The Ludwig von Mises Institute, founded 22 years ago by Lew Rockwell and headquartered in Auburn, represents a true "national treasure." As the leading exponent of the Austrian school of Economics, it is known worldwide and it is leading the science away from its mistaken and incorrect use of empiricism. This was brought home forcefully to me when a Professor of Philosophy from Tuskegee volunteered that his discipline narrowly escaped falling into the same trap. This puts schools of philosophy several steps ahead of schools of economics, where macro-economists bought into and in some cases still accept empiricism.
Misled by the remarkable successes of Newtonian physics, thinkers came to believe that the methodology of physics was the only truly scientific method. What was worse was the tendency to go further and claim that statements not verified empirically were not only unimportant, but did not represent knowledge at all. This pushed scientists into trying to make all studies fit the methodology that worked for physics. Eric Voegelin emphasizes in his The New Science of Politics, that this is wrong, that methods may differ depending on what is being studied. What works brilliantly for physics and chemistry will not necessarily work for other disciplines.
Reading the writers of the early 20th century one is struck by their very upbeat, yet hopelessly incorrect belief in man's ability to resolve all his problems, to discover a science of political management. Intellectuals are still trying to find rules – macro-economists are frequently at fault here, that will enable political affairs to be managed from the top. The ideas of Mises – recognized as a leader in his early career, fell out of favor when he pointed out the impossibility of this search. His understanding of economic science led to his statement that Socialism was too important to be ignored, but that its ideas had to be refuted if man was to avoid returning to barbarism. Paul Samuelson saw things differently. His understanding of economics saw Socialism as a workable system. He argued for the possibility of the USSR to surpass the US in per capita gross national product. The collapse of the USSR demonstrated that Mises was right, something common sense had already told many. Hayek had clinched the argument in his The Road to Serfdom. His chapter Why the Worst Get On Top, makes it horrifyingly clear why Communism was able to turn into such a murderous business (100 million of their own citizens killed by their own governments in Communist countries in the last century).
The Austrian school recognizes economic science as a logical discipline. All economic law can be deduced from the assumption that man is an acting creature, making choices and seeking to improve his position by trading. To function for the benefit of everyone a society requires private property, a rule of law, and the freedom to make exchanges. Since government typically monopolizes enforcement of laws that it, itself, has enacted, this makes it dangerous. How it is restrained matters a good deal more than how it is chosen. Austrians believe that money matters, and that it matters very much. Hence they see stable money as necessary, which is why, despite its apparent futility, they continue to argue for a gold standard. They believe the market should determine the value of money just as it determines the value of all other goods. They see war, while sometimes necessary, as always destructive, and the corporatism that has developed in Washington as a threat to our freedoms.
This column is written as a salute to Lew Rockwell and his crew. We owe them a lot.
December 11, 2004
