Another Lying Pol in the Fed’s Pocket

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If you want to understand how to deliver cheap shots as a congressman, watch the video of Rep. William Lacy Clay (D-Mo.) during yesterday’s hearing of Ron Paul’s Monetary Policy subcommittee. This isn’t the first time a cheap shot has ever been delivered in Congress, but given Clay’s background it probably ranks up there with the all time greats.

Here’s what went down.

One of the witnesses at the hearing was University of Maryland Professor Thomas DiLorenzo. When it came time for Clay to "question" the witnesses, Clay addressed his remarks to DiLorenzo. He first stated that because DiLorenzo was from the Austrian School of Economics that the Austrain school uses a deductive method of analysis, rather than an empirical method to study, economics. This is true. But then Clay went on to call the Austrian deductive method a non-rigorous scientific method. DiLorenzo could have explained the error in Clay’s thinking, but, since Clay was delivering cheap shots, he did not give DiLorenzo the opportunity to reply. Some search for truth there on the part of Clay.

As far as the deductive method being rigorous scientific, this would come as a surprise to most logicians, since logic is all about using the deductive method. The science of mathematics uses the deductive method. The best example being the "proofs" every high school student learns in geometry class.

The great Nobel prize winning economist, F.A. Hayek wrote, The Counter Revolution of Science, which discusses why the science of economics should use the method of deduction versus empirical study. On a more practical level, former Treasury Secretary Robert Rubin in his memoir, In An Uncertain World, appears to take a view along the lines of Hayek, when he writes at the very start of his book:

Some people I’ve encountered in various phases of my career seem more certain than I am about anything. That kind of certainty isn’t just a personality trait I lack. It’s an attitude that seems to me to misunderstand the very nature of reality – its complexity and ambiguity – and thereby to provide a rather poor basis for working through decisions in a way that is likely to lead to the best results.

Rubin clearly, on a gut level, would understand Hayek’s argument that the world is too complex to simply use empirical data. Hayek would agree that it is an "uncertain world."

For Clay to attack DiLorenzo for being non-scientific because the Austrian school uses the deductive method is absurd. Clay demonstrates that he is either a buffoon or a manipulative liar.

Clay then goes on to attack DiLorenzo for the fact that the deductive method requires basic assumptions. Clay hints that these basic assumptions are picked out of a hat. What is the key assumption that the Austrian school uses? That man acts, i.e. that man uses purposive behavior to achieve goals. For anyone who doesn’t think you can create an entire deductive edifice about economics from this principle, I recommend Ludwig von Mises magnum opus, Human Action. Read that and then try and come back and tell me that it can’t be done.

From here things get really interesting. Clay attacks DiLorenzo for being affiliated with the League of the South. As best I can tell from the web site, the League is a group of southerners Fed up with big government, who want to be left alone. They don’t want to have to use Federal Reserve currency, they don’t want to be told what to do by those in Washington D.C. or by northerners.

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2011 Economic Policy Journal

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