Rebuilding the Way We Learn Economics
[Reprinted from the Lara-Murphy Report, February 2017.]
LARA-MURPHY REPORT: How did you become interested in Austrian economics?
JEFF DEIST: Fortunately Austrian economics became interested in me, through two happy developments.
First, my father had a tattered paperback copy of Hayek’s The Road to Serfdom on his bookshelf when I was a teenager. Although the book perhaps focuses more on political theory than pure economics, it makes important points about markets, imperfect knowledge, and bureaucratic hubris that had a big impact on me. So like many people, Hayek was my gateway to Austrian thought — even though as a young person I didn’t approach Serfdom as a book about economics at all, but rather a book on libertarianism and the role of government.
Second, in the early 1990s a good friend of mine heard that Professor Murray Rothbard was teaching economics at UNLV. My friend decided to obtain an advanced degree there, almost entirely because of the opportunity to study economics from an Austrian perspective. I had no idea who Rothbard was at the time, but on my friend’s advice I drove up to Las Vegas from San Diego a few times to sit in on Murray’s classes. It was quite an experience, and made me understand how little I really knew about economics. Like many libertarians I thought about economics in terms of policy rather than science. I knew the minimum wage and taxpayer-funded stadiums and drug prohibition represented bad economics, but I lacked the knowledge to verbalize how and why. When you don’t study economics as an academic discipline, it’s easy to get caught up seeking prescriptive justifications for liberty rather than accepting the descriptive nature of all honest science. Seeing Rothbard in person motivated me to learn more, and from there I eventually read Mises, Menger, and many of their contemporary fellow travelers — including Bob Murphy!
LMR: Now that Donald Trump is in office and his critics on the left are suddenly remembering the virtues of the Constitution, many libertarians can’t help but focus on the hypocrisy of people who had no problem with President Obama’s “secret kill list,” in which he could assassinate people with drone strikes without even a judicial review. On the other hand, other libertarians argue that we should forget leftist hypocrisy and focus on the abuses of power coming from the White House, as that is the clear and present danger. What’s your take?
JD: I must say we live in strange times when the left wants to resurrect a Cold War with Russia! Or when Democrats start talking about nullifying federal laws at the state and local level, or withholding taxes as civil disobedience. The obscene level of political amnesia and hypocrisy on both sides shouldn’t shock us, but it still does. The only meager advice I have is to detach yourself emotionally as much as possible from political outcomes, because at the end of the day we can be sure of only one thing: it’s absurd to imagine everyone else sees the world the same way.
As for Trump, I think libertarians fundamentally miss what his election means. It’s not about him, his behavior, his policies, or the people he surrounds himself with. It doesn’t matter what one thinks of Trump, what matters is that so many Americans were willing to go off-script and vote against the left-progressive narrative of inevitability. For all of their talk about democracy, progressives are angry and horrified to imagine that people don’t agree with them. I’m happy about this shakeup, but not hopeful that progressives will see Trump’s victory as the intervention it was. Libertarians make a huge mistake when they dismiss or even attack Trump voters, many of whom were disaffected conservatives and independents who didn’t really want to vote for him but felt they had no choice. If Rand Paul or anyone else is going to advance the libertarian message politically, insulting Trumpians is not the way forward. Disdain for the deplorables [Hillary Clinton’s term for Trump supporters — eds.] may make libertarians feel superior, but it ignores the reality that many Trump voters are not simply angry but also honestly open to a new political worldview.
Trump is the symptom of an illness we have allowed to go undiagnosed and untreated for too long. In the current landscape, populism and anti-elitism are entirely justified. Top-down political control of 320 million diverse people by technocrats is a recipe for heartache and strife. Let’s hope it’s not a recipe for something worse.
LMR: Perhaps related to the last question, do you think libertarians should try to court horrified progressives? Perhaps with a pitch of, “You see how bad it is when someone you don’t like is elected? Maybe we should limit the power of the Executive?”
JD: I’d like to think this line of argument is possible with progressives, but I’m afraid they will revert to form when their guy or gal takes back the White House. It’s the inescapable tribal nature of politics, which is why we should do everything we can to depoliticize society wherever and whenever possible. But in the short term, I think the best we can hope for is tenuous single-issue coalitions. If progressives want to oppose Trump’s wars just because he’s not Obama, fine with me. I’m happy to align with anyone who wants to reduce the size and scope of government on any issue, for any reason. So let’s find common areas of agreement with progressives, even if they’re temporary. With Trump in office, I humbly suggest we start with war, the Fed, and drug laws.
LMR: Because of the polarizing election, secession is back on the table. Last summer, some polls showed at least 40 percent of Texans would consider secession if Hillary Clinton won. Now that Trump is the president, a recent poll in California showed 1 in 3 supported secession. What are your thoughts?
JD: Ah yes, secession — bogeyman of both left and right. I recently heard Victor Davis Hanson, a conservative with the Hoover Institution and National Review, refer to Calexit [an analog to “Brexit” for California leaving the Union — eds.] as a “neoconfederate” idea. Now Hanson is a brilliant guy, a formidable intellectual and definitely not some partisan hack. So when someone of his stature is so egregiously wrong and dismissive of the issue, you know we have a real problem. It’s the old intractable idea that the Civil War somehow decided things. Throw in a couple of specious Supreme Court decisions and you’ve unfortunately poured concrete into the minds of most Americans. What a pity, because breaking up and going through an admittedly painful divorce might be much more humane in the long run than forcing everyone to stay married to an abusive spouse in D.C. Chalk it up to Manifest Destiny and the mentality that USA Inc. must only expand, never contract — because something deep in the American psyche won’t let go of a single state.
LMR: What role does Austrian economics play in the future of liberty?
JD: First, I hope we use “Austrian” as a descriptive term of convenience. It’s not a rigid school of thought that expels practitioners who stray too far, at least not in my view. But I think the Austrian contribution has been and will be enormous, even if we sometimes lack the perspective to see it. Professor Walter Block recently shared some old emails he exchanged with the late Dr. Gary Becker, the University of Chicago economist and Nobel Prize winner. Block, a former student of Becker, was lamenting the treatment of Austrian scholars in certain academic journals. In response, Becker argued that much of what is good and groundbreaking in Austrian theory has already been incorporated into mainstream economics. Becker reminded Walter that Austrians already made huge advancements by explaining the impossibility of socialist calculation, presenting a theory of entrepreneurship, and pioneering the role of time in capital and interest theory. All of this was quite illuminating, especially coming from such a famous economist who viewed the Austrian school from an impartial and somewhat skeptical vantage point. And I should point out that Becker did not mention, though he hardly needed to, how the earthquake known as the Marginal Revolution was in good part Mengerian. The point is that we often underestimate the incredible and salutary impact Austrian scholars have had on both economics and society. It’s baked into the modern cake, so to speak, so we take it for granted.
While Austrians fret that neo-liberal economists don’t understand money, or interest rates, or methodology, or the role of mathematics, it’s easy to forget that even ardent Keynesians on the left like Paul Krugman and Brad DeLong give quite a bit of lip service to markets, price theory, and capitalism generally. They certainly don’t call themselves socialists. This is not a coincidence, but rather the result of decades of work by free-market economists chipping away at the socialist edifice that held the entire profession in thrall during the 1930s and beyond. The rhetoric of modern economics is much improved today, and generally pre-supposes a value for markets.
Contributions from Austrian and Austrian-friendly economists have been very important to human liberty, and the future is begging for more. We especially need an Austrian revolution in money and monetary policy, perhaps the single biggest blind spot for otherwise pro-market economists. Whether the breakdown of fiat currencies and sovereign debt results in the imposition of an IMF global currency regime, a return to gold-backed national currencies, or a flight into purely private blockchain payment systems remains to be seen. But the Austrian school planted the flag for money as a market commodity, for interest rates as prices, and for understanding business cycles as driven by the depredations of central bankers. The Austrian view of money is the future, no matter what governments and central banks do. Central bank money will fail. Good money, which is to say private money, will drive out bad — even if it’s forced into black markets.
Finally, let me say that a growing crop of young Austrians will continue to wrest economics away from its listless, econometrics-focused cul de sac and toward an emphasis on understanding human action. Economics is a profession badly in need of a shakeup, just as the greater world of academia is trapped in outmoded, expensive, and laughably inefficient models of higher education. “Peak university” is upon us. Perhaps the greatest contribution young Austrian academics will make to the cause of human freedom will be to rebuild the way we learn economics in the first place.