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The Austrian Threat to Poland?

July 1, 2004

Tags Global Economy

Under the title of Market Madness, Mariusz Doszyn of Znet (one of the left's most important popular websites) interviews Michael Albert, a writer for Z and the South End Press and a proponent of "participatory economics"—apparently a euphemism for another of variety of socialism. The interview is particularly interesting for Austrians in as much as the question and answers center on the influence of Austrians in Poland.

From the tenor and approach, it would appear that Misesians are on the march in Poland and represent the gravest existing threat to the political left of that country. Whether or not this is the case (and there can be no question that the influence of Austrians is rising all over the world), these two gentlemen express the view that "free marketeers" are hypocrites or fools who decry state intervention generally, but embrace state intervention when it benefits wealthy elites.

To be sure, some free market advocates have not been entirely consistent in rejecting state intervention in sector after sector, though it might be argued that an inconsistent free market advocate is always to be preferred to a consistent socialist. It turns out, however, that none of the charges actually stick to Austrians, who typically take their consistency quite seriously.  

On the question of specifics, the attacks get quite specific:

"See whether they are against defense spending."

This is an excellent suggestion. What do Austrians actually think about military spending and war? One place you can find such opinions is at the website Antiwar.com. If you prefer books to the internet, you can read John Denson’s The Costs of War. For a quicker reference you can read David Gordon’s review of this book online.

Mises.org also runs opinion pieces on war frequently. Some examples are: Adam Young's Will War bring Prosperity?; Jon Basil Utley's Alternatives to Unending War; and my own Does Capitalism Require War? Better still, you can go straight to the opinions of this websites namesake to see the actual views of a great free marketeer on war.

A brief examination of what those who advocate free markets actually think shows that we explicitly, utterly reject offensive warfare, some reluctantly accept purely defensive warfare, and all are harshly critical of peacetime military spending. Of course, one could argue that we unintentionally support warfare. However, the truth of the matter is that socialists like Joseph Stalin and Adolph Hitler cause war deliberately.

Their accusations continue:

"See if they turn down state subsidies to investment, and state purchases of output, and state protection against international competitors."

Okay, let's see

The content of these articles clearly contradict the claims made in this interview against Austrian Free Marketeers. It seems that Doszyn and Albert have much to learn about Austrian Political Economy.

Their mischaracterizations involve matters of theory as well.

"Austrian economists prefer to talk about individuals without wider economic and social context (they used to talk about Robinson Cru[z]oe's economy)."

What did Austrians really used to write on these matters?

"There is no special difficulty about the concept of an isolated person (or a group of persons directed by one of them) acting over a period according to a preconceived plan. In this case, the plan need not satisfy any special criteria in order that its execution be conceivable. . . . The situation is, however, different with plans determined upon simultaneously but independently by a number of persons . . . in a society based on exchange their plans will to a considerable extent provide for actions which require corresponding actions on the part of other individuals. This means that the plans of different individuals must in a special sense be compatible if it is to be even conceivable that they should be able to carry all of them out." (F.A. Hayek Economics and Knowledge first published in 1937, reprinted in Individualism and Economic Order University of Chicago Press 1948)

Or more recently:

"Under simple conditions, a Robinson Crusoe, or a family  of subsistence farmers, would not only value consumption goods, but would also be able to impute value to production goods. . . . In a society with a more complex technology, the rough-and-ready estimates employed by tiny bands of hunters and farmers would be useless. Here, assessment is made in terms of costly or less costly, dear or cheap, as demonstrated by objective exchange-values: market prices expressed in money." (David Ramsey Steele Posing the Problem)

The fact of the matter is that Austrians pioneered inquiry into the most relevant problems of complex social orders. It was Austrians who inquired into how prices and profit and loss calculations convey widely dispersed knowledge so as to enable the emergence of a spontaneous order among people the world over.

As for human nature, Doszyn and Albert see the Austrian view as being rather narrow.

"They virtually compel atomistic selfishness, not community."

Is that so?

Before making such a grand pronouncement, these two persons should have read a few things like Methodological Individualism or Methodological atomism: the Case of Hayek by Gregor Zwirn.

Mises and Hayek were quite explicit in their writings about economic science explaining means rather than ends. All the (Austrian) economic scientist assumes is that people have some ends, be they selfish, altruistic, or even irrational. What concerns us are the means by which people best obtain those ends. Furthermore, Austrians have sought to explain social orders where individuals act among each other as members of a community. The individual matters in Austrian economics, but not as an isolated individual. He matters as a member of a community of freely trading individuals based on a social division of labor. 

"Austrian economists (for example Mises) used to say that it is unnecessary to look at statistical data and measure social and economic phenomenon. They say that only important are 'economic laws'. Statistical data doesn't matter."

Is this true?

Austrian Economists (for example Hayek) do not reject empirical work. When Hayek moved to LSE he taught statistics. Prior to that Hayek was the director of an institute on business cycle research. Austrians are intensely interested in history—in fact more so than the mainstream of the profession. Looking through the QJAE, it is clear that the idea that Austrians do not look at statistics is itself empirically false.

What about Mises? Mises argued that we can arrive at conclusions through deductive reasoning. Mises also referred to historical examples in his writings. Mises separated history from theory, but did not say that statistics are irrelevant. He founded a business cycle institute to bring theory and history together. In fact, Mises’s student, Murray Rothbard, argued forcefully for a priori theorizing, but devoted a large part of his intellectual efforts to writing economic history.

Other Austrians, like Tom Dilorenzo, Pete Boettke, and Richard Vedder have written extensively on the history of Lincoln, the USSR and the US respectively. Austrians emphasize the importance of deductive reasoning. We also look at history and statistics.

The remarks of these two persons are the product of either ignorance or deliberate fabrication. This remark—"I don't know what Mises said about this matter"—indicates that these two persons are engaging in idle speculation based on second hand rumors.

This is the sort of ‘argumentation’ that socialists are currently reduced to. With the collapse of the Old Soviet-type systems and widespread failure of western welfare/regulatory states, the left has taken to recasting the pro-free market position as a pro-interventionist position based on ideology, rather than science.

This is absurd, but what else can they do? They worship the state and wish it to expand greatly, but face an obstacle in trying to argue against ‘Free Marketeers’ who can point to a vast number of interventionist failures of the past. How can socialists argue against this? Direct argumentation is out of the question, so the only choices that socialist ideologues have are to admit that they are wrong or to place the burden of defending government failures on advocates of ending government intervention.

The illogic of the latter course of action is obvious, but if such persons were thinking logically, they would find their own opinions indefensible. The opinions of Doszyn and Albert demonstrate just how weak the case against Austrian economics really is.

As for those who want to know more about the Austrian School, the resources are vast. Pick a subject: Overview, Biography, Method, Subjectivism, Price&Cost, Efficiency&Law, Competition, Entrepreneurship, Calculation, Capital&Interest, Money&Banking, Business Cycle, Wages&Labor, History, History of Thought, Mixed Economy, Interdisciplinary, Taxation, and this is just the beginning.

If Poland were to listen to the Austrians, what kind of economy would Poland have? One without violence or state impositions of any kind that lead to world integration, peace, and national prosperity. Austrians don't promise heaven on earth. What we do promise is that individual freedom protects us all from the hell that follows the any rise of omnipotent government on the Road to Serfdom.

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D.W. MacKenzie teaches economics at Ramapo College. Send him MAIL and see his Mises.org Daily Articles Archive.


Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

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