Applied Austrian Economics

Today, I’d like to bring attention to two videos that deal with topics surrounding the Austrian school of economics.

The first is the Henry Hazlitt Memorial Lecture given by my long-time friend and colleague, Ed Younkins: “Ayn Rand and the Austrian Economists” [YouTube link]. Ed is particularly qualified to have delivered this very interesting lecture. He has authored many books and essays exploring the interconnections between Rand and Austrian theorists, including Flourishing and Happiness in a Free Society: Toward a Synthesis of Aristotelianism, Austrian Economics, and Ayn Rand’s Objectivism (2011). He was also a contributor to the Spring 2005 Journal of Ayn Rand Studies (JARS) symposium, “Ayn Rand Among the Austrians,” for which he wrote the essay, “Menger, Mises, Rand, and Beyond.” That symposium featured important essays by a dozen authors, including George Reisman, Walter Block, Roderick T. Long, Peter Boettke, and Steven Horwitz. And as a coeditor, with Roger Bissell and me, of The Dialectics of Liberty: Exploring the Context of Human Freedom (2019), Ed also contributed an essay to that anthology, “Freedom and Flourishing: Toward a Synthesis of Traditions and Disciplines,” in which he argues for an integration of Aristotelian, Randian, and Austrian insights.

Clearly, this is a subject matter that has preoccupied Ed for many years. In this lecture, Ed draws from the neo-Aristotelian realist core in the works of Carl Menger, founding father of the Austrian school. Ed sees fruitful connections between Menger’s approach and that of Ayn Rand. He makes a case for integrating the praxeological insights of Ludwig von Mises with a larger normative (and meta-normative) vision, drawn not only from Rand but from the neo-Aristotelian philosophers, Douglas B. Rasmussen and Douglas Den Uyl. (It should be noted too that Ed and the Dougs were all on the Advisory Board of JARS for years, so it’s nice to see continuing cross-pollination!) And he addresses the thought of Murray Rothbard, who sought to reconfigure Mises’s Kantian-influenced praxeology on surer Aristotelian footing. As Ed puts it, the neo-Aristotelian and Objectivist worldviews can provide a more robust context for Austrian economic insights. And there is much to be gained from the intellectual exchange of these perspectives.

The only Austrian theorist not discussed in Ed’s presentation is Friedrich Hayek. Hayek departs from Misesian praxeology and is not generally considered a neo-Aristotelian. But there is much affinity between Hayek’s critique of constructivist rationalism and Rand’s rejection of rationalist thinking. On this basis alone, I have long argued that an engagement between Hayekian and Randian perspectives can be fruitful—and I’d strongly encourage integration of key Hayekian insights in any attempted integration of Austrian theory and Objectivism. (I explore Hayek’s views in depth in my book, Marx, Hayek, and Utopia, and I engage the Hayekian and Randian perspectives in my book, Ayn Rand: The Russian Radical, especially chapter 8.)

Coincident with the release of Ed’s lecture is a YouTube presentation by two dear friends: Ryan Neugebauer (Ryan N) and Ryan McGaughey (Ryan M), or as I like to call them: “Ryan Squared” (I can’t provide a superscript ‘2’ here, but you get the idea!)

This discussion, “Austrian Economics, Political Economy, and the Case for the Mixed Economy” [YouTube link], is as provocative as its title suggests. Their aim is to invite feedback as they move toward a coauthored essay that uses Austrian insights to make the case for a mixed economy.

The Ryans begin with a discussion of my work on dialectical libertarianism, specifically Total Freedom: Toward a Dialectical Libertarianism and its critique of Rothbard’s anarcho-capitalism (ancap). With dialectics—the art of context keeping—as methodological backdrop, they seek to promote the project of human freedom and personal flourishing with a recognition of the conditions that exist. They oppose reductionists on either side of the dualistic divide—those anarcho-capitalists who envision the market’s absorption of all governmental functions and those socialists or communists who propose the government’s absorption of the market. This false alternative leads the purists in both camps to embrace what Karl Popper once called “canvas cleaning.” The ancap would ‘push a button’ to eliminate the state as surely as the communist would ‘push a button’ to demolish the market, no matter how many bodies are left in the wake of wiping the slate clean. Moreover, even if such a button could be pushed, the proposed resolution ignores the need for a cultural transformation that might nourish and support any such radical social change.

The ‘mixed economy’—that catchall term for various mixtures of markets and states—has existed for eons and there is no foreseeable future in which this phenomenon will wither away. Indeed, it is no coincidence that classical economics was viewed as the study of political economy, for politics and economics have been inextricably intertwined in various ways. Ultimately, the question is: What kind of mixture is optimal for the nurturing of freedom and flourishing?

Before even considering this question, however, the Ryans’ focus here is on the ways in which the Austrian school of economics has helped us to understand the nature of a market economy. As Ryan M puts it, the Austrian school has provided core notions that were essential not just to the marginal revolution spearheaded by Carl Menger, but to the tradition he founded. Among those ideas was Menger’s insistence that value is not inherent in material objects, but in the subject’s valuation of those objects. This is the kind of ‘subjectivism’ that Ed Younkins views as fully compatible with Menger’s Aristotelian realism and Rand’s Objectivism, insofar as material objects are evaluated in an agent-relative manner that is fully engaged with the world, rather than cut off from it. (Rand distinguished her Objectivist alternative from the classical objectivist position, which she dubbed “intrinsicism,” insofar as it placed intrinsic value on the objects in the material world, rather than value-as-evaluated-by-a-conscious-subject.)

Other core notions in the Austrian tradition include an appreciation of the epistemic role of markets and an understanding of the non-neutrality of money. In his works, Hayek explained the function of the price mechanism in transmitting inarticulate (tacit) knowledge across social networks as a means of coordination. And, as Ryan M emphasizes, the Austrian view of the non-neutrality of money is crucially important to Austrian business cycle theory. Austrian theorists cast light on the differential ways that inflationary infusions of money redistribute wealth to those who are its first beneficiaries. In his 1938 work, Theory of Money and Credit, Mises pioneered this view in a way that fully embraced the discipline of political economy. While Austrians long championed the notion that money as an institution evolved through the division and specialization of labor, they also recognized the state’s intimate involvement throughout history with coinage, banking, and structural variations in the supply of money. Hence, to say that money is not neutral is not merely an economic observation; it is a profoundly political one as well. Mises’s approach was a scathing indictment of static equilibrium models in favor of a process orientation. It also pointed to a class dimension in the business cycle, a dimension explored more comprehensively by Mises’s student, Murray Rothbard.

This intermingling of economics and politics shows up in both Austrian economics and libertarian politics. Indeed, as Ryan N observes, it is often difficult to separate Austrian economics from the purest libertarian politics upheld by certain Austrian economists. Some Austrians, most notably Hayek, departed from these purist demands, favoring political means for the provision of social safety nets. The Ryans wish to utilize the economic tools of Austrian theory in ways that might bolster the case for a mixed economy. They are not unsympathetic to anarcho-libertarian ideals. But in the real world, those ideals have never been actualized. They might be implicit in some real-world social relations, but the rules of the game have been corrupted throughout human history. What is called “capitalism” today is not the “unknown ideal” of its advocates. In “capitalism: the known reality,” as I’ve called it, the structures of property ownership were historically constituted by the enclosure of the commons, conquest, and colonialism such that any notion of Lockean ‘just acquisition’ is rendered almost incomprehensible. To this extent, the dichotomous view of market and state is ahistorical, for the economic and the political have always been organically linked.

The Ryans maintain that those of us who are concerned with justice can’t rewind history and undo the damage of centuries of wealth and land redistribution. But we can attempt to make up for it. And that is the springboard for what the Ryans propose. Given the context that exists, how might Austrian insights be used to improve our society?

Moving forward—in building the case for a mixed economy, indeed, for a better mixed economy—I’d encourage my friends to address issues raised in the Austrian literature by two of its contemporary representatives: Don Lavoie and Sanford Ikeda. In National Economic Planning: What is Left? (1985), Lavoie is concerned with those state-centered mixed economies that tend toward the militarization of economic life, bolstering not only the welfare state, but the warfare state as well. This organic conjunction of welfare and warfare is something that has been a part of U.S. history, but it has had a global impact. And it has deep class dimensions.

Critiques of the mixed economy have been offered by Marxist, public choice, and Austrian thinkers. Marxist theorist Paul Mattick published a 1964 essay, “Dynamics of the Mixed Economy,” that explored these issues. Ikeda’s work, Dynamics of the Mixed Economy: Toward a Theory of Interventionism (1996), draws from both public choice and Austrian insights to address the “spontaneous order” that is distinctive to political processes in real existing mixed economies.

Any case for the mixed economy should grapple more fully with this literature.

I very much enjoyed both Ed Younkins’s lecture and the Ryan Neugebauer-Ryan McGaughey presentation and I highly recommend both YouTube videos to Notablog readers. Links below.

Comments are closed.

Post Navigation