The Hermeneutical Invasion of Philosophy and Economics

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This article
originally appeared in
Review of Austrian
3 (1989): 45–59.

In recent years,
economists have invaded other intellectual disciplines and, in the
dubious name of “science,” have employed staggeringly oversimplified
assumptions in order to make sweeping and provocative conclusions
about fields they know very little about. This is a modern form
of “economic imperialism” in the realm of the intellect. Almost
always, the bias of this economic imperialism has been quantitative
and implicitly Benthamite, in which poetry and pushpin are reduced
to a single level, and which amply justifies the gibe of Oscar Wilde
about cynics, that they [economists] know the price of everything
and the value of nothing. The results of this economic imperialism
have been particularly ludicrous in the fields of sex, the family,
and education.

So why then
does the present author, not a Benthamite, now have the temerity
to tackle a field as arcane, abstruse, metaphysical, and seemingly
unrelated to economics as hermeneutics? Here my plea is the always
legitimate one of self-defense. Discipline after discipline, from
literature to political theory to philosophy to history, have been
invaded by an arrogant band of hermeneuticians, and now even economics
is under assault. Hence, this article is in the nature of a counterattack.

To begin, the
dictionary definition of hermeneutics is the age-old discipline
of interpreting the Bible. Until the 1920s or 1930s, indeed, hermeneutics
was confined to theologians and departments of religion. But things
changed with the advent of the murky German doctrines of Martin
Heidegger, the founder of modern hermeneutics. With the death of
Heidegger, the apostolic succession of head of the hermeneutical
movement fell upon his student, Hans-Georg Gadamer, who still wears
this mantle.

The greatest
success of the hermeneutical movement has been achieved in recent
decades, beginning in the closely related movement of “deconstructionism”
in literary criticism. Headed by the French theorists Michel Foucault,
Paul Ricoeur, and Jacques Derrida, deconstructionism in the Western
Hemisphere is led by the formidable Department at Yale University,
from which it has spread to conquer most of the English-literature
departments in the United States and Canada. The essential message
of deconstructionism and hermeneutics can be variously summed up
as nihilism, relativism, and solipsism. That is, either there is
no objective truth or, if there is, we can never discover it. With
each person being bound to his own subjective views, feelings, history,
and so on, there is no method of discovering objective truth. In
literature, the most elemental procedure of literary criticism (that
is, trying to figure out what a given author meant to say) becomes
impossible. Communication between writer and reader similarly becomes
hopeless; furthermore, not only can no reader ever figure out what
an author meant to say, but even the author does not know or understand
what he himself meant to say, so fragmented, confused, and driven
is each particular individual. So, since it is impossible to figure
out what Shakespeare, Conrad, Plato, Aristotle, or Machiavelli meant,
what becomes the point of either reading or writing literary or
philosophical criticism?

It is an interesting
question, one that the deconstructionists and other hermeneuticians
have of course not been able to answer. By their own avowed declaration,
it is impossible for deconstructionists to understand literary texts
or, for example, for Gadamer to understand Aristotle, upon whom
he has nevertheless written at enormous length. As the English philosopher
Jonathan Barnes has pointed out in his brilliant and witty critique
of hermeneutics, Gadamer, not having anything to say about Aristotle
or his works, is reduced to reporting his own subjective musings
– a sort of lengthy account of “what Aristotle means to me.”
Setting aside the hermeneutical problem of whether or not Gadamer
can know even what Aristotle means to him, we push back the
problem another notch. Namely, why in the world should anyone but
Gadamer, except possibly his mother or wife, be in the least interested
in the question of what Aristotle means to him? And even in the
improbable event that we were interested in this earth-shattering
question, we would in any case be prevented on hermeneutical principles
from understanding Gadamer’s answer.

and hermeneutics are clearly self-refuting on many levels. If we
cannot understand the meaning of any texts, then why are we bothering
with trying to understand or to take seriously the works or doctrines
of authors who aggressively proclaim their own incomprehensibility?


Indeed, a crucial
point about the hermeneuticians is that, for them, incomprehensibility
is a self-fulfilling prophecy. As a colleague of mine ruefully told
me: “I have read everything on hermeneutics I can lay my hands on,
and I understand no more about it than I did when I first started.”
Even in a profession – philosophy – not exactly famous
for its sparkle or lucidity, one of the most remarkable qualities
of the hermeneuticians is their horrendous and incomparably murky
style. Stalactites and stalagmites of jargon words are piled upon
each other in a veritable kitchen midden of stupefying and meaningless
prose. Hermeneuticians seem to be incapable of writing a clear English,
or indeed a clear German sentence. Critics of hermeneutics –
such as Jonathan Barnes or David Gordon[1]  – are understandably moved
to satire, to stating or quoting hermeneutical tracts and then “translating”
them into simple English, where invariably they are revealed as
either banal or idiotic.

At first, I
thought that these German hermeneuticians were simply ill-served
by their translators into English. But my German friends assure
me that Heidegger, Gadamer, et al. are equally unintelligible in
the original. Indeed, in a recently translated essay, Eric Voegelin,
a philosopher not normally given to scintillating wit, was moved
to ridicule Heidegger’s language. Referring to Heidegger’s master
work, Sein und Zeit (Being and Time), Voegelin refers to
the meaningless but insistent repetition of a veritable philosophical
dictionary of phrases as the Anwesen des Answesenden (“the
presence of that which is present”), the Dingen des Dings
(“the thinging of the thing”), the Nichten des Nichts (“the
nothinging of the nothing”), and finally to the zeigenden Zeichen
des Zeigzeugs (“the Pointing sign of the pointing implement”),
all of which is designed, says Voegelin, to whip up the reader “into
a reality-withdrawing state of linguistic delirium.”[2] 

On Gadamer
and the hermeneuticians, Jonathan Barnes writes:

What, then,
are the characteristic features of hermeneutical philosophy? Its
enemies will wade in with adjectives like empty, vapid, dreamy,
woolly, rhetorical. Gadamer himself tells an uncharacteristic
story. At the end of a seminar on Cajetan, Heidegger once startled
his devoted audience by posing the question: “What is being?”
“We sat there staring and shaking our heads over the absurdity
of the question.” Quite right too, say the enemies of hermeneutics:
the question is perfectly absurd. But Gadamer has only a frail
sense of the absurd, and his own readers ought to react as he
once – but alas, only once – reacted to Heidegger.

Barnes goes
on to say that Gadamer admits “that his thought has sometimes been
less than pellucid.” He further quotes Gadamer as saying:

I sometimes spoke over my pupils’ heads and put too many complications
into my train of thought. Even earlier my friends had invented
a new scientific measure, the “Gad,” which designated a settled
measure of unnecessary complications.

Barnes adds

Some may
prefer to this self-congratulatory little story a remark which
Gadarner makes of his younger self: “Despite my title of doctor,
I was still a 22-year old boy who thought rather murky thinking,
and who still did not really know what was going on.”

Barnes adds:
“Did the boy ever grow up?”[3] 

At this point
we may cite Sir Karl Popper on G.W.F. Hegel, who counts along with
Friedrich Schleiermacher as at least a great-grandfather of hermeneutics.
What Popper lacks in satiric gifts he makes up in the vehemence
of the scorn that he heaps upon the legion of his philosophical
enemies, real or imagined. After denouncing Hegel’s “high-flown
gibberish” and “imbecile fancies,” Popper quotes with obvious relish
the attack on Hegel by his contemporary Schopenhauer as:

a flat-headed,
insipid, nauseating, illiterate charlatan, who reached the pinnacle
of audacity in scribbling together and dishing up the craziest
mystifying nonsense. This nonsense has been noisily proclaimed
as immortal wisdom by mercenary followers and readily accepted
as such by all fools, who thus joined into as perfect a chorus
of admiration as had ever been heard before.[4] 

Why this enormous
acclaim and influence exerted by mystifying nonsense? In addition
to noting its establishment in the interests of the Prussian state,
Popper offers the following explanation:

For some
reason, philosophers have kept around themselves, even in our
day, something of the atmosphere of the magician. Philosophy is
considered a strange and abstruse kind of thing, dealing with
those mysteries with which religion deals, but not in a way which
can be “revealed unto babes” or to common people; it is considered
to be too profound for that, and to be the religion and theology
of the intellectuals, of the learned and wise.[5] 

For a final
citation on the incomprehensibility of hermeneutics, let us turn
to the witty and devastating demolition by H.L. Mencken of Thorstein
Veblen, another early protohermeneutician and an institutionalist
opponent of the idea of economic law. In the course of an essay
featuring the “translation” into English of Veblen’s indecipherable
prose, Mencken wrote that what was truly remarkable about Veblen’s

was the astoundingly
grandiose and rococo manner of their statement, the almost unbelievable
tediousness and flatulence of the gifted headmaster’s prose, his
unprecedented talent for saying nothing in an august and heroic

Marx, I daresay,
had said a good deal of it long before him, and what Marx overlooked
had been said over and over again by his heirs and assigns. But
Marx, at this business, labored under a technical handicap; he
wrote in German, a language he actually understood. Prof. Veblen
submitted himself to no such disadvantage. Though born, I believe,
in these States, and resident here all his life, he achieved the
effect, perhaps without employing the means, of thinking in some
unearthly foreign language – say Swahili, Sumerian or Old
Bulgarian – and then painfully clawing his thoughts into
a copious and uncertain but book-learned English. The result was
a style that affected the higher cerebral centers like a constant
roll of subway expresses. The second result was a sort of bewildered
numbness of the senses, as before some fabulous and unearthly
marvel. And the third result, if I make no mistake, was the celebrity
of the professor as a Great Thinker.[6] 


Marx, in fact,
has been hailed by the hermeneuticians as one of the grandfathers
of the movement. In 1985, for example, at the annual meeting of
the Western Political Science Association in Las Vegas, virtually
every paper offered in political theory was a hermeneutical one.
A paradigmatic title would be “Political Life as a Text: Hermeneutics
and Interpretation in Marx, Heidegger, Gadamer, and Foucault.” (Substitute
freely such names as Ricoeur and Derrida, with an occasional bow
to Habermas.)

I do not believe
it an accident that Karl Marx is considered one of the great hermeneuticians.
This century has seen a series of devastating setbacks to Marxism,
to its pretensions to “scientific truth,” and to its theoretical
propositions as well as to its empirical assertions and predictions.
If Marxism has been riddled both in theory and in practice, then
what can Marxian cultists fall back on? It seems to me that hermeneutics
fits very well into an era that we might, following a Marxian gambit
about capitalism, call “late Marxism” or Marxism-in-decline. Marxism
is not true and is not science, but so what? The hermeneuticians
tell us that nothing is objectively true, and therefore that all
views and propositions are subjective, relative to the whims and
feelings of each individual.

So why should
Marxian yearnings not be equally as valid as anyone else’s? By the
way of hermeneutics, these yearnings cannot be subject to refutation.
And since there is no objective reality, and since reality is created
by every man’s subjective interpretations, then all social problems
reduce to personal and nonrational tastes. If, then, hermeneutical
Marxists find capitalism ugly and unlovely, and they find socialism
beautiful, why should they not attempt to put their personal esthetic
preferences into action? If they feel that socialism is beautiful,
what can stop them, especially since there are no laws of economics
or truths of political philosophy to place obstacles in their path?

It is no accident
that, with the exception of a handful of contemporary economists
– who will be treated further later – every single hermeneutician,
past and present, has been an avowed collectivist, either of the
left- or right-wing variety, and sometimes veering from one collectivism
to another in accordance with the realities of power. Marx, Veblen,
Schmoller, and the German Historical school are well known. As for
the modern hermeneuticians, Heidegger found it all too easy to become
an enthusiastic Nazi once the Nazi regime had been established.
And Gadamer had no difficulty whatever adapting either to the Nazi
regime (where he was known for having only a “loose sympathy” with
the Third Reich) or to the Soviet occupation in East Germany (where,
in his own words, he won “the special esteem of the Russian cultural
authorities” for carrying out “their directives exactly, even against
my own convictions”).[7] 

and Keeping the “Conversation” Going

Here we must
note two variants of the common hermeneutical theme. On the one
hand are the candid relativists and nihilists, who assert, with
an inconsistently absolutist fervor, that there is no truth. These
hold with the notorious dictum of the epistemological anarchist
Paul Feyerabend that “anything goes.” Anything, be it astronomy
or astrology, is of equal validity or, rather, equal invalidity.
The one possible virtue of the “anything goes” doctrine is that
at least everyone can abandon the scientific or philosophic enterprise
and go fishing or get drunk. This virtue, however, is rejected by
the mainstream hermeneuticians, because it would put an end to their
beloved and interminable “conversation.”

In short, the
mainstream hermeneuticians do not like the “anything goes” dictum
because, instead of being epistemological anarchists, they are epistemological
pests. They insist that even though it is impossible to arrive at
objective truth or indeed even to understand other theorists or
scientists, that we all still have a deep moral obligation to engage
in an endless dialogue or, as they call it, “conversation” to try
to arrive at some sort of fleeting quasi-truth. To the hermeneutician,
truth is the shifting sands of subjective relativism, based on an
ephemeral “consensus” of the subjective minds engaging in the endless
conversation. But the worst thing is that the hermeneuticians assert
that there is no objective way, whether by empirical observation
or logical reasoning, to provide any criteria for such a consensus.

Since there
are no rational criteria for agreement, any consensus is necessarily
arbitrary, based on God-knows-what personal whim, charisma of one
or more of the conversationalists, or perhaps sheer power and intimidation.
Since there is no criterion, the consensus is subject to instant
and rapid change, depending on the arbitrary mind-set of the participants
or, of course, a change in the people constituting the eternal conversation.

A new group
of hermeneutical economists, eager to find some criteria for consensus,
have latched onto a Gestalt-like phrase of the late economist Fritz
Machlup, perhaps taking his name very much in vain. They call this
criterion the “Aha! principle,” meaning that the truth of a proposition
is based on the exclamation of “Aha!” that the proposition may arouse
in someone’s breast. As Don Lavoie and Jack High put it: “We know
a good explanation when we see one, and when it induces us to say
aha.”[8]  Somehow I do not find this criterion
for truth, or even for consensus, very convincing. For example,
many of us would find the prospect of being confronted with the
option of engaging in endless and necessarily fruitless conversation
with people unable to write a clear sentence or express a clear
thought to be the moral equivalent of Sartre’s No Exit.

I have a hunch that if someone came up with the proposition: “It
would be a great thing to give these guys a dose of objective reality
over the head” or at the very least to slam the door on their conversation,
that this would elicit many more fervent “Ahas!” than the murky
propositions of the hermeneuticians themselves.

The prime moral
duty proclaimed by the hermeneuticians is that we must at all times
keep the conversation going. Since this duty is implicit,
it is never openly defended, and so we fail to be instructed why
it is our moral obligation to sustain a process that yields such
puny and ephemeral results. In keeping with this alleged virtue,
the hermeneuticians are fervently and dogmatically opposed to “dogmatism”
and they proclaim the supreme importance of remaining endlessly
“open” to everyone in the dialogue. Gadamer has proclaimed that
the highest principle of hermeneutic philosophy is “holding oneself
open in a conversation,” which means always recognizing “in advance,
the possible correctness, even the superiority of the conversation
partner’s position.” But, as Barnes points out, it is one thing
to be modestly skeptical of one’s own position; it is quite another
to refuse to dismiss any other position as false or mischievous.
Barnes points out that the modest skeptic:

that he himself may always be wrong. Gadamer’s “open” philosopher
allows that his opponent may always be right. A modest skeptic
may … indeed, in his modest way, regard the history of philosophy
as a ceaseless campaign, marked by frequent defeats and occasional
triumphs, against the ever powerful forces of fallacy and falsehood….
[W]ith some opponents he will not be “open”: he will be quite
sure that they are wrong.[9] 

The most important
hermeneutical philosopher in the United States is Richard Rorty,
who, in his celebrated book, Philosophy and the Mirror of Nature,
devotes considerable space to the prime importance of “keeping the
conversation going.” In his sparkling critique of Rorty, Henry Veatch
points out that, to the crucial question of how can we conversationalists
ever know which ideals or “cultural posits” (in the Rortian language)
are better than others, “Rorty could only answer that, of course,
there can’t be any such thing as knowledge in regard to matters
such as these.” So, if there is no knowledge and, hence, no objective
criteria for arriving at positions, we must conclude, in the words
of Veatch, that “although Aristotle may well have taught that ‘philosophy
begins in wonder’, … present-day philosophy can only end in a total
conceptual or intellectual permissiveness.”[10]  In short, we end with the Feyerabendian
“anything goes” or, to use the admiring phrase of Arthur Danto in
his summary of Nietzsche, that “everything is possible.”[11]  Or, in a word, total “openness.”

But if all
things are open, and there are no criteria to guide conversationalists
to any conclusions, how will such conclusions be made? It seems
to me, following Veatch, that these decisions will be made by those
with the superior Will-to-Power. And so it is not a coincidence
that leading hermeneuticians have found themselves flexible and
“open” in response to the stern demands of state power. After all,
if Stalin, Hitler, or Pol Pot enters the “conversational” circle,
they cannot be rejected out of hand, for they too may offer a superior
way to consensus. If nothing is wrong and all things are open, what
else can we expect? And who knows, even these rulers may decide,
in a sardonic burst of Marcusean “repressive tolerance,” to keep
some sort of Orwellian “conversation” going in the midst of a universal

In all the
blather about openness, I am reminded of a lecture delivered by
Professor Marjorie Hope Nicholson at Columbia University in 1942.
In a critique of the concept of the open mind, she warned: “Don’t
let your mind be so open that everything going into it falls through.”

There is another
self-serving aspect to the hermeneutical demands for universal openness.
For if nothing – no position, no doctrine – can be dismissed
outright as false or mischievous or as blithering nonsense, then
they too, our hermeneuticians, must be spared such rude dismissal.
Keeping the conversation going at all costs means that these people
must eternally be included. And that is perhaps the unkindest cut
of all.

If one reads
the hermeneuticians, furthermore, it becomes all too clear that
typically no one sentence follows from any other sentence. In other
words, not only is the style abominable, but there is no reasoning
in support of the conclusions. Since logic or reasoning are not
considered valid by the hermeneuticians, this procedure is not surprising.
Instead, for reasoning the hermeneuticians substitute dozens or
scores of books, which are cited, very broadly, in virtually every
paragraph. To support their statements, the hermeneuticians will
list repeatedly every book that might possibly or remotely relate
to the topic. In short, their only argument is from authority, an
ancient philosophic fallacy which they seem to have triumphantly
revived. For indeed, if there is no truth of reality, if for logic
or experience, we must substitute a fleeting consensus of the subjective
whims, feelings, or power plays of the various conversationalists,
then what else is there but to muster as many conversationalists
as possible as your supposed authorities?[12] 

Armed with
their special method, the hermeneuticians are therefore able to
dismiss all attacks upon themselves, no matter how perceptive or
penetrating, as “unscholarly.” This lofty rebuttal stems from their
unique definition of scholarly, which for them means ponderous and
obscurantist verbiage surrounded by a thicket of broad citations
to largely irrelevant books and articles.

So why then
have not the distinguished critics of hermeneutics played the game
on their opponents’ own turf and waded through the mountains and
oceans of hogwash, patiently to cite and refute the hermeneuticians
point by point and journal article by journal article? To ask that
question is virtually to answer it.

In fact, we
have asked some of the critics this question, and they immediately
responded in a heartfelt manner that they do not propose to dedicate
the rest of their lives to wading through this miasma of balderdash.
Moreover, to do so, to play by the hermeneuticians’ own rules, would
be to grant them too much honor. It would wrongfully imply that
they are indeed worthy participants in our conversation. What they
deserve instead is scorn and dismissal. Unfortunately, they do not
often receive such treatment in a world in which all too many intellectuals
seem to have lost their built-in ability to detect pretentious claptrap.[13] 


like to think of their discipline as the “hardest” of the social
sciences, and so it is no surprise that hermeneutics – though
having conquered the field of literature and made severe inroads
into philosophy, political thought, and history – has yet made
very little dent in economics. But the economics discipline has
been in a state of methodological confusion for over a decade, and
in this crisis situation minority methodologies, now including hermeneutics,
have begun to offer their wares in the economics profession; of
course, the practitioners down in the trenches only loosely reflect,
or indeed have scarcely any interest in, the small number of methodological
reflections in the upper stories of the ivory tower.

But these seemingly
remote philosophical musings do have an important long-run influence
on the guiding theories and directions of the discipline. For approximately
two decades, Lionel Robbins’s justly famous The
Nature and Significance of Economic Science
was the guiding
methodological work of the profession, presenting a watered-down
version of the praxeological method of Ludwig von Mises. Robbins
had studied at Mises’s famous privatseminar at Vienna, and
his first edition (1932) stressed economics as a deductive discipline
based on the logical implications of the universal facts of human
action (for example, that human beings try to achieve goals by using
necessarily scarce means). In Robbins’s more widely known second
edition (1935), the Misesian influence was watered down a bit further,
coupled with intimations no bigger than a man’s hand of the neo-classical
formalism that would hit the profession about the time of World
War II.[14]  After the war, the older economics
was inundated by an emerging formalistic and mathematical neoclassical
synthesis, of Walrasian equations covering microeconomics and Keynesian
geometry taking care of macro.

Aiding and
abetting the conquest of economics by the new neo-classical synthesis
was the celebrated article by Milton Friedman in 1953, “The Methodology
of Positive Economics,” which quickly swept the board, sending Robbins’s
Nature and Significance unceremoniously into the dustbin
of history.[15]  For three decades, secure and
unchallenged, the Friedman article remained virtually the only written
portrayal of official methodology for modern economics.

It should be
noted that, as in the triumph of the Keynesian revolution and many
other conquests by various schools of economics, the Friedman article
did not win the hearts and minds of economists in the pattern of
what we might call the Whig theory of the history of science: by
patient refutation of competing or prevailing doctrines. As in the
case of the Mises-Hayek business-cycle theory dominant before Keynes’s
General Theory, the Robbins book was not refuted; it was
simply passed over and forgotten. Here the Thomas Kuhn theory of
successive paradigms is accurate on the sociology or process of
economic thought, deplorable as it might be as a prescription for
the development of a science. Too often in philosophy or the social
sciences, schools of thought have succeeded each other as whim or
fashion, much as one style of ladies’ hemlines has succeeded another.
Of course, in economics as in other sciences of human action, more
sinister forces, such as politics and the drive for power, often
deliberately skew the whims of fashion in their own behalf.

What Milton
Friedman did was to import into economics the doctrine that had
dominated philosophy for over a decade, namely logical positivism.
Ironically, Friedman imported logical positivism at just about the
time when its iron control over the philosophical profession in
the United States had already passed its peak. For three decades,
we have had to endure the smug insistence on the vital importance
of empirical testing of deductions from hypotheses as a justification
for the prevalence of econometric models and forecasting, as well
as a universal excuse for theory being grounded on admittedly false
and wildly unrealistic hypotheses. For neoclassical economic theory
clearly rests on absurdly unrealistic assumptions, such as perfect
knowledge, the continuing existence of a general equilibrium with
no profits, no losses, and no uncertainty, and human action being
encompassed by the use of calculus that assumes infinitesimally
tiny changes in our perceptions and choices.

In short, this
formidable apparatus of neoclassical mathematical economic theory
and econometric models, all rests, from the Misesian point of view,
upon the treacherous quicksand of false and even absurd assumptions.
This Austrian charge of falsity and unreality, if noticed at all,
was for decades loftily rebutted by pointing to Friedman’s article
and asserting that falsity of assumptions and premises do not matter,
so long as the theory “predicts” properly. In its founding years
in the early 1930s, the Econometric Society emblazoned on its escutcheon
the motto, “Science is prediction,” and this was the essence of
the Friedman-derived defense of neoclassical theory. Austrians such
as Mises and Hayek replied that the disciplines of human action
are not like the physical sciences. In human affairs, there are
no laboratories where variables can be controlled and theories tested,
while (unlike the physical sciences) there are no quantitative constants
in a world where there is consciousness, freedom of will, and freedom
to adopt values and goals and then to change them. These Austrian
contentions were dismissed by neoclassicals as simply posing a greater
degree of difficulty in arriving at the human sciences, but not
in offering a troublesome difference in kind.

The neoclassical
synthesis, however, began, in the early 1970s, to lose its power
either to understand or to predict what was going on in the economy.
The inflationary recession that first appeared dramatically in the
1973–74 contraction put an end to a thirty-five-year period of arrogant
and unquestioned hegemony by the Keynesian wing of the neoclassical
synthesis. For Keynesian theory and policy rested on the crucial
assumption that inflationary recession simply cannot happen. At
that point, Friedmanite monetarism came to the fore, but monetarism
has now come a cropper after making a rapid series of disastrously
wrong predictions from the beginning of the Reagan era until the
present. But he who lives by prediction is destined to die by prediction.

In addition
to these failures of Keynesianism and monetarism, the blunders and
errors of econometric forecasting have become too notorious to ignore,
and a wealthy and supremely arrogant profession, using ever higher-speed
computer models, seems to enjoy less and less ability to forecast
even the immediate future. Even governments, despite the assiduous
attention and aid of top neoclassical economists and forecasters,
seem to have great difficulties in forecasting their own spending,
much less their own incomes, let alone the incomes or spending of
anyone else.

Amid these
failures, there has been a chipping away at the neoclassical formalism
of Walrasian microeconomics, sometimes by disillusioned leaders
operating from within this ruling paradigm.

As a result
of these problems and failures, the last ten or fifteen years has
seen the development of a classic Kuhnian “crisis situation” in
the field of economics. As the positivist neoclassical orthodoxy
begins to crumble, competing paradigms have emerged. Sparked also
by Hayek’s receipt of a Nobel Prize in 1974, Austrian or Misesian
economics has enjoyed a revival since then, with numerous Austrians
teaching in colleges in the United States and Britain. Recently
there have even emerged five or six Austrian graduate programs or
centers in the United States.

In a crisis
situation, of course, the bad jostles the good in the new atmosphere
of epistemological and substantive diversity. No one ever guaranteed
that if a hundred flowers should bloom, that they would all be passing
fair. On the left, the nontheory of institutionalism has made a
bit of a comeback, jostled by “post-Keynesians” (inspired by Joan
Robinson) and “humanistic” neo-Marxists who have substituted a vague
adherence to “decentralization” and protection of all animal and
vegetable life forms for the rigors of the labor theory of value.
Which brings us back to hermeneutics.

For in this
sort of atmosphere, even the underworld of hermeneutics will vie
for its day in the sun. Probably the most prominent hermeneutical
economist in the United States is Donald McCloskey, who calls his
viewpoint “rhetoric” and whose attack on truth occurs in the name
of rhetoric and of the eternal hermeneutical conversation.[16]  McCloskey, unfortunately, follows
the modern path of rhetoric run hog-wild and divorced from a firm
anchor in truth, overlooking the Aristotelian tradition of “noble
rhetoric” as the most efficient way of persuading people of correct
and true propositions. For Aristotelians, it is only “base” rhetoric
that is divorced from true principles.[17]  McCloskey is now organizing a
center for rhetorical studies at the University of Iowa, which will
organize volumes on rhetoric in a number of diverse disciplines.

Much as I deplore
hermeneutics, I have a certain amount of sympathy for McCloskey,
an economic historian who endured years as a drill instructor and
cadre leader in the Friedman-Stigler Chicago school’s positivist
ranks. McCloskey is reacting against decades of arrogant positivist
hegemony, of an alleged “testing” of economic theory that never
really takes place, and of lofty statements by positivists that
“I do not understand what you mean,” when they know darn
well what you mean but disagree with it, and who use their narrow
criteria of meaning to dismiss your argument. In this way, the positivists
for a long while were able to read virtually all important philosophical
questions out of court and consign them to the despised departments
of religion and belles lettres. In a sense, the rise of hermeneutics
is those departments’ revenge, retorting to the positivists that
if “science” is only the quantitative and the “testable,” then we
shall swamp you with stuff that is really meaningless.

It is more
difficult to excuse the path traveled by the major group of hermeneuticians
in economics, a cluster of renegade Austrians and ex-Misesians gathered
in the Center for Market Processes at George Mason University. The
spiritual head of this groupuscule, Don Lavoie, has reached the
pinnacle of having his photograph printed in his magazine Market
Process talking to the great Gadamer.[18]  Lavoie has organized a Society
for Interpretive Economics (interpretation is a code word for hermeneutics)
to spread the new gospel, and has had the effrontery to deliver
a paper entitled “Mises and Gadamer on Theory and History,” which,
as a colleague of mine has suggested, is the moral equivalent of
my writing a paper entitled “Lavoie and Hitler on the Nature of

It must be
noted that nihilism had seeped into current Austrian thought before
Lavoie and his colleagues at the Center for Market Processes embraced
it with such enthusiasm. It began when Ludwig M. Lachmann, who had
been a disciple of Hayek in England in the 1930s and who had written
a competent Austrian work entitled Capital
and Its Structure
in the 1950s, was suddenly converted by
the methodology of the English economist George Shackle during the
1960s.[19]  Since the mid-1970s, Lachmann,
teaching part of every year at New York University, has engaged
in a crusade to bring the blessings of randomness and abandonment
of theory to Austrian economics. When Lavoie and his colleagues
discovered Heidegger and Gadamer, Lachmann embraced the new creed
at the 1986 first annual (and, if luck is with us, the last annual)
conference of the Society of Interpretive Economics at George Mason
University. The genuine Misesian creed, however, still flourishes
at the Ludwig von Mises Institute at Auburn University and in its
publications: The
Free Market
, the Austrian
Economics Newsletter
, and the Review
of Austrian Economics
, which in its first issue included
a critique of a quasi-hermeneutical book by two ex-Misesians who
claim to have discovered the key to economics in the works of Henri

One of the
main motivations of the ex-Misesian hermeneuticians is that their
horror of mathematics, to which they react as to the head of Medusa,
leads them to embrace virtually any ally in their struggle against
positivism and neoclassical formalism. And so they find that, lo
and behold, institutionalists, Marxists, and hermeneuticians have
very little use for mathematics either. But before they totally
embrace the desperate creed that the enemy of my enemy is necessarily
my friend, our Market Process hermeneuticians should be warned that
there may be worse things in this world than mathematics or even
positivism. And second, that in addition to Nazism or Marxism, one
of these things may be hermeneutics.

And just as
Professor McCloskey’s history may serve as a partial mitigation
of his embrace of hermeneutics, we may go further back and mitigate
the sins of the logical positivists. For, after all, the positivists,
much as they may be reluctant to admit it, also did not descend
upon us from Mount Olympus. They grew up in old Vienna, and they
found themselves in a Germanic world dominated by protohermeneutical
creeds such as Hegelianism as well as by the young Heidegger, who
was even then making his mark. After reading and listening to dialectics
and protohermeneutics day in and day out, after being immersed for
years in the gibberish that they were told constituted philosophy,
is it any wonder that they – including for our purposes Popper
as well as Carnap, Reichenbach, Schlick, et al. – should finally
lash out and exclaim that the whole thing was meaningless or that
they should cry out for precision and clarity in language? Is it
also any wonder that the nascent positivists, like McCloskey a half-century
later, should go too far and throw out the philosophic baby with
the neo-Hegelian bathwater?

This article
originally appeared in Review
of Austrian Economics 3
(1989): 45–59 (available
in PDF
) and was adapted from a paper delivered at a Conference
on Recent Trends in the Social Sciences held by the London Academic
and Cultural Resources Fund and the Institute of Philosophy of the
Jagellonian University of Krakw at Krakw, Poland, in April 1987.


[1]  Barnes, “A Kind of Integrity”; and
David Gordon, “Hermeneutics
versus Austrian Economics
” (Auburn, Ala.: Ludwig von Mises Institute,

[2]  Eric Voegelin, “The German University
and the Order of German Society: A Reconsideration of the Nazi Era,”
Intercollegiate Review 20 (Spring/Summer 1985): 11.

[3]  Barnes, “A Kind of Integrity,” p. 13.

[4]  Karl R. Popper, The
Open Society and its Enemies
, 4th ed. (New York:
Harper & Row, 1962), 2, p. 33.

[5]  Ibid, p. 30.

[6]  H.L. Mencken, “Professor Veblen,” A
Mencken Chrestomathy
(New York: Alfred A. Knopf, 1949),
p. 270.

[7]  Barnes, A Kind of Integrity,”
p. 12.

[8]  Don Lavoie and Jack High, “Interpretation
and the Costs of Formalism” (unpublished manuscript), p. 14.

[9]  Barnes, “A Kind of Integrity,” p. 13.
For a critique of the triumph of the ideal of “openness,” see Allan
Bloom, The
Closing of the American Mind
(New York: Simon and Schuster,

[10]  Henry Veatch, “Deconstruction in
Philosophy: Has Rorty Made It the Dennouement of Contemporary Analytical
Philosophy?” Review of Metaphysics 39 (December 1985): 313–14,

[11]  Arthur C. Danto, Nietzsche
as Philosopher
(New York: Columbia University Press, 1980),
p. 12; cited in Veatch, “Deconstruction,” p. 312.

[12]  I am indebted for this point to Sheldon
Richman of the Institute for Humane Studies at George Mason University.

[13]  In a witty and perceptive article,
the distinguished Yale philosopher Harry Frankfurt calls this phenomenon
“bullshit,” which he asserts to be a greater enemy to the truth
than an outright lie, since a liar recognizes that he is violating
the truth whereas the bullshitter does not. Frankfurt writes:

The contemporary
proliferation of bullshit also has deeper sources, in various
forms of skepticism which deny that we can have any reliable access
to an objective reality and which therefore reject the possibility
of knowing how things truly are. These “antirealist” doctrines
undermine confidence in the value of disinterested efforts to
determine what is true and what is false, and even in the intelligibility
of the notion of objective inquiry.

See Harry Frankfurt,
“On Bullshit,” Raritan 6 (Fall 1986): 99–100.

[14]  Lionel Robbins, An
Essay on the Nature and Significance of Economic Science

(London: Macmillan, [1932] 1935).

[15]  Milton Friedman, “The Methodology
of Positive Economics,” in Friedman, Essays
in Positive Economics
(Chicago: University of Chicago Press,

[16]  Donald N. McCloskey, The
Rhetoric of Economics
(Madison: University of Wisconsin
Press, 1985). For a comprehensive Misesian critique of McCloskey’s
work, see the book review essay by Hans-Hermann Hoppe, “In
Defense of Extreme Rationalism: Thoughts on Donald McCloskey’s The
Rhetoric of Economics
,” Review of Austrian Economics
3 (1989): 179–214.

[17]  Cf.
Richard M. Weaver, The Ethics of Rhetoric
(Chicago: University of Chicago Press) and Larry Arnhart, Aristotle
on Political Reasoning: A Commentary on “The Rhetoric”
Northern Illinois University Press, 1981).

[18]  Market Process 4 (Fall 1986):

[19]  Ludwig M. Lachmann, Capital
and Its Structure
(London: London School of Economics, 1956).
The later, post-Shackelian or nihilist Lachmann may be found in
his “From Mises to Shackle: An Essay on Austrian Economics and the
Kaleidic Society,” Journal of Economic Literature 54 (1976).

[20]  Thus, see Charles W. Baird, “The
Economics of Time and Ignorance:

A Review
,” Review of Austrian Economics 1 (1987): 189–223.

N. Rothbard
(1926–1995) was the author of Man,
Economy, and State
, Conceived
in Liberty
, What
Has Government Done to Our Money
, For
a New Liberty
, The
Case Against the Fed
, and many
other books and articles
. He was
also the editor – with Lew Rockwell – of The
Rothbard-Rockwell Report

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