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Philip Pilkington: The Austrian Disease – Poor Scholarship, a Priori Bias

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By Philip Pilkington, a journalist and writer living in Dublin, Ireland

Recently I wrote an essay claiming that Austrian economics provided a metaphysical-theological basis for what is today called ‘libertarianism’ – a popular, dogmatic political cult in the vein of Marxism-Leninism. The essay was abstract and, quite possibly, a bit obtuse – for that I apologise, but such is the nature of the material.

If I am correct and libertarianism is a political cult and its foundations were laid by the Austrian economists, what real world effects does this have? I pointed out in the aforementioned essay that if the libertarians ever truly seized power the results would probably be – as so often is the case with extremists who preach liberty – totalitarianism. But in all likelihood the libertarians will never get hold of true power – for unlike their Marxist-Leninist brethren, they are a political cult without a broad base of support; they have no proletariat and no peasantry!

So, what effects does the libertarian dogma have on popular debate? In the US quite a great deal, or so it would seem if we took a superficial look at the political landscape. But I think most of this can be accounted for by certain peculiarly American values that were incubated after the Revolutionary War of 1776 and not due to the libertarian dogma per se. Marxism-Leninism tried to impose a whole new culture upon Tsarist Russia, while libertarian soundbites are taken up by everyone from Evangelical Christians to blue-collar plumbers in the US. There’s something altogether different going on in those two examples. The libertarians have not created new cultural value from whole cloth; they’ve instead used existing ones as a Trojan horse for ideas that are radical and in many ways at odds with the political freedoms that America’s founders cherished.

Despite its efforts to reach a broader audience, libertarianism is a marginal discourse and it probably always will be (political cults without real power are always marginal – because they’re so extreme that the majority will not accept them, but may have them imposed on them by the state). But it lingers around the internet, derailing many economic and political debates.

Libertarians – and their Austrian brethren – since they are, at heart, metaphysicians and cultists, are often proselytizing rather than engaging in a discussion, even about the most mundane and non-theoretical of topics; such as, say, the structure of the modern banking system. Anything that calls into question any of their principles is quickly steamrolled over with either mounds of rhetoric or sophistical arguments.

Let us take an example of a ‘liberty-meme’ that bounces around the internet. There are many of these. One could, for example, deal with the 1920-21 recession that is torn out of context and elevated to mythic status. But that is too nuanced a discussion to have in short form (even though I think the evidence that 1920-21 was no more than an unmanaged post-war adjustment and thus has little bearing upon possible government responses to a massive debt deflation).

Instead we should focus our attention on the nature of some of these arguments. The way that these arguments are presented that supports the notion of a cult mindset. We will deal then with a simple one paragraph prediction put forward in the clearest and most definitive prose by Austrian school icon Murray Rothbard. But before we do this we will turn to another of Rothbard’s works to see what sort of scholarship this man habitually engaged in.

Partisanship, Bias, and an Unwillingness to Turn to the Index

My first encounter with Rothbard was in his essay on Karl Polanyi’s classic book The Great Transformation: The Political and Economic Origins of Our Time. Rothbard’s essay is entitled Down With Primitivism: A Thorough Critique of Polanyi.

From the title two things struck me. First of all, why did Rothbard need to insist that his critique was ‘thorough’? It was as if Polanyi had offended his sensibilities in some way needed not just dismissal, but ‘thorough’ dismissal. Secondly, having read Polanyi I had gotten no impressions of ‘primitivism’ – that is, the celebration of and nostalgia for primitive ways of life. Quite the contrary, I had always seen Polanyi as a progressive and a champion of the New Deal and Keynesianism – hardly ‘primitivist’ ventures.

From a title that raises such questions Rothbard’s essay begins on an emotional note:

Karl Polanyi’s The Great Transformation is a farrago of confusions, absurdities, fallacies, and distorted attacks on the free market. The temptation is to engage in almost a line-by-line critique.

Wow! Something in Polanyi’s book really offended Rothbard. Unfortunately, we do not get such a line-by-line critique but instead – perfectly in keeping with the metaphysical mindset of the libertarian cult – Rothbard aims to set out “some of the basic philosophic and economic flaws”. He continues in a metaphysical vein:

One basic philosophic flaw in Polanyi is a common defect of modern intellectuals—a defect which has been rampant since Rousseau and the Romantic Movement: Worship of the Primitive.

We will not yet look to see if this is true quite yet. Instead I ask the reader to reflect on the argument. Rothbard is arguing a broad point here; nothing less than the nature of Man.

From here Rothbard launches his ‘critique’. He starts out by attributing to Polanyi a certain viewpoint and – regardless, for the moment, of whether this mindset is Polanyi’s or not – goes on to engage him purely on these terms. Rothbard is not interested in facts, he is interested in philosophy.

This is a classic libertarian-style, philosophizing argument. Libertarians are not good with empirical detail; it eludes them. Their home turf is on the ground of morals and metaphysics. Rather ironically this dogma – who worships the practical, business-like aspects of human life – could never be taken seriously by any truly practical-minded person.

But Rothbard’s zeal gets the better of his argument in the most embarrassing of ways.

To illustrate this consider a thought experiment. You are going to engage in a critique of a book – nay, a ‘thorough’ critique of a book. You want to characterise this book as worshipping primitive man. What is the very first thing you do? Answer: you turn to the index of the book and look up the term ‘primitive man’ to see if the author has mentioned it, then carefully study the pages therein to ensure that one understands fully the argument being put forward.

Rothbard never bothered. Because if he had he would have found a passage clearly marked in the index as Polanyi’s key proclamation on ‘primitive man’ that was, in its estimation, rather caustic and cynical in its estimation of the concept.

First we will set forth Rothbard’s accusations against Polanyi:

[I]t is implicitly and even explicitly assumed that the way primitive tribes act is more “natural”, is somehow more appropriate to man than the “artifices” of civilization. This is at the root of Rousseauism. The way ignorant, fear-ridden, quasi-animalistic savages act is somehow more natural, because presumably more “instinctual”, than the ways of civilization.

And now Polanyi himself in his key passage on the primitive man:

The work of social anthropology proved to be emphatically right. For if one conclusion stands out more clearly than another from the recent study of early societies, it is the changelessness of man as a social being. His natural endowments reappear with a remarkable constancy in societies of all times and places.

It is easy to spot Rothbard’s rather glaring error. Polanyi was not arguing that modern man needs to return to some purported Rousseauian ‘state of nature’ – to a garden of primitive bliss where the constraints of modern civilisation are done away with. No, Polanyi is actually saying quite the opposite. He is saying that we are far more similar to our primitive brethren than many of us would think.

But Rothbard is not interested in arguing about this. Instead he goes on a long moralistic tirade about the evils of what he calls ‘primitivism’ (that is, this apparent desire to return to a state of supposed nature), while Polanyi believes in no such thing. Polanyi – quite clearly, it must be added – is claiming that we bear many affinities to primitive tribes people. This is precisely the opposite of claiming that we have grown so different from them that we need to return to their way of life.

We could simply chalk this up as a strawman and have done with it. But I believe it highlights something specific about the libertarian mind. The libertarian is generally not interested in arguing about empirical facts or the empirical validity of a theory, just as Rothbard is not interested in examining the possible similarities between Westerners and primitive tribes people and their respective economic systems. Instead, they are only comfortable when making broad-sweeping moral or metaphysical arguments – and so, a typical rhetorical tactic is to assign a moral or metaphysical point-of-view to the opponent and then take this apart. Meanwhile the opponent sits there in a complete daze, trying to get a point in sideways about the structure of the banking system or something so banal while being accused of being a ‘primitivist’, a ‘communist’ or some other such nonsense.

This is the ground, the ground of generalisations and stereotypes that the libertarian inhabits. The world is divided up into ‘good guys’ and ‘bad guys’ with clearly delineated metaphysical positions that can be attacked or approved of. Meanwhile, those of us who eschew such pat generalisations try to argue with facts and are baffled when the libertarians begin once more to talk about their metaphysics. But such is nature of the libertarian mind.

Waiting for Judgement Day

Because the libertarian’s world is divided up into ‘good’ ideologies and ‘bad’ ideologies it is inevitable that they should actively seek out some reason that the ‘bad’ ideologies will eventually be punished. When one engages in this sort of moralistic and theological dividing up of the world, it is not surprising that one soon falls back on the old religious ways of thinking about Judgement and Punishment. What is so fascinating is that, not unlike the stories of the anti-evolutionists, this dogma is so impervious to facts.

And so, we arrive at our next Rothbard example. A prediction, no less. (A premonition, perhaps?)

Back in 1991 Rothbard wrote the following and it has since become a regular online ‘liberty meme’ in the blogosphere and elsewhere:

The important point here is a basic change that has occurred in the psychology of the market and of the public. In contrast to the naive and unquestioning faith of yesteryear, everyone now realizes at least the possibility of collapse of the FDIC. At some point in the possibly near future, perhaps in the next recession and the next spate of bad bank loans, it might dawn upon the public that 1.5 percent is not very safe either, and that no such level can guard against the irresistible holocaust of the bank run.

At that point, ignoring the usual mendacious assurances and soothing-syrup of the Establishment, the commercial banks might be plunged into their ultimate crisis. The United States authorities would then be faced with two stark choices. One would be to allow the entire banking system to collapse, along with virtually all the deposits and depositors in that system. Since, given the mind-set of American politicians, and their evident philosophy of “too big to fail,” it is certain that they would be forced to embrace the second alternative: massive, hyper-inflationary printing of enough cash to pay off all the bank liabilities. The redeposit of such cash in the banking system would bring about an immediate runaway inflation and a massive flight from the dollar.

The libertarians regularly quote this as if it had come true. If you read that quickly you might have been superficially impressed. If so, give it another glance and go a bit slower because Rothbard makes a very specific claim. First, he says that if there was a collapse of the banking system the US would engage in a very specific policy measure. He says that the US government would engage in, and I quote:

…[the] printing of enough cash to pay off all the bank liabilities…

So far so good right? Rothbard knew this because the Federal Reserve had acted as Lender of Last Resort many times in the past. Any economist would have been able to tell you that this would happen in the case of a large-scale banking collapse in the US. This is no more a prediction than saying that if the US were attacked on a reasonably large-scale by a terrorist organisation once again that they would step up the War on Terror.

So far, then, Rothbard’s is not a prediction, per se, but merely a description of what the Federal Reserve generally does when banking crises arise. But then he makes a prediction; a real prediction. I quote:

The redeposit of such cash in the banking system would bring about an immediate runaway inflation and a massive flight from the dollar.

This is as specific a prediction as you will ever get. And because of that it is as falsifiable a prediction as you will ever get.

Rothbard not only says that there will be “runaway inflation” and a “massive flight from the dollar” but he gives us a time-period: “immediate”. “Immediate”. Not “four years down the line”. Not “when the economy recovers”. “Immediate”. “Immediate”.

As everyone now knows, Rothbard was wrong. (He also predicted that there would be apocalyptic bank runs, which was also wrong.) He was wrong because he did not understand how modern banking systems work. But that is a side-issue. What is key here is that he made a very specific prediction and it turned out to be incorrect. After the bailouts the US experienced neither “immediate runaway inflation” or “a massive flight from the dollar”. And yet here’s the most amazing thing: I have encountered that quote (more than once) as proof that Rothbard was correct and he saw it all coming!

Just look at this Mises.org post entitled ‘Rothbard saw the future’ written by this rather unusual individual (who also seems to have also written an essay rationalising drinking liquor in the morning). Incredible!

You would think that a rational person, after reading that would inquire into why Rothbard had gotten it so wrong. But no, not the libertarians. Instead, the cult devotee takes the quote and shamelessly presents it as evidence to his intellectual adversary that his views are correct. Imagine if we could all walk around showing our failures to our opponents and claiming that they were victory. “Logic be damned, even when I’m wrong I’m right!”

These are the popular manifestations of the libertarian ideology. This is what happens when a political cult forms. There are many other examples – indeed, the libertarian style is often an adoption of one of the above positions: either an attempt to lull the opponent into a metaphysical shouting match or an attempt to pass off a watery, unverifiable quote as truth about a given issue or to shamelessly display a failed theory or prediction and claim it as an intellectual victory. And all of this stems out of the same phenomenon: a closed mind.

Libertarians are typically narrow and closed minded individuals. They are in search of Absolute Truths about the world and when they have posited them to themselves these Truths enter an intellectual sphere where they are beyond empirical reproach. For all their hatred of primitivism, the libertarians are the primitive ones. They have not yet entered into the civilised world of disinterested, factual argument. They remain stuck in an adolescence filled with value judgements, vague predictions (that are often incorrect) and metaphysical proclamations.

Andrew Dittmer has pinpointed this tendency in the sixth part his excellent ‘interview’ series on libertarianism. The libertarians even have a pseudo-rational name for this proud perversion of the scientific method: praxeology. Praxeology is to the libertarians as diamat was to the Marxist-Leninists; an a priori pseudo-philosophy that allows them to ignore unwelcome evidence and insulate themselves from criticism.

As Dittmer says to his interlocutor:

Your argument is not very convincing. It is built out of a series of assertions, and none of the assertions makes sense. The argument with the graphs is exactly the same, but with graphs.

And that could pretty much be applied to most libertarian arguments: they are usually based on assertions, and these assertions are typically unconvincing. When you argue with them they, like Rothbard in his ‘debate’ with Polanyi, tend to attack you based on assertions that they attribute to you – and so it becomes a solipsistic argument with a single interlocutor bouncing two assertive dialogues against each other that he himself created. The libertarians may think they win this type of game, but all they’ve done is create an echo chamber.

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197 comments

  1. mhkranish

    Murray Rothbard’s criticism of Karl Polyani reads like an editorial from the Daily Worker circa 1938. Murray Rothbard grew up in a communist culture. Althought he changed his ideology, his style of writing seems to be mid-century ex-communist.

    1. Ransome

      Murray was going communist, at least in tactics. He had been working at the Volker Fund for ten years and was becoming militant. If you read the other confidential memo to the Fund, he wanted to advance from educating to propaganda, front organizations and infiltration. Wiki the Volker Fund and then follow the link to Lew Rockwell. The fund was set up for charitable use but after Volker passed, his son used the fund to promote Libertarian ideas. Murray was a book reviewer that was promoting libertarian ideas and he didn’t like what he saw in Polanyi, not at all. He may have wanted to suppress the book using propaganda. The next year Murray was fired during a shake up at the foundation.

      I have never heard of Polanyi but followed some links to an eleven part (8 min ea) video series where his daughter, an economist from Canada, gives her thoughts on her father’s most famous book, with some modern thoughts on the economy. The topic of the event “Is Basic Income a Right”. Her (His) point is that social justice is necessary for economies to grow. The take home message is that Western economies have become too wealth and income distorted since the 80′s and the embrace of financialization (unearned income). The other speaker (German) discusses life of a worker in a social democracy and the meaning of freedom, liberty and security with respect to jobs and wages. In other words, a view from the 99%. It is pretty clear why Polanyi drove Rothbard around the bend.

      My readings on commune-ist social experiments is quite different than I thought. They resemble the team approach in a flat corporate organization, assigning jobs to those most capable, skill-wise. They don’t work very hard by their own admission and are successful, but no one gets filthy rich. Interestingly, there is a little friction with the locals because as a group, they go to the major cities to get wholesale prices on supplies and then market their output locally, creating a balance of trade issue.

      The more democratic the commune-ists are, the less efficient they become! The second speaker in the video explains why, it takes time to be informed in a democracy and it is a requirement for democracy to work. Teams with an experienced leader operate more efficiently while keeping the team dialogue open. One hundred years later we just discovered that.

      http://www.youtube.com/watch?v=Y6SicXusnlI&feature=related

      It takes you to part 1 but you can skip it and go to part 2. If you care to watch part 1, imagine you are an immigrant and someone is giving you an IQ test in Portuguese or whatever language the host is speaking. The name of the event is BIEN2010.

  2. psychohistorian

    I see the definition of economics the same way as libertarianism.

    Economists continue to demand that their theories can and do work outside the real world of political economy, class structure, inheritance and associated accumulation of property wealth and social power. Whenever they are questioned about the lack of real societal context for their models and proscriptions they argue lots of things but never admit the contextual shortcomings.

    Free markets don’t exist and most likely never will.

    Capitalism does not exist and most likely never will along with all the other Isms they say are worse.

    Our social class system exists

    Inheritance exists

    Accumulated ownership of property, wealth and power exist.

    Why can’t we start focusing on what exists and the problems they cause in society instead of theories that don’t exist and never will?

    1. Moneta

      Because those who care about people and their wellbeing spend their days dealing with people and their multiple shades of grey. They don’t have time to develop black or white ideologies and write books to propagate them.

      Beware of the isms.

    2. JustSomeGuy

      My dad, who was a practical economics prof, used to define economics as “A description of how a society distributes is goods and services –as of last week.”

      The ideas that economics was about some kind of immutable laws, rather than a description of a historical social arrangement, struck him as odd.

      Needless to say, he never made the big leagues of economics.

  3. Parvaneh Ferhadi

    Just to make it clear: I am not Libertarian, nor do I think much of their views.BUT:
    Isn’t it a bit early to make the call that bank runs haven’t happened and no run-away inflation has occurred thus Rothbard was wrong?

    The crash of the financial system is still in progress, and the U.S. government – or all governments – haven’t, so far, “printed enough cash to satisfy all the banks’ liabilities”.so isn’t it quite possible that we’ll still see bank runs and hyper-inflation?

    1. Philip Pilkington

      I don’t think so. But even if it is, as I say in the piece Rothbard claimed that there would be ‘immediate’ runs, inflation, depreciation etc. So, in this he was wrong. And if I were an Austrian the first thing I’d do is try to figure out why the predicted catastrophe didn’t occur when it did in my models.

      No such luck. I had an Austrian tell me the other day that the ECB bailouts would lead to… you guessed it: immediate hyperinflation and bank runs. He/she actually provided that Rothbard quote to ‘substantiate’ his/her claims. We’re not dealing with rational people here. Not by a long shot.

      1. Parvaneh Ferhadi

        I’d still maintain, that it is way to early to make a final call on whether Breitbard was right on this one or not – so far, he clearly hasn’t been. But then, they financial system is far from being saved, it is still coming apart at the seams. Now the current concern is government bonds – mostly in Europe, but also elsewhere.

        It’s only a question of time until the focus will shift back to private debt/liablities the (private) banks hold in their books. This problem hasn’t been solved at all yet.

        1. Philip Pilkington

          I’ll bet you €1,000 I’m right.

          But then, if the Austrians are right the euros won’t be worth anything, so I win either way!

        2. different clue

          “Immediate” means “now, right this minute.” Maybe in something as big as an “economy”, it could be stretched to mean “happens within several days to a week”. But “immediate” can’t be stretched any further.

          So if someone says “doing this will make that happen immediately” and it doesn’t happen for a day or a week or a month or a year, and here it is two years later and we’re still waiting . . . that prediction has been proven wrong in the real world.

    2. reason

      Why would covering all the banks existing liabilities result in hyperinflation? Bank liabilities are the financial assets of the public. So that money already exists as far as the public is concerned. What the printing of money is doing is stopping money from being destroyed.

      1. Philip Pilkington

        Shhh… haven’t you heard? Printing money = hyperinflation.

        QE = hyperinflation; TARP = hyperinflation; ECB bailout = hyperinflation; bank robberies = hyperinflation. (Okay, I made the last one up, but it might ‘logically’ follow).

        It doesn’t have to make sense. It doesn’t actually have to happen. So long as you BELIEVE!

        http://www.youtube.com/watch?v=NMrIpvuYwTs&feature=pyv

      2. reason

        It seems to me Austrians don’t understand money and that is a lot of the problem. In particular, they don’t understand the importance of the process by which consumers attempt to move consumption to the future (and how this attempt doesn’t guarantee that the goods – unknown or at least uncertain at the time – that they want to consume in the future will be available). Look through “Austrian” descriptions for the words uncertainty and risk. Their view of the process is far too mechanical (which comes from a-priori reasoning – a look at the real world would have made it’s stochastic nature apparent).

        1. SH

          I’m not on either side, but the time preference of money is central to the Austrian argument. The entire edifice is built on people saving and lending and when those signals are distorted, you get a situation where someone thought their investment would pay off in the future because they saved and lent, but they don’t get the return because inflationary signals sent the wrong message and they’re left holding the bag. Your comment is incorrect in respect to the school of thought.

          1. F. Beard

            “Time preference of money” is code for a money monopoly of some sort so that people are forced to borrow a medium of exchange. But why should people or companies have to save or borrow money if they already have real capital? Example: Does a common stock company need to borrow money before it can issue new stock to buy assets or is the common stock itself a form of private money?

            “Time preference of money” is a defense of government enforced usury. But usury between fellow countrymen is forbidden in Deuteronomy 23:19-20.

          2. SH

            If I have a hundred dollar bill in my pocket I can either spend it or save it or loan it to someone else. If I don’t spend it or hold it and decide to loan it than I should get something in return. The only reason I would not spend it is because I want it later and that is the time preference of money. It’s not usury. I should not be obligated to give it to you if I don’t want it. If I was obligated to do that, that would definitely be usury.

          3. F. Beard

            or loan it to someone else. SH

            Why should anyone borrow your money if they can create their own interest free?

            … than I should get something in return. SH

            Says who? Not the Bible unless the interest comes from foreigners.

            The only reason I would not spend it is because I want it later and that is the time preference of money. SH

            That is time preference of a a particular money form, a form that requires usury or hoarding to generate a return. Common stock, for example, requires no usury. It “shares” wealth rather than reaps it.

            It’s not usury. SH

            Usury is collecting ANY interest, not just someone’s definition of “excessive interest”.

            I should not be obligated to give it to you if I don’t want it. SH

            Who said you were?

          4. SH

            So I got a plow I could either use to sow more crops, trade for something else, store in my barn to replace my current plow, or let another person use it for a fee. If I decide that the best use of my plow is to let someone else use it while I’m not, but I want some payback for the wear and tear then I may just ask a fee.

            Money is not the point. The bible is not the point. The point is the fact I have options with my plow and if I lend it to a neighbor, in good spirit at that, they get use out of it and an I don’t so I should get a cut.

          5. F. Beard

            and an I don’t so I should get a cut. SH

            One of the problems with usury is that money is “sterile”; it does not reproduce itself. So if all money is drawing interest then where shall the interest (payable in money) come from? Your “cut” doesn’t even exist in aggregate!

            As for the plow example, note that the fee is not payable in plows but in money so it is not interest but a fee.

          6. SH

            This is my last. My plow example represented what I think money should be, a claim to a real good. I agree if I can create money out of thin air then I should not be entitled to the interest. However, if money is a unit of exchange, then if I have it and give it to someone else, it means the exchange of one productive good for another. By choosing to exchange a claim to a real good now for a claim to a real good later, I still would want a cut. If I could lend the plow to you and you could make some money for yourself and me, I would do it. Money is just an easier way to get between my plow and the guy that want to run it in my opinion. It’s unfortunate there are usurious people that take cuts along the way.

            Thanks for the fun and have a good night,

            Scott

          7. F. Beard

            My plow example represented what I think money should be, a claim to a real good. SH

            And I think money should be a “share” in wealth and power. But there is no need to argue. True liberty in private money creation would allow all sorts of money forms to be used for private debts.

            Good night.

          8. reason

            Yes, this is their argument but it doesn’t make sense. People don’t use save for any particular good – they save to have general purchasing power in the future. Uncertainty rules, and it is completely missing from their model. And empirically, interest rates sensitivity is far too low to have the effects they want it to have.

          9. reason

            oops use – should be usually.

            “The entire edifice is built on people saving and lending and when those signals are distorted, you get a situation where someone thought their investment would pay off in the future because they saved and lent, but they don’t get the return because inflationary signals sent the wrong message and they’re left holding the bag.”

            I’ll try and do this again. Because I didn’t explain the problem well. You see the argument that some error in nominal short term interest rates causes people to make incorrect investments (why exactly?). But that means that investors are calculating blindly based on prices with exact expectations about what demand for their particular good will be at some point in time. The real solution for this problem is of course futures markets, but ignoring them (they didn’t exist when most Austrian’s writing) why on earth should this be true? So much of the future is uncertain. Why should a marginal temporary change in one price (which is not even the price relevant to them which is risk adjusted medium to long term interest rates) effect their profitability massively in the future? This can only work if your view of the future is a totally mechanical one where everything is calculated extremely finely.

          10. reason

            See, my view of monetary policy is that is mostly about managing expectations of the future, and risk perceptions. If people see that the monetary want to keep inflation in some band and real growth in some band, then they can plan on that basis. If your model doesn’t even consider expectations of the future and perceptions of risk you can’t possibly understand monetary policy. And believe me, perceptions of risk (to future income streams) effect desired savings (but not actual savings) much more than interest rates do.

      3. Parvaneh Ferhadi

        Well, I don’t know about hyperinflation, but covering all the banks liabilities by printing money seems like it could lead to serious inflation, considering the 700 trillion in OTC derivatives (notional value). Even if you take just the gross market value, it’s still 20 trillions of OTC derivatives.
        And that’s just OTC derivatives.
        This is not money is in the system at all, those are private assets/liablities, which may or may not even have the value assigned to them by the private parties. They generate cash-flows, for which cash is needed. If the cash-flow stops, the OTC edifice crashes down.

        When governments or central banks decide to cover/pay for these bank liabilities to prevent the crash, they are in fact monetizing those private contracts with public money (cash).

        If they monetize this in any serious way, then it’s hard to see how this wouldn’t devalue the currency/cause inflation.

        1. Philip Pilkington

          Nah, banks don’t lend reserves. So, as long as the money remains in the banking system as reserves the only inflationary effects that will be felt are due to the low interest rates (that encourage people to seek out risky assets and commodities).

          We’ve had too many experiments now for this to be in any way controversial (Japan, UK, US, SMP program in Europe etc.). The BIS have started churning out papers on this recently.

          1. Parvaneh Ferhadi

            It cannot stay in reserves, in my view – simply because of profitability reasons.
            In most countries central banks would not pay interest (or significant interest) on reserves, so that this is dead capital from the banks’ point of view.

            If they keep that much money as reserves instead of giving out credits based on it, they would cease to be profitable and that would require quite a paradigm shift in bankers’ thinking – especially where bonuses are concerned.

          2. Philip Pilkington

            Well, now you’re referring to low interest rates. As I said: any inflation that takes place will be due to the low interest rates. Problem is, that no one wants to borrow. People are paying back debt etc. and no one is borrowing.

            But even if everyone decided they did want to borrow tomorrow and the economy picked up again, the central bank would just raise interest rates.

            And that is why modern banking systems are not prone to hyperinflations and the like. The Austrians are stuck back in the 19th century. I’d be surprised if many of them had even stepped into a modern bank — I’ll bet they have their savings stashed under their mattresses, in the form of gold bullion.

          3. F. Beard

            But even if everyone decided they did want to borrow tomorrow and the economy picked up again, the central bank would just raise interest rates. Philip P

            I’m not sure that would work if inflationary expectations caught hold. If prices are going up 15%/yr one can still make money borrowing at 10%/yr. And why would the banks continue to lend at negative real interest rates? Because the banks are not truly lending money; they are creating it as they lend?

            One sure fire way to halt price inflation would be to just ban any further private credit creation at ANY interest rate. Then the only source of new money into the economy would be vertical money from the US Treasury.

          4. Philip Pilkington

            I have never seen any evidence in my life that inflation expectations alone could drive those sorts of rates in an advanced country.

            To be honest, I think ‘inflation expectations’ only exist among investors, not among consumers (unless there was already hyperinflation).

          5. F. Beard

            To be honest, I think ‘inflation expectations’ only exist among investors, … Philip P

            That’s who I had in mind – investors/speculators.

          6. Parvaneh Ferhadi

            People are paying back debt? I don’t think so. This is the point of the current problems: People/debtors don’t have the money to pay back (all) debt that has accumulated, they default or are in arrears, which threatens the existence of the banks unless someone buys that bad debt, many of the (big) banks will fail.

            So, if the government buys all that debt with printing money, where does the money go. Into reserves? Unlikely. This is dead capital for a bank, it doesn’t earn them money, which is kind of their core business. They need to “invest” that somewhere, when they do that, the money will enter they economy, most likely creating bubbles. If the CB jacks up interest rates, the bubbles will deflate, this normally causes a recession. That’s not what you need when you want to grow your way out of your debt.

          7. reason

            Parvaneh Ferhadi,
            “So, if the government buys all that debt with printing money, where does the money go. Into reserves? Unlikely. This is dead capital for a bank, it doesn’t earn them money, which is kind of their core business. They need to “invest” that somewhere, when they do that, the money will enter they economy, most likely creating bubbles. ”

            You don’t seem to be understanding that this money was printed in order to replace money that would otherwise have been lost (via bankrupcy/insolvency/reposession). It’s the net effect that is important not the money injection.

        2. reason

          Derivatives are zero sum? They cost one party exactly what they gain another – why are they relevant?

          1. Parvaneh Ferhadi

            Derivatives are not zero-sum. Let’s take the CDS, for example. You pay a fee to A be protected against the default of B.
            Now, if nothing happens, you pay the fee and A doesn’t pay anything. This is not zero-sum, it costs you something.

            If B defaults, A will have to fork over the whole amount you insured against. This may be less, equal or more than what you have paid in fees, but it’s not zero-sum either.

          2. reason

            “Now, if nothing happens, you pay the fee and A doesn’t pay anything. This is not zero-sum, it costs you something.”

            But you pay him/her. How is that not zero sum. You -A him +A.

            “If B defaults, A will have to fork over the whole amount you insured against.”

            So he -B you +B. Looks zero sum to me. Show me where money has been created? These derivatives are important in the A may end up going broke and start an avalanche of defaults and insolvencies. But they do not create any spending power in the economy.

      4. Hal Roberts

        The Hyper inflation has been alive and well under the heading of Leverage in the system the only place that those assets exists is on the stock market investor quarterly statements. Hush money, QE is small time compared to the built in leverage.

        When I worked retail sale a fair profit was considered key Stone 100% mark up, the stock markets have Admitted to 1400% mark up with 11,954.90 DOW less 14 times Leverage =853.92 DOW. Dam their (welfare) needs we are not here to support their Greed. IMO

    3. Kukulkan

      As seismologists know, predicting earthquakes is easy:

      Just predict that a magnitude 6 earthquake will occur within the coming week — just don’t say where.
      Or predict that an earthquake of at least magnitude 4 will occur in a specific location — just don’t say when.
      Or predict that an earthquake will occur in a specific area within the coming month — just don’t say how big it will be.

      Follow these simple rules and you will always be right.

      That’s why when someone proposes some new idea on how to forecast earthquakes the prediction has to say where, when and how big and the prediction has to get all three right to be judged valid.

      Rothbard made an economic prediction of what would happen — runaway inflation and a massive flight from the dollar — and a timeframe within which that would occur — immediate.

      If you’re willing to ignore the time element of that prediction, then obviously he’s right. If a run occurs on the US Dollar years or even decades from now, then he was right, it did indeed occur after the bailing out of the banks.

      Same thing with hyperinflation. Again, if that occurs years of decades (or even centuries) from now, then again, he’s right: it did come after the bailing out of the banks.

      However, if it hasn’t happened within two years of the event that was supposed to trigger it, I think we can safely conclude that the prediction hasn’t been borne out. Personally, when the timeframe is “immediate”, I think two weeks is sufficiant to discredit it.

      If Rothbard had said that the predicted events would occur “within five years” or similar of the trigger, then you’d be right; it would be to early to make a final call. But he said “immediate” and that window has well and truly passed.

  4. Foppe

    Not that I don’t agree with your conclusion(s), but given their rather sweeping scale, it would probably have been useful to include a few more examples (e.g. on Rothbard’s own thoughts on the uses of ‘praxeology’, or even just a more lengthy description of it).

  5. Middle Seaman

    NC is mostly devoted to the current cruel, stupid, obnoxious and powerful economic/political reality. The level of posts in NC is amazingly high especially when one compares it to the ho-hum garbage generated by many other rather highly respected blogs with similar political and economic views.

    Sadly, the last couple of weeks we saw a deluge of posts on libertarianism. Libertarianism is not practiced in the US, unless one counts the individuals truly believing in it using ones fingers. The GOP, currently a radical movement with strong Leninist tendencies (the worst it is the better off we are), believes in economic and somewhat political apartheid, where the rich play the whites and everybody else is colored. In addition, the GOP believes in Soviet socialism for the rich. Namely, the government should be in the business of hording as much riches as possible on the rich whether in the form of apartheid looting, creating deficits or transferring public property to the rich without compensation.

    The Democratic party officially stopped existing when the Obama myth was invented to fight the Clinton Brigades that invaded from the South and diluted the purity of the “better” people (yet another apartheid-derived idea). The party started deteriorating with enormous speed starting with the bizarre and racist Carter who reached the presidency with as little ability as our current right wing and spineless president.

    Where in this hell does libertarianism fit in? May be in some dark corners of academia, but clearly it is at best a lab created organism not found in real life.

    1. Philip Pilkington

      There are some places it holds sway. The Tea Party, for example, used libertarian scare-tactics to convince voters of many untruths. Using these tactics the Republicans took back a great deal of power and set the terms of the debate in the media.

      I’m also fairly sure that the Austrians are having a major indirect influence on the European situation right now. Austrian discourse (hyperinflation, devaluation etc.) is rampant in the Bundesbank and, as we all know, they’re very much so Bundebuddies with the ECB.

      Then there is the whole Mount Pelerin debacle and Friedman’s watering down of Austrian doctrine and fobbing it off to the public in form of monetarism and public choice theory.

      [http://en.wikipedia.org/wiki/Mont_Pelerin_Society]

      I say in the piece that the libertopians will never take power. I also say that their influence is limited and draws on preexisting cultural mores. But even minority groups can have sway when they get into certain positions. Rothbard was aware of this, others should be too.

  6. Moneta

    They remain stuck in an adolescence filled with value judgements, vague predictions (that are often incorrect) and metaphysical proclamations.
    ——–
    If they believe that there is not enough to go around and there are too many people walking this earth, or that they just simply want power isn’t their strategy quite logical?

    Since their ideology is only good for a handful of people, they are not going to win the masses by saying they will be made serfs.

  7. Daniel

    I found this article resonated with the ideas I have about libertarianism, Though I would just like to point out this article isn’t beyond making philosophic claims.

    In particular, you seem to be making an implicit epistemic claim that goes something like “We can only have knowledge through empirical research.”

    And, though it seems the libertarian is wrong to ignore empiricism for the sake of their trite claim’s about “liberty” and “freedom,” it still seems like there’s a place in economic policy making for ideas about human rights.

  8. Patricia

    What I find frustrating in reading and talking to libertarians is the shift between a moral claim and an empirical one. Sometimes the claim is that liberty is the only thing that matters as a value — a moral belief very few people share, since most of us care about many other things as well. Other times the claim is an empirical one — that protecting liberties will lead to best consequences overall. This empirical claim seems to defy common sense, but when faced with examples, in my experience libertarians “explain away” those examples by appealing to what seem to me irrelevant details.

    I think these elements come together to make the belief feel like a “cult” in the way the author describes.

    I agree with the original poster that this kind of thinking influences a lot of Americans these days even if they don’t know how to say so and even if they don’t know much about the details of libertarianism.

  9. allcoppedout

    The argument in this piece is largely eristic. Ad hominem has its place in revealing deep divisions – but that’s about as far as it can get, What we need are some sophisticated attempts to lay out the informal and defeasible logic of the economic environment.

    1. ray ray

      That explains why the Libertarian party is flush with corporate money. The current system harms large corporations, which is why they don’t donate to the Democrats or Republicans.

      1. reason

        This simply ignores the two party nature of the American system. Giving money to third parties just is a waste of money (anathema to businessmen). So what they do is to change the terms of the “debate”. Where do you think mises.com gets its money from?

  10. Zoltan Jorovic

    “Libertarianism” sounds like what in Europe we would call extreme free market(ism). The main purpose of such people is to act as a smoke screen for the real powerbrokers. The elite who actually run things have no ideology except to maintain their grip and the wealth it requires and attracts. Such people will appropriate ideas if they are useful, and make use of people who genuinely believe, however irrationally, especially when the beliefs are extreme, so they can appear in contrast as “reasonable” and moderate and thus present themselves as the sane alternative.

  11. Daniel Hewitt

    The two scenarios Rothbard put forth were contingent upon system-wide bank runs on commercial banks. That did not occur. Therfore “money printing to cover their liabilities” is not a prediction until the bank runs happen.

    Rothbard can be criticized for the fact that system-wide bank runs on commercial banks have not occurred, even in a huge crisis like ’08.

    1. Philip Pilkington

      Yes, his prediction was: bank runs => Fed LLR => hyperinflation. It didn’t happen. Rothbard got it wrong. Yet people keep toting this quote as a ‘prediction’ of some sort. It’s bizarre.

      Rothbard has almost nothing to say about modern day banking meltdowns, yet he’s still a God in the eyes of many.

      1. Daniel Hewitt

        Agreed. But why would you tote the inflation as a prediction, when you knew that it was not? There are many legitimate criticisms of Rothbard that you could have made.

        1. Philip Pilkington

          Because it’s a very popular quote used by Austrians to ‘substantiate’ their hyperinflation fears (see the Mises blog post by the editor).

          The point of the piece is how the libertarians reason — or ‘reason’. The Rothbard quote says a lot about this. It’s wrong. It’s proved wrong. But it’s still dredged up because it kinda sorta looks like what’s going on right now.

          And this isn’t just by internet trolls. It’s by the editor of one of the sites. People like Schiff are currently pissing peoples’ money away based on the same ‘reasoning’.

          It’s not about whether Rothbard is right or wrong — but the way the Austrian cult argues and understands the world.

        2. Philip Pilkington

          P.S. My understanding of Austrian economic theology indicates that it’s not as clear cut as all that as far as causality goes. They would claim that so-called ‘money printing’ (QE etc.) would actually cause bank runs and hence hyperinflation.

          So, for the Austrian preacher, the causality can run as follows:

          Fed LLR/QE => panic over ‘money printing’ => bank runs => hyperinflation

          1. Daniel Hewitt

            Then why not refute the idea of the “Fed LLR/QE => panic over ‘money printing’ => bank runs => hyperinflation” causal chain? That would have been more productive than refuting a prediction that Rothbard did not make. Using poor reasong to refute poor reasoning is somewhat self-defeating.

            Thanks for all the replies BTW.

          2. Philip Pilkington

            I’m not so sure that he didn’t make it. I don’t think they’re strictly misquoting him in this regard. Here he is specifically talking about FDIC, for example, but if you look at the quote in context he is very much arguing about the ‘general evils’ of the current banking system.

            The quote is imprecise — but, as I said, it’s imprecisely used by the Austrian crowd (and that’s the point).

            Here’s the paragraph prior to the quote in my article:

            “At first, in the mid-1980s, the fractional-reserve savings and loan banks “insured” by private deposit insurance firms, in Ohio and Maryland, collapsed from massive bank runs. But then, at the end of the 1980s, the entire S&L system went under, necessitating a bailout amounting to hundreds of billions of dollars. The problem was not simply a few banks that had engaged in unsound loans, but runs upon a large part of the S&L system. The result was admitted bankruptcy, and liquidation of the federally operated FSLIC (Federal Savings and Loan Insurance Corporation). FSLIC was precisely to savings and loan banks what the FDIC is to the commercial banking system, and if FSLIC “deposit insurance” can prove to be a hopeless chimera, so too can the long-vaunted FDIC.”

            So, Rothbard is talking about bailouts in this article too and how they call into question the health of the financial system. Okay, I’m giving the Austrians a bit of slack in interpreting this, but I don’t think it’s wholly unjustified.

            I guess their line of reasoning is: “Rothbard said that the S&L bailouts call into question the FDIC. Hence, current Fed operations will do the same thing. So, I can now quote the Rothbard article on what might happen today when similar albeit much larger bailouts have been undertaken.”

          3. tom allen

            So, question from the idiot in the classroom:

            “Fed LLR/QE => panic over ‘money printing’ => bank runs => hyperinflation”

            Is that a bad thing? Seriously. :-P

            Everyone’s running around trying to maintain equilibrium, but that seems to me to be ultimately a fool’s errand. (LOL, I should talk.) But evolution in nature, and possibly in politics and economics, seems to take place at points of punctuated equilibrium. Shouldn’t you all be concerned more about the next step in the chain?

            Bank runs => hyperinflation => ???

            A change in government, one assumes, and possibly a change in economic systems. Which can be very good or very bad, yes? So shouldn’t you all be working on that?

        3. Philip Pilkington

          One more point. I wasn’t going to go into it, but if you actually examine the article this originally came from…

          http://mises.org/rothbard/100percent.pdf

          …you’ll see that Rothbard is making a general point. Although he sets up a single example, he is clearly alluding to the more general Austrian fear of the fiat money/hyperinflation nexus. In the paragraphs leading up to the oft quoted ‘liberty memes’ he conflates FDIC and the Fed acting as LLR during the S&L crisis.

          The more you look at these paragraphs the more they look like pure rhetoric — just sort of bundling together of examples that the reader, being ‘in the know’, will equate with hyperinflation. I think that’s why it became a ‘liberty meme’, even though the specific example is (apparently0 to do with FDIC.

          1. Daniel Hewitt

            ???

            In the previous paragraph Rothbard discussed S&L failures, insurance, runs, and the collapse of the insuring entity. And clear mention that the FSLIC was the insuring entity.

          2. Philip Pilkington

            He rhetorically conflates the two. Look:

            “The result was admitted bankruptcy, and liquidation of the federally operated FSLIC (Federal Savings and Loan Insurance Corporation). FSLIC was precisely to savings and loan banks what the FDIC is to the commercial banking system, and if FSLIC “deposit insurance” can prove to be a hopeless chimera, so too can the long-vaunted FDIC.”

            See? He questions the FSLIC and then uses this to question the FDIC.

          3. reason

            Philip,
            one thing that may be useful here is to try to pin down exactly what is “Austrian” and what isn’t. A know a number of mainstream economists (John Quiggin, Nick Rowe) have tried to tie down an understanding of the Austrian position and have failed to get a clear view of what Austrian model is. Various supporters seem to contradict each other, and some themselves. (I almost have the feeling that for any given quote from Hayek, you can find another that says the exact opposite.)

            I know they think they are saying important, it is just that nobody else can understand it. Whenever anybody tries to criticise their model, they all scream “strawman” without offering an alternative interpretation. (Some don’t even try to explain it – they just point to Hayek – who Friedman thought was “unreadable” – and say “what he said”.). Do you feel you understand them?

          4. Philip Pilkington

            @ reason

            I think (hope) I pinned it in the last piece on them. They are characterised by the following points:

            (1) They do not believe in market equilibrium.

            (2) They believe that this disequilibrium is caused by entrepreneurs.

            (3) Hence, unlike the Marxists or the Keynesians, they think that this disequilibrium is fundamentally ‘good’.

            All this sharply distinguishes them from the mainstream for whom equilibrium is a central tenet and the basis of ALL their theories. That’s why Austrian economics looks superficially similar to neoclassicism (in that it is pro-market) but seems to diverge from them (they cannot accept ANYTHING neoclassicals say because its all based on equilibrium analysis).

            I’m pretty confident that’s the difference. And I think most Austrians would agree with me.

          5. Philip Pilkington

            @ reason

            P.S. Of course mainstream economists cannot pin down or even understand Austrian economics. They can’t even understand the IDEA that a system might be in disequilibrium. They cannot fundamentally think outside of their own equilibrium paradigms. So they always miss the Austrians.

          6. reason

            Philip,
            this is a reply to your last post – the blog won’t let me reply anymore at that debth.

            I think Philip this is not sufficient. They must have some sort of equilibrium concept, or their obsession with “malinvestment” (i.e. investments that end up losing money) wouldn’t make any sense. A real disequilibrium analysis would see them as all part of the “discovery” process, and maintaining the general level of activity (what the central bank) would seem to be unambiguously a good thing. So they seem to be both pro- and anti-equilibrium.

          7. reason

            “They can’t even understand the IDEA that a system might be in disequilibrium.”

            No this is not correct. Keynesians of various shades recognise the possibility of disequibrium and they are mainstream economists. They just always maintain equilibrium as a reference point (which I don’t necessarily agree with).

          8. Philip Pilkington

            “I think Philip this is not sufficient. They must have some sort of equilibrium concept, or their obsession with “malinvestment” (i.e. investments that end up losing money) wouldn’t make any sense.”

            Well, that’s the weird thing with Austrian economics. If I think equilibrium doesn’t exist I give up on supply and demand models because they no longer make sense. The Austrians stick to them. As I said in the last piece: it’s a question of faith — a Leap of Faith.

            They recognise the inconsistencies and then turn these inconsistencies into an ideology. It’s very odd. I’m not the only one to have commented on the strangeness of this. Varoufakis and Mirowski see it too and think it’s just as bizarre.

            “Keynesians of various shades recognise the possibility of disequibrium and they are mainstream economists. They just always maintain equilibrium as a reference point.”

            Exactly. So they always a piori assume equilibrium. They cannot understand a system FUNDAMENTALLY in disequilibrium. Hence, they’ll never get the Austrians (or the Marxists or the post-Keynesians).

          9. JustAnObserver

            And, of course, in the quote Rothbard totally ignores the massive level of fraud in the S&L debacle … but then that’s what one comes to expect from the libertarian cultists.

    2. Ransome

      The money printing did occur in the form of QE, bad assets for good money. We had a liquidity trap and TARP which was a lending project but there was no market for the securities so QE was used. The supposed value of the securities was baked into the economy, so exchanging them for capital had little impact on main street. It is about volumes and flows. It is a shame they didn’t help main street but that is not the Fed’s responsibility.

  12. chas

    “Libertarians are typically narrow and closed minded individuals” Note empherical statement –

    Then – “They are in search of Absolute Truths about the world and when they have posited them to themselves these Truths enter an intellectual sphere where they are beyond empirical reproach.”

    What kind of meaningless crap is this? And Pilkington expects us to take him seriously?

    1. reason

      So you are now going to produce empirical evidence that Libertarians are in fact open minded, pragmatic people?

    2. reason

      P.S. I think you have a valid point (and he did start out talking about “Austrians” not “Libertarians”) but you have also not supported your accusation. And he is on safer ground talking about “Austrians” because with rare exceptions they dismiss empiricism on fairly shaky methodological grounds.

    3. Piano Racer

      “Libertarians are typically narrow and closed minded individuals” is right up there with “Jews are typically miserly and unscrupulous individuals” and “Christians are typically narrow and closed minded individuals” and “Negroes are typically unintelligent and violent individuals”.

      Let me make a statement that is far more specific and does not paint a broad swath of diverse individuals with an ad-hominem brush: “Phil Pilkington is a hypocrite and a bigot”.

      1. reason

        Um,
        sorry that is not exactly a fair comparison because these people are selected exactly by what they believe. (If instead of just Christians above you said Fundamentalist Christians you would surely have to concede the point.)

        1. Piano Racer

          So why doesn’t Phil refer to those he attacks as “Fundamentalist libertarians”? It’s that first word that implies what Phil is accusing libertarians of being, not the second. And indeed, fundamentalism roughly does equal “narrow and closed minded”.

          So the logical fallacy here is that Phil (and you, apparently) view all libertarians as fundamentalists. That is simply not true; Phil only believes it because he is a “narrow and close minded fundamentalist MMT’er”, just check out his blog:

          “The only school of economic thought I find convincing is the post-Keynesian school. I think that the Modern Monetary Theorists in particular are approaching economics from the right angle.”

          http://thenewinstrument.com/?page_id=135

          That’s all you need to know to see this for what it really is: a fundamentalist MMT’er vs. fundamentalist Austrian/Libertarians. None of it has anything to do with the real world, and everything to do with pointless ideological mental masturbation.

          1. Philip Pilkington

            Look, if you don’t like Rothbard and the Mises.org gang and you don’t sign up to a dogmatic belief in free markets that you think you can ‘prove’ through sophistical arguments, I’m probably not referring to you.

            That’s who I’m referring to. They’re only words. But you need a tag to put on these people. And they call themselves, at various times, ‘libertarians’ and ‘Austrians’. If you don’t want to be lumped in with them then stop referring to yourself as a ‘libertarian’.

          2. Piano Racer

            Oh great, Phil wasn’t referring to me! Maybe I’ll pen a diatribe about Christians and use the same language, and we’ll see how that explanation goes over.

          3. Philip Pilkington

            Well, they call themselves ‘libertarians’ and ‘Austrians’. And there are sufficient number for them to get noticed. I’d ‘depeg’ my political identity to them if I didn’t like how extremist they were, if I were you…

            Frankly, I cannot see what else I’m supposed to refer to them as.

          4. Piano Racer

            Perhaps I’ll title my piece “The Christian Disease”, and only in the comments point out that really, I’m just referring to the fundamentalist, really-bad Christians, the ones who enslaved and butchered vast swaths of humanity. THAT makes sense, and definitely wouldn’t starkly reveal my OWN ideological rigidity…

          5. Philip Pilkington

            Major world religion vs. minor political ideology. Hmmm… don’t know about that…

            But seriously, you have to generalise when you talk about a group. I think this generalisation has taken hold (most people know who I mean when I refer to ‘libertarians’), so if you don’t like the nomenclature, drop the name. It’s not difficult. It doesn’t cost anything.

  13. Anonymous Jones

    Is preaching to the converted fun? Who exactly do you think you are convincing with this?

    What kills me is that you most likely have a deep respect for Yves. Otherwise, why would you be writing on this site? Why don’t you actually *read* her posts and examine the way she constructs an argument? She’s compelling. She doesn’t rely on labels like “cults” and “metaphysicians” as if they are substantive arguments, or use “proselytizing” in what seems to have been meant in a pejorative way. [Not saying she doesn't use labels, she just knows how to be compelling in setting forth an argument.] We all do these things. We all belong to one “cult” or another. There is no way to navigate the universe except to accept certain things on faith (such as, most obviously, that our senses are in fact delivering to us an accurate picture of the world we inhabit).

    I’m sure the “unwashed masses” must think you quite erudite, but your writing makes me want to disagree with you, even though I of course cannot on a basic level when you’ve chosen an opponent in Rothbard far too extreme to withstand any small scrutiny whatsoever.

    And you even reference Dittmer’s series. Did you read his post on comments to his piece? He clearly sets out to discuss that there are different sects of “libertarianism”, but you again just seen to lump everyone together in a scramble that distorts everyone’s ideas.

    One of my math professors once set forth a proof that all numbers were equal to one another and since they were all equal to one another, they were all equal to 39. It was very difficult to examine the proof for the error. The error was hidden in an early assumption, hiding in plain sight no doubt, but small and easy to skip over. That is the obvious problem with most of what is popularly branded as libertarianism (i.e., the small government meme). It is not even necessary to go into all this depth about the whole thing. The thing is, there is no evidence that government is the only thing in the world that inhibits liberty. In fact, there is no real evidence that government is a net detriment to personal liberty. The natural world, one’s own nutritional requirements, other individuals, and private groups, these all can restrict one’s personal liberty. Government can as well, but nowhere has there been set forth any proof that government is worse than the others (although it certain *can* be), and it is quite clear that in at least a few cases (ha, ha, understatement) that government can increase personal liberty by controlling the first four inhibitors I listed above. That’s the Jenga Assumption. As soon as you pull it out and see it is rotten, the whole edifice crumbles.

    The rest of this bombast is just missing the forest for the trees.

    1. Philip Pilkington

      You know Yves runs this stuff, right? I haven’t been hacking the site for the last six months…

      “…your writing makes me want to disagree with you…”

      Really?

      1. Foppe

        You know Yves runs this stuff, right? I haven’t been hacking the site for the last six months…

        AJ is offering you a suggestion that you would do well to take a bit more seriously, Philip.
        Not to state the obvious, but you aren’t Matt Taibbi (or Ames), so the name-calling isn’t all that entertaining. Moreover, the way you employ slurs is entirely different from the way they’re doing it, in that you use them as substitutes for arguments far too often.
        It’s all well and good to have opinions, but by presenting them in the way you’re doing, you’re forcing us to share your value judgments with you, rather than that you present us with your arguments, and then allow us to decide ourselves how we want to feel about it — almost as though you’re worried that we’re incapable of drawing the ‘correct’ conclusions.

        1. Philip Pilkington

          “Not to state the obvious, but you aren’t Matt Taibbi (or Ames), so the name-calling isn’t all that entertaining. Moreover, the way you employ slurs is entirely different from the way they’re doing it…”

          Really?

          http://exiledonline.com/anatomy-of-a-libertard/

          “We dismissed Rand too easily because we made the mistake of judging her on her intellectual and writing abilities, which were slapstick funny at best– if you think putting a crazy baglady from Russia babbling about “Objective rational truth” as head of the most powerful cult in America…”

          “Weirdos in the biggest and best-funded cult in America. And like a true cultist, Will Wilkinson has been in a “domestic partnership” with another cultist, Kerry Howley…”

          True, Ames is going after the institutions and I’m going after the ideas… but the arguments look remarkably similar.

          I’m not sure, guys. You seem to have a new argument for why my writing is so awful every week.

          1. Foppe

            I don’t believe I have made any arguments along this line before, so I am not entirely sure who this “you” you are talking about consists of, exactly. Furthermore, I don’t think the quote quite disproves the point I was making.
            Anyway, do with it what you wish..

        2. Piano Racer

          Foppe & Jones, I 100% agree with you, though I probably lean far more libertarian than either of you. I love hearing good criticisms to the views I hold, because it helps me refine them and my understanding of the world.

          It makes me sad that Yves seems to implicitly endorse what Phil says (or rather, the way he says it). His emotionally-charged diatribes are so off-putting, they lower Yves’ credibility by proximity.

          And look, he can’t even hear you. The most you will ever get from him is a half-apology with an immediate blame-shift:

          “The essay was abstract and, quite possibly, a bit obtuse – for that I apologise, but such is the nature of the material.”

          Right. Its the material’s fault. Sheesh, I bet he only wrote that because Yves said something to him (she has publicly acknowledged his acidity in comments to his previous diatribes). What a blowhard. Wake up Yves, this guy is hurting your credibility. I mean I get it – he’s Irish, he’s angry, I would be too if I were Irish. But the forces destroying his country (and indeed, us all) are not the evil Libertarians or the evil Austrians – it is fascism, the marriage of state and corporation, and a great deal of ignorance among the proles, Phil included apparently.

          1. F. Beard

            are not the evil Libertarians or the evil Austrians – it is fascism, Piano Racer

            Sorry but most of the Austrians I have encountered are fascist. They supposedly believe in liberty but want government to enforce a PM money standard. Hayek is apparently an exception since he advocated private fiat currencies – I suppose to compete equally with government fiat for private debts.

            As for evil, there is no doubt that some Austrian policies such as deflation to “purge the malinvestments” are dangerous and ignore justice too.

          2. Piano Racer

            F. Beard says:
            “Sorry but most of the Austrians I have encountered are fascist. They supposedly believe in liberty but want government to enforce a PM money standard. Hayek is apparently an exception since he advocated private fiat currencies – I suppose to compete equally with government fiat for private debts.”

            Ok so just to be clear, government-enforced fiat money standards are NOT fascist, but government-enforced PM money standards ARE fascist? Are you familiar with the old-robot-saying: “Does Not Compute?”

            I cannot speak for the “fundamentalist Austrians”, but for myself, I simply want the removal of ALL legal tender laws and the government to enforce NO money standard. People should be free to use whatever medium of exchange that they want in exchange for their goods and services. No government enforcement is necessary. I personally believe that PMs are well-suited to this task, and I believe that history will back me up on that. Austrians typically advocate a PM-based currency, its true, but are you certain that they want the government to dictate the terms, since they are ostensibly mostly anti-government? I certainly do not.

            “As for evil, there is no doubt that some Austrian policies such as deflation to “purge the malinvestments” are dangerous and ignore justice too.”

            Life is chaotic and often difficult. We cannot prevent every ill that befalls us, and justice is something that must always be striven for and never fully achieved. The reason that Austrians accept that allowing deflation, purging of malinvestments, etc. is not “evil” and does not “ignore justice” is for this reason and this reason alone:

            Austrians do not believe that the laws of economics allow us to magically fix these problems, but rather that they can only be postponed with worse outcomes down the road. They believe that it is better to take the bitter medicine now and begin to heal, than to band-aid over the problem only to inevitably face a larger one down the road.

            To many this may seem like callousness and indifference. To me it is simply looking at the bigger picture and coming up with the best LONG-TERM solution.

    2. JTFaraday

      “And you even reference Dittmer’s series. Did you read his post on comments to his piece? He clearly sets out to discuss that there are different sects of “libertarianism”"

      Really? That’s the way you read that? I read Dittmer as selecting an even more extreme person in Hoppe/Conservative Nut Case, and presenting that extremist as prototypically “libertarian.”

      I think he may have backpedaled off that a bit in his final comment post, but I read that as a defense of his series in the face of criticism that it was a “parody” of “libertarianism” which in all honesty it was, although I completely agree that there are some shared founding assumptions across people calling themselves “libertarian” that Hoppe/CNC push to their logical extremes, (which not everyone would necessarily do).

      In other words, I think both Pilkie and Dittmer take the part for the whole in order to better skewer the whole. Whereas I see a lot of continuity between contemporary “libertarianism” and the whole classical liberal tradition, and thus essentially “libertarian” ideas are very difficult to get away from in the Anglo-American world even if you think you’re a good liberal, unless you stay specifically focused on narrow policy points like defending New Deal legislation or something.

      The truth is, the whole tradition has a tendency to take statements out of particular historical contexts, raise them to the level of general principle, while ignoring the ways in which circumstances are changing, perhaps requiring new responses. Likewise, people who deployed ideas in the defense of their rights and liberties when they were on the receiving end of the kick, turned them into general principles, which are then deployed years later by people who ignore new contexts and who are in positions of power with no real business deploying the same arguments. Etc.

      There’s your rich “libertarian.” It’s not surprising people find them annoying, but it would be nice if we thought these things through a little better rather than–in this particular post– setting out to catch in a dragnet people like “evangelical christians” and “blue collar plumbers” (who, I suppose, might be likely Tea Partiers) just because it’s culturally satisfying to do so and we’re talking about a Conservative Nut Case today.

      Anyway, this one technical example of Rothbardian stubborness itself is of limited import, and truthfully, we don’t know all the fallout of the financial crisis yet, regardless of whose predictive oxes end up gored down the road.

      It’s impossible for me to say, for example, that I definitely think the government should have supported the failed banks instead of liquidating them. After all, when the Republicans wanted to punish the UAW, for example, they happily invented the big government “controlled bankruptcy.”

      So, “printing money” and bailing the banks out didn’t cause hyperinflation… big effing deal.

  14. GP

    Great article! I’ve always found that Libertarians come off as teenage know-it-alls trapped in the body of an adult.

  15. Hal Roberts

    Yves,now that you have covered Libertarian history,why don’t you cover Centrist and their modern role in the USA political system and how it works in with the Globalist movement to rob and destroy Sovereign Nations. #1 they don’t believe in individual rights contrary to US constitutional rights belong to the individual etc.

        1. Hal Roberts

          Thats the one and it work better than any other sovereign piece of paper on the Globe. Their all sucking off the tit of the United States of America.

          If it weren’t for a bunch of fancy financiers and their payed off politicians we would still be riding high. Globalist/Centrist rigged casino games have cost us dearly.

          Our Constitution is still the best and you (no name) hate it. The Globalist/Centrist are afraid of it. Accountability is a tough pill to swallow.

          1. Hal Roberts

            I can see that they have learnt to go to the USA and it Constitutional government for Monetary needs ,Military needs, Humanitarian needs.

            Which Country on Earth would you use as a Superior Example as a successful Government . Who’s game plan you gonna jump on, I mean who or what the hell do you stand for?

          2. reason

            “Which Country on Earth would you use as a Superior Example as a successful Government .”

            Actually apart from Italy or Greece almost any Western country would do.

  16. John

    Mr. Pikington, you may be right. But in my experience the summary argument you make in your final paragraph can be applied to anyone who subscribes to an “ism.”

  17. Ransome

    Are there (were there) any functioning libertarian experiments (communities)? What is the libertarian endgame?

    1. reason

      Somalia?

      The end game is not yet clear, but eventually some country with a significant Merchant Navy will probably get sick of the Pirates and take over the country (if it doesn’t get emptied by famine first).

        1. reason

          Austria – the land – doesn’t actually use “Austrian” economics in making policy. (Yeah I know you were trying to make a joke.) But you didn’t seem to notice that I was actually talking about Somalia.

  18. McDiggity

    I agree with others, the recent attacks on libertarian/austrian bogeymen lately have been tiring and of little value. I am a big NC fan, but as someone has already mentioned, the problems with Austrian and Libertarian theory are not unique – the theory and models usually don’t work as expected in real life. Surprise, surprise. The same can be said for any “school” of economics. If every economic theory was thrown into the trash heap at the first fail prediction or model, what would be left?

    What I take away from Austrian theory is that over time debt and leverage tends to create malinvestments and bubbles that can create widespread economic disruption, make recovery much more difficult, and delegitimize the debtor. Second, top-down government intervention tends to create distortions via its incentive/tax/regulatory/lending functions that enable debt/leveraging and exacerbate bubble formation.

    Perhaps they begin with metaphysical-theological viewpoint, as you say, but that in itself doesn’t make their claims entirely false.

    Read Wilhelm Röpke or at least about his work and influence in post-war Germany. Rothbard is indeed dogmatic and wrong headed, but in Röpke I find writing and economic opinion that is much more practical and pragmatic.

    1. reason

      I’ve never seen an “Austrian” theory of bubbles. And they never explain why “malinvestment” will be worse than it otherwise would be. They seem to be implying that “entrepeneurs” have both amazing insights (chrystal ball really), and are incredibly stupid (they don’t know what the Central Bank is doing when it tells them).

      1. McDiggity

        Surely you jest? No Austrian theory of bubbles? I am no Austrian apologist, but booms and busts are the central focus of almost all their writing. And while I laughed at your caricature of their thought, it is just as easy to caricature and oversimplify any other school of thought.

        1. reason

          No – I know they talk about it all the time, but I find no evidence of an identifyable theory. They laugh at Keynesian “animal spirits”, but seem mystified when I point to land prices – i.e. asset prices – (not investment in building new houses) as the main culprit of our current problems. Their whole emphasis seems to be on phsysical investment and not on asset prices – unlike for instance Minsky.

          1. F. Beard

            They laugh at Keynesian “animal spirits”, reason

            Justifiably in my opinion. Without the government enforced/backed counterfeiting cartel, the banking system, what harm could “animal spirits” do?

          2. reason

            Ever heard of goldrushes? Think about them – lots of people feverishly engaged in ultimately unproductive activity. Just the same as any asset bubble, but you don’t need a banking system for them to happen.

          3. F. Beard

            Just the same as any asset bubble, but you don’t need a banking system for them to happen. reason

            No, just a gold standard for money or an expectation thereof is needed.

            People who can create or mine money will do so with zeal if the money they create is state sanctioned.

    2. reason

      OK,
      I read up on Röpke in Wikipedia (the German one). Apart from his clash Hayek in the Mont Pelerin Society in the US, he seems not really to belong to any school in particular. Pragmatic (and centrist) as you say.

    3. I'llHaveADouble

      “…the problems with Austrian and Libertarian theory are not unique – the theory and models usually don’t work as expected in real life. Surprise, surprise. The same can be said for any “school” of economics. If every economic theory was thrown into the trash heap at the first fail prediction or model, what would be left?”

      Basically just MMT. Although things get a little weird when they start talking about interest rates, they’ve been able to call the crisis from the start.

      And really, yes, we need to trash heap more economic theories and modelling conventions. When, for example, behavioural economics has decisively shown departures from rationality, and noise trading has shown how arbitrageurs are theoretically hamstrung, and Stiglitz has shown that markets are informationally inefficient, graduate students need to effing stop writing useless EMH papers.

  19. Charles Wheeler

    “Sadly, the last couple of weeks we saw a deluge of posts on libertarianism. Libertarianism is not practiced in the US, unless one counts the individuals truly believing in it using ones fingers. The GOP, currently a radical movement with strong Leninist tendencies (the worst it is the better off we are), believes in economic and somewhat political apartheid, where the rich play the whites and everybody else is colored. In addition, the GOP believes in Soviet socialism for the rich. Namely, the government should be in the business of hording as much riches as possible on the rich whether in the form of apartheid looting, creating deficits or transferring public property to the rich without compensation.”

    I think Libertarianism has a far stronger foothold than you suggest – and we know a number of policy-makers and entrepreneurs consider themselves to be acolytes of Ayn Rand – indeed, it could be argued that we are heading into a Randian dystopia.

  20. gaw

    “The more you look at these paragraphs the more they look like pure rhetoric” – perfect description of your entire thesis. Why don’t you state the simple truth – “I hate Austrians, Libertarians, and anyone who dares disagree with me, and will use any argument I can find, no matter how absurd or cherry picked or taken out of context, to browbeat my audience into submission, as only I am right and they are all so wrong, ignorant and misinformed”.

    Which is probably why I will in future skip over every post you make, as they are simply not worth the time to read them. No doubt you will say the same about my comment. Let’s agree to never speak again, I’m sure we’ll both be happier.

    I am not a particularly strong Austrian supporter, but they do have many good logical common sense points which you dismiss entirely as they do not fit your obviously biased viewpoint. And your attempts to argue down every comment that disagrees with you only demonstrate the intellectual weakness of your entire viewpoint. The entire tone of this series is so sneeringly “intellectually superior”, that it only suggests to me your arguments are probably weak and your conclusions most likely wrong. Which reminds me of some of my old Profs, who brooked no dissent with their groupthink.

    Just retitle your posts more truthfully: “Yet another tiresome biased diatribe using cherry picked selective arguments against those who piss me off, because I can”.

    1. reason

      “I am not a particularly strong Austrian supporter, but they do have many good logical common sense points which you dismiss entirely as they do not fit your obviously biased viewpoint.”

      Could you be more specific. And “common sense” is often wrong.

  21. Jardinero1

    As a libertarian and Austrian acolyte, I have to say I am growing weary of the hatchet jobs Yves Smiths keeps throwing up here. I would suggest that in the interest of fairness she invite Lew Rockwell, or Stephen Kinsella or Doug French or Walter Block. I can assure you that anyone or all of them would be happy to take Pilkington, et al; rhetorically out behind the woodshed.

          1. Jardinero1

            Because Pilkington’s critique is based on two fallacies the strawman and the ad hominemA attack. He is given carte blanche to both define the terms, definitions and arguments in a way that is not what the aforementioned Austrian/libertarians would. He then argues against the very definitions/arguments he allowed himself to define – classic strawman. Referring to people or groups using derisive terms is ad hominem.

            I suggest that if the owner of this blog has the courage, then she invite the persons I referenced, who represent the current face of Austrianism, to reply.

    1. F. Beard

      As a libertarian and Austrian acolyte, Jardinero1

      Most Austrians are not libertarians; they almost all believe in some form of government enforced PM money standard.

      1. Piano Racer

        Why do you keep repeating this fallacy, Beard? This is at least the third time I’ve seen you reference it. Can you back it up AT ALL with references?

        1. Jardinero1

          Typically, Austrians are opposed to any coercive money regime. Being in favor of gold as a unit of exchange is not the same as being in favor of the government coercing you into paying for everything with gold.

          1. F. Beard

            Being in favor of gold as a unit of exchange is not the same as being in favor of the government coercing you into paying for everything with gold. Jardinero1

            They are sneaky about it. Example:

            “The government does have the right to establish the form of money that citizens must use to pay their taxes. The government should limit itself to a statement regarding the weight and fineness of the tax coins. If private enterprise produces coins that meet these standards, the government must accept such coins as valid for the payment of taxes. The government lawfully controls the form of taxation; but it should not have any power to monopolize the production of coins. Governments have always asserted this authority, and they have always done so to the detriment of liberty.” Gary North from http://www.lewrockwell.com/north/north895.html

          1. F. Beard

            Ludwig von Mises is well-known for his uncompromising defense
            of the gold standard during a period when that standard was being
            denounced by most other prominent economists. Mises’ reasons for
            preferring gold over a managed fiat money are not so widely understood. Some self-styled ‘‘Misesians’’ defend the gold standard (or
            an extreme ‘‘100 percent’’ gold standard) on ideological and moral
            (‘‘natural rights’’) grounds, while portraying it as a practically flawless
            institution (Rothbard 1974, Sennholz 1975). Mises, in contrast, made
            a utilitarian case for the gold standard, while recognizing gold’s drawbacks: Mises defended the gold standard, not because he considered
            it ideal or because he thought fiat money immoral, but because he
            was convinced that a managed fiat money would prove less stable
            than gold.
            from http://www.cato.org/pubs/journal/cj19n2/cj19n2-4.pdf

          2. Jardinero1

            Try reading “Money and Credit” by Mises. That is if you want to know what Mises actually said. Available here at no charge:

            http://mises.org/resources/194

            Also, Austrians are not this monolithic group with Mises leading the way. Try reading “The Austrian School of Economics” by Eugen Maria Schulak and Herbert Unterkofler

            http://mises.org/resources/6136/The-Austrian-School-of-Economics-A-History-of-Its-Ideas-Ambassadors-and-Institutions

            Pilkington would do well to at least check his facts in the Schulak monograph.

          3. F. Beard

            The excellence of the gold standard is to be seen in the fact that it renders the determination of the monetary unit’s purchasing power independent of the policies of governments and political parties. Furthermore, it prevents rulers from eluding the financial and budgetary prerogatives of the representative assemblies. Parliamentary control offinances works only if the government is not in a position to provide for unauthorized expendi~ures by increasing the circulating amount of fiat money. Viewed in this light, the gold standard appears as an indISpensable implement of the body of constitutional guarantees that make the system of representative government
            function.
            Ludvig V Mises The Theory of Money and Credit page 416

            The above is proof that Mises did support a government enforced gold standard and was thus no libertarian.

            Shall we do Rothbard next? He is a lot easier to read.

          4. F. Beard

            Also, Austrians are not this monolithic group with Mises leading the way. Jardenero1

            Show me an Austrian Economist besides Hayek who was/is not in favor of a gold standard.

          5. Piano Racer

            Beard, I can relate, I have had several posts eaten in Chrome. VERY frustrating.

            I read your Mises quote as him choosing the lesser of two evils. The debate at the time was to keep the gold standard they had, or go completely fiat. Given those choices, of course Mises would advocate for the gold standard.

            “Mises defended the gold standard, not because he considered
            it ideal or because he thought fiat money immoral, but because he was convinced that a managed fiat money would prove less stable than gold.”

            I think that you, much like Phil, are taking things to illogical extremes. Mises lived in the real world and had to accept what he felt could realistically be accomplished at the time.

            AND – again – just because there are examples of one Austrian (granted one of the “founders”) endorsing systems that are not technically in line with their philosophies does not mean that all libertarians are fascist proponents of a government-enforced gold standard.

            All that being said, I’d still choose a gold standard over what we have today, but given the choice I would, as I’ve mentioned, abolish all legal tender laws. I think many Austrians would agree with me.

          6. F. Beard

            but given the choice I would, as I’ve mentioned, abolish all legal tender laws. Piano Racer

            All legal tender laws for PRIVATE debts should be abolished along with all other government privileges for the banks.

            But in order to have a completely free market in private money creation, inexpensive fiat is the ONLY ethical money form for government debts. Otherwise, those private money forms that are accepted for government debts will have an enormous advantage over those that are not.

            This is implied, btw, in Matthew 22:16-22 (“Render to Caesar …”)

    2. craazyman

      There was a libertarian interviewed here at this web site recently in a 6-part interview, but he would not reveal his real name and went by the code name “Mr. Cain”.

      I thought he made some good points and landed some rhetorical blows.

      The interviewer was a little snarky at times, but who’s perfect. All in all it was civil and thoughtful discourse, and I think Mr. Cain held up his side pretty well.

      All in all, it’s hard to reason through these topics because life is not a double-blind lab experiment with easy measurements, although maybe we’ll find out it really was and we just weren’t watching. Sounds like a Kung Fu episode.

      1. Piano Racer

        craazyman, you do realize that Code Name Cain was a fictional character, created by the author as a straw man, right?

        He doesn’t actually exist…

        1. craazyman

          I had heard that rumor but it’s not true.

          I actually contacted Mr. Cain to congratulate him on the interview and express my appreciation for his civility and then I had dinner with him Sunday night at his heavily fortified compound (a doorman with a baseball bat in the package room, basically, just in case).

          There was something about Mr. Cain that didn’t ring entirely true to me, I admit, and with his agreement I found out what it was. He’s not a true libertarian believer, he’s a comedian looking for PR and this was a stunt. He said he doesn’t believe any of that stuff, any of it. He said he doesn’t believe anything. I found that hard to believe but whatever. He’s thinking of a movie project about a libertarian professor who builds a following and takes them to Mars, where they start a new world. Other thaqn that, what he said is confidential.

          He had me going that’s for sure. I guess you just can’t believe everything you read on the internet. :)

  22. Susan the other

    Money is as money does. For the last 50 years we have been practicing economic inflation intentionally. And calling it growth. The relative value of our currency, and others, did not deteriorate. Many aspects of all this growth were good. Except for the devastation of the environment and that was/is our nemesis. We all know this, not because we are responsible keepers of the Earth – because so far we have not been – but because we cannot continue to pretend that the patterns of our previous growth are not causing huge climate fluctuations. And we cannot pretend – even with some good science – to predict the climate. Growth/Inflation was a great tool once. The inflation the EU worries about, and others worry about now, is based on panic over the fact that there is no more growth – as we have known it – that is growth with abandon and the environment be damned. The only thing that matters now is to find a way back. It doesn’t matter that Bernanke gives banks overnight credit. Well, except that some of them are unprosecuted fraudsters. If we got it together and went forward with sufficient dedication to clean up our planet we could have a great economy world wide. Which could once again absorb all sorts of “inflation.” So: how do we commodify recycling, and cleaning up the oceans? I don’t know about you, but I would like to eat fish again someday. Has the carbon credit scheme worked? What will? New Energy is still a few years out. But we have enough science to get started now.

  23. marcos

    So this means that Greenspan was to American libertarian capitalism as Stalin was to Soviet socialism?

    I guess there is no Kruschev in our future, huh?

  24. phichibe

    Philip,

    From one Philip (well, Philippe) to another, I just wanted to say that I’ve thoroughly enjoyed your debunking of the libertarian economic literature. As a thorough-going enemy of libertarian ideology and its role as a cats-paw for the wealthiest and most powerful in society to seek to gut government and return us to a state of Lex Talionis, I have enjoyed almost as much the anguished squeals of the libertarians among the NC readership. I stand in wonder at you patience in replying to their frequent posts on your articles.

    Were I you, I would fall back on a response that Mark Twain cited with admiration from his days as a newspaper reporter: his editor had received a particularly incoherent attack from a rival, and his response was to cite the Biblical passage: “His argument resembles the Peace of the Lord” – leaving unsaid the balance of the passage, namely “… in that it passeth all understanding”.

    I would heartily implore Yves not to give the wingnuts equal time to propound their theories on NC. First, they have no shortage of venues (may a I suggest the Cato Institute’s lecture series/web sites, or Congressman Paul Ryan’s brown-bag Rand-a-thons?). Slate recently had an essay lamenting the decline of science journalism due to a misguided tendency to present PRO and CON opinions as having equal claim to our attention, when in point of fact there generally is one side with the evidence and the other side with nothing but an unshakeable faith in their credos.

    I’m old enough to remember when Ayn Rand was an embarrassment left in the intellectual attic and not spoken of among people with educations past the 3rd grade. The insidious thing about this revival of libertarian slogans and world-views (I won’t dignify them back calling them thoughts) is not their danger in and of themselves; they’re no more dangerous than creationists waiting for the end of days.

    What is dangerous about them is the fact that behind them are VERY powerful men and women who have enormous amounts of money, and whose ambition is to make even more enormous amounts of money, if they can only succeed in rolling back government protections for the poor, the weak, and even for the basic middle class worker. Clean water, pure food and drugs, safe working conditions: none of these would be ours were it not for government inspectors enforcing govt regulations, however each of these may be imperfect. The idea that wealthy men would provide such protections as these out of some notion as reputational hazard is beyond credulous; it’s an insult to anyone with an IQ higher than that of a glass of water.

    THis is why the Koch brothers and their like (Richard Mellon Scaife, anyone?) fund so much of this dreckerie, and this is why Grover Norquist, Karl Rove, Ralph Reed, Jack Abramoff et al have labored so hard to move us to a government that, in those charming words of child killers everywhere, “is small enough to drown in the bathtub”.

    When it becomes acceptable for political rhetoric to turn to talk of “makers” vs. “takers”, you can smell the debtors prisons and poor farms not far behind, and from there it’s a terrifyingly short leap to extermination camps and engineered famines to get to a “Final Solution”. Now if libertarians (big L or little l, I don’t really care) would accept the logical conclusion of their intellectual constructs, and be up front about it, I’d respect them more than I do now (not difficult, as I don’t respect them at all). However, even such candor wouldn’t make me want to listen to their lunatic leaders talking about how a political utopia awaits just around the corner if we only have the courage to cut the strings of the “Nanny” state and bravely go forth as brave, free men and women.

    The old maps used to mark areas yet unmapped with the legend “Here Be Dragons”. Sometimes this was the truth, and that is exactly how I feel about these ridiculous utopias conjured by Libertarian Pied-Pipers.

    Cheers,

    Phichibe

  25. Pitchfork

    Pilkington apparently isn’t aware of this, but there are “Austrians” and then there are Austrians. There are the cult-like, numskulls he refers to here (yes, I’ve encountered them), but there are actual “Austrian” economists doing real economics and having civilized discussions that have to do with both theory and empirical fact.

    In other words, there are Austrian economists who see their work as part of a progressive, dynamic research program, as opposed to a theology. One empirical fact about this program — they are well aware of the defects of mid-century versions of the Austrian theory of the business cycle. You can meet them here:
    http://www.coordinationproblem.org/

    BTW, it used to be called The Austrian Economists Blog, but they changed the name precisely because of the Austrian theologians Pilkington goes after here.

    My point is, that there are libertarians and Austrians who do NOT fit the image painted here — to wit, the very ones most respected in the field of economics (as opposed to the mere internets). Rather than Lew Rockwell or some other ideologue (I rather admire Rockwell as an ideologue and critic of empire), I suggest working economists like Pete Boettke, Steve Horwitz, or Larry White.

    1. Pitchfork

      Meant to write:

      As for some kind of rebuttal or debate, rather than Lew Rockwell or some other ideologue (I rather admire Rockwell as an ideologue and critic of empire), I suggest working economists like Pete Boettke, Steve Horwitz, or Larry White.

    2. Pitchfork

      Please, anyone. Read this blog post from yesterday, along with the comments, and tell me if it fits the picture of “Austrian” painted in Pilkington’s post or in the comments to it.

      Looks like some pretty reasonable, methodologically aware stuff to me. Notice the citation of Stiglitz and other “heretics,” plus the comment about Austrian Bus. Cycle Theory being inadequate to fully explaining the Great Depression, for example.

      I’m not spoiling for a fight on this, it’s just simply an empirical fact that not all Austrian economists are blinkered numbskulls.

    3. Because

      Rockwell is a flaming idiot. He is against “empire” but the empire is a creation of capital. Yet, we need to let capital run free and control everything.

      Me thinks Mr. Rockwell is using you people big time ala Ron Paul. True users and enablers. I suspect both would let foreign capital owners run America without a whim.

      In truth, if you follow their agenda, their real goal is to make Paul Ryan and his cohorts look “reasonable” to their “extremist” views. Say, like getting rid of the full employment clause in the FED charter, so the FED can bailout the banks and then really put the screws to take labors savings(or whats left of it) through deflation tax.

    4. reason

      I did come across Steve Horwitz on the long discussion of a blog post by John Quiggin, and he came across as more reasonable than most of the other “Austrian” supporters. But I still thought he was largely unconvincing. And he had almost no support from the other “Austrian” supporters. I think these guys are a small moderate splinter group. I suppose the issue is just where do you draw the line as to what is “Austrian” school and what isn’t. I’m not convinced I understand what they are saying well enough to know.

      In general they seem for some reason to think most instability is introduced by faulty monetary policy, and to emphasize the difficulty of adjusting the supply side, rather than the instability of the demand side, by why escapes me. The detailed data consistently fails to support their view. But whenever anybody points this they claim they are being misrepresented, without ever explaining exactly how they are being misrepresented.

      http://modeledbehavior.com/2011/12/07/hayek-and-macroeconomics/

  26. Andyc

    “(who also seems to have also written an essay rationalising drinking liquor in the morning). Incredible!”

    This is called humor

  27. Hugh

    The problem with libertarianism, and it is not confined to libertarianism by a long shot, is that its consequences are left to be borne by others. Sink or swim, devil take the hindmost, you’re on your own, these are not assertions of rugged individualism but sociopathy.

    There is a callous cavalier quality to the contention that it is better morally and economically (for others) to suffer now that they may suffer less in the future. It reminds me of something that Hannah Arendt wrote about totalitarian propaganda in her Origins of Totalitarianism:

    Totalitarian propaganda raised ideological scientificality and its technique of making statements in the form of predictions to a height of efficiency of method and absurdity of content because, demagogically speaking, there is hardly a better way to avoid discussion than by releasing an argument from the control of the present and by saying that only the future can reveal its merits. p.346

    1. F. Beard

      “…there is hardly a better way to avoid discussion than by releasing an argument from the control of the present and by saying that only the future can reveal its merits.” Hannah Arend via Hugh

      Exactly.

    2. Ransome

      There are several flavors of selfishness and freedom from social responsibility or social conscience that includes Randians, Libertarians, Neocons, and Neoliberals. Their visions attract those with sociopathic tendencies who make up 4% of the population. The Nazi Party topped at 2%, so you need to be informed. It is no accident that income and wealth disparity are climbing while social unrest is becoming noticeable.

      Piano racer would like to spend his money as he sees fit, but it is not that simple. How you spend your money has a social impact. Look at the housing crisis. The fact that so many people seemingly did the same foolish things suggest coercion rather than a “free” market. If the Fed took away the punch bowl in 2003, we would be all deaf from the howling and gnashing of teeth and that would be from Wall Street and builders and perhaps piano racer.

      1. F. Beard

        If the Fed took away the punch bowl in 2003, we would be all deaf from the howling and gnashing of teeth and that would be from Wall Street and builders and perhaps piano racer. Ransome

        It’s not “punch” the Fed/banking system control, it’s the life blood of the economy.

        Central bankers should not even mention “punch” cause that’s what many would like to do to them (in a boxing ring of course). We could raise millions by raffling chances to box Alan Greenspan. Heck, give me a year to train and I’ll take on Paul Volker too. :)

      2. Piano Racer

        “Piano racer would like to spend his money as he sees fit, but it is not that simple. How you spend your money has a social impact. Look at the housing crisis. The fact that so many people seemingly did the same foolish things suggest coercion rather than a “free” market. If the Fed took away the punch bowl in 2003, we would be all deaf from the howling and gnashing of teeth and that would be from Wall Street and builders and perhaps piano racer.”

        You say that so many did foolish things, and that they must’ve been coerced to do so, in the housing bubble.

        I disagree. I think everyone involved in the housing bubble, including me, were acting in their own rational self-interest.

        Those who were signing up for sub-prime loans were acting in their own self-interest, in that they were VASTLY upgrading their living conditions, even in the long term it could not be sustained in the long run (sound familiar?)

        Those who were handing out the sub-prime loans made TONS of money, because high-risk loans have great yields, and when those loans went bad the government stepped in, as those making the loans knew they would. Well really most were sold to the GSEs, which amounts to the same thing (private gains, public losses).

        It was the government intervention that drastically altered the incentives in the loan-making process. You have to understand that. The lenders would’ve never made loans that they knew couldn’t be paid back if they didn’t expect to make a profit. In a free market (free as in free of government intervention), how would that ever make sense?

        Government interventions cause many of our problems by skewing incentives in the marketplace. The FIRE industry would not be 10x what it was a few short decades ago if not for the massive increase in government intervention in financial markets. The sub-prime crisis would never have happened. The dot-com bubble would never have happened.

        I don’t want to keep all that I have earned because I am a selfish miser who has no desire to help his fellow man (in fact I am extremely generous with regards to my friends, family, and charity that I support). Its just that I view government intervention as always having a negative impact on most individuals in the long run, even those they are purportedly “helping”. Governments are about picking winners and losers, and as much as we’d like to believe it, the redistribution is in no way just (see: Corzine, Blankfein, Dimon, etc. etc). As George Carlin said, its a big club, and YOU AIN’T IN IT.

        1. Hugh

          “The lenders would’ve never made loans that they knew couldn’t be paid back”

          Actually they would and did. Banks and those who worked in this area didn’t care about the loans. It was all IBG YBG. They made their money on the flow and the fees they could charge off it. Most of the loans got passed along to saps further downstream in the form of bogus trusts and various iterations of exploding CDOs. Under Congressional pressure, the GSEs also bought into a lot of this action, and this went way beyond subprime. Now the banks as institutions did get burned to some extent because by this. Some of them even blew up but that was because they held on to what they thought were better loans as part of their portfolio or they got caught with a lot of inventory when the bubble went splat that they couldn’t flush down the securitization pipeline.

          You also have to be cognizant of the information asymmetries. It is a logical fallacy to equate John or Jane Q. Homeowner’s expertise in mortgage finance with that of the banks and their loan experts. They simply aren’t comparable. Nor does Fed policy let the banks off the hook. The Fed may have made money available that could be abused by the banks, but no one forced the banks to make abusive use of it. Their charters and responsibilities would, in fact, have directed them not to engage in abusive practices. And the law against fraud at no time during this period was suspended or disappeared.

  28. F. Beard

    Austrians do not believe that the laws of economics allow us to magically fix these problems, but rather that they can only be postponed with worse outcomes down the road. They believe that it is better to take the bitter medicine now and begin to heal, than to band-aid over the problem only to inevitably face a larger one down the road. Piano Racer

    Bitter medicine for who? The victims and the innocent?

    To many this may seem like callousness and indifference. To me it is simply looking at the bigger picture and coming up with the best LONG-TERM solution. Piano Racer

    And a government enforced gold standard is the best long term solution? For who? Gold miners, gold owners, gold lenders and those who seek a risk-free return hoarding money?

    The Austrians are just wrong to callously ignore the victims. They remind me of surgeons who used to amputate limbs without anaesthesia because they thought the agony sped the healing process.

    1. Piano Racer

      “Bitter medicine for who? The victims and the innocent?”

      Life is not so simple that people can be divided into one of the two camps. Think of it this way; who benefits under inflation? Who benefits under deflation? Who benefits when they know in advance which we will have?

      “And a government enforced gold standard is the best long term solution? For who? Gold miners, gold owners, gold lenders and those who seek a risk-free return hoarding money?”

      How many times do I have to repeat to you that neither I, nor any Austrian advocate that I know, endorses a government enforced gold standard? Why are you so terrified of gold? It’s just an atomic element with a few neat properties, and even under a government-enforced standard the only meaningful effect it would have would be to constrain the government from spending money they do not have, thus reigning in the monstrous size to which it has grown under our current fiat system.

      “The Austrians are just wrong to callously ignore the victims. They remind me of surgeons who used to amputate limbs without anaesthesia because they thought the agony sped the healing process.”

      I have much sympathy for victims of monetary chaos. I am not callous. I do not believe that suffering itself cures anything. I just believe that taking the path of least resistance often has disastrous results when it comes to monetary policy, and that the choices that will actually put us on the path to prosperity can in the short run be very, very painful. And that pain will come, MUST come, later if not sooner, and if later, than to a much greater degree. Fixing the problems now are about PREVENTING suffering.

      Sheesh.

      1. F. Beard

        Life is not so simple that people can be divided into one of the two camps. Think of it this way; who benefits under inflation? PR

        The entire population, including savers, could be bailed out equally with new fiat WITHOUT increasing the total money supply (reserves + credit) IF further credit creation was prohibited AND if the bailout was metered to just replace existing credit as it is paid off.

        So much for the inflation scare.

        Who benefits under deflation? PR

        The above solution would not produce deflation either.

        Who benefits when they know in advance which we will have? PR

        Speculators.

        How many times do I have to repeat to you that neither I, nor any Austrian advocate that I know, endorses a government enforced gold standard? PR

        I have spent days at mises.org debating this topic. One way or another, most Austrians want government privileges for gold as money.

        Why are you so terrified of gold? PR

        A gold brick fell on me as a child.

        It’s just an atomic element with a few neat properties, and even under a government-enforced standard the only meaningful effect it would have would be to constrain the government from spending money they do not have, thus reigning in the monstrous size to which it has grown under our current fiat system. PR

        Under a gold standard, the government’s ability to create new money would be limited to the mining rate of gold. But that is absurd which is why gold bugs are laughed at. And a fixed money supply is even worse if that is what gold is meant to approximate. Furthermore, there is a far better way to abolish the “stealth inflation tax” – genuine private currencies for private debts only.

        “The Austrians are just wrong to callously ignore the victims. They remind me of surgeons who used to amputate limbs without anaesthesia because they thought the agony sped the healing process.”

        I have much sympathy for victims of monetary chaos. I am not callous. I do not believe that suffering itself cures anything. I just believe that taking the path of least resistance often has disastrous results when it comes to monetary policy, and that the choices that will actually put us on the path to prosperity can in the short run be very, very painful. And that pain will come, MUST come, later if not sooner, and if later, than to a much greater degree. Fixing the problems now are about PREVENTING suffering. PR

        I’ll concede your compassion but why did it take a post-Keynesian, Steve Keen, to come up with a universal bailout solution? Why didn’t Mises or Rothbard think of it when they supposedly understood the injustice of FR banking?

  29. depth

    Since its widely accepted that Austrian economics is little but a footnote, you’ll take the next logical step and embrace the current state of the world as the result of the practices of the dominant economic philosophies.

  30. Because

    The Austrian school arose as a rejection to Marxism, but you have to understand, Marxism and Austrianism are on the same coin. Intellectual fantasies to the most puritanical sense.

    Other economic schools base themselves around science. Marxism(no matter what Marx said) did not, nor did the Austrians. I wonder how much a lack of sex drive hurt these people?

    1. Foppe

      The Austrian school arose as a rejection to Marxism, but you have to understand, Marxism and Austrianism are on the same coin. Intellectual fantasies to the most puritanical sense.

      Other economic schools base themselves around science. Marxism(no matter what Marx said) did not, nor did the Austrians. I wonder how much a lack of sex drive hurt these people?

      Sigh. I blame you for this, Philip.

  31. Jim

    I would hypothesize that the Pilkington analysis of libertarianism fits nicely into the “progressive” state vs. “evil” free market narrative of political change which is still hegemonic among most of the NC commetariat.

    But what if the future task is neither to simply restore the broken market nor to simply remake society through regulation and legislation?

    What if the American populist tradition combined with a reconfigured American federalism offers an alternative political vision which transcends the comfortable but outmoded left/right divide?

    What if the emerging collision is between those who want to preserve local autonomy, cultural particularity, direct democracy and self-determination versus the centralizers of both the market and the state?

    What if the OWS movement evolves into a new American populism that stands in opposition to the collusive behavior of Big Capital, Big Government and Big Bank?

    What if we are on the way to figuring out how to build a structure of popular assertion that is strong enough to contest the existing structure of power while at the same time creating within itself forms of social relations that are both democratic and have a clarity of purpose?

    1. rotter

      Ok, “what if”, then what might that be like? And

      Pilkington is an apologist ad nauseum for stock standard European style Neoliberlism, not a crusader against “evil free markets”.

      1. JTFaraday

        Yeah, my jury’s been deliberating that one. I think the MMT cult may be a neo-liberal trojan horse, with a Stalinist work farm on the side–that’s the “compassionate conservative” part.

        In any case, that’s what the current regime would do with it, so whether or not they’re pure in their hearts like Obama and Jacob Hacker isn’t really the pertinent question.

    2. JTFaraday

      I agree we need new analysis and new forms of organization and strategies, as well as new ways to live. But, I still don’t think that we will be allowed to just live peaceably under the fascists.

  32. Skippy

    Thoroughly enjoyed your post Philip and comments show how hard a nut it can be to crack. This is not just economics or ideology, too me, its how thought[s can run away, stray so far from their original (still incomplete data) portent to some absolutely strange place.

    Just look at what happened to the Buddhist book of the dead once translated, fooking Hitler was a fan. What a messed up thing it must be to search for fact with an answer already in tow, but, only looking for the right ology -ism to justify it… with.

    Skippy…Humanity vs. balance of accounts, bloody sad state of affairs.

  33. Anthony Pinkney

    It is telling that this critique of ‘the Austrian disease’ is in fact a critique of a couple of specific points by an interesting, but certainly not definitive Austian school thinker, that is then extrapolated in exactly the manner you condemn into a wholesale rejection of Austrain theory because one specific quote, made many years ago, has not come entirely to pass. You fail to mention any of the overwhelming evidence that theories of the results of a central bank planned economy propounded by the likes of Hayek and Mises have massive amounts of empirical evidence supporting their validity. You make no reference to the fact that everything prominent Austrian scholars such as Ron Paul predicted prior to the housing bubble collapse has indeed come to fruition. The empirical evidence for the ongoing and worsening financial collapse is a text book example of Austriann businerss cycle theory. The policies and solutions offered by advocates of central planning have not provided, and continue to not provide, any prospect of resolution to world economic events. So what is your suggestion Mr Pilkington? As the great empiricist Einstein noted; “We can’t solve problems by using the same kind of thinking we used when we created them.”

    1. reason

      This is a parody isn’t it? It must be surely – there are lots of give away lines like describing Einstein as an empiricist.

  34. Daniel T.

    I don’t see anything in this article about WHY libertarianism is wrong. You say we don’t care for facts, but what facts have you presented? All you’ve done is rant about how all libertarians apparently have one personality and all of them argue in the same way and how the method of discussion you perceive them to employ is wrong. If that’s not Straw Man, I don’t know what is.

    The only refuting I see is of Rothbard’s prediction, but Rothbard is not representative of the entire libertarian movement. Actually, there is no single person that is.

    Also, thinking that if you put a few people in charge of controlling an entire economic system they’re not going to use their powers for their own (and their cronies’) personal gain does not reflect very well on your own intellectual abilities either. You call us a cult, but we’re not the ones who have blind faith on our economic and political overlords.

    I mean, what are these central bankers and politicians? Some kind of absolutely selfless Angels? Sorry if I’m just a little bit skeptical.

  35. James in London

    Rothbard’s macroeconomics is not his best material. Business cycle theory is a tricky area. However, the basic microeconomics is the bedrock of libertarianism and true. Government intervention is always (yes, always) second best to non-intervention. The “order” we see in society arises spontaneously from individual interaction. It is surprising to socialists like Pilkington, just as evolution is an impossibility to their cousins in the “intelligent design” movement of anti-science Christians. Socialists like Pilkington are really just fundamentalist conservatives who don’t get freedom and anarchic order that results from libertarianism.

    1. F. Beard

      Government intervention is always (yes, always) second best to non-intervention. James in London

      Except of course when enforcing a gold standard. Mises, Rothbard and every other Austrian Economist I know of were/are in favor of a government enforced gold standard. That’s rather hypocritical for so-called “libertarians”, eh?

      1. James in London

        It is a big debate (yes, debate) amongst libertarians whether fractional reserve banking is fraud. I think it isn’t but can see the other side’s point of view. But libertarian anarchist law courts declaring something as fraud, isn’t the same as libertarians asking for the state to enforce a gold standard. One thing we all agree on is that there should be no state, and certainly no legal tender laws. We all support a free society, free to choose what one regards as money.

        1. F. Beard

          One thing we all agree on is that there should be no state, James in London

          It’s too late for that. It has been since 1 Samuel 8. The question now is how the need for the State can be minimised over time.

          and certainly no legal tender laws. James in London

          So long as we have a State, then the government’s own inexpensive fiat should be the ONLY legal legal for government debts else no true free market in private money creation is possible since any private money or private money form (such as PMs) acceptable for government debts will have an unfair advantage over other private moneys or money forms that are not acceptable.

          We all support a free society, free to choose what one regards as money. James in London

          I agree which is why inexpensive fiat is the ONLY ethical money form for government debts. As for private debts, private monies should be allowed to compete fairly with the government’s fiat. That means in practice the abolition of the capital gains tax, no lender of last resort, no government deposit insurance and no other government privileges for the banks.

    1. Zeno Izen

      Haha, I quoted something with angle brackets. I guess that doesn’t work:

      trite claim’s about “liberty” and “freedom,”

  36. Econophile

    This kind of attack on Austrian economic theory by Mr. Pilkington is not new and follows a rather “classic” format. That is, they haven’t really read the basics of Austrian theory and therefore they don’t understand it. Instead they read critiques of the theory or, perhaps in Mr. Pilkington’s case, one article or a snippet quote taken often out of context, and not always relevant. In this case most of his conclusions are just wrong.

    The problem with Austrian theory is that it is difficult to understand and requires a high degree of study to “get it.” If I may continue in the ad hominem manner which Mr. P has chosen to follow, I would say that Mr. P’s scholarship and analysis, as a Progressive and Chartalist is lacking and facile. Anyone who can claim to be predisposed to “Progressivism” misunderstands some of the basics of economics and philosophy. Someone who can subscribe to Modern Monetary Theory (Chartalism) fails to understand the basic of “money.” I confess I checked out Mr. P’s web site.

    Rather than being rigid, close-minded folks as Mr. P claims, I find Libertarians to be intellectual and engaging, but yes, exceptions abound. I find Austrian theorists to be the most intellectual of any academic or economic tradition I’ve studied because of the broad scope of its reach: epistemology, methodology, and analysis.

    I agree with Mr. P in that I find most economists rather rigid, blindly rejecting unorthodoxy because of their Groupthink mentality. As we all know the mainstream were horribly wrong foreseeing our current Great Depression. Yet many of the Austrians got it right. And yes, some got it wrong and some habitually get it wrong. Rothbard among them. Mises foresaw 1929, etc. etc. But in modern times, most Austrian saw it coming in a timely manner. I find applied Austrian economic theory to be an excellent way to interpret and forecast current economic events.

    It would only be fair for Mr. P to have read Menger (Principles of Economics) and Mises (Human Action) and Rothbard (Man Economy and State) and even Hayek’s work on epistemology. Most of the Austrians I am aware of have read Keynes and even Marx, plus Smith, Locke, Hume, and even a little Kant. I don’t find much epistemology or even basic philosophy as a course of study in mainstream Neo-Keynesian-Neo Classicist-Econometric economics curricula.

    I think the series done here on Libertarianism was interesting, albeit it was only one person’s vision of that philosophy. It would have been nice if Mr./Ms. Code Name Cain came out of the closet and shed his/her anonymity.

    So, Mr. P., I wish you would do some study, know what you are talking about, then come back and present your ideas.

    Jeff Harding
    The Daily Capitalist

    1. Skippy

      Jeff,

      When you build on assumption you have no baseline and length of time a belief is accepted_is not_an empirical standard. These so called isms and ology of capital and economics are psychological templates of various backgrounds and history’s. None are backed by the laws of the Universe, they are a choice, a self contrived reality.

      The choice bit bothers me the most as its more a case of manufactured desire than options explored. A morality play with out regard to new observations and data ie, large slice scans used in neuroscience, massive increase in anthropological evidence, mathematical and computational power used to dispel vaporous opines presented as fact (non influenced by ism – ology backed monies), et al.

      Personally I’m heartened at the fact they all proceed so blindly, failure is insured, see fossil record, anthropological evidence.

      Skippy…how much death are you – do you find acceptable to win victory for your beliefs?

    2. reason

      This sounds like the standard theological argument. (See also Scientology.) There are deep hidden secrets that only the initiated (for a fee) can know. But none the less there are lots of ignorant followers. If you people understand it – why can’t you explain it so that (very intelligent) people can understand it.

    3. reason

      ” Anyone who can claim to be predisposed to “Progressivism” misunderstands some of the basics of economics and philosophy.”

      i.e. If you disagree with me you are wrong. What arrogance. (And arrogance is a form of stupidity.)

    4. reason

      Bye the way, notice the style of this post, it is very instructive.

      1. It claims to have true knowledge (well because it is true) which others don’t.
      2. It doesn’t attempt to explain exactly where others go wrong, or address their arguments.
      3. It provides no evidence for its claims.
      4. It claims this true knowledge is complicated and you can only acchieve this knowledge through exhaustive study.

      As I mentioned before this is the way that Scientology tries to rip the world off. It is also a way of avoiding a real discussion.

    5. LucyLulu

      Econophile wrote: Rather than being rigid, close-minded folks as Mr. P claims, I find Libertarians to be intellectual and engaging, but yes, exceptions abound.

      Knowing quite a few libertarians (including myself, albeit a liberal one), generally speaking……

      I would agree that they tend to be intellectual (“intelligent” would be more fitting description) and engaging, at least superficially. I also find them to be among the most irritatingly rigid and close-minded people I know. Not only do they fail to recognize that they possess these latter two traits, but they are convinced that they are flexible and open to diverse perspectives, which makes them even more annoying to engage with in any kind of substantive discussion where there is disagreement.

      How many people does it take to change a libertarian lightbulb?
      None. It can’t be done.

  37. SH

    After 200 comments it gets a bit difficult to not repeat other arguments, but I want to voice two complaints in the name of the cult.

    One, libertarianism is not an option of the Federal government. We’re not choosing A, B, C, or D here. By assuming that a system of government is either valid or invalid presumes a government. Textbook libertarianism, and by that I mean the matrix of social vs. economic concerns, local government is an option. Socially liberal and fiscally conservative.

    As for the cult… I have not seen the real cult issue addressed once. Who owns you? Do naturalization laws make you dominion of the state or do your parents have precedence? Does god own you or do naturalization laws own you? Personally, I own myself which pisses off both sides, but if you want to address the cult like factor of libertarianism, don’t waste your time with Austrian economics. Sack it up and get to the point of who is in charge. That’s where the cult lies and that is what we should be discussing.

  38. Steve Horwitz

    So I see: we take one book review by one scholar and we use that to dismiss a scholarly tradition in economics that goes back to 1871 and was part of the founding of modern economics in general.

    And then you title this post “The Austrian Disease: Poor Scholarship, a Priori Bias?”

    “Physician Heal Thyself” has never been more appropriate. THIS post is an exemplar of poor scholarship and bias. Try reading the scholarly literature in Austrian economics, then come back and have a serious conversation instead of this National Inquirer nonsense.

    1. reason

      “tradition in economics that goes back to 1871 ”

      Unlike say creationism that goes back forever. Or nuclear physics that starts in the 1920s. (Steve while I think the discussion here errs on picking on a single example – this argument is really irrelevant.)

  39. Ciaran

    Philip,

    I enjoyed this post very much.

    It’s also worth pointing out the flip-side of the ‘Libertarian’ resort to metaphysics: the tendency to dress their theories up as hard science (cf ‘cool, rational analysis’, ‘rational agents’, ‘objectivism’, etc.).

    Personally, I’d like people to refrain from referring to these people as ‘libertarian’. As Noam Chomsky has pointed out on several occasions, one can hardly talk nowadays when discussing actual libertarianism, which has its roots in anarchism. Whereas the Austrian school types who identify themselves as ‘libertarian’ seem to want to live in a world that’s made up of some bizarre sociopathic free-for-all.

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