With David Willetts blowing yet another unsolicited Kiss of Death into the rapidly fading twilight of the UK Conservative Party, it was interesting to hear Polly Toynbee say Willetts had been using the thoughts of our old friend, John Maynard Keynes, to push forward the increasing statism of his latest ideas, such as using coerced taxpayers’ money to subsidise working mothers.
No wonder Ms Toynbee has been so taken with Mr “Two Brains” Willetts’ recently published pamphlet. What it contains used to be called social engineering, of the most crude kind, but now it has been re-labelled as compassionate conservatism, and even arch-socialist Ms Toynbee has declared her guarded support. I therefore thought we’d better examine the roots of Mr Willett’s new philosophy, and get an Austrian view on the Keynesianism underlying it.
And what better place could we start than Mises.org? Good old Murray N. Rothbard doesn’t let me down, having written a seminal piece on Keynes, originally published in 1992. There is a PDF version, and you may also be able to see an HTML version of this 35 page piece Keynes, the Man.
From the outset Mr Rothbard jumps straight into Keynes’s birth into the imperial purple of British Victorian aristocracy, his membership of the secretive Apostles’ club at Cambridge, and his nepotistic relationship with one of the world’s most dominant economists, Alfred Marshall. Following this Rothbard dissects Keynes’s lifelong confrontation with ‘bourgeois’ values, moving towards Keynes’s quote that:
I remain and always will remain an immoralist
Splendid.
But the fun has just begun. Rothbard is severely critical of a review Keynes did, in 1912, of Ludwig von Mises’ early German language work, Treatise on Money and Credit. The upshot of this is that Keynes criticised it for being unoriginal, but then a decade and a half later admitted that his knowledge of German was insufficient to understand original ideas in this foreign tongue. Rothbard is scathing:
Such unmitigated gall. This was Keynes to the hilt: to review a book in a language where he was incapable of grasping new ideas, and then to attack that book for not containing anything new, is the height of arrogance and irresponsibility.
As this book came out before World War I, even Hayek, whom Rothbard criticises for having been swayed too much by the charisma of Keynes, later said:
The world might have been saved much suffering if Lord Keynes’s German had been a little better
Rothbard then moves onto Keynes’s time as an investor, where he made much money in the London markets. This ability to make money, which greatly funded the quasi-socialist Bloomsbury group, was often used later to justify Keynes’s financial reputation. But Rothbard questions Keynes’s very close links with the British Establishment, via his civil service work for the India Office:
Whether Keynes used inside Treasury information to make such [good] investment decisions is still unproven, though suspicions certainly remain. Even if we cannot prove the charge of swindling against Keynes, we must consider his behavior in the light of his own bitter condemnation of financial markets as “gambling casinos” in The General Theory
Rothbard moves on relentlessly to Keynes’s key role in the destruction of the gold standard (which as fellow proto-Rothbardites will know, Mr Rothbard was less than keen on.) And then Murray N. arrives at The General Theory, the seminal work of the Great Man. Here’s a few of the more choice phrases Rothbard uses to describe the book:
And yet The General Theory was not truly revolutionary at all but merely old and oft-refuted mercantilist and inflationist fallacies dressed up in shiny new garb, replete with newly constructed and largely incomprehensible jargon…indeed it took ten to fifteen years of countless hours of manpower to figure out the Keynesian system…the more obscure the content the more successful the book, as younger scholars flock to it, becoming acolytes
The book itself, Rothbard says, divides the world into several types of people. First of all robotic consumers, whose actions are entirely predictable, then a second rentier class of insufferably bourgeois savers, who practice virtues of thrift and farsightedness, a group Keynes despised, and the root group of all problems. A third group followed, of intelligent wise investors, ruled by mood swings and ‘animal spirits’. Because of these psychological impediments, this third group could not be trusted to always do the right thing.
Therefore, to place a hand on the tiller of society Keynes presented a fourth group, full of free will, activism, and knowledge of economic affairs, just like the third group of hapless investors, but lacking their mood swings of irrationality. Of course this supremely rational group is ‘the government’, led of course by Platonic philosopher-economics kings (themselves led, inevitably, though without the necessity of saying it, by John Maynard Keynes.)
And so the state is necessary to ‘help along’ the consumers and the investors, and to remove the need for the bourgeois rentiers. Does this pattern look familiar? No wonder so many marxists and socialists took to Keynes in such a big way. But there is a difference from traditional socialist collectivism, and that is the praise for the third group of investors.
So government controls investment, while the investors own the means of production. Hmmm…
Have we seen this somewhere before, too? Yes, says Rothbard, in the practice of straightforward undiluted fascism. Murray N. then goes on to point out the special foreword Keynes wrote for the German edition of The General Theory, published in 1936, hinting at Keynes’s attraction to this particularly aggressive form of collectivism.
To sum up Rothbard’s conclusion on Keynes, Murray N. thinks the economic champion of the Left was a fallacious buccaneer driven by an arrogance bordering on egomania. Keynes derived his influence from his enormous charisma, which even threw Hayek into a swoon. But above all, Keynes was a pernicious malignant Machiavelli, and a power-driven statist, though one full of charm, embodying the most malevolent trends of the twentieth century.
And can anyone say any fairer than that? Give this 35 page document a read, if you want to get to the Austrian truth behind the socialist pump-prime myth of John Maynard Keynes.
Hang on a minute? Didn’t that description above also cover Tony Blair? Funny that. It must be a ‘Spawn of Satan’ thing.
Andy writes:
“Good old Murray N. Rothbard doesn’t let me down”
Which is why it is all the more distressing when eventually he does. It is the ideas at which one should marvel rather than the guru. Rothbard is rightly to be celebrated for having had so many good ideas, but he said some pretty dumb stuff too. Nevertheless, one can be very much worse than a Rothbardian.
Yes Paul,
Like Mr De Havilland I’m less than struck by Murray N.’s conviction that Uncle Joe Stalin was just a nice kindly old gentleman who only invaded and conquered all of Eastern Europe, because he was afraid of the West, and really wanted to wear warm slippers at night, while thinking of Georgia, drinking cocoa, and knitting jumpers.
But on economics, there is no-one to match him. If you’d like to suggest any other contenders, you know, the kind who speak in everyday language, and explain how real people operate in the real world, and can explain to my personal satisfaction the reasons why I get up in the morning and do the things I do, then go for it.
That’s what I love about Austrian economics. It actually makes sense.
BTW, that’s proto-Rothbardian, in my case, not Rothbardian, if that’s unclear (my apologies if that’s so). I aspire to full Rothbardianism, but I’m still stuck in the Minarchist Popperite statist pigeon-hole, for the moment, until I too can persuade myself that Uncle Joe really had no interest beyond his own borders.
And on Rothbard world, if such a thing ever comes to pass, I’d be in the SAS/Scots Guards defence insurance plan, and I’d like to see the second world-renowned appeals court, the final private court under world common law, with HM Queen as supreme judge.
I’m sure Murray N. wouldn’t approve, but hey, it’s a weird English thing, I suppose! 🙂
Gosh, you’ve got me a bit confused there, Andy.
But on economics, there is no-one to match him. If you’d like to suggest any other contenders, you know, the kind who speak in everyday language, and explain how real people operate in the real world, and can explain to my personal satisfaction the reasons why I get up in the morning and do the things I do, then go for it.
Milton Friedman?
Or his son, David?
Rothbard’s academic output was consistently excellent and his earlier polemical writings are classics. What is less good is his behaviour during the last years of his life when he started sucking up to the religious right and the anti-immigration brigade and he equivocated on several of his important positions.
mark writes:
Gosh, you’ve got me a bit confused there, Andy.
It’s part of my Keynesian style attempt to appear far more intelligent than I am! 🙂
Andy Wood writes:
Milton Friedman? Or his son, David?
Well, I’ve read most of Friedman Senior’s Magnum Opus books, and I’ve read most of Von Mises’ and Rothbard’s similarly seminal works, and I’d rather take Austria than Chicago, every time.
Milton Friedman has written two fabulous books, above, which I thoroughly recommend to anyone who hasn’t already read them, but he’s too statist for my liking, making too many compromises with the enemy ruling class (which I think is why the Republicans love him so much, and some of the UK Conservatives), though he is, as you say, still an immense figure.
Rothbard edges it for me, for his purity of thought, without compromise with the tax-grabbing enemy class, and without trying to beat Keynes through uber-Keynesianism and all those monetary velocity diagrams. He just tells it straight, like it is, and how economics affects real small people in a real big world, following on from the individualistic Human Action of his mentor, Ludwig von Mises.
What I love about Von Mises, as an economist, is that he can explain the whole of economics from a single man on a desert island, all the way through to the New York stock exchange, with only a few errors on the way, which his disciple Rothbard fixed for him.
Though I do love Uncle Milt’s explanation as to how money gets wasted by governments, as popularised by P.J.O’Rourke in ‘Eat the Rich’, as the “if you’re not paying and you’re not benefitting, you buy the other fella a gold-plated golf club even if he doesn’t like golf” effect, otherwise known as wastefully spending other people’s money on other people! 🙂
However, I also fell for the plausibility of Uncle Milt’s negative income tax, and in the UK this has caused terrible repercussions through Gordon Brown’s income tax credits scheme (which Gordon pretends he invented…come on Gordon, the rest of us can read too, you know!).
Since realising my mistake on my acceptance of this policy, I have turned further and further away from Friedmanism.
There’s another good Austrian article on this particular Friedmanite policy, and how it has badly affected the US, here.
I suppose it all depends on whether you’re a limited government minarchist libertarian or a full-blooded anarcho-capitalist libertarian, fundamentally, whether you’re a believer in Chicago or Austria? But we’re all still in the same family, on the same cusp, as it were.
I’m in the unfortunate position of being half-way between the two stools, wanting to be a full-blooded anarcho-capitalist, but still thinking we need state defence services (army, police, prisons, courts, etc), and hesitantly accepting the idea that school vouchers may be the first stage on the way to creating fully private schooling (but will this go the same way as the income tax credits?)
Being strung out like this is a real monkey, and I suppose, eventually, I’ll have to make a choice to go one way or t’other.
Alas, I don’t know David Friedman’s work, though as he’s a self-declared anarcho-capitalist, maybe I better start finding out, especially to see if he can fill in those areas of doubt I have about Uncle Murray! 🙂
However, I am slightly disturbed by this review of his Hidden Order book, which seems to paint him out as a neoclassical (slightly utilitarian) liberal, rather than an anarcho-capitalist?
But, I suppose I’ll have to check out at least his Magnum Opus, the Machinery of Freedom, and cut down on all those Terry Pratchett books I’ve been buying of late! 😉
Unless you recommend otherwise, I’ll start with “The Machinery of Freedom”. Are there any others I must add to my list?
The distinction between anarcho-capitalism and minarchism is not coincidental with Austrianism and Chicagoism. Most Austrians, Mises, Hayek etc. are not anarcho-capitalists and many anarcho-capitalists, David Friedman, Bryan Caplan are not Austrians.
Read ‘The Machinery of Freedom’ its approach is very different to Rothbard’s. You may prefer Friedman but if you really like Rothbard then I suspect not. Friedman does present some pertinent criticisms of Rothbard but I think that his approach is fundementally erroneous and his two subsequent books, ‘Law’s Order’ and ‘Hidden Order’ perpetuate his error. Friedman however is a much better contemporary advocate of anarcho-capitalism than the main disciple of Rothbard now writing. Read Hans-Herman Hoppe’s ‘Democracy: The God That Failed’ for a truely nightmareish vision of Rothbardland as concieved by its contemporary advocates.
Cheers Paul,
It looks like I won’t be completing Mr Pratchett’s Discworld series, for quite some time ahead! 🙂
Rgds,
AndyD
Andy,
I agree on Willetts. I read his speech with mounting incredulity. It looked very like a shameless, me-too pitch for the urban vote. No wonder Polly T is gushing with praise for his new-found feminism. If this is the direction the Party’s going in its only hope is for the gentlefolk of the Havant Association to deselect Two-Brains as fast as possible – but not so fast that he has time to find another safe constituency.
Paul,
Rothbard was not alone among libertarians in opposing open borders. Hans Hoppe and John Hospers offer similar views. What is the reason for your disapproval?
However, I also fell for the plausibility of Uncle Milt’s negative income tax, and in the UK this has caused terrible repercussions through Gordon Brown’s income tax credits scheme (which Gordon pretends he invented…come on Gordon, the rest of us can read too, you know!).
Since realising my mistake on my acceptance of this policy, I have turned further and further away from Friedmanism.
It may be worth pointing out that Friedman proposed a negative income tax as a replacement for government welfare payments, not as an addition to them. When the U.S. considered introducing a negative income tax in the early 70s, Friedman argued against the scheme in his testimony to congress on the grounds that unless it was accompanied by the removal of welfare payments, it would make things worse. I suspect he would have opposed Gordon Brown’s tax credits on the same grounds.
On David Friedman:
However, I am slightly disturbed by this review of his Hidden Order book, which seems to paint him out as a neoclassical (slightly utilitarian) liberal, rather than an anarcho-capitalist?
He is a neoclassical liberal, but I don’t think that’s inconsistent with anarcho-capitalism.
Friedman does present some pertinent criticisms of Rothbard but I think that his approach is fundementally erroneous and his two subsequent books, ‘Law’s Order’ and ‘Hidden Order’ perpetuate his error.
I’m curious as to why? Is it his scepticism about natural rights?
Guessedworker,
Both Rothbard and Hoppe performed a volte face on immigration restrictions. Rothbard (in Power and Market) and Hoppe (in The Economics and Ethics of Private Property) strongly condemned the imposition of state border controls. Later, as they redefined their views as paleo-libertarianism, they changed their minds. I don’t think their later views are consistent with libertarian principles for the same reason as Walter Block who, as I’m sure you already know, still advocates the pristine Rothbardian line on immigration.
Hoppe’s mistake is that he appears to think that the state can predict accurately which persons private property owners will want to exclude from their properties and then approximate the workings of the market in operation of an immigration policy. For someone who claims to be an Austrian economist this is a very odd position to take.
Hoppe and Rothbard were right first time around, state immigration restrictions reduce liberty, welfare and prosperity.
Andy Wood,
I think Friedman’s idea of the economic analysis of law is very seriously flawed. Too technical to explain why here.
Too technical to explain why here.
Why not email me then?
Andy,
I may do later.
Paul,
Am I too simplistic, then, in reducing the debate between Block and Hoppe to the choice of free immigration or restricted entry? If not, my question is how does Block’s individual property owner deny access, should he so choose, to the million saints decamping from the south of France? Where is his power of choice without a responsive agency to act for him? Does he hire Yul Brynner?
It seems to me that Hoppe’s model has, at least, the virtue of practicality. Yes, the predictive aspect requires governmental thinking, which is too tautologous to dwell upon. But the property owner could mandate his (limited) government, ie do the difficult thinking for them.
At its blackest, this debate is about the choice between two awful outcomes. One is racial dispossession and the other is government despotism. One can at least live under the second in one’s own land.
Guessworker:
“If not, my question is how does Block’s individual property owner deny access, should he so choose, to the million saints decamping from the south of France? Where is his power of choice without a responsive agency to act for him?”
Why is this any different from the enforcement of any other property rights? “Denying access” in this context means simply preventing trespass onto land and evicting those who do trespass. I don’t see that there is anything peculiar in the enforcement of those rights which requires a State any more (or less) than the enforcement of other private rights.
Of course you may say that the protection of all private rights requires a State and that would be a consistent minarchist position. But Hoppe does not take that line. In effect, he is an anarchist except when it comes to kicking out the wogs.
Andys Duncan and Wood (and Paul):
Rothbard stressed the primacy of ethics and was vehemently opposed to (David) Friedman’s use of efficiency as a criterion for formulating law and allocating property rights. See http://www.mises.org/rothbard/efficiency.asp
At the same time, David Friedman’s libertarian credentials are immaculate – his work is devoted to identifying mechanisms and criteria for allocating property and allied rights under a stateless legal order – a crucial task for would-be anarcho-libertarians at a theoretical level.
So we are left with a serious clash of principle between two seminal libertarian thinkers of the last 40 years. So far as I can tell, the clash has yet to be satisfactorily resolved at a theoretical level – although Paul will tell you otherwise :-).
Paul has made to me privately the fair point (albeit one that is freely admitted by Friedman) that Friedman’s analysis entails the prospect of non-libertarian elements (in effect mini-States) emerging in a stateless order. Hardly a good thing from a libertarian perspective.
However, at least Friedman sets out about the task of analysing how quasi-libertarian laws might emerge under a free market legal order – whereas sometimes it seems that Rothbard and others simply assume away the problem (as in “the laws will be libertarian because the people will be libertarian”).
Now I shall go and hide from Paul ….
Cydonia has done an excellent job of setting out the problem. David Friedman, however, totally fails to supply anything approaching a solution. The basics of his argument is that laws can be traded like commodities on the free market and the operation of efficiency will mean that something approaching libertarianism will result.
My critique of this is that in the absence of a general libertarian disposition among society such a market in law will not even approach libertarian outcomes, it will instead simply reflect existing dispositions and prjudices; in short it will collapse into the status quo.
Efficiency alone does no work in the absence of goal directed human action. If we want a libertarian outcome then we need humans to see the value of liberty as the goal. Friedman is tenatively supportive of this but it forms no part of his formal theory. Efficiency provides no escape from the situation that a libertarian legal order requires a (broadly) libertarian population.
Sadly Cydonia still fails to see the power of my critique and continues to find merit in Friedman’s approach. Never mind, I am a patient man and will persevere with him, he leads a very stressful life and has taken to wearing ladies underwear to help him relax, perhaps this is affecting his ability to properly appreciate my arguments 😉
Cydonia,
Thanks for the reply. I don’t think it addresses the “awful outcomes” with which I concluded my previous comment. I suspect that you won’t take them seriously. Anyhow, I’ll have another go.
No, turning back the Camp of the Saints invasion is not the same as “the enforcement of any other property rights”. It is a question of scale. I know you are not proposing atomism. But over time the effect of immigration is disposession, displacement and permanent genetic change. It is simply beyond the capacity of the individual to respond morally and practically to this except on a group basis. It is like standing in the rain, trying to defy the plurality and nature of raindrops.
Let me take as an example the Palestinian right of return. Every Israeli, probably almost every Jew, considers r-o-r to be, in the short, medium and long term, racial suicide. If there was no government in Jerusalem, no IDF, no border control do you doubt that exiled Palestinians would return to their ancient homeland now – right now? That is what they yearn for, after all. Do you think that the open Israeli border would enhance liberty and prosperity? OK, anarcho-libertarian jews certainly would deny the returnees access to their property. But for pity’s sake, how long do you think it would be before murder then outrage then genocide then Dimona curtailed the experiment?
Of course, you can counter that anarcho-libertarianism must grown in suitable soil. If people stop self-identifying, if they see themselves and eachother as independent economic and social units instead of Jews or Palestinians everything would be different.
But as our friend, Joe, said on an earlier thread, you have to understand human nature. I myself have made strenuous (if sometimes too crashingly sociobiological) attempts to sharpen that, and to show that you have to understand the human psyche. Libertarianism as a whole is not good at this. Anarcho-libertarianism is profoundly incapable of it.
Guessedworker:
I’d be interested to continue this debate but this thread is probably not the place. Feel free to email me privately (your address doesn’t show up on your comment so I can’t email you directly).
Paul:
“he leads a very stressful life and has taken to wearing ladies underwear to help him relax”
Sadly I don’t have the legs for it.
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I happened to come across this recently and thought it deserved a response. Paul Coulam, explaining what is wrong with my approach, writes:
“Efficiency alone does no work in the absence of goal directed human action. If we want a libertarian outcome then we need humans to see the value of liberty as the goal.”
I am curious whether Paul believes the same thing applies to engineering. In order to have the market produce good cars–cars that produce outcomes consumers like–do the consumers have to have correct opinions about how to build cars? Do we all have to be knowledgeable about automobile engineering?
If the answer is “no,” he might want to think about why he believes that the same wouldn’t apply to law. Under the institutions I recommend, consumers are “buying” a set of legal rules by hiring the services of a rights enforcement agency. Why won’t that mechanism lead to legal rules that make the individuals under those rules better off for the same reason that a similar mechanism leads to car designs that make consumers better off–without, in either case, the consumer having to know why one design, for car or law, is better than another?
If you agree that a competitive market in legal rules does tend to produce economically efficient legal rules in the usual sense–very roughly speaking, rules that maximize the summed utility of the people they apply to–avoiding my conclusion requires you to claim that libertarian law is worse for people than some alternative. Is that your position?