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The Austrian Economics Newsletter

Summer 1998 

Markets and the Quality of Life 

An Interview With Randall G. Holcombe 

Randall G. Holcombe is DeVoe Moore professor of economics at Florida State University and an adjunct scholar of the Ludwig von Mises Institute in Auburn, Alabama. He is author of eight book including Public Finance and the Political Process (1983), An Economic Analysis of Democracy (1985), Economic Models and Methodology (1989), and Public Policy and the Quality of Life (1995), along with many articles in academic journals, including the Review of Austrian Economics and the Quarterly Journal of Austrian Economics. He is also editor of Fifteen Great Austrian Economists (Auburn, Ala: Mises Institute, 1998). He was interviewed at the 4th Austrians Scholars conference, April 3-4, 1998. 

AEN: What gave rise to your book on the quality of life? 

HOLCOMBE: After the collapse of the Soviet Union and the fall of the East Bloc, it is widely recognized that markets do a better job of producing goods and services than central planning. The facts speak for themselves and have brought some degree of closure to the debate originally kicked off by Mises shortly after the Soviet Union was created. 

At the same time, there is this idea that there are other aspects to our lives that aren't about producing goods and services. Instead, they are about the quality of life itself, and the market is not that good at protecting that. Sure, people say, let the market handle production, but we still need a central plan to preserve and enhance our quality of life. 

The Mises-Hayek argument against socialism turns out to be highly relevant to these debates. They weren't just arguing against socialism; they were arguing for the necessity of market prices as signals that make economic coordination possible. 

My book revisits the Austrian case against government planning, and then looks at a number of these quality of life issues to show how market mechanisms are better than government planning in enhancing our quality of life. 

It's appalling to me that people are constantly finding problems for the government to solve, even though the evidence shows that government isn't much good at anything it does. Government control may sound good in the abstract. But what it really means is: whoever has the most political power decides what's done. 

AEN: In the course of your argument, you come to the defense of so-called urban sprawl. What does this phrase mean? 

HOLCOMBE: There's no good definition of "urban sprawl," but that doesn't keep government from legislating against it. There is a section of Florida's growth management legislation that says our land-use plans are supposed to prevent the proliferation of urban sprawl. When people use the phrase, they mean low-density development that spreads out from downtown. Other people think of unsightly strip shopping centers. 

I use the definition provided by Florida's Department of Community Affairs, the agency that tells local communities how they can and cannot develop. The DCA says one indicator of urban sprawl is leap-frog development, where development is not contiguous with other development. Another indicator is strip or ribbon development, which run along corridors or highways. A final example is low-density, single-use development, where there are miles upon miles of houses with no businesses. 

But when you look at these development patterns, they actually can be the components of efficient development. Let's say you have a housing subdivision that leapfrogs undeveloped land. The developers are seeking out lower land costs and people who purchase homes there are seeking more space for the dollar. 

Since nobody wants to build a shopping center on the outskirts of town, leapfrogging creates an economic opportunity for commercial development. It will already be surrounded by residential areas on either side. This is a good way to develop land. 

In the same way, nobody wants a house on a major thoroughfare. But if you have strip or ribbon development, and there is undeveloped land in between these developed strips, there's a good place for residential areas. You can live on a quiet street and yet have convenient access to major shopping. 

Finally, low-density, single-use development is typically brought about by zoning laws that prevent multiple-use development. The same people who push for zoning regulations then turn around and complain about the results their policies bring about. If we just leave the market alone, the result is an enhancement of the quality of life. 

AEN: What are the consequences of anti-sprawl legislation? 

HOLCOMBE: As with all central planning, you end up with a miniature version of what Mises called "planned chaos." It creates less efficient land use patterns than you would get if you just let property owners decide how to use property on their own. 

It also generates a big transfer of wealth from some property owners to others. If you have property in what is sometimes called an urban-service area, you can develop your property. But if you own land outside that area, the value of your property is pushed down. 

If undeveloped land is declared undevelopable, the present value is reduced. Sometimes this can have huge consequences. If you are a farmer and are trying to borrow money against the value of your property, your borrowing ability may be restricted, even if you did not plan to develop your land. 

Typically this wealth transfer runs from the poor to the rich. People who live in apartments are poorer relative to people who live in owner-occupied houses. Development restrictions push up the prices of both. That raises the wealth of homeowners, but hurts renters. You can see why some interest groups might favor land restrictions. But they still create inefficient land-use patterns and coercively transfer wealth. 

AEN: You also talk about the law of nuisance. 

HOLCOMBE: A nuisance is something you do that annoys your neighbors. Prohibiting this has a long history in common law as a good way to control externalities. For example, the law of nuisance is what prevents somebody from putting a cement factory next to your family's home. What's happened in the case of land-use specifically, is that zoning laws have replaced the law of nuisance. 

It used to be that cement companies would not open up next door for fear of creating a nuisance and being shut down. Now the managers can go to the zoning board and appeal for the land to be zoned industrial. Then they have a defense no matter how much of a nuisance they cause. 

There's an interesting case in Florida. Runoff from sugar farms was polluting the Everglades. A former governor of Florida sued the farmers claiming that the runoff is a nuisance. The sugar farmers shot back that there are government regulations that control their operations, including their runoff flow. They claimed that because they are in compliance, they are not subject to the law of nuisance. When the suit was brought, the court agreed, and threw out the suit. That is now being reconsidered. 

AEN: You also write about restrictive covenants. 

HOLCOMBE: A restrictive covenant is a contract among owners which allows them to guarantee that property will be used in a certain way. When I bought my house, along with it came a long list of regulations drawn up by the homeowners association. They aren't government regulations; they are private and designed to keep property values high. These covenants are increasingly common and very efficient market means of insuring the quality of life. The key is that they are entered into voluntarily. They are used in areas where there is no zoning, but also in areas with heavy zoning restrictions. 

AEN: How to the initial owners know the kinds of private regulations that are going to enhance property values? 

HOLCOMBE: They can't know for sure since knowledge is never perfect. The question is: what institutional arrangements are most suitable for discovering the best method? It turns out that markets are much better at planning for the long term than governments. 

If you own property, you have an incentive to maintain the value of property, even long after you are dead and gone. At any time, you or your heirs can sell the property. With government ownership, there is no incentive to maintain property values because it is always unclear who is going to control it in the future. 

Let's assume that the environmentalists are really sincere about improving our quality of life. Without having a direct stake in the value of property, there is very little they can do to preserve and enhance the environment. With government, you can't buy an outcome; you can only rent it. The next legislature can always undo what the present one does. Private ownership is the key to protecting an asset. 

AEN: And this is true even with land preservation? 

HOLCOMBE: A retired friend of mine owns a tree farm. He just cut down a stand of trees and then replanted. Those trees he planted aren't going to be ready for harvest until well after his lifetime. So why would he do that? Why would he plant trees that someone else will profit from? Well, he owns the property and wants to make it as valuable as possible right now, and today's value depends on the expected yield in the far-distant future. 

It's private ownership that gives the incentive to think for the long term. Sometimes on television, you see these awful pictures of forests that have been clear-cut and the ground is eroding. The idea is to say: look what the evil loggers have done! But invariably, these pictures are of national forests, which are owned by the government. The timber rights are given on a contract basis, and the recipients have no incentive to preserve the value of the land because it's not theirs. 

AEN: But the cause and effect relationship is not immediately obvious to the person who sees these pictures. 

HOLCOMBE: That's true in many areas of economics. An example reappears just about every rainy season: flood insurance, which the government subsidizes. With this insurance, people can say, "I love this house down by the river. It might flood, but, hey, I've got my government flood insurance." The nature of the insurance affects the way people behave. Private insurance takes account of relative risks, but public insurance causes people to disregard risks. 

AEN: And assessing risk is a key to the quality of life. 

HOLCOMBE: Product quality in general illustrates the point even better. If the government didn't assume a monopoly on the regulatory function, private regulatory agencies would pop up everywhere to certify quality. Underwriters Laboratories is a good example. It is entirely private and non profit, but it produces the most trusted seal of safety there is. These days, you almost can't bring an electric product to market without having the UL stamp on it. 

Another example of a private regulatory agency is Best Western Motels. They own no motels. But they'll let you put the sign up that says "Best Western" if you meet their guidelines. They've got dozens of pages of regulations that you must meet: how wide the halls are, the temperature in the bathrooms, the quality of the doors, the quality of the television reception, and on and on. If you meet their regulations, you pay them for their sign. 

Why would anybody pay to be regulated like that? The answer lies in an understanding of consumer preference. You're driving down the street thinking about stopping at a motel. There's "Mom and Pop's Motel" but you've never heard of it. There's also "Mom and Pop's Best Western Motel," and you choose it because the risk of poor service is reduced. Companies are willing to pay private regulatory agencies like Underwriters Laboratories and Best Western in exchange for certifying their products. 

AEN: And can this approach be extended to areas like medicine and law? 

If we did away with state licensure of doctors tomorrow, allowing anyone who wants to practice medicine to do so, credentialing agencies would spring up everywhere. The American Medical Association would certainly work as a private credentialing organization. 

And it would have competitors. A patient might say, "I've been going to an AMA doctor, but I'd like to try a different kind of doctor." Licensure of doctors serves as a cartelization device to keep out competitive approaches. Doctors get infuriated with me when I say that, but it's true. 

The same is true of law. You might argue that we need state licensure of lawyers because courts are run by the state. But even here, look at the huge increases in private arbitration. They correct for the unresponsiveness of government courts. It's proof the government need not monopolize courts or lawyer certifications. Private agencies can take over the function of guaranteeing quality judicial services. 

This whole approach has been eliminated by government regulation, which crowds out private regulation. Government uses tax dollars to finance its regulation; generally firms prefer this to spending their own money to certify good quality. Sometimes people say that the rarity of private regulation makes the case for government regulation. In fact, private regulation is rare because government regulation is so widespread. 

AEN: Why is private better than government regulation? 

HOLCOMBE: Government regulations do not ensure the quality level that consumers desire. Regulatory agencies are not responsive to consumers but to lobbying pressure, typically applied by the very industry being regulated. So government regulations end up protecting certain big players in an industry against market forces. Quality standards become an arena for using coercive instead of market pressure against competitors. 

Also, there is no rational cost accounting with government agencies. How much should be spent when evaluating quality? What constitutes quality? At what point do the costs of raising quality exceed the benefits? Bureaucratic regulations cannot answer these questions with any degree of assurance. Markets are needed to sort out these issues. 

Government involvement with health care--not just licensure but also subsidies and direct benefits--has eclipsed the role of the consumer. I was talking to a doctor the other day, an old-timer, who told me that one of the first questions his patients used to ask him was: how much will this procedure cost? Now that question has no relevance because consumers are rarely personally affected by the costs of procedures. This is a consequence of government involvement of all sorts. 

AEN: It seems like every year or so the Congress passes another bill increasing government control over medicine. 

HOLCOMBE: This raises a crucial problem of democracy. Instead of looking to the Constitution or to individual rights as a normative standard, public policy tries to give people what they want. Early on, the Clintons assumed, wrongly as it turns out, that people wanted full socialization of medicine. The interesting thing about that debate was not the outcome but the process, which depended so heavily on public opinion. 

If the majority polled had said they wanted the Clinton plan, it would probably have passed. Polls seem to be driving public policy across the board. Every news story comes with a little poll attached, as if this were the crucial consideration. This is not the way a free society is supposed to function. 

AEN:Your newest studies for Austrian journals have been in public-goods theory 

HOLCOMBE: I've been interested in the subject since my student days. Many of the interesting questions in economics have to do with the public sector. From economics we learn how markets allocate resources when markets are left alone. But then, according to the public finance literature, we need this huge public sector because there are supposedly problems with the market. 

Modern public finance theory starts out from mathematical conditions for the stability of competitive equilibrium. These models provide clear conditions that have to be met for market institutions to allocate resources efficiently. This allows us to look at the math; when the condition isn't met, there is a role for government. From there, developed this whole literature of "market failure" in the 1950s. 

The theory says there are generally four reasons why markets might not work: externalities, public goods, monopoly, and economic instability. That taxonomy is still in principles of economics books today. The presumption is that government must intervene. 

AEN: Yet even the classical economists said government should perform functions the market cannot perform. 

HOLCOMBE: Yes, but more for philosophical reasons. Today, it is based on a seemingly scientific foundation. Beginning in the 1950s, economists began to advance Paul Samuelson's idea of a public good. This is a good in which additional consumers can consume the good without reducing the consumption of any existing consumer. In other words, once the good is produced, additional consumers can consume all they want. 

An example of that is a radio broadcast. Once the signal goes out, anyone can listen to it without reducing anyone else's ability to listen. This feature supposedly makes the good unlikely to be efficiently provided through market means. This is as opposed to soft drinks; if I drink one, there's one less to drink. 

AEN: Ironically, though, the market produces radio broadcasts. 

HOLCOMBE: Yes, and, in fact, most public goods, as defined by economic theory, you can think of are provided in the market. The best example I can think of is computer software. Once the code is written, additional users can take advantage of it at no cost to the existing user. It's simply a matter of making a copy. 

No matter how many are made, it doesn't reduce the consumption of any other consumer. There can be ten or a million copies at no cost to the existing users. Issues of copyright aside, then, software has the characteristics of a public good, but look how well the market produces it. In fact, the government thinks the market produces it too well: witness the campaign against Microsoft. 

AEN: It raises the question of how well government produces public goods. 

HOLCOMBE: I've actually done some research on this. Logically, if anything seems to fit the description of a public good, it is passing legislation. I'm not talking about enforcing it. I'm just speaking of the legislative process itself: the legislature gets together and passes laws. 

Following public goods theory, you might think the size of the jurisdiction wouldn't matter for the cost. As with software, what difference does it make for your costs whether these laws are for a thousand people or a million or ten million people? But it turns out to make a huge difference. A colleague and I looked at the costs of legislatures across the 50 states and adjusted for legislative output. There is a very close correlation between the number of people in a state and the cost of operating its legislature. 

If you double the size of population, you nearly double the cost of legislation. Legislation is like hamburgers at a picnic: if you've got twice as many people, you've got to cook twice as many burgers. Additional users don't use the good for free. So legislation--which most plausibly looks like a public good--actually fails the Samuelsonian test. 

AEN: What about other supposed public goods? 

HOLCOMBE: Right now, I'm doing a study of national defense, and in my initial results, there appears to be a one-to-one correspondence between the number of people in a country and defense spending. The more people the government is defending, the more it spends in doing so. So, defense turns out to fail the Samuelsonian definition as well. And, really, that's not too surprising. What's surprising is that the theory of public goods has survived despite its lack of theoretical or empirical merit. 

AEN: Why has idea survived? 

HOLCOMBE: Why does most government propaganda survive? The people who have promoted public goods theory as a justification for government intervention are researchers with a vested interest in supporting the activities of government, either because they work in government schools and universities or heavily subsidized private ones. 

If you want to get a more compliant population, you can beat them into submission. But it would be easier and better to convince them that your way of thinking is right. That's the role of public education. Public educators even admit this. They say the main role of public schools is to socialize children, that is, propagandize them. 

Public-sector institutions have an incentive to look for and support theories that back public-sector spending. Economists, like anyone else, have an incentive to support institutions that support them. That is why government-supported research produces theoretical developments biased toward government intervention. 

AEN: Yet Samuelson's rationale for big government hasn't exactly become common wisdom. 

HOLCOMBE: One of my pet peeves is how economists use terms in two ways. We define terms in a technical way to use among ourselves--and Samuelsonian public goods theory is a good example. It means: "the marginal cost of an additional consumer consuming the good is zero." Then we have the man-on-the-street definition of the same thing: "things that are produced by government." But it turns out that the two terms are completely different. Yet in policy pronouncements, economists gloss over the difference in order to justify government intervention. 

AEN: Is there an optimal size of government? 

HOLCOMBE: I'm currently doing some work with James Gwartney and James Lawson on the effect of the size of government on economic growth. This is a pure empirical study. We are trying to discover what difference the size of the public sector makes on the rate of economic growth. 

We looked at time-series data in particular countries like the U.S., at a cross-sectional data set of more than 20 OECD countries, and a larger data set from 60 countries around the world (none of them from the present or former centrally planned economies). No matter how you look at it, there is a very strong and systematic relationship between economic growth and the size of government. For all the data we have, the smaller the public sector, the higher the rate of growth. 

We had no observations of countries with public sectors smaller than 15 percent of GDP. Empirically, we can't know too much about how much growth very small government would permit. But in the United States today, government expenditures at all levels are 35 percent of GDP. We could cut that by half and vastly expand our growth. We should keep going until we run out of spending we don't need. I like the founders' view of government, that it should be as small as possible. 

AEN: It's a big question, but how did we get from the founders' view to the current view of government? 

HOLCOMBE: I've been working on a book for some years tentatively titled, From Liberty to Democracy: The Transformation of American Government. So you can guess my answer from the title. When the founders created this country, the underlying philosophy of American government was liberty. What the founders meant by liberty was freedom from government oppression. Their view was that liberty's enemy is government. So they wanted a government that would only protect rights and liberties. That was the point of the Constitution. 

But today, most people think the underlying philosophy of government is democracy. How do we decide what public policy should be? We find out what the majority wants. This idea is completely antithetical to the founders' view. By degrees, we became increasingly democratic and let this notion of liberty fall by the wayside. There is a relationship between the rise of democracy and the decline of liberty. Democracy, as we understand it today, is antithetical to liberty. 

AEN: But didn't the founders want rule by the people? 

HOLCOMBE: They wanted popular government, but not for the people to determine public policy. Initially, the one area of government in which people had a direct role was the House of Representatives, though there was no guaranteed right to vote. But the Senate was chosen by the state legislatures, until the 17th amendment in 1914. 

The president was chosen by the electoral college. The electors were chosen by the states. The Constitution never specified how the states picked their electors. Originally, it was most common for them to be chosen by their state legislatures. 

If a majority of the electors voted for one person, he would be president. Otherwise the decision would go to the House. The founders figured the electors would vote for somebody from their state. Because of that, nobody would get a majority. Therefore the House would choose the president. 

So the electoral college was to be a kind of search committee. They would be knowledgeable people, know the strengths and weaknesses of the possible candidates, and the electors would forward a slate of candidates to the House. As it happened, it didn't work out that way. A majority of electors usually agreed on one candidate. And by the 1820s, most states had already gone to popular election of electors. By 1828, political parties were out campaigning for presidents. 

AEN: And Andrew Jackson was the main player. 

HOLCOMBE: Andrew Jackson was an interesting character. On the one hand, he was committed to Jeffersonian ideals of limited government. He ran for president because he thought presidents after Jefferson had unjustly expanded the scope of government. He wanted a return to the founders' ideals. 

I'm sympathetic with that, but he also thought the best way to control the political elite in the country was through more democratic representation. As soon as elected officials are made more accountable to the public, they also have to be looking for ways to win elections. You end up with public policy as a popular opinion poll instead of commitment to a principle like liberty. Unwittingly, then, Jackson became part of a longer-term problem. 

AEN: Why, when you ask the public what it wants, is liberty not the answer? 

HOLCOMBE: We tend to take liberty for granted. And these days, there's also a big status-quo bias. Despite the complaints about government's intrusions into our lives, people think we have it pretty good and have a hard time imagining huge changes away from the status quo. 

I was discussing the finance of highways in my economics class. I asked about the toll that finances the Florida turnpike. My students all said it makes sense. Then I asked about the interstate highways and whether they should be similarly financed. Well, they didn't like that idea. They wanted free access to one but not the other. My interpretation is that they have a status-quo bias. 

When most people are getting along pretty comfortably, it's hard to convince them that we have strayed far from the principles that produced this level of comfort and prosperity. But prosperity is increasingly threatened as we move farther from the principles that produced it. 

It's my job as an economist to explain how small changes in policy can have huge effects, and in ways that are not always immediately predictable, unless you are thinking carefully. 

AEN: What attracted you to economics in the first place? 

HOLCOMBE: It offers a simple, palatable theoretical structure. And with theory, so much of the workings of the world are revealed to you. Immediately I loved the power of pure theory. The bottom line of this theory is that the market works. The hard part is the supposed exceptions to the market rule, and that's what attracted me to public finance. 

AEN: As a student, did you have defined views on these matters? 

HOLCOMBE: Unlike a lot of people who say they were socialists or some such when they were young, I already leaned toward pro-market views. All the intellectuals I knew were interventionists. Sometimes, I felt like an anti-intellectual because I couldn't agree with the interventionist view. So the discovery of the Austrian School was a revelation. First it was Hayek, and then Rothbard, and then Mises, and finally, I felt I had an intellectual foundation for what already seemed intuitively plausible. 

AEN: And you continue to work within this framework. 

HOLCOMBE: Yesterday, at this Austrian Scholars Conference, I delivered a paper on entrepreneurship, building on some ideas of Austrian economist Israel Kirzner. I asked the question: what is the origin of entrepreneurial opportunities? You might think that if an entrepreneur discovers a profit opportunity and uses it, that entrepreneurial opportunity is used up. Where do new ones come from? My answer is that they come from entrepreneurship itself. 

A good example is computers. Someone had a great idea for an infrared mouse on computers. But first someone had come up with a graphical operating system, which would not have been possible if someone had not come up with the good idea of a personal computer, which previously required the idea of the microprocessor, and so on. I argue in a forthcoming issue of The Quarterly Journal of Austrian Economics that this is the primary source of economic growth. 

AEN: How does this view compare with mainstream growth theory? 

HOLCOMBE: In the mainstream view, growth is created by combining inputs. The natural way to bring about growth, then, is to increase inputs. The production function takes it from there. My paper suggests that while inputs are crucial, entrepreneurship is more important. 

If you look at the old Soviet Union, they used the production function approach to growth. They invested in capital, they tried to push the technological frontiers, and they had an educated population. They were concentrating on the inputs--exactly according to mainstream theory--but neglecting the environment in which growth takes place. If you create the environment, the inputs take care of themselves. Yet even today, the IMF and the World Bank use mainstream growth theory that points to a central-planning model. 

AEN: You've also written a book on economic method. 

HOLCOMBE: When I began that project, a friend advised me against "falling into the black hole of methodology." I can see his point. My chapter on "Theories of Utility and Entrepreneurship" was the initial one, written just as a paper. It became a 40-page paper, then an 80-page chapter, then I started to divide it into pieces. The only way I could extract myself from the black hole of methodology was to consolidate it into a whole book and send it off to a publisher. 

Economists typically go about their discipline the way everyone else does, and they don't often think about the methodology they follow or whether it makes sense. It was a learning experience for me to explore how economists go about the search for truth, and to sort out what we as economists actually know about the world, versus conjectures about what may be true, versus outright propaganda. Too often economists construct elegant theories that have no connection to the real world. 

AEN: And what did you conclude? 

AEN: I end up being critical of methodological positivism, in which empirical evidence is used as a demonstration of the proof of theories. There's a good case for looking at empirical data and looking for regularities to see how the real world works. Econometrics is a lot like looking out the window: you want to make sense of what you see. If you are looking at a page of thousands of numbers, it is reasonable to ask yourself if there are any regular relationships between them. But the notion that you are testing a theory in doing this is outright wrong. You really can't test theories in any formal, empirical sense. 

AEN: This was Mises's fundamental methodological claim. 

HOLCOMBE: I completely agree with him. Most theories we want to test we came up with by looking at the data anyway. That's especially true in macroeconomics, in which there is only one set of data. Everybody knows it. It's not like pulling balls out of an urn, a statistics game in which you try to estimate the color composition of the urn of balls based on sample drawings. In economics, you are not doing that because everybody already knows the data. You've already looked at the urn. 

Also, economists don't really test theories; any empirical test must simultaneously test both the theory and the assumptions necessary to connect the abstract theory with real-world data. Whenever the empirical test turns out to contradict the theory, we don't reject the theory. We reject the supporting assumptions and go back to look for more data. We assume our test was wrong, change the specifications of the model, and run some more regressions until the data turns out to back the theory we had to begin with. Then we say: Aha! The data confirms the theory! 

So economists don't really test theories and they never reject theories. I challenge economists in general: if we really think we are testing theories, show me a theory that has been rejected on the basis of an empirical test. There are not many. Nevertheless, the data are still useful for looking at regularities. 

AEN: Also in your methodology book, you highlighted the Austrian notion of rationality. 

HOLCOMBE: In the Austrian view, all behavior is rational, from the point of view of the individual. A person acts, ex ante, to improve his position. That means there is no behavior that is not intended to be utility-enhancing, but it also means there is nothing to allow for prediction. Austrians agree that demand curves are downward sloping, for example, but this follows not from data but from logic. 

The neoclassical view assumes that people are wealth maximizing, income maximizing, or profit maximizing. These assumptions give you "testable" hypotheses. That is where the misuse begins. Social scientists are always blasting economists for believing only in "economic man." We respond by saying, "actually our view is much broader." Yet the neoclassical theory of public goods and externalities is built entirely on this same caricature. Well-known economists base their public-policy recommendations on it. 

Despite so many examples where people act charitably toward others and go out of their way to respect the rights of others, so much government coercion is justified based on the idea that we must prevent people from having any opportunity to be shirkers or free riders. 

AEN: Do you consider yourself an adherent of the Austrian School proper? 

HOLCOMBE: I don't know exactly where I fit in the taxonomy of the Austrian School--which, as this Scholars Conference demonstrates, is quite diverse. I've learned a great deal from Austrian writers, and I am a strong supporter. But there are scholars, many of them here, who have dedicated their academic careers to pushing the frontiers of the school. I have worked in different areas. I am enthusiastic about promoting the ideas of Austrian economics, both to my students and to the academic mainstream. The good news is that economists in the academic mainstream are increasingly interested in discovering what Austrian economics has to offer.