Economics:
The Weather-Vane Profession

By Llewellyn H. Rockwell, Jr.

The economics profession has made a sharp turn to the Left as was evident at the last meeting of the American Economic Association. Gone was any praise of tax cuts and private property, or criticism of federal spending and regulation. Instead, there were reassertions of Keynesian falsehoods, mathematical treatises with no economic content whatsoever, and an attempted (and mistaken) extension of economics into sex and religion.

This Left turn took place, as it has in the past, because most economists are lapdogs of the state. Paid directly or indirectly by government, they seek their advancement through government, consider government jobs to be the pinnacle of their profession, and are ever attentive to their master's voice.

When Reagan was in the White House, supply-sideism was in vogue. If most economists didn't become disciples of Arthur Laffer, Jude Wanniski, and George Gilder, they were at least interested in incentives. The less-statist Rational Expectations and Monetarist schools also became popular.

Now, however, with Bush's neo-Keynesians in control of national policy, academic after academic defends government spending and deficits, and attacks tax cuts and "market failure." Few write about privatization or deregulation.

Economists are buttressed in their attitudes by the national media, which are also pro- government. Any economist who wants to be "fit to print" had better stay in step with the zeitgeist.

Not that this is anything new. Contrary to myth, Franklin D. Roosevelt did not embark on his statist New Deal because of Keynesian economics. Keynes's General Theory wasn't published until 1936, when the New Deal was already three years old. (Mussolini's program was FDR's actual prototype.)

Nor was it a coincidence that the model that came to dominate the profession was the policy of nearly every industrial power (including Nazi Germany, whose economics Keynes praised in his introduction to the German edition of the General Theory).

Not until Western governments began to run deficits as a matter of course did economists discover the benefits of red ink, most economists were not in favor of central bank manipulation of the economy until the Federal Reserve was established; and there was no profession-wide consensus on the virtue of redistribution until the income tax amendment.

Shifts to the Left are made easier these days by mainstream analytical models, which are radically unsound. For starters, they bypass questions of private property, legal institutions, and differences among people. For this reason, the popular schools of the eighties were not solidly free market. While they improved the old Keynesian aggregations, none – Supply-Side, Rational Expectations, nor Monetarist – challenged the Keynesian framework.

No Keynesian model allows economists to question the notion of government management, or that it can improve on the free market by making business more competitive, wages more flexible, prices more responsive, and money flows more rational. This is part of the reason that economists of almost all stripes have continued to dance to the Keynesian tune, changing only partners.

There is only one school of economic thought that refuses to dance: the Austrian. We want to fire the conductor, break the instruments, tear up the sheet music, and lock the ballroom.

Only the Austrian School is based on economic law, on real human beings acting in a world of scarcity, and on the natural order of liberty. That is why we know, and can demonstrate, that government intervention must always damage the market.

From Carl Menger's day to our own, Austrian School economists have condemned the errors of government, no matter what the politicians wanted, no matter what the risk to careers.

Austrians remain a minority in the profession (the courageous are always a minority), but a bigger minority than at any time since the 1930s; we have an astounding number of good professors and students. But meanwhile, the welfare state grows. What to do?

We cannot rely on politicians, although we should try to elect the rare good one. Most economists are useless as well. That is why we need the public, guided by the right intellectuals. As Ludwig von Mises pointed out, economics is far too important to leave to the economists. Everyone should know at least the basics.

At the 2nd annual meeting of the John Randolph Club in January, Club President Murray N. Rothbard laid out a strategy for involving the public. Certainly the inchoate sentiments already exist. Who doesn't despise bureaucrats and politicians? What normal American really thinks they should run our families, regulate our businesses, and spend our incomes?

Most Americans are angry and resentful at the present state of affairs, and who can blame them? What other emotions should we feel as society, subverted by socialist egalitarianism, collapses around us? It is our job to point out the villains: state managers and their pet welfare recipients: underclass, foreign, and corporate.

Instead of trying to persuade the politicians of some marginal scheme, we need to show the public how the trillions extracted from their wallets are spent, and on whom. Once done – and it is no small task – we could begin an authentic revolution against Washington D.C. Then we need not worry about the economics profession. It will be following along nicely.