Thursday, July 30, 2009

Human beings are not numbers

Ten years ago, I interviewed Wendy Shalit, who had just then published A Return to Modesty. Now a married mom who blogs at Modestly Yours, Ms. Shalit was then a recent graduate of Williams University, where her protest against co-ed dorm bathrooms had led to an article in Commentary, and then to her book.

My interview with Ms. Shalit occurred in the lobby of a Washington hotel where, when the interview was concluded, she was to meet her parents for dinner. So it happened that I was introduced to her father, who is an economist.

Although I was not then recognized as a "top Hayekian public intellectual," my devotion to the Austrian School of economics was already passionate, which fact I mentioned to Ms. Shalit's father. This remark prompted Ms. Shalit to declare that she was herself an Austrian because -- as opposed to other approaches to economics -- it required less math.

This was evidently something of a running joke between Ms. Shalit and her father, a devotee of Milton Friedman (i.e., "Chicago School" economics), and her father responded by chiding Wendy about the importance of mathematics to proper understanding of the discipline.

Ms. Shalit's remark about mathematics and Austrian economics recurred to my mind this morning, when I encountered an article by the Acton Institute's Samuel Gregg:
[T]here appears to be little inclination on the part of some contemporary economists to ask some searching questions about their heavy reliance on mathematical logic and argumentation. This may well be because doing so would raise some rather profound questions about the very nature of post-Keynesian economic science.
One who posed precisely these questions was the German economist Wilhelm Röpke (1899-1966). Röpke is well-known as an intellectual architect of post-war West Germany’s path from collectivist economic oblivion to market-driven economic miracle in the ten years following its economic liberalization in 1948.
Less attention, however, has been given to Röpke’s fierce critiques of the post-war Keynesian consensus. . . .
In Röpke’s view, [John Maynard] Keynes was "a representative of the geometric spirit of the 20th century" and "an exponent of positivistic scientism," for whom "economics was part of a mathematical-mechanical universe." . . .
According to Röpke, the neo-Keynesian new economics was inclined to reduce economics to mathematical and statistical formulas and analyses. Röpke may have been thinking of Paul Samuelson’s 1947 effort to reconfigure economics on the basis of mathematical language. For Röpke, such efforts conflated the object of economics with one tool of economic analysis. Opening a post-Keynes economic textbook, Röpke suggested, made readers wonder if they had stumbled upon a chemistry curriculum. . . .
Read the rest at the Witherspoon Institute's Public Discourse site. (Hat-tip: The New Ledger.)

As I noted earlier this month at The American Spectator, Fed Chairman Ben Bernanke has ignored Friedman's Chicago School monetarist teachings, but it is the Austrian critique -- and Ropke was a disciple of Ludwig von Mises -- that most clearly exposes the misconceptions which now warp public opinion about economics.

Let's start with Wendy Shalit's jest about mathematics. Too many people think that understanding economics requires a genius IQ and mastery of elaborate algebraic formulae. This is false.

Mathematics is certainly necessary to the specialized business of trying to predict the results of various economic inputs: What will be the impact on the price of X if variable Y increases by factor Z? This is the what the economist is trained and paid to do. But the fundamental concepts of economics, the general principles of market operations, are really very simple.

Furthermore, what most people think of when they say "economics" is what is properly called political economy -- that is to say, the study of what impact government policy has on economic life. The specialized training of the economist is useful to this endeavor, in order to measure and analyze the connection between policy and result. Yet no math at all is necessary to study the history of economics and draw conclusions about the wisdom or folly of various policies.

Therefore, I am qualified as a "top Hayekian intellectual" even though (a) I did not major in economics and (b) I suck at math.

This is especially true when it comes down to the most important question now facing us: Should our nation pursue an economic policy that seeks to expand liberty or should we side with Obama, Pelosi, Krugman, et al., in pursuing greater government control of economic matters?

Are we too free? That's really the question, and algebra cannot answer it. A neo-Keynesian like Paul Krugman claims to know how much deficit-funded "stimulus" the American economy needs (in a word, more) and Treasury Secretary Timothy Geithner claims to know exactly how that "stimulus" should be spent (in two words, Goldman Sachs), and anyone who disputes the claims of Krugman and Geithner is met with a highly nuanced argument: "Shut up."

What the neo-Keynesians wish to do is to centralize and increase economic control, on the basis of their implicit argument that the ordinary American is unfit to exercise economic liberty.

Yet it is a fairly simple matter to demonestrate that this elitist, control-oriented approach to economics -- Expertocracy, as it were -- is the source of the very problems that the experts now propose to solve by further expansion of their own power.

The fundamental question is not whether the experts who run the economy should pursue policy X or Y or Z. Rather, the question is whether experts should be running the economy at all. To be an Austrian is to say that the government experts already exercise too much economic power, and that this power should be reduced, not expanded.

The individual's desire for economic liberty is a moral choice. But the minions of the Expertocracy, who wish to deprive us of our liberty, are also making a moral choice, and they ought to be required to admit it.

Why is our desire for liberty morally inferior to the expert's desire to control us? To summarize the experts' answer: Because they're better than us.

If you believe that, if you think that Timothy Geithner is so much your superior that he is better qualified to run your life than you are, then I will politely agree.

Yes, indeed! If you do not love freedom, if you would rather have some bureaucrat in Washington making every important economic decision in your life, then you are certainly a very inferior human being. The lover of liberty is infinitely your superior.

Yesterday, my 16-year-old son walked in to show me the chainsaw he'd just bought second-hand for $175. Why the chainsaw, I asked? He and his buddy Nick had contracted with a lady to do some yard work (trees felled by a storm), my son explained. The job would take them about two days, and would pay them $500 each.

If my 16-year-old son can find such lucrative employment in this economy, let Paul Krugman find the formula which disproves my contention that the amount of "stimulus" we need is exactly zero.

"Experts,"my Hayekian ass.



  1. The VERY brief deconstruction of "mathematical econ" is the observation that 'economics is a SOCIAL science.'

    After all is said and done, all Econ does is measure human action vis-a-vis costs--and it does that rather poorly because 'human action' is not always rational (i.e., model-able.)

    By the way, Ms. Shalit spent a good deal of her life in the Milwaukee area.

  2. "The individual's desire for economic liberty is a moral choice."

    Yes. Adam Smith's academic title at Glasgow was Professor of Moral Philosophy.

    The title of his magnum opus is not "Wealth of Nations." It is "An Inquiry into the Nature and Causes of the Wealth of Nations."

    The significance of the book's title is decisive for its meaning.

    The "nature and causes of the wealth of nations" is, according to Smith, and as demonstrated by experience, moral man freely and eagerly making moral choices in moral social structure (economics). He did not support or propose "laize faire capitalism." That is French, Rousseau, produced to The Terror.

    Smith's observation, as expressed in "The Theory of Moral Sentiments" and confirmed in experience, is that human nature is inherently moral and must be moral to be happy and that the free expression of moral human nature produces the wealth of nations and numerous other beneficial delights.

    "An Inquiry into the Nature and Causes of the Wealth of Nations" is in the nature of observations regarding what makes life go well. It is not, as modern economists self-appoint, including both Keynes and Friedman, a tendentious prescription/proscription for what everyone (well, not quite everyone ...) must do.

    Smith is a scientist in the true sense: an observer of what goes on, in this case what builds happiness (freely made prosperity) and what drives decline (compelled existence).

    Economics means "building up and out." It is a building, having both horizontal and vertical components, not a driving, which has only an horizontal component.

    Kant himself said that Scotland of the 18th Century was the most enlightened nation of Europe. Scotland and Smith were deeply admired by the German academy of those days. Scotland then had the world's highest, widest and deepest rate of literacy and was profusely productive.

    I am unfamiliar with Ropke's work but as you describe it subscribe it enthusiastically and surmise he reflects German admiration for the Scottish Enlightenment's achievements dating at least from the German Enlightenment (which differed significantly from the Scottish, English, French and American Enlightenments) and as expressed by its star representative, Kant.

    Of course Geithner and his boss and associates want decline (for the masses), not building, so what they are doing makes perfect sense, and they know that it does, which is why they are doing it.

    The outcome depends, as from their start, on how fast they can get it done before they are stopped.

    It is now, as Lincoln said of the Campaign in Northern Virginia, "... a question of legs." Jackson's "foot cavalry" answered that question then ....

  3. Noteworthy connections:

    Stonewall's "foot cavalry" demonstrated the value of drill and hard marching, or in modern reporters' terms, "shoe leather."

  4. "Are we too free?" - "Nancy Pelosi thinks so."
    "Are we too free?" - "Barack Obama thinks so."
    "Are we too free?" - "Arlen Specter thinks so."
    "Are we too free?" - "John Cornyn thinks so."

    That message should be pounded into the brains of this nation until we right the course.