Is the Market a Test of Truth and Beauty?

539 Pages·2011·2.8 MB·English

by  Leland B. Yeager

(cid:341)(cid:351) (cid:352)(cid:340)(cid:337) (cid:345)(cid:333)(cid:350)(cid:343)(cid:337)(cid:352) (cid:333) (cid:352)(cid:337)(cid:351)(cid:352) (cid:347)(cid:338)
(cid:352)(cid:350)(cid:353)(cid:352)(cid:340) (cid:333)(cid:346)(cid:336) (cid:334)(cid:337)(cid:333)(cid:353)(cid:352)(cid:357)(cid:362)

Is the Market a Test
of
TRUTH (cid:333)(cid:346)(cid:336) BEAUTY?
EssaysinPoliticalEconomy
by
L(cid:337)(cid:344)(cid:333)(cid:346)(cid:336)B.Y(cid:337)(cid:333)(cid:339)(cid:337)(cid:350)
LudwigvonMisesInstitute
©(cid:513)(cid:511)(cid:512)(cid:512)bytheLudwigvonMisesInstituteandpublished
undertheCreativeCommonsAttributionLicense(cid:514).(cid:511).
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LudwigvonMisesInstitute
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mises.org
(cid:341)(cid:351)(cid:334)(cid:346):(cid:520)(cid:518)(cid:519)-(cid:512)-(cid:517)(cid:512)(cid:511)(cid:512)(cid:517)-(cid:512)(cid:519)(cid:519)-(cid:517)
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
(cid:348)(cid:333)(cid:350)(cid:352) (cid:341): (cid:337)(cid:335)(cid:347)(cid:346)(cid:347)(cid:345)(cid:341)(cid:335)(cid:351)
(cid:512) ShouldAustriansScornGeneralEquilibrium(cid:315)eory? . . . . (cid:514)
(cid:513) WhySubjectivism? . . . . . . . . . . . . . . . . . . . . . (cid:512)(cid:520)
(cid:514) HenryGeorgeandAustrianEconomics . . . . . . . . . . . (cid:516)(cid:512)
(cid:515) (cid:315)eDebateabouttheEfficiencyofaSocialistEconomy . . . (cid:518)(cid:513)
(cid:516) (cid:315)eDebateoverCalculationandKnowledge . . . . . . . . . (cid:520)(cid:514)
(cid:517) AustrianEconomics,Neoclassicism,andtheMarketTest . . . (cid:512)(cid:511)(cid:511)
(cid:518) IstheMarketaTestofTruthandBeauty? . . . . . . . . . . (cid:512)(cid:512)(cid:517)
(cid:519) MacroeconomicsandCoordination . . . . . . . . . . . . . (cid:512)(cid:513)(cid:519)
(cid:520) (cid:315)eKeynesianHeritageinEconomics . . . . . . . . . . . . (cid:512)(cid:516)(cid:518)
(cid:512)(cid:511) HuttandKeynes . . . . . . . . . . . . . . . . . . . . . . . (cid:512)(cid:518)(cid:514)
(cid:512)(cid:512) (cid:315)eImageoftheGoldStandard . . . . . . . . . . . . . . . (cid:512)(cid:520)(cid:512)
(cid:512)(cid:513) Land,Money,andCapitalFormation . . . . . . . . . . . . (cid:513)(cid:511)(cid:520)
(cid:512)(cid:514) TacitPreachmentsaretheWorstKind . . . . . . . . . . . . (cid:513)(cid:513)(cid:516)
(cid:512)(cid:515) TautologiesinEconomicsandtheNaturalSciences . . . . . . (cid:513)(cid:517)(cid:514)
(cid:348)(cid:333)(cid:350)(cid:352) (cid:341)(cid:341): (cid:348)(cid:347)(cid:344)(cid:341)(cid:352)(cid:341)(cid:335)(cid:351) (cid:333)(cid:346)(cid:336) (cid:348)(cid:340)(cid:341)(cid:344)(cid:347)(cid:351)(cid:347)(cid:348)(cid:340)(cid:357)
(cid:512)(cid:516) FreeWillandEthics . . . . . . . . . . . . . . . . . . . . . (cid:513)(cid:519)(cid:514)
(cid:512)(cid:517) ElementosdelEconomiaPolitic . . . . . . . . . . . . . . . (cid:514)(cid:511)(cid:518)
(cid:512)(cid:518) Is(cid:315)ereaBiasTowardOverregulation? . . . . . . . . . . . (cid:514)(cid:513)(cid:512)
(cid:512)(cid:519) EconomicsandPrinciples . . . . . . . . . . . . . . . . . . (cid:514)(cid:515)(cid:520)
(cid:512)(cid:520) AmericanDemocracyDiagnosed . . . . . . . . . . . . . . (cid:514)(cid:517)(cid:512)
(cid:513)(cid:511) CivicReligionReasserted . . . . . . . . . . . . . . . . . . (cid:514)(cid:517)(cid:518)
(cid:513)(cid:512) ALibertarianCaseforMonarchy . . . . . . . . . . . . . . (cid:514)(cid:518)(cid:516)
v
vi Contents
(cid:513)(cid:513) Uchronia,orAlternativeHistory . . . . . . . . . . . . . . . (cid:514)(cid:519)(cid:519)
(cid:513)(cid:514) HayekonthePsychologyofSocialismandFreedom . . . . . (cid:514)(cid:520)(cid:518)
(cid:513)(cid:515) KirznerontheMoralityofCapitalistProfit . . . . . . . . . (cid:515)(cid:511)(cid:518)
(cid:513)(cid:516) MisesandHisCriticsonEthics,Rights,andLaw . . . . . . (cid:515)(cid:513)(cid:513)
(cid:513)(cid:517) (cid:315)eMoralElementinMises’sHumanAction . . . . . . . . . (cid:515)(cid:515)(cid:514)
(cid:513)(cid:518) CanaLiberalBeanEgalitarian? . . . . . . . . . . . . . . . (cid:515)(cid:517)(cid:513)
(cid:513)(cid:519) Rights,Contract,andUtilityinPolicyEspousal . . . . . . . (cid:515)(cid:518)(cid:518)
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:516)(cid:512)(cid:517)
Introduction
(cid:315)is book’s title is the same as the newly chosen title of chapter (cid:518), “Is
the Market a Test of Truth and Beauty?” (cid:315)at chapter, along with the
onebeforeit,questionsadangerouslyfalseargumentforthefree-market
economysometimesmadebyitssupposedfriends.(cid:315)eirargumentthreat-
ens to discredit, by association, the powerful and valid case for the mar-
ket. Asked whether the market is a test of truth and beauty—of excel-
lence—AynRandwouldpresumablygivethesameanswerasmine:“No,
ofcoursenot!”Considerherheroof(cid:315)eFountainhead,HowardRoark.
Political economy is the area of overlap among economics, political
science, and philosophy. Beyond its positive content, political economy
doesbearonpolicybutnotonlyonpolicy;itisfarfromahodge-podgeof
differentpeople’spolicyprejudices.Economics,whennotdisregarded,is
obviously relevant to policy. So are philosophy and psychology, as when
theyunderliedoctrinessuchasredistributionismandegalitarianism.Pol-
icy can affect economics. More exactly, a policy proposal may help clar-
ifyastrandofeconomicanalysisevenwhen,consideringside-effects,the
authordoesnotactuallyrecommendthepolicy;“Land,Money,andCap-
ital Formation,” chapter (cid:512)(cid:513), provides an example. Regrettably, though,
policy-driven economists do exist who start with their or their employ-
ers’preferredpoliciesandthentwisttheiranalysisintosupportingthem.
Writings in political economy, being interdisciplinary, typically omit
the deep technicalities of any specific field. Most of this book’s chapters
are semipopular pieces that the attentive “general reader” should under-
stand.(cid:315)eydealwithintersectingfieldsratherthanwithadvanceddetails
ofanyonefield.Leftoutofthisbook,then,areanyofmyrelativelytech-
nicalwritings,asonmonetarytheoryandinternationaleconomics.Afew
semitechnical chapters, including numbers (cid:512) and (cid:512)(cid:513), come close to mak-
ing an exception. Chapter (cid:512)(cid:513) contributes to a field of particular interest
toAustrianeconomists,capitaltheory.Yetittoostrivesfornontechnical
language.
vii
viii Introduction
Some linkages among the chosen articles may not be immediately
obvious. But, for example, “Free Will and Ethics” and “Uchronia, or
AlternativeHistory”bothilluminatethechanceaspectsoflife.Sodoing,
both bear on political philosophy (as on the role of luck in personal sta-
tus).Bothalsounderlinethedifficultyofpinpointingthesupposed“deep
parameters”oftheeconomyandsotomakingquantitativepredictions,as
opposedtowhatF.A.Hayek((cid:512)(cid:520)(cid:517)(cid:518))called“patternpredictions.”(Farbeit
from me, however, to say that the necessary achievements of the econo-
metriciansareforeverdownrightimpossible.)
About half of the articles deal with economics in particular. “(cid:315)e
Debate about the Efficiency of a Socialist Economy” and “(cid:315)e Debate
Over Calculation and Knowledge” are among them. (cid:315)e latter chapter
summarizespointsmademorefullyinmy“MisesandHayekonCalcula-
tionandKnowledge,”ReviewofAustrianEconomics(cid:518),no.(cid:513),(cid:512)(cid:520)(cid:520)(cid:515),andin
the ensuing debate with Joseph Salerno, Guido Hülsmann, Jeffrey Her-
bener,andHans-HermannHoppein(cid:512)(cid:520)(cid:520)(cid:517)and(cid:512)(cid:520)(cid:520)(cid:518)issuesofthatReview.
(cid:315)at debate runs to too many pages for inclusion here (see the Review’s
issuesof(cid:512)(cid:520)(cid:520)(cid:515),(cid:512)(cid:520)(cid:520)(cid:517),and(cid:512)(cid:520)(cid:520)(cid:518),onlineattheMisesInstitute’swebsite).
My“AustrianEconomics,Neoclassicism,andtheMarketTest,”chap-
ter(cid:517),alsoprovokedcontroversy,specificallyfromDavidLabandandRob-
ertTollisonintheQuarterlyJournalofAustrianEconomics(cid:514),no.(cid:512),Spring
(cid:513)(cid:511)(cid:511)(cid:511).(cid:315)ereadershouldreadtheirarticle(attheMisesInstitute’swebsite)
alongwithorbeforereadingmyreplyinchapter(cid:518).
Chapters on “Macroeconomics and Coordination,” “(cid:315)e Keynesian
Heritage in Economics,” “Hutt and Keynes,” and “(cid:315)e Image of the
Gold Standard” deal with money-macro topics. (cid:315)e last two of the
Economics chapters concern methodology or, rather, countermethodol-
ogy: they advise against being intimidated by narrow methodological
preaching.
Several chapters in the Politics and Philosophy section examine the
merits and demerits of democratic government. Two of them are book
reviews.OneofthebookstreatstheAmericanpoliticalsystemrealistically.
(cid:315)e other takes the George Stigler/Earl (cid:315)ompson line that—if I may
exaggerate just a bit—whatever institution exists must be optimal or at
least satisfactory; otherwise it would already have been replaced. Other
chaptersinthesectiondealwithpoliticalphilosophy.
Most chapters are reprinted with only slight editing, particularly to
standardize the system of references. Chapter (cid:519) has been expanded (and
renamed)totakeaccountofdevelopmentsinthefifteenyearssinceitfirst
Acknowledgments ix
appeared,andchapter(cid:516)(alsorenamed)hasbeenmodifiedatitsbeginning
toreadlesslikeaninvitedintroductiontoothers’articles.Severalpagesof
chapter(cid:513)(cid:516)havebeencutoutbecausetheyrebutastrainedinterpretationof
Mises’sworkthatishardlyworthattention.Chapter(cid:515),“(cid:315)eDebateabout
the Efficiency of a Socialist Economy,” although and perhaps especially
becauseitdatesfrom(cid:512)(cid:520)(cid:515)(cid:520),isprintedunchanged.
(cid:315)eselectionprocesshasjusthappenedtogivethebookanAustrian
flavor not originally intended. (cid:315)e bulk of my work is not particularly
Austrian.OnwhetherIcountasanAustrianeconomist,seetheopening
linesofchapter(cid:517).
(cid:333)(cid:335)(cid:343)(cid:346)(cid:347)(cid:355)(cid:344)(cid:337)(cid:336)(cid:339)(cid:345)(cid:337)(cid:346)(cid:352)(cid:351)
Forenjoyableandinstructivediscussionsovermanyyears,Iamindebted
to dozens, even hundreds, of students in my graduate Seminar in Polit-
ical Economy at the University of Virginia and at Auburn University.
((cid:315)at seminar covered its topics in more scope, detail, and technicalities
thanthearticlesincludedhere.)Manypersons,includingonesbothmen-
tioned and unmentioned in the individual papers, have given me valu-
ableinstruction,encouragement,provocation,andwarnings.Ihesitateto
list names because any such list would be incomplete and would suffer
from my lapses of memory; but it would include Roger Garrison, Luis
Dopico,DanielEdwards,RobertGreenfield,RogerKoppl,JuergenBack-
haus, Steven Caudill, Warren Nutter, Edgar Browning, William Breit,
Northrup Buechner, Murray Rothbard, James Buchanan, Gordon Tul-
lock, and, to go back many years, Aurelius Morgner, James Waller, and
ClarencePhilbrook.
(cid:315)e Ludwig von Mises Institute made no suggestion that I mod-
erate any views contrary to its own. For this and other reasons I am
indebted to Llewellyn Rockwell, the Institute’s chairman, and Douglas
French,itspresident.JeffreyTucker,editorialvicepresident,encouraged
and patiently supported this book project from the beginning. Perhaps
theInstitute’sgreatestsupporthasbeentheservicesofMissLaurenBar-
low. She helped select the papers to reprint; standardized the system of
citations(includingplacementofnoteswheretheybelong,atthebottom
of each page); questioned errors, undue repetition, and infelicitous for-
mulations; coped with many drafts; and gave invaluable support on the
many arduous chores scarcely imaginable by someone who has not tried
toassemblediversearticlesintoacoherent(Ihope)book.