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The Mises Review

Edited and written by David Gordon, senior fellow of the Mises Institute and author of four books and thousands of essays.


Market Process: Essays in Contemporary Austrian Economics, The

Peter Boettke and David Prychitko

1 1995
Volume 1, Number 1


 

What Should Anti-Economists Do?

Spring 1995

 

THE MARKET PROCESS: ESSAYS IN CONTEMPORARY AUSTRIAN ECONOMICS
Edited by Peter J. Boettke and David L. Prychitko
Edward Elgar, 1994. XV + 304 pgs.

Tertullian famously asked, "what has Athens to do with Jerusalem?" After reading The Market Process one can but inquire, "What has bad philosophy to do with Austrian economics?" As Don Lavoie makes clear in his informative preface "the scholars at the Market Process Center" (p. x) of George Mason University came to view themselves as the architects of a radical new research program within Austrian economics.

One of the two main theoretical innovations of the group during the 1980s directly involves philosophy. "A group of graduate students and professors began studying hermeneutics, especially the work of the German philosopher, Hans-Georg Gadamer, and became very excited about the implication of this approach for market process economics." (p. x) (The other innovation, a type of computer programming, is not discussed in the book) So agog with excitement were our innovators that they have transcended economics altogether and have now formed a new department, the Program on Social and Organizational Learning, in which they can pursue "their radically new way of thinking about society and organizations" (p. xi).

To inform a waiting world of the results of their inquiries, the Center began to issue the Journal Market Process in 1983; and the present volume collects a number of significant articles from that periodical. So successful and well-received was Market Process that the Center suspended publication of it in 1990. "The Market Process stopped publishing Market Process just when it was arguably at its peak. The decision was made that it was time to turn publication efforts out into the many new scholarly communities which market process scholars had located, both written and outside the economics profession" (p. xii).

Those wishing a bird's-eye of the revolution can do no better than to begin with "A Political Philosophy for the Market Process," by the presiding genius of the school. In it, Professor Lavoie informs us that classical liberalism has hitherto been defended in an improper way. "The older form of classical liberation relied on a natural-rights approached based on metaphysical arguments concerning such things as the 'essence' of man. This position which essentially takes the rule of law to be imposed by God from outside of human society leaves no room for democracy, for the participation by the members of society in the setting and revising of rules. It thus belongs naturally to conservatism. The later utilitarian version had its own difficulties, not least of which was the questionableness of its claim to be a value-free way of declining with value-laden policy issues. Utilitarianism takes the rule of law to be nothing but what the majority of the moment decides it to be, and thus sets no limits to democracy. It belongs naturally to socialism (p. 276)."

I have quoted this passage at some length, as it demonstrates Professor Lavoie's utter incompetence in political philosophy. If a natural law position derives rules from the essence of man, how can it at the same time view these laws as imposed by God? Does Lavoie know the difference between a natural law and a divine command theory of ethics? Why does a natural law position require that people play no role in making rules? What if one of the natural laws just is that people do have such a role? And if there are natural laws immune from democratic revision, what is the matter with that?

Rarely have I had to defend utilitarianism, but Lavoie forces me to it. Utilitarianism is not a value-free way of dealing with policy - it is of course a theory of ethics whose adherents presumably stand committed to the values it promotes. Utilitarians need not favor democracy, let alone unrestricted democracy; the political system a utilitarian supports will depend upon his appraisal of what best promotes happiness. I wonder what Mises and Hazlitt, both utilitarians, would make of Lavoie's claim that their ethical position belongs to socialism.

Though past political theory does not meet Lavoie's exacting standards, he is far from a pessimist. He has found in the work of Gary Madison, a student of Paul Ricoeur, the way to a proper market-process defense of classical liberalism. As Madison realizes, humans have no access to absolute truth - instead, truth is agreement. "[I]t is the discussion process among subjective minds itself which constitutes the standard, no some absolute, final target of objective truth toward which this process is supposed to be tending." (p. 279)

One might at first fear that this leads to nihilism: does it not count as true whatever people chose to think true? But Lavoie, well aware of the difficulty, is quick to offer a remedy. "Truth isn't 'nothing but agreement' because agreement isn't really 'nothing but agreement.' Agreement in this sense refers not just to whatever people actually agree to, but what they can come to a reasonable agreement together about." (p. 279) And if you find that clears matters up, you qualify for a position in the Program on Social and Organizational Learning.

Unfortunately, amateurism in philosophy beguiles not only the presiding genius but some of his acolytes as well. David Prychitko finds the root of socialist evil in Rene Descartes. "Descartes Rene to attain pure reason." (p. 264) Accordingly, he rejected custom and tradition (did he?); all institutions must be constructed afresh, according to rational principals. And this is exactly what socialists believe about the economy. They wish to subject the economy to a comprehensive plan, and here lies their undoing. The knowledge required to run a modern economy is dispersed among entrepreneurs and much of it in "tacit," incapable of being encapsulated into exact rules. Simply by attending to philosophical fundamentals, we have obtained a quick refutation of socialism. Away with such Cartesian nonsense!

Unfortunately, this will not do at all. A socialist will reply that he also proposes to use the tacit knowledge of economic actors - why need he advance his plan as specifying all knowledge? To refute him, a detailed economic argument is required, along the lines laid down classically by Mises. It seems to me "fundamental misapprehension that one can simply mouth a philosophical slogan, such as "tacit knowledge" or "spontaneous order" and expect it to do the work of rigorous argument.

The eminent economic historian Donald McCloskey also appears guilty of philosophizing by slogan. In his "Splenetic Rationalism," he anxious to counter Hans Hoppe's claim that he is a relativist who denies differences between truth with a small "t" and truth with a capital "T." "Small 't' truth is what we use every day to get across the street or to detect another a subatomic particle. By contrast Big-T truth is a philosopher's construct, justified true belief....well, there is such a thing as objective truth, the agreement we all make for purposes of navigating the world and society....The problem is that there doesn't seem to be any way of knowing whether we have hold of Objective Truth, capital-O, capital T. Its presence or absence would seem to be knowable only to God." (p. 192)

Here we have it. Truth with a capital-T is justified true belief; thus, the upshot of McCloskey's; perfervid defense of rhetoric is that we have no justified true beliefs, since it is precisely truth with a capital-T to which he denies no access. Or is his position that even if we do have justified true belief, we cannot know that we do? Why not? And in his thesis to that effect itself meant as a justified true belief? If so, by his own contention, he cannot know it. Or is an instance of small-t truth? If so, who agrees with it? Hoppe clearly does not.

To press McCloskey with elementary worries of this sort in futile. He has seized upon a phrase that attracts him and has neglected to explicate what he means by it. I doubt that he knows himself - his "definition" of capital-T truth is in fact not a phrase about truth but rather the classic criterion of knowledge, now abandoned by most contemporary philosophers. McCloskey has something in mind as an object of attack by declines to specify what he means. Instead, he waits for critics such as Hoppe to guess his thesis and then reproves then for missing the point.

It is not enough for our market process crew to concoct a slapshot theory of knowledge. To attract Austrians to their program, they suggest an unimpeachable Austrian pedigree for their ideas. According to Professors Boettke, Horwitz, and Prychitko Mises himself stands among their precursors in epistemology! True, they acknowledge, he often sounded distressingly Euclidean, but at times he saw the light.

Mises, they aver, "defends praxeology on pragmatic grounds"; they proceed to cite a passage from Human Action that appears to do just that. But, taken in context, the passage does not signify Mises's adoption of a pragmatic stance; rather, he argues, "the champions of mechanicalism" defend science on pragmatic grounds. And it on these same grounds that "the emptiness of the panphysicalist dogma becomes manifest." (Mises, Human Action, New Haven: Yale University Press, 1963, pp. 23-24) Mises is thus arguing that his opponents premise refute itself, not stating his own position.

The problems of The Market Process are by no means confined to articles that address methodology. A particularly unfortunate piece is Steven Horwitz's "Misreading the 'Myth' : Rothbard on the Theory and History of Free Banking." As he notes, Rothbard challenged Larry White's claim "that Scottish banking from 1721 to 1845 was a successful example of an actual free banking system." (p. 166) But Horwitz proceeds to impute to Rothbard an incredible syllogism the purport of which is that if Scotland was "not much of a free banking system," then free banking theory is invalidated (p. 127).

Horwitz asks why the failure of one example refutes the theory and accuses Rothbard of ignoring the distinction between theory and history. But of course Rothbard nowhere adopts the reasoning Horwitz finds "implicit" in his review of White. Rather, he confines himself to an evaluation of White's historical claims.

One further example of questionable argument will have to suffice. In "Beyond Equilibrium Economics," Boettke, Horwitz, and Prychitko suggest that equilibrium consists simply of the repeated declaration that the concept is a "mechanical metaphor" (p. 65). Rather than rigorous argument, they offer slogans. I suppose then that one must at least give them credit for a consistent approach to both philosophy and economics.

Not all the articles in this book are bad. Quite the contrary, several raise issues eminently worth pursuing. But the meritorious pieces (which I shall not single out for mention) are in bad company. Boettke, Horwitz, and Prychitko state about the market process group, "No one is denying objective reality or truth." (p. 71, n. 1). As the Duke of Wellington once said, if you can believe that, you can believe anything.


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