Recently Stan Grant wrote to tell us that F.A. Hayek — of all people — not only founded the global order we have today, but gave us a set of ideas that lead directly to ball tampering in cricket! It was another one of those cliched “other people consider mere economics but ‘I’ consider higher ideals” articles. The bogeyman of “Neoliberalism” strikes again, we are told.
The message of Grant’s article is that economics is pretty much the science of greed. He complains of the “reduction of all human motivation to the one-dimensional rational self-interest of Homo-economicus”. The concept of homo-economicus was constructed by the early classical economists because homo-real-life didn’t fit their mathematical models. But anybody familiar with economic history would know that Hayek was from the Austrian school, which robustly rejected this approach.
The Austrian method starts with humans as they actually are – purposeful, choosing, acting beings, with imperfect knowledge and heterogenous goals. In this world of material and temporal scarcity, no-one has ever managed to avoid choosing and acting. Economics is the study of human action: the weighing up of costs and benefits; setting aside one course of action in order to undertake another, whether successfully or not. Costs and benefits are defined in their broadest sense – not just the financial kind, and not just those accruing to the actor themselves. Humans are not one-dimensional calculating machines – our moral judgements inform our choices.
Describing certain actions as either selfish or altruistic does not put them into or out of the scope of economic analysis. Just as the science of physics can be used to study the trajectory of a ball thrown in fun or a rock hurled in anger, so economics studies the consequences of all human actions, based on the whole range of human motivations. Mother Teresa set aside various possible alternative actions in order to help lepers in Calcutta. She weighed up (consciously or not) the benefits and costs as perceived by her. A burglar likewise weighs up the benefits and costs of robbing your house, as they perceive them –clearly differently to how the victim would have weighed them. If we don’t like certain motives or actions, we should say so. But we do not, therefore, throw out the sciences by which actions and consequences are studied.
Left-leaning columnists see “neoliberals” everywhere, ready to elevate greed and selfishness as the highest virtue and to use the levers of power, which they undoubtedly hold, to force everybody to embrace their wicked ways. If you have been conditioned to uncritically accept that neoliberalism is an existential threat – let me ask you one thing – have you ever met anybody who calls themselves a neoliberal? I have only ever met one self-described neoliberal. Sam Bowman from the Adam Smith Institute spoke at the Australian Libertarian Society’s Friedman Conference last year, to explain how his UK based think tank is consciously adopting the label. Besides these outliers, the term neoliberal is little more than school-yard name-calling; an epithet for anything you don’t like.
Classical liberalism is a thing – it is the idea of treating other people peacefully and respectfully, avoiding the use of aggressive force or fraud, and respecting others’ peacefully acquired property. It was these ideas that lead to the abolition of slavery in the nineteenth century, and to the greatest increase in wealth, life expectancy and peace the world has ever known. And it was these ideas that came to an abrupt halt in the early twentieth century with the build-up to world wars, and the domination of collectivist ideas including nationalism, socialism, and their mutant offspring of fascism. The remnant classical liberal thinkers such as Mises and Hayek were like voices in the wilderness, ignored as much in their own day as they are today, by anybody who holds political power.
Hayek’s primary contribution to the social sciences can be summed up in two words: intellectual humility. The functioning of a peaceful society requires the dispersed knowledge, tacit and formal, of everybody. The central planner simply cannot acquire all of the knowledge with which to plan. “The curious task of economics,” says Hayek, “is to demonstrate to men how little they really know about what they imagine they can design”. Thomas Sowell calls this a “constrained” view – an honest appraisal of what is possible given the nature of humans – as opposed to the unconstrained vision of the central planners which asserts that the only barrier to their desired utopia is sufficient political will. But how do you think a message of intellectual humility goes down with rulers and their spokespeople?
I have 22 different economics textbooks on my shelves (thanks to publishers sending me desk copies) including all the leading titles used in Australian universities. Of these, 19 texts do not even list Hayek’s name in the index at all. Only one (which I had to order) makes an effort to cite Hayek’s contributions, while two others dismiss his work with a single call-out box or side note. So much for founding the global order!
Who then was the major influence on economic policy over the last century? There is no doubt it was John Maynard Keynes, whose policy prescriptions and theories swept the field, to be practised by just about all governments and taught in all government educational institutions.
Keynes’s ideas can be summed up in one word: hubris. Keynes was a leading eugenicist, an intellectual elitist, a narcissist, a bully, a chauvinist, an anti-Semite and a hedonist, who came up with policies to advance those ideals, and theories to justify them. He hated bourgeois morality and working-class family values, which included a degree of future orientation and thrift and a focus on the local community over the nation-state. In contrast, Keynes advocated totalitarian control by the state, so long as the levers of power were held by those of his own social set. He tipped his hat to the Nazi regime and admired the methods of the Soviets, except for their veneration of the proletariat, whom he despised.
Keynes’s policy prescriptions very much suited those who hold or seek political power, giving them a theoretical rationalisation for the policies they always wanted to implement. As Mises explains:
The unprecedented success of Keynesianism is due to the fact that it provides an apparent justification for the “deficit spending” policies of contemporary governments. It is the pseudo-philosophy of those who can think of nothing else than to dissipate the capital accumulated by previous generations.
Keynes provided the intellectual cover for governments as they ushered in the era of top-down economic planning; the monopolisation of money under central banking; a reversion to protectionism and mercantilism; labour laws designed to exclude women and minorities; to the era of total government and total war. It was these ideas which elbowed aside classical liberalism and shaped the way economic life was governed over the ensuing century. That is why blaming Hayek for ball tampering (or anything else you don’t like) makes as much sense as blaming it on the Aztecs or the Druids. In the brilliant video Fight of the Century – Keynes vs. Hayek Round Two, Hayek wins the intellectual argument with a knock-out blow – but Keynes is declared the winner anyway, to the surprise of both contestants.
As Mises says in Human Action: A Treatise on Economics:
Society is not merely interaction. There is interaction — reciprocal influence — between all parts of the universe: between the wolf and the sheep he devours; between the germ and the man it kills; between the falling stone and the thing upon which it falls. Society, on the other hand, always involves men acting in cooperation with other men in order to let all participants attain their own ends.
Society is the result we get when people treat each other peacefully and respectfully. Society cannot exist independently of its constituent members, it must be created and maintained every day by our choices and actions. While free and voluntary interaction creates society, the use of aggressive force or fraud can undo and destroy it. Anti-social actions include illegal means such as robbery or ball tampering or legalised uses of coercive force via the political means. Both social and anti-social behaviour occur in every time and place; the proper purpose of law is to encourage the former and discourage or punish the latter.
But anti-social behaviour can be popular. As Frederic Bastiat warned:
When plunder becomes a way of life for a group of men living together in Society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.
With classical liberalism swept aside during the “progressive era” of the early twentieth century, the moral code of the economic planners glorified the state – the epitome of coercion and control.
In the classical liberal tradition, society meant peaceful interaction. But the interventionists came to view society quite differently. “Society” according to them is an entity in itself, and they are its spokespeople. We should all set aside our “selfish” individual interests, and put “society’s” interest first, they would say. They do not simply mean you should be kind to the people around you – a quite normal human priority. The “society” they speak of is not real flesh and blood people – for your neighbours are just “mere individuals” too. Society to them is what Murray Rothbard calls “a small group of power hungry doctrinaires and exploiters ready to take your money and to order your actions and your life”. Their moral code holds anti-social behaviour as a virtue, as long as it is done by them. They speak as if the predator and the prey are one and the same.
Anti-social behaviour offers the most advantage to those who employ it when everybody else behaves peacefully. A con-man doesn’t want everybody else to be a con-man. A mugger doesn’t want to live where everybody is a mugger. Ball tampering would not give any advantage to the team if every other team did it too. The same goes for tax collectors and social planners – their schemes wouldn’t work if everybody was a coercive parasite and nobody was a productive host. Hence the motto of the statist is “it’s not OK when you do it, but it is OK when I do it”. It is these ideas, when they permeate through society, that lead to widespread corruption, cheating and even ball tampering.
Hayek was awarded the Nobel prize for economics in 1974, a year after the death of Mises, for their work on monetary theory, which both predicted and explained the events that were transpiring – outcomes considered impossible in the Keynesian framework. Despite being right, the policy prescriptions that emerge from their Austrian analysis were still too unpalatable to the holders of power and were ignored. No central bank abolished itself and no government set out to reduce the overall size of its depredations on society.
Nevertheless, there was a shift in economic policy around the 1980s, in the Thatcher/Reagan/ Hawke/Keating years. This era saw the abolition of some of the worst instances of market meddling and manipulation: the end of many industry tsars sitting on “wool boards” and “egg boards” and the like, imposing their “quotas” on production; the reduction of crippling tariffs on imported consumer goods; and the opening up of industries like telecommunications and airlines previously squatted in by coercive government monopolies. In all these industries the products and services became significantly more affordable for all, increasing real incomes especially for the poor.
Along with these consumer relieving reforms, tax rates were lowered from their spiteful highs around 90 per cent. But it was not because governments suddenly discovered that stealing was wrong; they were as unbothered by conscience as ever. These changes were advanced by economists of a different sort to the Austrians – with more Machiavellian cunning. Art Laffer used his famous Laffer Curve (Beuller? Anyone?) to show the ruling class that, past a certain point, high tax rates lead to lower tax take by the state. This is especially so when taxing high-income earners who have higher elasticity of behaviour –they can avoid doing the thing that is taxed. Just as Machiavelli showed his Prince that it was in his selfish interest to give his subjects some liberties, thereby benefiting the common people by stealth, so Laffer and his contemporaries did for the plundered class in their own day.
Thomas Sowell said, “politics is the art of making your selfish desires seem like the national interest”. But Laffer made the common interest coincide with the selfish desires of the political class – at least to a point. The predatory state grew, but the peaceful and voluntary sector grew as well, once people were free to serve one another’s needs with fewer violent impediments by the state. The task of actually shrinking the coercive sector and treating all anti-social behaviour as a crime – of achieving a voluntary society – is much more difficult though. The parasitic ruling class, free from the ethical considerations that govern the behaviour of peaceful individuals, will do “whatever it takes” to maintain their power and control.
Mark Hornshaw is a lecturer in Economics, Entrepreneurship and Management at The University of Notre Dame Australia.
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