• The Hermeneutical Invasion

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    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 Krakow at Krakow, Poland, in
    April 1987.


    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 on 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

    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

    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 manner….

    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


    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
    mindset 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
    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

    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 gulag.

    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

    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
    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
    , 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 35-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 10 or 15 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 Freedom.”

    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 Bergson.[20]

    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?


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

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

    Barnes, “A Kind of Integrity,” p. 13.

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

    Ibid, p. 30.

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

    Barnes, “A Kind of Integrity,” p. 12.

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    (unpublished manuscript), p. 14.

    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,

    Henry Veatch, “Deconstruction in Philosophy: Has Rorty Made
    It the Dennouement of Contemporary Analytical Philosophy?” Review
    of Metaphysics 39 (December 1985): 313 – 14, 316.

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

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

    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.

    Milton Friedman, “The Methodology of Positive Economics,” in Friedman,
    in Positive Economics
    (Chicago: University of Chicago
    Press, 1953).

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

    (London: Macmillan, [1932] 1935).

    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.

    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”

    (DeKalb: Northern Illinois University Press, 1981).

    Market Process 4 (Fall 1986): 16.

    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).

    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 dean of the Austrian School,
    founder of modern libertarianism, and chief academic officer
    of the Mises Institute. He
    was also editor — with Lew Rockwell — of The
    Rothbard-Rockwell Report
    , and appointed Lew as his literary
    executor. See
    his books.

    2012 by the Ludwig von Mises Institute.
    Permission to reprint in whole or in part is hereby granted, provided
    full credit is given.

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