The Kochtopus vs. Murray N. Rothbard, Part II

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After Murray Rothbard and the Cato Institute permanently parted company, in the manner described in Part I, a fundamental issue arose. Would Cato, and the other organizations in the Kochtopus, continue to promote the same ideas as they had previously done? Ostensibly, there had been no ideological split. Rothbard had objected to Cato’s hiring a non-Austrian economist, David Henderson; but he left Cato after a short time. (As I recall, he threw a party to celebrate his own ouster.) Rothbard also objected to the anti-nuclear energy position of Roy Childs and some of his associates at Libertarian Review; but after Rothbard left, little was heard of this strange view. Was the separation between Cato and Rothbard, then, reducible to a dispute between Ed Crane and Rothbard over the best political strategy for the Libertarian Party?

Rothbard did not think so. Cato had been founded to promote Rothbardian ideas. Indeed, Charles Koch’s support for Rothbard long antedated the founding of Cato in 1977. Koch had given money to Rothbard’s Center for Libertarian Studies. Could the ideas remain the same when Rothbard had departed? He predicted that the Kochtopus would, without his guidance, depart from its original program. He joked about "Pabloism without Pablo," referring to a Trostkyist group, once headed by Michel Pablo (the pseudonym of the Greek revolutionary Michalis Raptis), which had dispensed with its founder. Time was soon to prove him right.

Rothbard deemed it of prime importance to advance Austrian economics, of which he was of course a leading exponent. Here, at any rate, the Kochtopus seemed at one with him. Walter Grinder, working from the Koch-dominated Institute for Humane Studies, promised a "Rothbardianism with manners." In his view, Rothbard had been too acerbic; through a policy of suaviter in modo, Austrian views could better gain access to the mainstream. But he did not deviate at all from Rothbardian orthodoxy in his own economic views. At the Eugene, Oregon, Cato conference in June 1979, mentioned in Part I, he gave excellent lectures on Austrian business cycle theory.

His new policy took over an idea from Friedrich Hayek’s famous essay, "The Intellectuals and Socialism," though I doubt that Hayek would have endorsed the IHS application of his ideas. Hayek stressed that new social movements first gain adherents among top-ranking theorists. The majority of intellectuals, the "second-hand dealers in ideas," then popularize and simplify what they have learned from these thinkers, passing the product on to the general public. Grinder and others in leadership posts at IHS concluded that they should concentrate on elite universities such as Harvard, Yale, and Princeton in the United States, and Oxford and Cambridge in England. If students could be recruited from these universities or, if already sympathetic, admitted to their programs, success was at hand.

Grinder placed particular emphasis on Tyler Cowen, a brilliant student who had been interested in Austrian economics since his high school days. Cowen enrolled in an Austrian economics program at Rutgers, where he impressed both Joe Salerno and Richard Fink with his extraordinary erudition. When Fink moved to George Mason University, Cowen moved with him; and he completed his undergraduate degree there in 1983. Grinder considered him the next Hayek, the hope of Austrian economics.

In accord with the elite universities policy, Cowen went to Harvard for his graduate degree. There he came under the influence of Thomas Schelling and gave up his belief in Austrian economics.

After he finished his PhD in 1987, Cowen was for a time a professor at the University of California at Irvine, and he used to visit me sometimes in Los Angeles. I was impressed with his remarkable intelligence and enjoyed talking with him. But I remember how surprised I was one day when he told me that he did not regard Ludwig von Mises very highly. Here he fitted in all-too-well with another policy of Richard Fink and the Kochtopus leadership. They regarded Mises as a controversial figure: his "extremism" would interfere with the mission of arousing mainstream interest in the Austrian School. Accordingly, Hayek should be stressed and Mises downplayed. (After the collapse of the Soviet Union, which led to new interest in Mises’s socialist calculation argument, this policy changed. The mainstream, though of course continuing to reject Mises, now recognized him as a great economist.) The policy was strategic, but Cowen went further — he really didn’t rate Mises highly.

Cowen eventually returned to George Mason University as a Professor of Economics. He is said to be the dominant figure in the department. Because of his close friendship with Richard Fink, who left academic work to become a major executive with Koch Industries and the principal disburser of Koch Foundation funding, Cowen exerts a major influence on grants to his department.

Although he is largely favorable to the free market and believes that the Austrian school has contributed insights, Cowen remains a strong critic of Austrian and Rothbardian views. He has published a book that sharply attacks Austrian business cycle theory, Risk and Business Cycles: New and Old Austrian Perspectives (Routledge, 1997); and in an article written with Fink, "Inconsistent Equilibrium Constructs: The Evenly Rotating Economy of Mises and Rothbard" (American Economic Review, Volume 75, Number 4, September 1985), he argued that a key feature in the economic theory of Mises and Rothbard, the evenly rotating economy, is fundamentally flawed. It was ironic that the hope of Austrian economics, according to Grinder, and the prime ornament of his stress on elite universities, wrote an article for the most prestigious economic journal in the United States critical of the theory Grinder wished to propagate. Cowen has also criticized libertarian anarchism, another fundamental plank in Rothbard’s thought. He has defended government funding of the space program and limited government subsidies for the arts.

One might object to what I have said so far. Although the heavy Koch support for Cowen did not advance Austrian economics, was not a flourishing Austrian program established at George Mason? If so, did not the generous fellowships offered by Koch organizations, such as the Claude Lambe Foundation, play a major role in this happy development? Fellowships were also given to those studying in the Austrian program at NYU.

There is indeed an Austrian program at George Mason, but Rothbard was proved correct. Absent his guidance, the program veered from his ideas. Many of the Austrian sympathizers at George Mason stressed the views of Ludwig Lachmann, in a way that aroused Rothbard’s misgivings. These included Karen Vaughn, who became the department chair. She was very influential in the department, in part owing to her friendship with James Buchanan, a Nobel Laureate who had brought his Center for Public Choice to George Mason. She did not like Rothbard. A few years after receiving her PhD, she had attended the famous South Royalton Conference in 1974 on Austrian economics. Rothbard responded to one of her comments in what she deemed a dismissive fashion, and apparently she never forgave him. I understand that she blocked the tenure of George Selgin, an excellent economist and hardline Austrian.

Rothbard admired Lachmann’s early work in capital theory but believed that his later thought carried to an extreme the valid Austrian point that the future is uncertain. Lachmann used this point, Rothbard contended, to eliminate economic theory altogether. He termed this deviation "Lachmannia."

Rothbard and the George Mason Austrians clashed over another issue. Don Lavoie, a popular teacher and an authority on the socialist calculation debate, became interested in hermeneutics, principally as developed by the German philosopher Hans-Georg Gadamer. The details of this philosophical view are singularly difficult to grasp, but fortunately it is not necessary for our purposes to explain it. Suffice it to say that Lavoie thought that Gadamer’s philosophy would lend support to the Austrian criticism of the scientistic procedures of neoclassical economics.

Rothbard emphatically disagreed. He denounced Gadamer’s philosophy as anti-theoretical. No doubt Gadamer opposed scientism; but, Rothbard claimed, he advanced in its place a relativistic historicism that subverted Mises’s praxeology. (In this battle I played a minor role on Rothbard’s side.) After a few years, interest in hermeneutics subsided. Lavoie fell out of favor with Fink — according to one account, he refused to support the appointment of someone Fink wanted on the faculty — and as a result of the discord this caused, he transferred to another department, the Program on Social and Organizational Learning. He died at the early age of fifty in 2001.

Grinder did not support the interest in hermeneutics displayed by some of the younger Austrians to whom he had served as a mentor. He too aroused Fink’s displeasure, and he lost his influential position.

The current Austrian program at George Mason, headed by Peter Boettke, stresses a combination of Austrian theory with other approaches, especially game theory, public choice, and institutional economics. Since Rothbard was critical of all of these movements, it is safe to say he would not have completely approved of this program.

The activities of the IHS under Walter Grinder and his successors have by no means been confined to support for economics students. Quite the contrary, fellowships and other support have been made available to those in a number of other disciplines. Again, the pseudo-Hayekian policy discussed previously has had results out of keeping with the promotion of classical liberalism, let alone a strict Rothbardian program.

Stephen Macedo perfectly fit that policy. He did graduate work at Princeton, Oxford, and the London School of Economics. It is hardly surprising, then, that he received extensive funding. He now serves as Laurance S. Rockefeller Professor of Politics and Director of the Center for Human Values at Princeton University.

One might at first think that Macedo’s career is a triumph for the elite universities policy. A student who attended some of these schools is now a professor at one of them: what could be better? There is unfortunately one small catch. Macedo does not support classical liberalism. Quite the contrary, in his major work Liberal Virtues (Oxford University Press, 1990), he defends compulsory indoctrination in politically correct values in a way entirely alien to libertarianism. Values he deems to be liberal, such as diversity, must shape the private lives of citizens, as well as their public activities. The principal result of the Koch funding he received was a pamphlet published in 1987 by Cato, The New Right versus the Constitution, an attack on strict construction of the Constitution. John Gray, an Oxford don who later taught at the London School of Economics, was another IHS favorite who abandoned classical liberalism. Gray has made a career of moving from one ideology to another, often at six-month intervals. His current views call to mind a phrase of the "Gloomy Dean," William Ralph Inge: "a rather soppy socialism."

The oddities of IHS were not confined to its funding policy. Roderick Long, a leading libertarian philosopher who for a time worked at IHS, has noted that Charles Koch, who, appropriately enough, wanted results for the money he spent, had a peculiar way of measuring them. After Walter Grinder’s departure, Koch decided to emphasize policy studies over academic work. The size of student seminars increased, and students were given questionnaires at the beginning and end of a week’s program to determine the extent of their political progress. Applications for IHS scholarships were run through a computer to determine how many times the "right" names, e.g., Mises, Hayek, and Bastiat, appeared.

Incidentally, despite his immense wealth, Koch was often ungenerous in his subventions. In her last years, the centenarian Margit von Mises was in failing health, and it was suggested that she move to a rest home. Koch was approached for a contribution, and he responded that he would pay half the cost, if the remainder were raised through a public subscription. Paying for the full cost would have been for him the equivalent of an ordinary person’s spending a cent or two, but evidently this was asking too much of him. Much better, apparently, to turn the whole matter into a public spectacle. In any event, nothing came of the proposal.

Let us return to the Cato Institute, the main part of the Kochtopus with which Rothbard was associated. Rothbard’s prediction that Cato would depart from his views has been eminently fulfilled. He is mentioned in the Cato Home Study Course, but his thought is little more than a sideline. When, in Part I, I claimed that people at Cato often refer to him with hostility and contempt, a former employee wrote to correct me. Rothbard is hardly mentioned at all, he said; and I think he is very largely right. I have been able to turn up only one strongly critical assessment by a leading figure at Cato. This writer, among other things, dismissed Rothbard’s writings on money as those of a crank. (Friedrich Hayek once told me how much he admired the account of the business cycle in Rothbard’s America’s Great Depression, an account that rests on Rothbard’s understanding of monetary theory; and the Nobel laureate Maurice Allais has also praised the book. But what do they know?) For the rest, he is ignored.

Austrian economics, once the mainstay of Cato, is now at best a tolerated minority position. The 24th Annual Monetary Conference of Cato, held in 2006, on the theme "Federal Reserve Policy in the Face of Crises," featured only one Austrian speaker, Larry White. Establishment worthies such as Robert Barro and Anna Schwartz, among many others, dominated the proceedings. The keynote address was, however, delivered by a onetime recipient of Koch funding to study Austrian economics, Randall Kroszner. Far from defending Austrian economics, though, he spoke in his capacity as a member of the Board of Governors of the Federal Reserve System. Kroszner, who attended Brown as an undergraduate and Harvard as a graduate student, has been another "triumph" of the elite universities policy. Like Cowen, he was a favorite of Grinder and IHS and received extensive funding, but he no longer manifests any interest in Austrian economics.

The 25th Annual Conference included a few more Austrians, on the panel "Remembering Milton Friedman"; this time Fed Chairman Ben Bernanke delivered the keynote address. Ron Paul, despite his expert knowledge of monetary issues and his fame as the leading Congressional spokesman for a free society, has never in twenty-five years been invited to these conferences. He was the subject of Koch and Fink’s displeasure when he refused to convert to a pro-central-banking position.

In foreign policy, Cato no longer adheres strictly to Rothbard’s resolute non-interventionist views. In an article that appeared in The Wall Street Journal, January 28, 2008, Roger Pilon, who holds the B. Kenneth Simon Chair in Constitutional Studies at Cato, opposed Congressional efforts to enact mild restraints on President Bush’s warrantless wiretapping. Such attempts to "micromanage" the president, he averred, were unconstitutional and threatened America’s security. Others at Cato differed with him, but his grossly anti-libertarian stance was a permissible option for a principal Cato figure. Brink Lindsey, Vice President for Research, is another Cato official who supports the Iraq war.

As mentioned in Part I, the Kochtopus strongly opposes the Mises Institute, which aims to continue the Rothbardian policy of Austrian economics, laissez-faire, and peace that Cato was established to promote. The opposition continues to the present day. Reason, now under Koch patronage, did not react to Ron Paul’s The Revolution: A Manifesto with the praise one would expect for this best-selling libertarian book. David Weigel, in a post of April 30, 2008 on the Reason website, took the occasion to attack Lew Rockwell and other so-called "paleos." The Kochtopus cannot forgive those who continue to champion Murray Rothbard.

To Be Continued

May 12, 2008

David Gordon [send him mail] is a senior fellow at the Ludwig von Mises Institute and editor of its Mises Review. He is also the author of The Essential Rothbard. See also his Books on Liberty.

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