, collaborative interdependency -- it is not brutal force that is the avenue to survival anymore. It is intelligence, mental creativity for purposes of production, innovation, and artistic work. In the "militant" society those weak of body, poor of eyesight, mild of spirit have little or no chance of survival in the "struggle" for life. But in the "industrial" society those qualities in men that would result in their death or enslavement in a social system of conquest and plunder, now find their place in the peaceful social system of division of labor. Poor eyesight in the "hunt" may find its place in the delicate work of the dress-maker; the physically weak who are unfit for combat find their place in the counting house of commerce; the gentle spirit who has no chance in a social setting of violent intrigue finds his place in the world of art, music and dance, and even in the trading house of the merchant. The "militant" society places a premium on the qualities of the "brute." The "industrial" society values and has a place for the "gentle" man. Spencer highlighted the humanity and humaneness that can and had started to come with man's evolution from the "militant" to the "industrial" society. It is why he lamented the rise of socialism and collectivism in the late 19th and beginning of the 20th centuries. This trend was a movement backwards in human development, as far as Herbert Spencer was concerned. It is why he entitled some of his last essays analyzing this retrogressive movement before his death in 1902, "Re-Barbarization," "Regimentation," and "Imperialism and Slavery." It is the classical liberals and the free market economists who have been the true friends of humanity -- analytical "citizens of the world" searching for insights to raise up all men, everywhere, to a material, cultural, and social standard of well-being, dignity, and respect. One of the tragedies of our times has been our inability to convincingly demonstrate what the (classical) liberal friend of freedom is really all about in his pursuit of understanding and analysis of the "laws of economics." Richard Ebeling
Alchian and Allen's "University Economics" is one of the great economics textbooks of the 20th century. Any student who successfully goes through that book and masters the logic and method of economic reasoning developed there is way ahead in becoming an "economist." It was recommended to me long, long ago, when I was still an undergraduate back in the 1970s. The months I spend with it on my own was one of the most rewarding "courses" in economics I ever experienced. Then reading through "Economic Forces at Work" made clear to me what a non-Austrian economics could be at its very best. It is unfortunate that the Nobel Committee did not see fit to award a prize to Alchian. He would truly have been deserving of that high honor -- far more than some recent recipients! Richard Ebeling
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Feb 19, 2013