Classical Liberalism and the Austrian School

 

6	The Centrality of French Liberalism

Introduction

In his invaluable history of economic thought, Murray Rothbard notes, with some asperity, the misguided account that has economic theory begin with Adam Smith—whose “reputation almost blinds the sun”—and triumphantly continue with Malthus, Ricardo, and John Stuart Mill. This nearly universal concentration on the British writers, Rothbard maintains, obliterates the far more fruitful Continental tradition represented by the Late Scholastics in Spain and, particularly, by the French school of Cantillon, Turgot, J.-B. Say, and Frédéric Bastiat.1

It is the thesis of this essay that a similar point can be made for the study of the history of European liberalism, the political economy and political philosophy so closely connected with the development of economic thought. As regards the nineteenth century at least, the importance of Britain in the history of liberal thought has usually been exaggerated, while the contributions of French thinkers—often notably relevant to present day concerns—have as a rule been either minimized or overlooked completely.

This is especially true of the writers of the journal, the Censeur Européen, Charles Comte, Charles Dunoyer, and Augustin Thierry, in the early nineteenth century. They provided what is probably the most detailed and analytical treatment of the millenia-long struggle between the predatory, state-oriented social strata and their victims among the producing strata. This subject is dealt with in the essay, “The Conflict of Classes: Liberal vs. Marxist Theories,” in the present volume.

Hayek’s “True and False Individualism”

Unfortunately, an element of great confusion has been introduced into the study of French liberalism through some of the writings of F.A. Hayek, principally his influential essay, “Individualism: True and False.”2 In this rather baffling work, Hayek attempts to distinguish two traditions of individualism (or liberalism). The first, basically a British and empirical line of thought, represents genuine liberalism; the second, French (and Continental), is a no true liberal tradition, but rather a rationalistic deviation that leads “inevitably” to collectivism. This follows from the contrasting social theories underlying the two approaches. Where the first appreciated the truth regarding social institutions, that they originated and developed “spontaneously,” the second held them to be the product of deliberate human “contrivance or design.”

The problems with Hayek’s treatment are legion, and many of them are addressed in the essay on “Liberalism: True and False,” in the present volume. Later, in The Constitution of Liberty (56), when Hayek notes some eighteenth natural rights theorists—including Priestley, Price, Paine, and Jefferson—he asserts that they “belong entirely” to the rationalist tradition of liberalism. No evidence is presented that these thinkers held that social institutions are “designed” by all-knowing legislators, which he takes to be the hallmark of that tradition.3 Strangely, it is this strand of natural rights thinking that is supposed to have led to “totalitarian democracy.”4

Some might uncharitably suspect Hayek of a terminal Anglophilia which tended to blind him to some obvious facts. He himself wrote: “I sometimes feel that the most conspicuous attribute of liberalism . . . is the view that moral beliefs concerning matters of conduct which do not interfere with the protected sphere of other persons do not justify coercion.” (The Constitution of Liberty, 402.) But it was in France, with the Napoleonic Code, that religious equality was established decades before it “evolved” in Britain; and the same Code decriminalized voluntary sexual acts between adults a century and a half before the British government ventured to publish the Wolfenden Report.

If Hayek’s analysis were correct, it would be hard to account for the fact that the liberal intellectual tradition in France through the nineteenth and into the twentieth century retained a vigor and purity it could boast of nowhere else. Indicative of this is that in France the term “liberalism” even today suggests what in Anglophone countries must generally be qualified as “classical liberalism.” In this essay some of the important and distinctive insights of nineteenth century French liberalism will be sketched and their remarkable pertinence to many current political issues highlighted.

The Place of Benjamin Constant

Benjamin Constant is, I would maintain, the representative figure not only of French but of European, liberalism in the nineteenth century.5 Émile Faguet was only somewhat exaggerating when he said of Constant that he “invented liberalism.”6 Fortunately, Constant is one exception (Tocqueville is the other) to the deplorable neglect of French nineteenth century liberal thinkers. Isaiah Berlin, the philosopher of pluralism, has championed the importance of Constant, calling him “the most eloquent of all defenders of freedom and privacy.”7 As Constant studies have flourished in recent years, it has grown increasingly clear that Constant was, above all, the political philosopher of modernity.

What is the essential character of the modern world, and what is the political system suited to that distinctive character? Constant was led to consider this question by his experiences as a young man during the Great Revolution. That Revolution had been born in the quest for liberty. But, as Constant saw it the Revolution manifested a fatal flaw. The Terror cannot be explained merely as the result of circumstance. There was a theory behind it: in Constant’s view, it was the idea of Ancient Liberty misapplied to the modern age.

Constant’s discussion of the ancient polis, or city-state, is celebrated. Max Weber took what he called “the brilliant Constant hypothesis” to be a perfect example of the concept of “ideal-type.”8 Briefly, according to Constant, Ancient Liberty was the ideal of the classical republics of Greece and Rome, and, in the modern time, of writers like Rousseau and Mably.9 It held that freedom consists in the citizens’ exercise of political power. It is a collective notion of freedom, and it is compatible with—even demands—the total subordination of the individual to the community. While each citizen would be subordinate to the whole, he would have his share in the exercise of total power over the community’s members.

Ancient Liberty had its roots in the society of those times, a society of slavery and incessant warfare. The idea of Modern Liberty, too, has its roots in its own distinctive society, one based on free labor and peaceful commerce. Constant asks, “What is it that in our time an Englishman, a Frenchman, an inhabitant of the United States of America, understand by the word, ‘liberty’”:

It is for each to be subject to nothing but the laws, not to be arrested, nor imprisoned, nor put to death, nor mistreated in any way as a consequence of the arbitrary will of one or more individuals. It is for each the right to speak his opinion, to choose his line of work and to practice it; to dispose of his property, and even to abuse it; to go, to come, without obtaining permission, or giving an account of his motives or undertakings. It is for each the right to join with other individuals, whether to confer on his interests, or to profess the religion that he and his associates prefer, or simply to fill his days and hours in a way more fitted to his inclinations and his fantasies. Finally, it is the right of each to influence the administration of government . . .10

The fatal error of Rousseau and the Jacobins was to attempt to resurrect the ancient ideal in the modern world. Since the modern world has produced an entirely different sort of human personality—what we know as “the individual,” in a sense unknown to the ancients—the result could only be catastrophe.11

But the Jacobin project did not end in 1794. In fact, the essence of the totalitarian movements of the twentieth century was the goal of realizing a collective freedom and creating a uniform and collective type of human being (Soviet Man, National Socialist Man, etc.). As the philosopher of an irreducible pluralism, Constant was the great critic of all such totalitarian pretensions avant la lettre.

Moreover, Constant’s analysis has a direct bearing on western countries today, which have become the arena of what have been called the culture wars, on the analogy to the wars of religion of earlier centuries. Conflicting groups wish to make use of the state power to realize their own cultural—religious, moral, ethical, even aesthetic—values. Those on the “right” promote “traditional” or “family” values, while “leftists” push for the spread of “progressive,” “egalitarian,” or “enlightened” ideas. Both sides contend for mastery of important parts of the state apparatus, the public schools above all, but also the media (in countries where radio and television are departments of the government), and the centers for state funding of culture. The struggle is often bitter, especially when, as in the case of the public schools, it is the minds of children that is at stake. Again, what is involved in all of this is an attempt, less savage than during the French Revolution, to ensure uniformity of culture and moral values through state coercion.

Constant was the first great liberal thinker who was compelled to wage an intellectual battle on two fronts, a situation that became typical of liberalism in the nineteenth century and into our own time. His enemies were the Jacobin and socialist descendants (for the most part) of Jean-Jacques Rousseau on the one side, and, on the other, the theocratic conservatives such as de Maistre and de Bonald.

As against the egalitarians and socialists who aimed to overthrow tradition, especially in religion, Constant appreciated the importance of voluntary traditions, those generated by the free activity of society itself. In this respect, Constant was much superior to John Stuart Mill, whose distaste for all of the inherited ways of mankind has misled Anglo-American liberalism in highly unfortunate directions (see the essay on “Liberalism: True and False” in the present volume). Constant emphasized the value of these old ways in the struggle against state power. Having lived through the Reign of Terror and the Napoleonic dictatorship, he was one of the first to understand the power of the modern state. Any element of social life that might act as a barrier to it was welcome in his eyes. Anticipating Tocqueville, and, in our century, thinkers like Bertrand de Jouvenel and Robert Nisbet, Constant wrote:

The interests and memories which are born of local customs contain a germ of resistance which authority suffers only with regret, and which it hastens to eradicate. With individuals it has its way more easily; it rolls its enormous weight over them effortlessly, as over sand.12

As for the conservatives, they attempted to erect the Christian notion of Original Sin into the theoretical underpinning for a system of oppression, arguing for a strong state to keep a firm check on natural man. Constant was willing to grant some plausibility to the notion of the natural corruption of human nature. But how could this be turned into a warrant for an authoritarian state? Were the politicians born of an Immaculate Conception? As Constant wrote:

[There is a] bizarre notion according to which it is claimed that because men are corrupt, it is necessary to give certain of them all the more power . . . on the contrary, they must be given less power, that is, one must skillfully combine institutions and place within them certain counterweights against the vices and weaknesses of men.13

While under the Jacobins, the state power had been thrown into the scales to produce a society based on Rousseauian values, under the Restoration, conservatives sought to use the state power to instill Catholic and theocratic values, which was no less objectionable to Constant. As he put it: “If I reject violent and forced improvements, I equally condemn the maintenance, by force, of what the progress of ideas tends to improve and reform insensibly.”14 He summed up the necessary attitude on the conflict of cultural values inevitable in the modern world:

Remain faithful to justice, which is of every age; respect liberty, which prepares all good things; consent to the fact that many things will develop without you; and confide to the past its own defense, to the future its own accomplishment.15

The resolution, then, of the culture wars is similar to that of the wars of religion: let the government keep out of the matter, let society arrange these matters for itself.

Political Centralization

A major theme developed by the French liberals is the danger of centralized power. The causes and consequences of the vast concentration of power in the hands of the state has preoccupied many of the deepest students of modern society, from Ortega y Gasset and Bertrand de Jouvenel (especially in his classic, On Power), to Robert Nisbet and Michael Oakeshott. On this question the great French source—indeed, the great source among political thinkers altogether—is Alexis de Tocqueville.

In France, as Tocqueville showed in his historical works, the modern bureaucratic state was built by the kings and continued by the Revolution and Napoleon.

When Tocqueville first came to the United States at the age of twenty-six, he was amazed by the virtual absence of any sign of the state. America seemed to him a country without a government, and he praised her for it. Here Tocqueville was continuing the love affair of French liberalism with the United States that began in the Enlightenment and continued for generations. (Sometimes, it must be admitted, the French became rather uncritical admirers, as in their adulation of Abraham Lincoln and the Union cause during the War Between the States.16)

Too much has been made of Tocqueville’s concern with “the tyranny of the majority” in the first volume of Democracy in America, perhaps because this motif is what caught the eye of John Stuart Mill in his enthusiastic review of that first part. Of more permanent interest is the analysis in the second volume, of the dangers of state centralization when linked with modern democracy and the striving of the masses for ever-growing material satisfactions. At the conclusion of Democracy in America Tocqueville presents what must be one of the most terrifying images in the whole history of political thought:

I seek to trace the novel features under which despotism may appear in the world. The first thing that strikes the eye is an innumerable multitude of men, all equal and alike. . . . Above this race of men stands an immense and tutelary power, which takes upon itself alone to secure their gratifications and watch over their fate. That power is absolute, minute, regular, provident, and mild. It would be like the authority of a parent if, like that authority, its object was to prepare men for manhood; but it seeks, on the contrary, to keep them in perpetual childhood: it is well content that the people should rejoice, provided that they think of nothing but rejoicing. For their happiness such a government willingly labors, but it chooses to be the sole agent and the only arbiter of that happiness; it provides for their security, foresees and supplies their necessities, facilitates their pleasures, manages their principal concerns, directs their industry. . .what remains, but to spare them all the care of thinking and all the trouble of living?17

It is astonishing that fifty years before the birth of the modern welfare state in Bismarckian Germany, Tocqueville was already describing—and critiquing—it.18

Following Tocqueville, the French liberals never ceased focusing attention on the dangers of state centralization. Indeed, in the speech that Henri-Dominique Lacordaire, along with Montalembert the outstanding leader of the French Catholic liberals (see below) delivered upon his election as Tocqueville’s successor at the Académie Française, he lashed out at the radical-democratic movement in Europe for aiding and abetting state centralization:

The European democrat, idolater of what he calls the State, takes the human being from his cradle in order to offer him as a sacrificial victim to the public Omnipotence. He holds that the child, before belonging to the family, belongs to the City [i.e., the political organization], and that the City, that is, the people represented by those that govern them, has the right to form his mind on a uniform and legal model. He holds that the commune, the province, and every other association, even the most indifferent, depends on the State, and cannot act, nor speak, nor sell, nor buy, nor, finally, exist, without the intervention of the State and in the degree determined by it, in this way making the most absolute civil servitude the entrance way and the foundation of political liberty.19

“Tolerance” and Belief in the Modern World

It is widely agreed that an important part of liberalism is the notion of the neutrality of the state in matters of culture and values. In the liberal view, the state must limit itself to procedural questions, insuring all individuals against the infringement of their rights by force, and otherwise leaving them free to develop concrete value systems in voluntary association with others.

A number of critics of liberalism have charged that this principle of state-neutrality tends to degenerate into the notion that all moral and cultural values are, in fact, “relative,” non-binding, and even non-existent in any meaningful sense (or else—which probably amounts to the same thing—all equally true or valid). But if all value systems, all religions, for instance, are seen as equally worthy not only of toleration but of endorsement and acceptance, this will necessarily sap and ultimately destroy any firm, heartfelt commitment to concrete values. In this way, spiritual life will be impoverished, and milder or more serious social and personal pathologies promoted.

Such an association of liberalism with moral relativism, however, is in no way necessary. In part, at least, it appears to be traceable to nothing more than the ambiguity of the term “liberal.” It is as if one were to claim that a (political) liberal is necessarily committed to a “liberal” education, i.e., has to condemn an education centered on engineering, for instance.

But the view that links liberalism with acceptance of what is commonly called moral relativism has sometimes gained support from self-described liberals, among them Stephen Macedo.20 Macedo grants that what he calls “liberal justice” (respect for the rights of others) implies “tolerance” for divergent lifestyles, ethical choices, etc. This is not, however, sufficient, in his view. “A merely ‘tolerant’ community does not really stand out as one that is flourishing as a community.” For a community to flourish “in a distinctively liberal way,” “liberal virtues” are also required.” We must “sympathize” with alien “projects and commitments, with choices different from our own, careers and lifestyles not seriously considered before.”

Liberal citizens who acquire the capacity to sympathize with widely divergent ways of life acquire a range of “live options,” and become open to change. Live options incite self-examination, self-criticism, and experimentation. Live options multiply with . . . the acceptance of “off-beat” careers and of different sexual orientations, with the breakdown of gender-based stereotypes, and with the acceptance of divorce and remarriage.21

Liberalism, according to Macedo, tends to “temper or attenuate the devotion to one’s own projects and allegiances, by encouraging persons to regard their own ways as open to criticism, choice, and change . . .” This must be welcomed, since, “if social practices and moral norms are to promote rather than constrain liberty they must have certain substantive characteristics, they must embody attitudes of tolerance [in the wider sense] and openness to change rather than pressures to conformity.” “Quiet obedience, deference, unquestioned devotion, and humility, could not be counted among the liberal virtues,” Macedo states.22 In his conception of liberalism, it “holds out the promise, or the threat, of making all the world like California.”23

Finally, in declaring that “the liberal ideal will not appeal to those who seek a final, definitive answer to the great question of how to live,”24 Macedo forecloses the possibility that adherence to liberalism is perfectly compatible with firm faith in a rigorous religious tradition.

The French Liberal Catholics on Tolerance and Pluralism

This was a question that was addressed by an unduly neglected but, again, highly relevant school of thought in nineteenth France, the Catholic liberals, whose best representative was the Count de Montalembert.25 These thinkers helped introduce a new phase in the evolution of liberalism. Earlier liberals, like the Idéologues, had been generally anti-religious, and especially anti-Catholic. The Censeur Européen, for instance, was thoroughly Voltarian in its treatment of the Catholic Church, waging “a merciless war against the revived religious orders, the reopening of the seminaries, the extension of religious instruction and the activities of the missionaries,” and ceaselessly denigrating “conversions, and mass ordinations.”26 In part under the influence of Benjamin Constant, the attitude of liberalism began to change.

In 1830, a group of Catholic liberals founded the journal L’Avenir [The Future}, to advocate religious freedom and to work towards a reconciliation of Catholicism and liberalism. For these writers, the all-important consideration was the character of society in the nineteenth century, “with its opinions so varied and contradictory, its diverse beliefs, its immense and inexorable need for tolerance and liberty”27—what would today be called the “pluralism” of modern society. One implication of this modern pluralism was that any faction, like the Catholics, that might attempt to curtail the freedom of others could not be sure that their own freedom would not in turn be curtailed when their opponents came to power.28

One of the editors of L’Avenir, Charles Forbes René de Tryon, Count de Montalembert, went on to become the leader of the movement. The most famous presentation of his views was at a Catholic congress held in Malines, Belgium, in August, 1863.29 Belgium was of great significance to Montalembert and his associates, since there Catholics (including the bishops) had joined with liberals in establishing full religious freedom in the constitution of 1831.30

In his two speeches, Montalembert places his plea for religious freedom within a historicist framework, reminiscent of Constant’s analysis of freedom ancient and modern. Just as Constant does not suggest that freedom as the ancients conceived of it was “wrong,” so Montalembert does not unequivocally condemn the religious intolerance practiced in previous centuries. Rather, his position on the Church’s use of coercion in past ages is somewhat ambivalent. While he feels “an invincible horror for all the tortures and all the violence done to humanity on the pretext of serving or defending religion,” it is a fact that Europe owes its Christian character to the Church’s past relationship with the state. Yet, European society has outgrown the need for such a relationship, and “even admitting that the system of force in the service of faith . . . has produced some grand results in the past, it is impossible to deny that it is doomed to hopeless impotence in the century in which we live.” Moreover, too often in the past, the Church paid for its privileged access to power by being required to act as an accomplice or servant to the temporal rulers.31

He is not, he claims, engaged in theoretical, still less in theological, disputation. He speaks solely as a politician and historian. “I invoke facts, and I draw purely practical lessons.” Given the character of the modern world, “nothing is more impossible today than to reestablish even a shadow of feudalism or theocracy.” Liberty is an absolute necessity for the Church; this is his overriding concern. Indeed, he describes his own career as having been “totally consecrated to the defense of the rights and the liberties of Catholicism.” But “the Church can no longer be free except in the bosom of general freedom. No special freedom, and that of the Church less than any other, can exist today except under the guarantee of the common liberty. It was otherwise in the great centuries of Christian history,” but times have changed, irrevocably.32

The Jacobin and Napoleonic dictatorships had given European, and especially French, liberals an inkling of the possibilities of massed power in the hands of the modern state. Montalembert quotes a prescient passage from Ignaz von Döllinger, the teacher of Lord Acton, who maintained that the unitary despotism of the Roman Empire was much less threatening to the liberty of the soul and to Christian faith than the absolutism of the modern state. The first Caesars had no censorship, secret or even ordinary police, official education, bureaucracy, telegraph, railroads, nor any of the infinite resources that civilization now puts at the service of tyranny. Today religion is necessary as an individual-moral, as well as an institutional, bulwark against the crushing power of the modern state. What else is capable of inspiring the individual “with the moral force, the virile patience, the invincible perserverance, the uncompromising independence which we will have more and more need of to hold our own against the torrent”? In particular, religious faith is needed to defend private property in this age of envious democracy, because, Montalembert notes ironically, if inaccurately, “to believe in property when one does not believe in God, one must be a proprietor.”33

It is highly significant that Montalembert, as he categorically states, refuses to defend religious liberty on the basis of “the ridiculous and culpable doctrines that all religions are equally true and good in themselves, or that the spiritual authority does not obligate conscience.” He distinguishes sharply between “dogmatic intolerance” and “civil tolerance,” “the one necessary to eternal life and the other necessary to modern society.” François Guizot is cited:

The principle of religious liberty, as every truly Christian man must understand and practice it, in no way touches on the unity, the infallibility of the Church. . . . It consists solely in recognizing the right of the human conscience not to be governed, in its relations with God, by human [i.e., state] decrees and punishments.34

Modern society is divided into two camps, believers and nonbelievers: while each maintains its own viewpoint, they must learn to live with each other. “As for me,” Montalembert asserts, “I hold every man to be my ally who, whatever may be his belief or banner, wishes for my freedom as for his own, and who does nothing to prevent me from praying, speaking, writing, giving alms, associating myself, and teaching, as I wish.” Again, distinguishing the dogmatic from the political level he states:

Our Lord, speaking of himself, says: “Who is not for me is against me.” But, speaking to his disciples, he tells them: “Who is not against you is for you.” It is a rule as essential to follow in public life as in spiritual life.

He ends his speeches at Malines by an act of deference and humility, doing his “duty as a Catholic, by submitting all of my expressions as well as all of my opinions to the infallible authority of the Church.”35

Some years later, Gustave de Molinari, who had evidently attended the 1863 congress at Malines, reported in detail on Montalembert’s speeches in a highly laudatory review.36 He noted that following its enthusiastic reception of Montalembert’s remarks, the Catholic assembly adopted a series of resolutions, including one Molinari found “particularly significant”:

It is in the interest of Catholics as of all citizens who sincerely wish for liberty to substitute as much as possible for the intervention and omnipotence of the state the creative energy and principle of expansion of the spirit of association.37

Molinari commended the Catholic liberals for attacking “the system of protection applied to religion.” Just as freetraders argued that protectionism undermined industrial efficiency and prosperity, so it can be argued that religious “protectionism,” as in the Spain of his time, has been deleterious to religion, while “competition” among religions has been beneficial. It is no wonder, Molinari added, that the Belgian organ of the free trade movement congratulated Montalembert on his speeches, calling him the “Cobden of religious liberty.” Molinari concluded by looking forward to the time when “the alliance of Catholicism and liberty” would become “a fruitful reality.”38

Montalembert’s Principled Anti-Statism

Montalembert was not simply an advocate of religious freedom within a modern pluralist society; his anti-statism was wide-ranging. He was a strong believer in private property and opponent of socialism.39 A careful student of Tocqueville, he was as firm an enemy of centralization and state bureaucracy as any French thinker of the nineteenth century. Decentralization—which he defines, rather in the spirit of the Tenth Amendment to the United States Constitution, as the sum of “liberties, local and personal, municipal and provincial”40—must be promoted in every possible way. Bureaucracy in modern societies is a “virus,” and the state has become a “secular idol.” The French must learn to withdraw themselves from the tutelage of this “colony of functionaries” sent from Paris that inhabits “the capital of every department, district, and canton,” and which “represents a kind of dominant or conquering caste, charged, like the English in Hindustan, with thinking, speaking, and acting for a population of incapable natives.”41

A particular object of Montalembert’s attack was the state monopoly in secondary and university education.42 As things stand now, he held, children undergo a process designed to convert them to values and views at odds with those of their parents. The world-view of the public school teachers differs radically from that of the French people as a whole. The teachers, like their university professors, preach a skepticism and corrosive rationalism that continually undermine the social order resting on religion, the family, and private property. Youth, and the people at large, is being deprived of religion and nothing put in its place, except socialism.

In a passage that surprisingly anticipates Joseph Schumpeter’s analysis of the role of the intellectuals in subverting capitalism, Montalembert attacks an overdeveloped educational system for producing a mass of half-educated graduates, “suited for everything and good at nothing,” who will inevitably become future office-seekers, thus necessitating a vast expansion of state functions: they will then “be hurled upon public jobs, that is, on the budget, as upon a prey.” If it were up to him, Montalembert declares, there would be no state education at all: “the state has only too much responsibility as it is.”

Since France is constitutionally required to provide public education, he proposes that instead of being centralized and directed from Paris it should be organized by the departments into which the country was divided. Control should be exercised by councils including members elected by fathers of families according to universal suffrage. In this way, “society” rather than the state would direct the education of children. Everything possible must be done to thwart the educational “monopolizers, [who] in the name and under the colors of the state,” tear children away from their parents “in order to close them up in intellectual prisons and keep them there until the very traces of the beliefs of their parental homes are obliterated from their souls . . .”43

The position of the Catholic liberals like Montalembert bears a strong resemblance to the one brilliantly presented in the work of H. Tristram Engelhardt, Jr.44 In dealing with the major questions of bioethics, Engelhardt has occasion to consider the place in liberal society of ethical systems that are rooted in religious and other outlooks that demand a good deal of rigor and impermeability to alternative value systems.

Like Montalembert, Engelhardt insists that he is offering no “manifesto on behalf of secular pluralist ethics,” but rather simply acknowledging its “inevitability.” In contrast to the ancient Greek polis or medieval European society, in the present age “a large-scale state must act as a neutral vehicle for spanning numerous communities with often diverse views of the good life.”45 Yet, such a bland enervated ethical neutrality is not appropriate for individuals:

It is only within the embrace of a particular community that one learns whether it is right or wrong, worthwhile or not, to do the things one has a secular moral right to do. The domain of secular ethics does not exhaust the universe of ethical reflection. . . . It is within particular moral worlds that one lives and finds full meaning in life . . . a full and concrete moral life.46

The solution lies in distinguishing between “ethics as a procedure and ethics as content.” This yields a “two-tiered moral life . . . (1) that of a content-poor secular ethics, which has the ability to span numerous divergent moral communities, and (2) the particular moral communities within which one can achieve a contentful understanding of the good life.”47

Competing moral visions, so long as they “are pursued within the morality of mutual respect . . . need to be tolerated, even if they are not endorsed or supported.” In the spirit of Montalembert, Engelhardt concludes: “One shows sufficient tolerance for the overarching procedural restraints of liberal society by walking to the property line of one’s peaceably established moral enclave, one’s Communist commune or one’s Amish community . . . insofar as one does not carry the imposition of one’s viewpoint beyond that line . . .”48

Gustave de Molinari: Reactionary Anarchist

The dean of the laissez-faire French economists in the last decades of the nineteenth century and virtually until his death in 1911 was the Belgian-born Gustave de Molinari.49 Molinari is most famous for his doctrine of “competing governments”—he has been called “the first anarcho-capitalist”50—and while he allegedly modified his position in later years, there is no doubt that he was always an unbending advocate of laissez-faire. Yet this “doctrinaire,” who would seem to fit perfectly into Hayek’s category of “French rationalist,” evidenced views on history and politics that place him in surprisingly close proximity to a kind of hard-core conservatism.51

The first and best known expression of Molinari’s anarcho-capitalism is an article in the Journal des Économistes, in 1849,52 the starting point of which already causes problems for Hayek’s typology. Molinari distinguishes between two schools of social philosophy: the first holds that human associations, since they are “organized in a purely artificial way by primitive legislators,” can be “modified or remade by other legislators, to the degree that social science progresses.” Molinari clearly believes this view, which, according to Hayek is the essence of “constructivist rationalism,” to be nonsense. The opposing school, the one to which Molinari obviously adheres, maintains that “society is a purely natural fact,” and “moves by virtue of pre-existing general laws.”

Common observation confirms that among the needs that must be satisfied in society is security—the protection of the life, liberty, and property of each of individual. It is clearly in the interest of the members of society to “procure security at the lowest possible price.” With all goods, whether material or immaterial, free competition guarantees that consumers will obtain goods at the lowest price. Thus, “the production of security should, in the interest of the consumers of this immaterial good, remain subject to the law of free competition.” From this it follows that “no government should have the right to prevent another government from establishing itself in competition with it, or to oblige the consumers of security to turn exclusively to it for this commodity.”

Under the present regime, the providers of security are able, through the use of force, to establish a monopoly and impose a “surcharge” (surtaxe) on the consumers, by charging a price for their commodity that is “higher than its value.” The government industry becomes highly profitable, and the natural consequence is the form of “competition” for “customers” characteristic of monopoly government: war. Monopoly provision leads to a situation where “justice becomes costly and slow, the police vexatious, individual liberty ceases to be respected, the price of security is abusively high and unequally levied.” In contrast, competition among “governments” would have the predictable benefits of lowering prices and stimulating improvement in the product.53

Drawing on both natural rights and economic (utilitarian) arguments, Molinari accuses other economists, in particular that paragon of laissez-faire, Charles Dunoyer, of inconsistency in repudiating this approach out of hand (while he commends Adam Smith for recognizing the benefits of competition among courts of law54). In fact, other French liberals, including Dunoyer and Bastiat, criticized Molinari’s theoretical elimination of “monopoly government,” and he seems to have had no followers on this issue in the France of his time.

Interestingly, in this early essay Molinari already demonstrates an antipathy to democracy which some would consider out of place in such a radical thinker, explicitly setting individual rights, including especially property rights, above majority rule. He considers the case in which a socialist majority is sent to the legislative assembly and a socialist president is elected. “Suppose that this majority and this president, invested with the sovereign authority, decrees, as M. Proudhon has demanded, the levying of a tax of three billion on the rich, in order to set up work for the poor, is it likely that the minority will submit itself peacefully to this iniquitous and absurd—but legal and constitutional— spoliation? No, without a doubt it would not hesitate to ignore the authority of the majority and defend its property [emphasis in original].”55

In his historical writings and in contrast to French liberals of a more “British” persuasion (in Hayek’s terminology), like Constant, Guizot, and Toqueville, Molinari came to see no redeeming features in the Revolution of 1789. Traditionally, French liberals had credited the Revolution with certain reforms (especially in its earlier, pre-Jacobin phase, “1789” rather than “1793”), such as abolishing internal tariffs and establishing religious freedom. But, Molinari maintains, “if the Revolution had not broken out, the reforms attributed to it would have been pursued peacefully for their useful qualities, and these reforms would then have been definitive.”56 This is a view of the Old Regime and the Revolution that in important respects differs little from the one later presented by the historian Pierre Gaxotte, an intellectual luminary of the royalist and far-right group, Action française.57

The Revolution put an abrupt end to this organic evolution and initiated a massive shift of power to the state. “Military serfdom”—involuntary military service, roundly condemned by Turgot, Condorcet, and nearly all the other pre-revolutionary economists—had nearly disappeared in France. The Revolution universalized conscription: “This retrogression in the regime of [military] serfdom would suffice of itself to outweigh all the progressive reforms, real or imagined, that are customarily set to the credit of the revolution.” This “blood tax” was retained by the Restoration, since the upper and middle classes could easily purchase exemption through paying for replacements. Here was another example of class-legislation, as was the livret, or book listing previous employments, now mandatory on laborers, and the prohibition of workers’ organizations. The end result of the Revolution has been “to diminish the sum of liberties enjoyed by the French and at least to double the weight of the government of France.”58

This most “extreme” of French or even of all European liberals (Auberon Herbert in Britain would be a close rival) displayed a warm sympathy for tradition and “organic” culture, going so far as to criticize the Napoleonic Code for consolidating the “reforms” of the Revolution by replacing the variegated customs of the provinces with a uniform legislation: “In many respects the ancient customs, adapted over centuries to the populations they ruled and successively perfected by way of experiment, left a much greater area to individual liberty and established the responsibility attaching to liberty with more equity.” Molinari even assailed “the system of weights and measures, invented by professors of mathematics, in contempt of the experience and needs of those engaging in exchange,” and imposed by the Revolution.59

Much to his honor, Molinari indicted the Revolution for its “war of extermination” against the Catholic and royalist population of the Vendée, in western France.60 He estimated that the attempted genocide claimed some 900,000 victims; in any case, the number was in the hundreds of thousands. This horrific, bloody episode had been blotted out of the accounts of earlier, less forthright French liberals (as it has been by pro-Revolution historians ever since). It may be that these liberals were anxious not to provide ammunition to their conservative foes. More likely, their strange silence is owing to the fact that these victims of state mass-murder were, after all, Catholic and royalist.

In the long run, Molinari maintained, the most destructive result of the Revolution was to remove any curb to “the appetite for exploitation” of the bourgeoisie. This is what the famous achievement of “equality before the law” in large part amounted to. “The Revolution left the field clear to the middle class, and the latter did not neglect to turn the situation to its profit, by replacing the privileges suited to the interests of the nobility and clergy by other privileges suited to their own.” A new class was put “in possession of the apparatus for concocting laws and regulations.” The hereditary monarch had at least to some extent a personal interest in preserving the state from ruin and in promoting its prosperity.61

Molinari applies the class conflict theory which by his time had become a cornerstone of French liberal ideas, but, unlike earlier thinkers, he does not exempt the regimes that passed for liberal in French politics.62 The “liberal” July Monarchy was the the creature of the bourgeoisie, which aimed “from now on to fix the exploitation of the state firmly in their own hands.” The liberal party “was the expression of those in the governing class that had issued from the revolution.” The middlle classes profited from tariffs, government contracts, state subsidies for railroads and other industries, state-sponsored banking, and the jobs available in the ever-expanding state bureaucracy itself. Soon, a radical movement emerged, as “the swelling profits of an exploitation spreading every day and branching out more and more excited the envy of the classes excluded from the feast.” The final term is arrived at with universal manhood suffrage, where the whole population must be bought off.63 Molinari’s relentlessly scathing and cynical analysis of representative government and advancing democracy suggests that his anarcho-capitalism was a product not only of economic and natural rights theory, but also of his interpretation of history.

“The sovereign nation” is, in Molinari’s view, “a simple fiction”; the reality is parties that are organized with the aim of taking over and exploiting state power. Parties, and even their subdivisions, always correspond to the grouped interests from which they issue and among which they recruit their members. Everywhere in politics, Molinari sees ideology, in the sense of a rationalization of class interests, at work. Thus, Napoleon III’s policy of having France defend the “oppressed nationalities” of Europe was an ideological cover for the expansionary demands of the Army, one of the Emperor’s main pillars of support. In general, in the “political marketplace,” each group requires a justification for its depredations: hence, the “economic sophisms and utopias” ground out for the use of the various parties. Molinari states, anticipating the “irrationalist” phase in the thinking of his follower, Pareto, that this charade never fails to mislead the masses, always more open to emotion and imagination than to logical reflection.64

In his ninety-second year, in what Molinari called his “last word,” he displays much of the radicalism of his youth. Politics is still essentially the arena of class conflict, where “successive proprietors of the state” vie to gain the right to levy taxes. Taxes are a continuation, through various merely formal transformations, of slavery: the tribute exacted by whoever exercises power over others. There is more than a hint of his earlier anarcho-capitalism:

What does a tax do? It takes either from the producer or the consumer a more or less sizeable portion of the product destined in part to consumption and in part to savings, in order to apply it to less productive or even destructive ends, and more rarely to savings.

It is impossible, he states, “to know if the price fixed by the government invested with a monopoly in furnishing its services [of protection] does not unjustly exceed what would have been established through competition.”65 But the State possesses an obligatory clientele, so that, “whether it raises the price or lowers the quality of its services, its client cannot refuse them. As ruinous as taxes may be, the State is amply provided with the powers necessary to force him to pay them.”66

The tendencies of modern society are deeply disappointing to Molinari. In the middle of the nineteenth century it appeared that peace and free trade would “rule the civilized world.” Now it is evident that “the parliamentary and constitutional regime has ended up in socialism.” Molinari feared the coming of the “socialist Mardi Gras”—the confiscation of the wealth created by capitalism—to be followed by the depletion of that wealth, and then “a long Lent.” He noted that, in order to disarm socialism, “certain states have had recourse to philanthropy,” i.e., the welfare state. Freedom of labor has practically disappeared, as the workers, after winning the right to organize, went on—”such is the protectionist nature of man”—to employ violence against employers and non-unionized workers; in this way, “the unionized workers taught fraternity to the non-unionized.” And on the eve of the First World War Molinari declared that “the interests of the most influential classes”—state functionaries, military and civilian, and armaments makers—“are pushing towards war.”67

In this last work, Molinari continues to voice “conservative” and even “reactionary” views out of keeping with the customary profile of the nineteenth century laissez-faire liberal. Seeing rather further than many other French liberals, Molinari was no supporter of the Northern side in the American Civil War;68 here, too, he perceived class interest at work. The war “ruined the conquered provinces,” but permitted the industrialists of the North to impose the protectionist policy that led ultimately “to the regime of trusts and produced the billionaires.”69 It is noteworthy that while Molinari was an “absolutist” when it came to the natural right to liberty in the abstract, it appears that historical circumstances could temper his position, as in the question of the emancipation of the slaves in the United States:

In truth, it was in masking their own practical and egoistic interests in domination and protectionism under the cover of humanitarian sentiments that the politicians of the Northern states emancipated the Negroes while ruining their proprietors. They won the admiration of naïve abolitionists throughout the world by bestowing on the freed slaves their total freedom overnight, with the responsibility and demands that the latter were incapable of meeting, and even adding the improbable bonus of political rights.70

Laissez-faire as Political Guideline

In distinguishing the good, British liberals from their negative images across the Channel, Hayek comments on the place of the laissez-faire idea in his typology. Of the British he writes:

Their argument was never a complete laissez faire argument, which, as the very words show, is also part of the French rationalist tradition and in its literal sense was never defended by any of the English classical economists. . . . In fact, their argument was never antistate as such, or anarchistic, which is the logical outcome of the rationalistic laissez faire doctrine . . .71

Hayek gives two sources for his characterization of the British classical economists. One, Lionel Robbins, is so eager to acquit them of the charge of adhering to laissez-faire that he even adduces the following, from Nassau Senior, with evident approval:

the only rational foundation of government, the only foundation of a right to govern and a correlative duty to obey, is expediency—the general benefit of the community. It is the duty of a government to do whatever is conducive to the welfare of the governed. The only limit to this duty is power . . .72

Hayek’s second source, D.H. Macgregor, widened the defense to include virtually all British economists, in particular, Alfred Marshall. Marshall is quoted as pronouncing in 1907 that “every economist of the present generation is a Socialist,”73 further declaring:

a new emphasis is given to the watchword laissez-faire:—Let everyone work with all his might; and most of all let the government arouse itself to do that work which is vital and which none but the government can do efficiently. . . . So I cry, Laissez-faire: let the State be up and doing.74

Macgregor cites Keynes to the same effect, summarizing his position: “Thus the end of laissez-faire is Laissez-faire l’État’; the principle is transferred to a higher sphere.”75

Yet invoking these august authorities hardly settles the question of the desirability of the laissez-faire doctrine. One important point that Hayek, Robbins, and others neglect in their brusque dismissal was elucidated by the English legal historian, A.V. Dicey:

The beneficial effect of State intervention, especially in the form of legislation, is direct, immediate, and, so to speak, visible, whilst its evil effects are gradual and indirect, and lie out of sight . . . these good results of State intervention are easily noticeable . . . [the] evils results . . . are indirect and escape notice . . . few are those who realize the undeniable truth that State help kills self-help. Hence the majority of mankind must almost of necessity look with undue favor upon governmental intervention. This natural bias can be counteracted only by the existence, in a given society as in England between 1830 and 1860, of a presumption or prejudice in favor of individual liberty, that is, of laissez-faire.76

Milton Friedman, in Capitalism and Freedom, quotes this passage and expresses his agreement with Dicey.77

As for Hayek’s claim that the laissez-faire doctrine was quintessentially French, that is certainly true. The French coined the slogan, and it is always used in the French form in other languages. The laissez-faire concept permeates French liberal thought from the mid-eighteenth century on. Even Benjamin Constant, whose name is not usually associated with economic questions, was a confirmed advocate of the principle, a fact that comes out most clearly in his only major work on economics, Commentaire sur l’ouvrage de Filangieri:

Whenever there is no absolute necessity, whenever legislation may fail to intervene without society being overthrown, whenever, finally, it is a question merely of some hypothetical improvement, the law must abstain, leave things alone, and keep quiet.78

Constant ends the work with the words: “Laissez-faire, laissez-passer.”

French economists remained faithful to laissez-faire long after it had fallen out of fashion elsewhere. In histories of thought, this dogged attachment is often traced to the supposed backwardness, superficiality, and general inferiority of the French economists.

Yet Joseph Schumpeter tells a different story. When he comes to discuss the “the laissez-faire ultras,” as he calls them, of the last decades of the nineteenth century and the first decades of the twentieth—Paul Leroy-Beaulieu, Émile Levasseur, the “indefatigable” Gustave de Molinari, Yves Guyot, Léon Say, and others—he notes that they

are known as the Paris group because they controlled the Journal des Économistes, the new dictionary, the central professional organization in Paris, the Collège de France, and other institutions, as well as most of the publicity . . . they stood staunchly by the drooping flag of unconditional free trade and laissez-faire.79

They held out, in Schumpeter’s words, “like Leonidas’ Spartans at Thermopylae.”80 He admits that they were “unscientific” according to his Walrasian standards, but insists that “the frank contempt with which both higher-powered theorists and anti-liberals treated the group is . . . not justified.”81 For when these men wrote on practical questions, they

knew what they were writing about. That is to say, they lived and thought in close proximity to business and political practice, which most of them knew from experience and not from newspapers. There is an atmosphere of realism and shrewdness about their works that partly compensates for lack of scientific inspiration. (Emphasis in original)82

This suggests the foundation of the French liberals’ commitment to laissez-faire. For Dicey, and with him Friedman, the chief value of the rule lies in preventing an immediate and obvious but inferior good from replacing a longer-range, less obvious but superior one. For the French thinkers the central concern was spoliation, or state-mediated plunder. From at least the time of Dunoyer and Charles Comte, the French economists had been preoccupied with the problem of public policy employed for the wholesale usurpation of property rights. Protectionism, socialism, all varieties of state favoritism and restrictions on competition, and the growth of bureaucracy and jobbery were the means by which special interests sought to exploit the public, the great mass of consumers and taxpayers. The “Paris group’s” knowledge of business and political practice to which Schumpeter refers—a knowledge not gained from “newspapers,” i.e., not subverted by the ideological rationalizations of interested parties—confirmed them in their view that only a solid barrier such as the laissez-faire doctrine could protect the public against the incessant onslaught of the would-be exploiters.83

The same considerations dominated economic thinking in Italy, which was strongly influenced by the French liberal economists, and where for decades economists were nearly as dedicated to laissez-faire as in France.84 The dean of nineteenth century Italian economists, the Sicilian Francesco Ferrara, wrote of a battle between “privilege, secret interest, political advantage, everything that is capable of coveting” and its “natural enemy,” the science “whose emblem, from the time of its birth, has been: laissez-faire, laissez-passer.”85 As this passage implies, Ferrara conceived of the laissez-faire principle above all as a necessary barrier to the attack of what today would be called rent-seekers. This was the position of mainstream of Italian economics, which included Vilfredo Pareto and Maffeo Pantaleoni, until around 1920.86

In the following generation, the laissez-faire tradition effectively died out in Italy. Luigi Einaudi, probably the most prominent economist of this period and later the first president of the Italian Republic, while oriented to the free market in policy questions, rejected strict laissez-faire and adopted a “pragmatic” approach. He correctly chided nineteenth century economists for abolishing the distinction between normative and scientific propositions in their enthusiasm for laissez-faire. When he comes to analyze the various meanings of economic liberalism, Einaudi distinguishes among them the “religious”: “From the frequency of the cases in which economists, for contingent reasons, are inclined to recommend free-market [liberistiche] solutions to individual concrete problems, there arises a third meaning of the free market maxim, which I will call ‘religious.’” Einaudi clearly means this to deny any scientific status to this “religious” conception. Nonetheless, he adds:

I will not say, however, that the religious conception of economic liberalism [liberismo] is devoid of practical value. On the contrary, its value can be very great. It is extremely useful that, in the face of the practice of asking everything from the state, of expecting everything from collective action, the economic liberal rises up to indict the sloth of the interventionist and the greed of the protectionist. Putting science aside, the moral figure of the first in practical and political life rises a thousand cubits above that of his opponents. Without him, the state would not only fulfill the tasks appropriate to it and complement individual action where convenient, but, intervening in economic affairs at the instigation of thieves and fools, would do harm to the whole society.87

James Buchanan, as is well known, was strongly influenced by the Italian liberal economists. Many years later he made a point similar to Einaudi’s, when he spoke of the lack on the part of the democratic electorate of “a generalized willingness to leave things alone, to let the economy work in its own way, and outside of politicized interference.” Despite loss of faith in socialism, “we are a long way from regaining any faith in the laissez-faire principle of the classical economists.” Buchanan spells out the consequences of the absence of any commitment to laissez-faire for political economy:

exploitation by those interest groups that have their own ready-made agenda for state action designed to yield these groups differentially high rents or profits. Building on the public’s unwillingness to act on principle in support of market solutions to apparent problems, whether real or imagined, these interest groups secure arbitrary restrictions on voluntary exchanges and, in the process, secure rents for their members while reducing both the liberties and economic well being of other members of the economic nexus, both domestically and internationally.

Buchanan concludes that what is required to thwart the impending protectionist-mercantilist regime are “principles that can be incorporated in constitutional structure, principles that dictate the imposition of constraits that will prevent the intrusions of ordinary politics into market exchange” (emphasis in original).88

Today, in every Western country, the sphere of state action grows inexorably, if not year by year, then decade by decade. If, in 1852, the state was already what Karl Marx called it, a parasite which “enmeshes society in a net and chokes all its pores,”89 what must we call it now? This leads us to the question: as between Bastiat and Alfred Marshall, who was—not the better economist in a technical sense, a point that is widely assumed to be settled90—but who was the better political economist? Who better understood the dynamic of state expansion? Was it Bastiat and the other Frenchmen, who insisted on the rule of laissez-faire? Or was it Marshall and the British, whose sage advice was: “Let the state be up and doing!”?

 

________________

91Murray N. Rothbard, An Austrian Perspective on the History of Economic Thought, 1, Economic Thought before Adam Smith, 345, 435, 441–48. See also the important essay by Joseph T. Salerno, “The Neglect of the French Liberal School in Anglo-American Economics: A Critique of Received Explanations,” Review of Austrian Economics, 2 (1988), 113–56.

92In F.A. Hayek, Individualism and Economic Order (Chicago: University of Chicago Press, 1948), 1–32. See also the chapter on “Freedom, Reason, and Tradition,” in idem, The Constitution of Liberty (Chicago: University of Chicago Press, 1960), 54–70. The confusion in “Individualism: True and False” begins with the motto from Alexis de Tocqueville that Hayek places at the beginning of his essay: “From the eighteenth century and from the revolution, as from a common source, two rivers had sprung: the first led men to free institutions, while the second led them to absolute power.” There seems no reason to think that the distinction Tocqueville makes here corresponds to the one that Hayek develops in his essay.

93Bastiat, in his well-known essay, “The Law,” complains of how “strongly rooted in our country” is the idea that “mankind is merely inert matter, receiving from the government life, organization, morality, and wealth . . .” He lists and critiques a number of French authors on the virtual omnipotence of the legislator. Among them, however, are only two who are generally included in the liberal tradition, Condillac—and one of Hayek’s favorites, Montesquieu. Frédéric Bastiat, Selected Essays on Political Economy, George B. de Huszar, (ed.), Seymour Cain (tr.) (Irvington, N.Y.: Foundation for Economic Education, 1964) 70–83. Leonard P. Liggio, in “Evolution of French Liberal Thought: From the 1760s to the 1840s,” Journal des Économistes et des Études Humaines, 1, No. 1 (Winter 1989), 145–46, notes that critics of French political centralization were heavily indebted to the French liberal thinkers who had experienced it first hand and were its most trenchent analysts.

94Ibid. Oddly enough, a few pages later (The Constitution of Liberty, 60), Hayek posits as “the logical outcome of the rational laissez-faire doctrine” not totalitarianism or collectivism, but anarchism. It should be pointed out that Hayek is mistaken in calling upon J.L. Talmon’s The Origins of Totalitarian Democracy (London: Secker and Warburg, 1955) for support of his thesis. The authors mainly dealt with in that work are Rousseau, Mably, and the Jacobins, chiefly Robespierre and Saint-Just. None of these can be considered liberals. The burden of the few pages (44–45) that Talmon devotes to the Physiocrats is that they offered “an astonishing synthesis of economic liberalism and political absolutism,” the latter deriving from their fear that any dilution of royal “legal despotism” would lead to a triumph of anti-social special interests.

95Hayek awards this honor to Tocqueville and Lord Acton, both of whose writings, despite other great merits, show a defective understanding of economic liberalism.

96Émile Faguet, Politiques et moralistes du XIXe siècle (Paris: Boiven, 1891) 255.

97See his “Two Concepts of Liberty,” in Isaiah Berlin, Four Essays on Liberty (Oxford: Oxford University Press, 1969) 126.

98Max Weber, The Methodology of the Social Sciences, Edward A. Shils and Henry A. Finch (trs.) (Glencoe, Ill.: Free Press, 1949) 104.

99Benjamin Constant, “De la Liberté des Anciens comparée à celle des Modernes,” Cours de Politique Constitutionnelle, Édouard Laboulaye (ed.) (Paris: Guillaumin, 1872) 2, 537–60.

100Ibid. 540–41. John Gray, in his Liberalism (Minneapolis: University of Minnesota Press, 1986), 20, cites this passage but omits any reference to property rights, an error caused by Gray’s reliance on the defective translation of this Constant text contained in Guido de Ruggiero’s History of European Liberalism. Unfortunately, Gray’s blunder has been repeated by subsequent authors who have relied on his book.

101The importance of Constant’s analysis of the Revolution has been recognized in a major work of synthesis, François Furet and Mona Ozouf (eds.) A Critical Dictionary of the French Revolution, Arthur Goldhammer (tr.) (Cambridge, Mass.: Harvard University Press, 1989). The thought of Constant and of his frequent collaborator, Madame de Staël, permeates this work.

102Benjamin Constant, Cours de Politique Constitutionnelle, 2, 170–71.

103Benjamin Consant, Commentaire sur l’ouvrage de Filangieri (Paris: Dufart, 1824) 27.

104Benjamin Constant, Cours de Politique Constitutionnelle, 2, 172n.

105Benjamin Constant, “De l’esprit de conquête et de l’usurpation,” Oeuvres, Alfred Roulin, (ed.) Pléiade edition (Paris: Gallimard, 1957) 1580.

106See Serge Gavronsky, The French Liberal Opposition and the American Civil War (New York: Humanities Press, 1968).

107Alexis de Tocqueville, De la Démocratie en Amérique, II, bk. 4, ch. vi.

108Stephen Holmes, “Constant and Tocqueville: An Unexplored Relationship,” Annales Benjamin Constant, no. 12 (1991) 39, writes of Tocqueville’s portrayal of the future despotism: it sounds “like the welfare state as libertarians conceive and deride it.” It would be interesting to know in which respects Holmes believes that Tocqueville’s vision differs from the reality of the modern welfare state in its essential character and tendencies.

109Henri-Dominique Lacordaire, Notices et Panégyriques (1886) (Paris: Poussielgue), 345.

110Stephen Macedo, Liberal Virtues. Citizenship, Virtue and Community in Liberal Constitutionalism (Oxford: Clarendon Press, 1990).

111Ibid. 266–67.

112Since he asserts this without qualification, Macedo seems to imply that these traits are somehow antithetical to or out of keeping with liberalism in all cases, presumably including deference to one’s parents, unquestioned devotion to one’s family, and humility before God.

113Ibid. 267, 270, 278.

114Ibid. 280. Since all this openness, willingness to experiment, endorsement of differing lifestyles, etc., is supposed to stimulate the growth of the individual, it is remarkable that Macedo holds at the same time that “there is no tension between being at home in a tradition or set of practices and the development of one’s individuality.” Ibid. 270.

115See C. Constantin, “Libéralisme catholique,” in A.Vacant, et al. (eds.), Dictionnaire de la Théologie Catholique (Paris: Letouzey, 1926), 9, cols. 506–629; and George Armstrong Kelly, The Humane Comedy: Constant, Tocqueville and French Liberalism (Cambridge: Cambridge University Press, 1992), 114–133. I am grateful to Professor Leonard P. Liggio for his great service in directing attention to the importance of this group.

116Ephraïm Harpaz, “Le Censeur Européen: Histoire d’un journal quotidien,” 147–49.

117Quoted in C. Constantin, “Libéralisme catholique,” col. 530. In the same passage, it demanded “freedom of labor and of industry.”

118Ibid. cols. 536–37. The conception of power as always a two-edged sword was a major argument used by Constant against state interference in religious and cultural questions.

119His two speeches are reprinted in Charles Forbes René de Tryon, Comte de Montalembert, L’Église libre dans l’état libre (Brussels: La revue belge et étrangère, 1863). See also C. Constantin, “Libéralisme catholique,” cols. 585–90.

120Ibid. cols. 522–24. The constitution provided for state subsidies to religious groups, however.

121Montalembert, L’Église libre dans l’ état libre 47, 52, 63–65.

122Ibid. 7, 12–15.

123Ibid. 26, 30–31.

124Ibid. 44–45. Compare C. Constantin, “Libéralisme catholique,” cols. 506, 509, 531, where the author points out that it is an error to identify the position of Catholic liberalism, in the sense advocated by Montalembert, with the liberal Protestant standpoint. The former “never wished to be and never has been dogmatic liberalism, whose fundamental principle is the absolute sovereignty of the individual reason. Instead, the Catholic liberal movement was and is “solely political and social.” The Catholic liberals insisted that in matters of religious dogma they were as orthodox as the most intransigent of their opponents within the Church. L’Avenir, the journal of the movement, insisted that “perfect civil tolerance” does not in the least imply “dogmatic tolerance.” The Church “at no point renounces its doctrine, which it preaches, defends, and propagates,” while recognizing the same right in other faiths.

125Montalembert, L’Église libre dans l’ état libre 84–85.

126Gustave de Molinari, “Les Congrès Catholiques,” Revue des Deux Mondes, 3rd series, 11 (1875), 411–30.

127Ibid. 420–21. Molinari noted that at the following year’s meeting in Malines, the Congress strongly recommended the introduction or development of the teaching of political economy in Catholic schools.

128Ibid. 427–28, 430. On the use of the free trade analogy on behalf of liberty of conscience by British writers, see George H. Smith, Atheism, Ayn Rand, and Other Heresies (Buffalo: Prometheus, 1991) 122–26.

129This is not to suggest that Montalembert was a thorough or consistent liberal in economic affairs. See, for instance, his speech to the National Legislative Assembly, December 13, 1849, “Impôt des boissons,” Montalembert, Discours (Paris: Jacques Lecoffre, 1860), 3, 1848–1852, 296–339, in opposition to Bastiat’s proposal to end the tax on wine.

130“La décentralisation,” in Montalembert, Oeuvres polémiques et diverses, (Paris: Jacques Lecoffre, 1868) 3, 385.

131Ibid. 388–90.

132Cf., e.g., the speeches of January 17, 1850, February 4, 1850, and February 12, 1850, in Montalembert, Discours, 3, 1848–1852: 340–85, 385–89, and 390–417.

133Montalembert, L’Eglise libre dans l’ état libre 25.

134H. Tristram Engelhardt, Jr., The Foundations of Bioethics (New York: Oxford University Press, 1986).

135Ibid. viii, 48.

136Ibid. 49–50.

137Ibid. 53–54.

138Ibid. 385–86.

139On Molinari, see the treatments by David M. Hart, “Gustave de Molinari and the Antistatist Liberal Tradition,” Journal of Libertarian Studies, Part I, 5, No. 3 (Summer 1981): 263–90; Part II, 5, No. 4 (Fall 1981): 399–434; and Part III, No. 1 (Winter 1982): 83–104; and Murray N. Rothbard, Classical Economics, 453–55. On Molinari’s most influential disciple, see idem., “Vilfredo Pareto, Pessimistic Follower of Molinari,” in ibid. 455–59.

140Ibid. 453 See the bibliography in Pierre Lemieux, L’anarcho-capitalisme (Paris: Presses Universitaires de France, 1988), 23–24.

141The reviewer of Molinari’s Les soirées de la rue Saint-Lazare. Entretiens sur les lois économique et défense de la propriété, in the Journal des Économistes, 24, No. 104 (November 15, 1849) 368–69, praises him for his stinging critique of the typical socialist—”this pygmy puffed up with pride who would try to substitute his own work for that of the creator”—and for his characterizing the principle of socialism as “recklessly arrogant.” This would seem, except for the much more aggressive phrasing, to be rather close to Hayek’s own conception of socialism as “the fatal conceit.”

142Gustave de Molinari, “De la production de la securité,” Journal des Économistes, 22, No. 95 (February 15, 1849) 277–90.

143Ibid. 281–282, 289. In connection with the controversial question of how a system of “competing governments” would work, Molinari sketches some of the requirements of his system, both for the suppliers of security and for its consumers. The latter would be obliged to subject themselves to the penalties on offenses against person and property imposed by the government they have chosen, as well as to submit to “certain inconveniences” the object of which is to facilitate the government’s apprehension of criminals. Ibid. 288.

144In The Wealth of Nations, Bk. 5, chap. 1.

145Molinari, “De la production de la securité,” 287. Molinari’s disciple, Vilfredo Pareto, advocated acting according to this principle when it came to an actual historical case, viz., the predatory conduct of socialist local governments in Italy before the Fascist seizure of power; see Ralph Raico, “Mises on Fascism, Democracy, and Other Questions,” Journal of Libertarian Studies, 12, 1 (Spring 1996), 19–20. A modified version of this appears in my essay, “Mises’s Liberalism on Fascism, Democracy, and Imperialism,” in the present volume.

146Gustav de Molinari, L’ évolution politique et la Révolution (Paris: C. Reinwald, 1884) 271–74.

147Pierre Gaxotte, La révolution française (Paris: Plon, 1936), 2 vols.

148Molinari, L’ évolutionpolitique et la Révolution, 280–81, 285, n. 1, 287, n. 1, 289–90.

149Ibid. 272. As Dr. David Gordon has pointed out to me, Herbert Spencer also opposed state-imposed standards of weights and measures.

150Ibid. 333, n. 1

151Ibid. 278–79, 290, 295–97.

152See Ceri Crossley, French Historians and Romanticism, 53, 65, where the author points out that Thierry, for instance, glorified the bourgeoisie per se, as the historical embodiment of the “eternal principles of reason, justice, and humanity,” and considered the triumph of this class in 1830 as the culmination of French history. See the essay on “The Conflict of Classes: Liberal vs. Marxist Theories,” in the present volume.

153Molinari, L’ évolution politique et la Révolution, 307, 311–12, 317.

154Ibid. 314–15, 319–20, 322, 327–29.

155Gustave de Molinari, Ultima Verba: Mon Dernier Ouvrage (Paris: Giard and Brière, 1911) 39–44.

156Ibid. 60.

157Ibid. i, x, 61–62, 64, 175, 261.

158See, for instance, Montalembert, “La victoire du Nord aux États-Unis,” in idem, Oeuvres polémiques et diverses, (Paris: Jacques Lecoffre, 1868) 3: 297–367, especially 308–09, where Montalembert states, amazingly, that “the true miracle and the supreme victory” was that the North won without infringing freedom: “no liberty [was] suppressed, no law violated, no voice stifled, no guarantee abandoned . . .”—this, in the face of Lincoln’s manifold violations of civil liberties, suppression of dissenting newspapers, imprisonment of dissenters, suspension of habeas corpus, and so on.

159Molinari, Ultima Verba, iii-iv.

160Ibid. 37–38.

161F.A. Hayek, The Constitution of Liberty, 60.

162Lionel Robbins, The Theory of Economic Policy in English Classical Political Economy (London: Macmillan, 1953), 45. The three representatives of the “extreme individualist,” “night watchman state” position whom he cites are the Physiocrat Mercier de la Rivière (whom he parodies), Herbert Spencer, and Bastiat.

163D.H. Macgregor, Economic Thought and Policy (Oxford: Oxford University Press, 1949), 69.

164Ibid.

165Ibid.

166A.V. Dicey, Lectures on the Relation of Law and Public Opinion in England during the Nineteenth Century, 2nd. ed. (London: Macmillan, 1963 [1914]) 257–58.

167Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962) 201. Typically, John Gray, Limited Government: A Positive Agenda (London: Institute for Economic Affairs, 1989) 20–21, makes no mention, much less attempts a rebuttal, of this argument in favor of laissez-faire, presented in well-known works by Dicey and Friedman, in his attack on that principle as a “mirage.”

168Benjamin Constant, Commentaire sur l’ouvrage de Filangieri, 70. Interestingly, Constant’s rejection of state action is based largely on the inherent difficulties of correcting errors and eliminating failures in state activity. See Ralph Raico, “Benjamin Constant,” New Individualist Review, 3, No. 2 (1964) (repr. Indianapolis: Liberty Press, 1981) 499–508.

169Joseph A. Schumpeter, History of Economic Analysis, Elizabeth Boody Schumpeter (ed.) (New York: Oxford University Press, 1954), 841.

170Ibid. 843.

171Ibid. 842, n.5.

172Ibid.

173Such an understanding is missing from the discussion by J.E. Cairnes, “Political Economy and Laissez-Faire,” in idem, Essays in Political Economy. Theoretical and Applied (London, Macmillan, 1873), 232–64. Cairnes states that “as a practical matter I hold laissez-faire to be incomparably the safer guide [compared to the principle of state control]. Only let us remember that it is a practical rule, and not a doctrine of science; a rule in the main sound, but like most other sound practical rules, liable to numerous exceptions; above all a rule which must never for a moment be allowed to stand in the way of the candid consideration of any promising proposal of social and industrial reform” (251, emphasis in original). With Cairnes’s “rule” so readily defeasible, it is hard to see what protection it could afford against anti-social policies.

174See Salerno, “The Neglect of the French Liberal School,” and Rothbard, Classical Economics, 448–49 and 455–59.

175Francesco Ferrara, “G. B. Say,” in Prefazioni alla Biblioteca dell’Economista, Part 1 of idem, Opere Complete, Bruno Rozzi Ragazzi (ed.) (Rome: Associazione Bancaria Italiana/Banca d’Italia, 1955) 2, 567.

176On the Italian liberal economists and the rent-seeking state, see the essay, “Mises on Fascism, Democracy, and Imperialism,” in the present volume.

177Luigi Einaudi, “Liberismo e liberalismo,” in Benedetto Croce and Luigi Einaudi, Liberismo e liberalismo, Paolo Solari, ed. (Milan/Naples: Riccardo Ricciardi, 1957), 125–26. In his review of Keynes pamphlet, “The End of Laissez-Faire,” Einaudi asks why Keynes, after “having once again placed the rule of laissez-faire hors de combat as a scientific principle, did not add some additional page examining the present importance of that rule as a practical norm of conduct?. . .has the practical importance of the laissez-faire rule for the conduct of men really diminished? That state intervention has become quantitatively more frequent may be a correct proposition, but its truth does not prove the decadence of the laissez-faire rule, since it may well be that, contemporaneous with the extension of public activity and interference in some branches of economic life, there has been a much greater increase of new kinds of activity where the old rule of laissez-faire retains its value intact.” Luigi Einaudi, “La fine del ‘laissez-aire’” La Riforma Sociale, 3rd series, 37, Nos. 11–12 (November-December, 1926) 572–73. Einaudi, incidentally, found nothing original or particularly significant in Keynes’s pamphlet. Einaudi’s continuing preoccupation with the question of spogliazione is indicated by his comments in “Epilogo,” in La condotta economica e gli effetti sociali della guerra italiana (Bari: Laterza, 1933) 397–416, where he excoriates “the immoral state, the state that does not fulfill its primordial duties [the protection of personal liberty and property] but makes itself the center of intrigues, of favors, of transfers of wealth” (415).

178James Buchanan, “The Potential and Limits of Socially Organized Humanity,” in idem, The Economics and Ethics of Constitutional Order (Ann Arbor, Mich.: University of Michigan Press, 1991) 248–49.

179Karl Marx, “The Eighteenth Brumaire of Louis Bonaparte,” in Karl Marx and Friedrich Engels, Selected Works in Three Volumes (Moscow: Progress Publishers, 1983) 1, 477.

180But see the well-informed essay by Jörg Guido Hülsmann, “Bastiat’s Legacy in Economics,“Quarterly Journal of Austrian Economics, 4, No. 4, where Hülsmann calls him one of history’s “greatest economists,” as well as his briefer treatment in the Mises Daily, February 17, 2006.

• 1Ludwig von Mises
• 2Raico’s profound and extensive knowledge of intellectual, political, and economic history are evident in each of the following essays and, in fact, virtually on each page of this book. His readers will also appreciate the warm passion he brings to the study of his subject, as well as his dry wit. Drawing from original sources in German, French, and Italian, as well as English, Professor Raico provides us with original scholarship on the history of liberalism from a decidedly liberal, though not exclusively Anglo-Saxon perspective. What is more, he definitely has the talent to rouse his readers to emulate the deeds of earlier generations. It was through Raico’s book Die Partei der Freiheit (The Party of Freedom) that I and many other Germans first heard of Eugen Richter, the champion of true liberalism in fin de siècle Germany. Forgotten by virtually everyone except for his social-democratic detractors, Richter has made a comeback in the past ten years and some of his major writings are again in print. Today his words and deeds inspire a new generation of intellectuals and politicians. Thank you for that lesson, Professor Raico! If Germany returns to the tradition of true liberalism, we shall have in Berlin a Raico Straße leading to the Richter Platz.
• 3Erich Streissler 1990a.: 60 has even maintained that it is in this area that Menger’s achievement is to be found, and not in co-initiating the marginalist revolution.
• 4Eugen von Böhm-Bawerk, for instance, stated (1891: 380–81): “We must not weary of studying the microcosm if we wish rightly to understand the macrocosm of a developed economic order . . . we must seek an understanding of the phenomena of great things in the study of the world of small things.” F.A. Hayek, who probably did more than anyone else to identify Austrianism with methodological individualism, wrote (1973: 8): “The consistent use of the intelligible conduct of individuals as the building stones from which to construct models of complex market structures is of course the essence of the method that Menger himself described as ‘atomistic’ (or occasionally, in manuscript notes, as ‘compositive’) and that later came to be known as methodological individualism.”
• 5Elster makes the important point (1985: 5; emphasis in original): “It is not only our confidence in the explanation, but our understanding of it that is enhanced when we go from macro to micro, from longer to shorter time-lags. To explain is to provide a mechanism, to open up the black box and show the nuts and bolts, the cogs and wheels, the desires and beliefs that generate the aggregate outcomes.”
• 6The Austrian method also involves a universalism that has strong affinities with liberalism, in contrast to certain forms of conservatism. As Mises stated (1969: 38): “As against the declarations of Schmoller and his followers, [the Austrians] maintained that there is a body of economic theorems that are valid for all human action irrespective of time and place, the national and racial characteristics of the actors, and their religious, philosophical, and ethical ideologies.”
• 7On the general philosophical background of the Austrian School, see especially Gordon 1993, also Smith 1994c. Pearson 1997: 31 attempts to minimize the differences between the German Historical School and the early marginalists (including the Austrians), maintaining that both were allegedly reacting against the Classical School (of mainly British political economy), rather than one another. His analysis fails to inspire confidence, however, since it is based on his assumption that the marginalists “displace[d] interest away from ‘value,’ that transcendent quality that had never quite lost the imprint of natural law, and toward ‘price,’ a frankly social phenomenon . . .”
• 8See Gellner 1968: 256 n. 4, where M. Ginsberg is cited: “those who refuse to accept methodological individualism . . . are well aware . . . of the dangers of concentrated power. But they deny that the only choice open to us is between a spontaneous competitive order on the one hand, and a system of all-pervading control on the other.” See also Gellner’s own comment on the same page: “[Methodological] individualists who attempt to save us, in the name of logic and liberty, from misconstruing our situation, are not wholly free at all times from suspicion that a little propaganda for laissez-faire is being hitched on to those very general issues.”
• 9In his account of the Great Depression (1963), as well as other works, Rothbard applies theory to help explain quite concrete historical events, often interpreting those events in the light of the “class” (or, “caste,” in the stricter, Misesian-Rothbardian terminology) interests involved. See also the comment by Garrison and Kirzner (1989: 121) that, among other scientific merits, “Hayek’s business cycle theory provided a basis for interpreting much of 19th-and 20th-century economic history.”
• 10Cf. White 1984: 4: “The subjective approach to economic phenomena builds economic analysis upon the insight that every individual chooses and acts purposively. . . . This approach has been the hallmark of the Austrian School from its inception in the 1870s to the present day, although different members have defended their method in different ways.” Cf. also Vaughn 1990: 382: “The human being that is the subject of Menger’s study . . . cannot be summarized by a static and fully defined preference function. . . . He is an active creator both of himself and of his world. And creation is a process rather than a state of affairs.”
• 11In contrast to Pareto, in the Austrian view, consumers are viewed, not as fixed loci of consumption functions, but as sources of incessant change, who also play an entrepreneurial role (Mises 1949: 253–54). As for Pareto, despite the positivism and apparent “anti-individualism” of his methodology, he was all his life a fervent economic liberal; see Finer 1968 and the essay on “Ludwig von Mises’s Liberalism on Fascism, Democracy, and Imperialism,” in the present volume.
• 12Cf. Kirzner’s remarks 1976b: 59: “It is easy to see how foreign the notion of the ‘automatic maintenance of capital’ [the Clark-Knight concept] must have appeared to Mises. An approach that concentrates analytical attention—as Austrian economics does—on the purposive and deliberate decisions of individual human beings when accounting for all social economic phenomena must treat the notion of capital as a spontaneously growing plant as not merely factually incorrect but simply absurd.”
• 13Cf. the statement of the self-described Austrian “fellow traveler,” Leland Yeager 1995: 219: “economics deals with human choices and actions, not with mechanistically dependable relations. The economy is no machine whose ‘structure’ can be ascertained and manipulated with warranted confidence.” There are no constants in economics comparable to those in the natural sciences, and “no amount of cleverness with econometrics can make the nonexistent exist after all.” See also Yeager 1997, where, after a judicious evaluation of Austrian economics, the author suggests some reasons for the relative neglect of the Austrian school by the mainstream of the profession.
• 14See especially the works attempting to develop Misesian ideas on this topic by Israel M. Kirzner, beginning with Kirzner 1973; and the exposition by Rothbard 1997, 2: 245–53. Jaffé 1976 argues that decisive differences between the Austrian and neoclassical approaches that existed from the start have been overlooked because of the tendency to “homogenize” Menger, Jevons, and Walras as co-founders of “the marginalist revolution.”
• 15For an informative discussion of other contrasts between Austrianism and neoclassicism, see Huerta de Soto 1998.
• 16Herbert Matis remarks (1974: 257) of the early Austrian school that “this new intellectual approach in economics was subjective, relative, and psychological, since it started from the human being and not from abstract concepts; it signified, therefore, to that degree a departure from classical liberalism.” The confusions evident here are not untypical of the superficial treatment of liberalism by many writers on its history.
• 17Cf., for instance, Edward G. Dolan’s critique 1976b: 6, 11 of “mainstream economics”: “it necessarily omits an important component of reality—the concept of purposive action,” while Austrianism “insists on laying bare the true causal relationships at work in the social world and is not content to simply establish empirical regularities among dubious statistical aggregates.” Austrianism offers “a microeconomic approach to macroeconomic problems.”
• 18See also the trenchant analysis in two essays on the subject by Rothbard 1997, 2: 180–84 and 217–25.
• 19Cf. the perceptive and important comment by Lawrence Birken (1988: 256): “Only with the emergence of marginalism was individual taste decidedly emancipated from the idea of universal need. With occasional exceptions, pre-marginalist thought had ignored or downplayed the significance of the idiosyncratic consumer, thus precluding the recognition of consumer preference as a mark of individuality. Early economic thought, functioning as a kind of secular morality which sought to uphold the idea of the ‘normal,’ conceived of need or utility in universal terms. . . . Only with the advent of marginalism do we see the emergence of a genuinely individualistic desire.” Birken’s analysis, however, would appear to apply much more to the Austrian than the neoclassical variant of marginalism.
• 20Hayek himself lent some support to Hutchison’s distinction between Mises and “Hayek II” in his foreword to a reprint of Mises’s Socialism (Mises 1981: xxiii-xxiv), when he criticized Mises’s claim that “all social cooperation [is] an emanation of rationally recognized utility,” as both “factually mistaken” and an expression of Mises’s “extreme rationalism.” But the general thrust of this passage is to downplay his disagreement with Mises. Hayek states, for instance, that Mises “largely emancipated himself from that rationalist-constructivist starting point,” and that “Mises as much as anybody has helped us to understand something which we have not designed.”
• 21Mises never claimed that the specific motivations of human action, in the psychological sense, were relevant to economics; rather it was a question of preferences as demonstrated in action.
• 22It should be noted that Friedman expressed these views in a popular address. Still, it is difficult to see how his argument could be made substantially more rigorous or coherent. Friedman declares, for example, that we must “beware of intolerance [such as Mises supposedly displayed] if we’re going to be really effective in persuading people,” yet concedes, very graciously, that “there is no doubt in my mind that Ludwig von Mises has done more to spread the fundamental ideas of free markets than any other individual” (1991: 18). Friedman’s brief account of Ayn Rand’s allegedly a priori philosophy is simply uninformed and incorrect.
• 23To those familiar with Mises’s achievements (see Rothbard 1988; Hoppe 1993; Reisman 1998; Zlabinger 1994; Ebeling 1981), the attempt of Hutchison and others to minimize them is more ludicrous than troubling, e.g., Erich Streissler’s assertion, regarding Mises (1990b: 109; see also 1988: 200) that, “not without truth, though certainly with little charity, [he] might be called the arch-lobbyist for entrepreneurial concerns in interwar Austria.”
• 24On the question of apriorism, it is worth noting that Hayek (1955: 221 n.1) wrote of John Locke that he regarded “the moral sciences” (ethics, political theory, etc.) “as a priori sciences comparable with mathematics and of equal certainty with it.” The context makes it clear that Hayek is here passing a favorable judgment on Locke. It is doubtful whether either Hayek or Hutchison would have wished to classify Locke as “a false individualist.”
• 25For an incisive critique of Popperian falsificationism, see Gordon 1993: 34–41.
• 26See also de Jasay 1991b. Gerard Radnitzky 1995: 49–84, especially 50, 64, 83, has criticized Popper’s oft-repeated praise of Marx as a “humanist,” as well as his political philosophy in general. He holds Popper’s concessions to “a not thought-through social democracy” to have been a “survival strategy,” which permitted him to find a wide readership for his views. This Radnitzky contrasts to Mises, who simply refused to compromise with the statist spirit of the times. Radnitzky’s view paints Popper as a hypocrite and an opportunist, which does not seem right.
• 27Popper’s knowledge of the history of liberal thought was astonishingly deficient. He held, for instance, 1992: 10 that Hayek originated the notion that complete socialism entailed political enslavement (and that Mises derived it from Hayek). But this idea was a commonplace among late-nineteenth century liberals, as evidenced by Herbert Spencer’s essay, “The Coming Slavery,” Yves Guyot’s La tyrannie socialiste, Eugen Richter’s Pictures of a Social-Democratic Future, and other works.
• 28On the influence of Capitalism and the Historians, see Taylor 1997: 162–64. In a learned study, Jeremy Shearmur (1996) has argued that, despite Popper’s evident social-democratic attitudes, the implications of his ideas are more closely related to classical liberalism than Popper himself understood. Whatever the validity or scope of that claim, there is the anterior and more fundamental question—whether Popper’s ideas on politics, based as they are on grossly incorrect historical and economic notions, are even important enough to warrant extended examination in the first place. Popper’s superficiality in dealing with political issues is nowhere more obvious than in his 1956 tour d’ horizon of the world scene, “The History of Our Time: An Optimist’s View” (1962: 364–76). Here he declares that “our own social world is the best that has ever been”—neglecting, among other things, the Chinese, around one-fifth of the human race and then living under the Maoist terror regime. He not only implies, for no good reason, that the disappearance of “class differences” is desirable, but announces, absurdly, that in the United States (and elsewhere) “we have, in fact, something approaching classless societies.” Similarly, in a tribute to Hayek (Popper 1997: 321, from a talk given in 1992), Popper recalls that often in conversations with Hayek, he criticized Mises’s conduct of the fight against “what was then called . . . protectionism, or state-protectionism” (sic—presumably, Popper is referring to what everyone else calls interventionism), because “in a complex society, anything approaching a free market could only exist if it enjoyed the protection of laws, and therefore of the state. Thus the term ‘free market’ should always be placed in inverted commas, since it was always bound, or limited, by a legal framework and made possible only by this framework.” On Popper’s “logic,” then, terms like “freedom of the press” and “religious freedom” should also always be placed in inverted commas, for the same reason.
• 29On some differences between Mises and Hayek in connection with the famous debate, see Keizer 1994.
• 30For a statement of this position, see März 1991: 101–05, where the author, in what purports to be a scholarly work, adopts the Marxist polemical tactic of characterizing Mises as having launched “the theoretical and ideological counter-offensive of the Austrian bourgeoisie” in his critique of socialist planning.
• 31Karen Vaughn 1994 maintains that the use by socialist writers of neoclassical theory to derive market socialist responses to the Austrian assault sensitized both Mises and Hayek to the distinctively Austrian components of their argument.
• 32Cf. Dasgupta 1985: 80: in contrast to classical economics, “consumption, not accumulation, appears in marginalist economics as the mainspring of economic activity. The new system, so to say, substitutes ‘consumers’ sovereignty’ for ‘capitalists’ sovereignty.’”
• 33It should be noted that by including the state in the same category as such social formations as language and markets, Menger is obscuring the crucial liberal distinction between state and civil society, coercion and voluntarism.
• 34Emil Kauder 1965: 61 points out that Menger opposed religious bigotry, anti-Semitism, militarism, dueling, and the glorification of war, and “was very critical of the feudal pillars of the Habsburg monarchy—clergy, army, and nobility.” A number of these are traditions or institutions which, it could well be argued, had developed “spontaneously.”
• 35In his last work on politics, Considerations on the Government of Poland, Rousseau, who is still viewed by many as a serious political thinker, continued his idolization of Lycurgus, while spelling out the totalitarian implications of his childish infatuation: “He showed them [the Spartans] their country unceasingly, in their laws, their games, their homes, their loves, their feasts. He did not allow them a moment to be by themselves alone. And from this continual constraint, ennobled by its object, was born that ardent love of country . . .” See Crocker 1973: 335.
• 36Wieser maintained 1923: 91–92 that, before Menger, all the schools of economic thought “pursued the interests of one of the great economic parties . . . [and] sought evidence for their partisan interest.” Very oddly, he even employs the Marxist terminology of “bourgeois” and “proletarian” economists, going so far as to assert that the “proletarian,” i.e. socialist, economists, will be able to learn from Menger’s economic theory, without “in any way giving up their fundamental standpoint”; rather, they will be able to “strengthen their standpoint.”
• 37It was left for Erich Streissler among non-socialists to impute a class interest to the Austrian economists (1988: 200–01): “after the end of the monarchy the members of the School belonged to the old ruling class dispossessed of power and mostly expropriated through the hyperinflation which had abolished their rentier capital. No wonder they were particularly critical of the state.”
• 38Fetter 1923: 602 noted that the negative implications of the subjective theory for Marxian economics appears more clearly in Wieser’s and Böhm-Bawerk’s works, but maintained that “this application had, however, been recognized from the very beginnings of the subjective school.” While he cites no particular evidence, he may have had in mind, for instance, Menger’s critique of Rodbertus’s claim that capitalists and landowners expropriate the product of labor and thus “live without working.” To this Menger 1981: 168 n. 30 countered that they live “upon the services of their land and capital which have value, just as do labor services, both to individuals and to society.”
• 39Streissler 1990a: 64 makes the peculiar statement that: “Perhaps Bukharin is not that far off the mark after all when he thinks it [Austrian economics] is the economics of the rentier.” However, Günther Chaloupek, an author sympathetic to Marxism, is considerably closer to the mark when he states 1986: 221, in discussing Bukharin’s critique of Austrianism: “But: if the marginal utility school drew attention to demand, this was certainly not in the first instance a symptom of the beginning of age of the rentier, but rather a reflex of the increased standard of living of the masses as well in the train of capitalist expansion.”
• 40Joan Robinson, on the other hand, argued 1962: 52, emphasis in original, that while “the whole point of utility was to justify laisserzfaire,” the theory had inherently egalitarian and redistributionist implications.
• 41That the approach to the history of economic thought centering on the British tradition from Smith to Mill must be abandoned is argued by Murray N. Rothbard (1976a). Rothbard persuasively claims 1976a: 53 that a more informed interpretation would see “Smith and Ricardo, not as founding the science of economics, but as shunting economics onto a tragically wrong track, which it took the Austrians and other marginalists to make right.” Citing works by Marjorie Grice-Hutchinson and Raymond de Roover, Rothbard emphasizes the importance of medieval and early modern thinkers, particularly the Spanish Late Scholastics. These themes also pervade Rothbard’s history of economic thought 1995c, where the Late Scholastics are treated in 1: 97–133. See also Jesús Huerta de Soto 1999.
• 42Oscar Morgenstern 1927: 673–74, however, had a sharply different interpretation of Wieser’s last work, Gesetz der Macht, and incongruously characterized Wieser as a “convinced pacifist.”
• 43Streissler 1986: 100 points out that Wieser’s constant references to “the socialist state of the future” influenced his student Joseph Schumpeter in the latter’s assessment of the probable course of historical development.
• 44Even as regards Wieser’s economic theory, Mises 1978b: 36 concluded that he “could not be called a member of the Austrian School, but was rather a member of the Lausanne School . . .” This viewpoint is cogently set forth in Hoppe and Salerno 1999.
• 45Cf. Streissler’s insightful remark 1987: 24: “Through Menger his school became a vessel of economic liberalism, at a time when in other countries it stood under an unlucky star. This school took over a then ‘lost cause,’ and nursed liberalism at the time of its deepest ebb—especially in the period between the wars.”
• 46Kauder 1965: 64 asserts of Menger: “He was not a consistent defender of free competition, and he was not a socialist, although his brother, the famous socialist Anton Menger, had some influence on him.”
• 47Paul Silverman, however, 1990: 85, 90–91 criticizes Kauder on the nature of the Austrian background of Menger’s work (as well as on Menger’s alleged methodological dependence on Aristotle). Silverman points up the importance in Austrian history of a school of liberal cameralists, including the key figure of Joseph von Sonnenfels, who posited “a system of preestablished social harmony which the state was to watch over and protect.” Josef von Kudler, whose work on economics was the standard textbook in Austrian universities in the decades before the appearance of Menger’s Principles, likewise displayed “a staunchly liberal outlook.” In Silverman’s view, the impact of the “Austrian tradition” on Menger was not in the direction of conservatism, spurring the search for a Metternichian stability; instead, it may mainly have worked to convey the notion of objective, rational ends for man in society. This set a limit to Menger’s subjectivism, leading him, for instance, to differentiate real from imagined needs.
• 48Böhm 1990: 232 n. 2 suggests that Mises’s extreme liberal viewpoint was out of step with the general position of the founders of Austrianism, who tended towards “a kind of ‘enlightened conservatism’ (in the European sense), or ‘paternalistic conservatism’—allegations of laissez faire repeated ad nauseam notwithstanding.”
• 49At the University of Vienna, Hans Mayer, who was all that was left of the Austrian school after the Anschluss with Nazi Germany, also held that Mises’s radical liberal conclusions were not inherent in the school’s teachings (Craver 1986: 10–11). This is easily understandable, given Mayer’s position as a functionary of the new National Socialist regime. The tradition of attempting to disassociate Mises’s “personal,” “Manchester-liberal” world-view from “the objective findings of the Austrian school” was carried on by Weber 1949: 644.
• 50Hans-Hermann Hoppe puts the matter very well. When Mises arrived in the United States in 1940, he was already “an international scientific celebrity,” and his influential works, The Theory of Money and Credit and Socialism had been available in English for years. “But while every third-class European Marxist or ‘Marxian’ of the time found a respectable academic position without any difficulty, in the land of capitalism the American universities and intellectuals plainly and shamelessly turned a cold shoulder to Mises, the great theoretician of liberalism and capitalism.” Mises finally obtained a position at New York University, but only as permanent guest professor, and the university did not pay his salary, which was covered from private sources. Hoppe 1993: 27–28, 30, 34 n. 24. Hayek’s situation was analogous. While he did become a professor on the Committee on Social Thought, he was deemed unsuitable, not “scientific” enough (i.e., not sufficiently positivist) by the economics department of George Stigler and Milton Friedman, and his salary was likewise paid from outside sources.
• 51Cf. Steele 1992: “The fact that there were capable liberal thinkers in Europe after World War II is mainly due to the influence of Die Gemeinwirtschaft [Mises’s Socialism] during the inter-war years. There might not have been any West German ‘economic miracle’ without the existence of a handful of active people converted from socialism by Mises.” See also Roll 1945: 176: “Hayek and his Viennese colleagues have been the leaders of an astonishing movement of revival [of individualism and liberalism] which in the early thirties began to appear also in England. . .There in nothing quite comparable to this movement in the United States.”
• 52See in particular Joseph T. Salerno’s perceptive introduction to Hayek’s Prices and Production and Other Works, “Hayek on the Business Cycle,” Mises Daily, October 8, 2008.
• 53On Hayek’s position, see Shearmur 1997. The German “neo-liberal” Alexander Rüstow was one of many who could not differentiate the position of Hayek from that of “his master Mises,” viewing both as “the last surviving examples” of the “old liberalism,” fit to be placed in a museum; see Kathrin Meier-Rust 1993: 69–70. Meier-Rust herself (91) discusses the sharp differences between the German “neo-” and “Ordo-liberal,” and the “classical laissez-faire champions” like Hayek.
• 54See also Streissler 1987: 10: “pronounced liberals, at least in the eighteenth and nineteenth centuries, were rather averse to a redistributive function [of the state]. On the other hand, Friedrich von Hayek, for instance, is no longer of this opinion. He believes only that the pursuit of Sozialpolitik should not be attempted with the help of the market but through transfers independent of the market.”
• 55Hayek also later remarked that another error in The Road to Serfdom was his neglect of the significance of the experience of Soviet Communism, adding, rather oddly, that this was a fault “which is perhaps pardonable when it is remembered that when I wrote Russia was our wartime ally.” This is a curious inversion of the strange criticism leveled at The Road to Serfdom by Erich Roll, in the American Economic Review (1945: 180): “Hayek might have stopped to reflect upon the very different development during the last few pre-war years in Germany and in the Soviet Union, and he might have had the grace, at the least, to acknowledge the very different manner in which the war itself has been conducted by the enemy and by our ally: we have yet to be shown that Maidanek is an inevitable corollary of a collective economy” (1945: 180). Evidently, Professor Roll and his equally ignorant editors at the American Economic Review had somehow never heard of the Ukrainian terror famine, the mass executions, or the system of forced labor camps known today as the Gulag, all conducted by our noble wartime ally, the model terror state of the twentieth century.
• 56Cf., e.g., Mises, 1949:149: “State or government is the social apparatus of compulsion and coercion. It has the monopoly of violent action. . . . The state is essentially an institution for the preservation of peaceful interhuman relations. However, for the preservation of peace it must be prepared to crush the onslaughts of peace-breakers.”
• 57Hans-Hermann Hoppe 1994: 67 has ventured to assert that “Hayek’s view regarding the role of market and state cannot systematically be distinguished from that of a modern social democrat.” But see the attack on Hayek for his rejection of the concept of social justice by a social democratic writer, in Plant 1994.
• 58Late in his life, Hayek 1994: 68, 72–73 referred to his “curious relationship” to Mises, from whom “I probably learnt more than from any other man.” Here Hayek made the confusing claim that “Mises remained in the end himself a rationalist-utilitarian, and with a rationalist-utilitarianism, the rejection of socialism is irreconcilable. . . . If we remain strict rationalists, utilitarians, that implies that we can arrange everything according to our pleasure.” At an earlier stage, Hayek’s judgment of Mises had been much more positive. In 1952, Hayek wrote 1952: 729–30 of Mises that “since the early twenties [he] has been building a new edifice of liberal thought more consistently, more systematically, and more successfully than anyone else . . . his work resemble[s] that of the great social philosophers of the eighteenth century much more than the labors of a contemporary expert . . . he alone has given us a conclusive treatment of all economic and social thought,” Hayek asserted, adding, “whether or not one concurs with him in every detail.”
• 59A comprehensive examination of what Hayek criticized as Mises’s “extreme rationalism” (foreword to Mises, 1981: xxiii) is presented, with a critique of Hayek’s position, in Salerno 1990.
• 60Menger adds in a footnote 1935c: 93 n.: “I certainly attack the so-called ‘ethical’ tendency in political economy in a number of places in my Investigations, while strictly distinguishing it from the ‘social-political’ [social reform] tendency in economic research.” Streissler, incidentally, cites Menger’s clash with Schmoller, but omits his praise of Schmoller’s crusade for Sozialpolitik (Menger 1994: 24 n. 8).
• 61By 1891 Menger (1935b: 244–45) also had some harsh criticisms of the policies of the social reformers: “The self-interest that the advocates of Sozialpolitik so utterly despise has not disappeared from the world. Rather, it has degenerated into a collectivist, national and class egoism, which strives not for the increase of the total product (of the object to be divided up!) but for as great a portion of the total product as possible for each individual social class.”
• 62On Thierry, see Augustin-Thierry 1922; Carroll 1951; Smithson 1973; and Gossman 1976.
• 63Augustin Thierry, “Commentaire sure L’Esprit des Lois de Montesquieu,” Censeur européen, 7 (1818), 228, 230.
• 64Ibid. 205–06.
• 65Ibid. 217.
• 66Ibid. 244.
• 67Ibid. 218.
• 68Ibid. 256–57.
• 69Ibid. 257–58.
• 70Ibid. 251–52.
• 71Ibid. 255.
• 72Charles Comte, “De la multiplication des pauvres, des gens à places, et des gens à pensions,” Censeur Européen, 7, 1n.
• 73Shirley M. Gruner, Economic Materialism and Social Moralism, The Hague/Paris: Mouton, 1973, 108–10, aptly summarizes Guizot’s standpoint: He “liked to be popular and therefore liked to be considered up-to-date in his ideas. Nor does he wish to appear ‘unscientific.’ Therefore he never denies anything outright but seeks to modify a little here and there so that finally nothing is left of it. There is no head-on opposition. . .This is in fact the whole problem of Guizot—his indecisive decisiveness so that not only in history but in politics the basically constitutional conservative appears at times to long for the trappings of a radical liberal.” Gruner shrewdly adds that “it has also been in the interest of certain groups, for instance the Communists of 1848 [including presumably Marx and Engels], to suggest that there was not much difference between Guizot and the other ‘bourgeois’ liberals.”
• 74Gerhard (1960), 305.
• 75François Mignet, “Le comte Sieyès: Notice,” Notices et portraits historiques et littéraires, I (Paris: Charpentier, 1854), 88.
• 76François Mignet, “Charles Comte: Notice,” ibid. II, 102.
• 77“After much time and labor lost in thus obtaining artificial results, I perceived that I was falsifying history by imposing identical formulas on totally different periods.” Augustin Thierry, Dix Ans d’Études Historiques (Paris: Furne, 1851 [1834]), 3. He adds that, after his first essays on English history, in the Censeur Européen, he began to feel the need to leave to each epoch its originality: “I changed style and manner; my former rigidity became more supple . . .” ibid. 6–7. Of his earlier radical-liberal views, he says: “I aspired enthusiastically towards a future of which I had no very clear idea . . .” [vers un avenir, je ne savais trop lequel . . .] ibid. 7.
• 78Ibid. 8.
• 79Ibid. 12.
• 80Thierry, Essai sur l’Histoire de la Formation et des Progrès du Tiers État (1894 [1853]) Paris: Calmann Lévy), 172.
• 81Ibid. 195.
• 82Ibid. 1–2.
• 83Marx discusses Thierry’s Essai in the letter to Engels cited in note 211. Interestingly, he commends Thierry for describing “well, if not as a connected whole: (1) How from the first, or at least after the rise of the towns, the French bourgeoisie gains too much influence by constituting itself the Parliament, the bureaucracy, etc., and not as in England through commerce and industry. This is certainly still characteristic even of present-day France.” Selected Corr. 88.
• 84Augustin Thierry, “Preface,” Essai sur l’Histoire de la Formation det des Progrès du Tiers État.
• 85Alexis de Toqueville, Recollections, Alexander Teixeira de Matos (tr.) J.P. Mayer (ed.), New York: Meridian, 1959. 2–3.
• 86Allix, 318–19.
• 87A. Augustin-Thierry, Augustin Thierry, 1795–1856 (Paris: Librairie Plon, 1922) 114.
• 88Ibid. 112f.
• 89Eugene Tenbroeck Mudge, The Social Philosophy of John Taylor of Caroline: A Study in Jeffersonian Democracy (New York: AMS Press, 1968 [1939]), 151–204, passim.
• 90William Leggett, Democratick Editorials: Essays in Jacksonian Political Economy, Lawrence H. White (ed.) (Indianapolis: Liberty Press, 1984), 250–51. See also Lawrence H. White, “William Leggett: Jacksonian Editorialist as Classical Liberal Political Economist,” History of Political Economy, 18, No. 2 (Summer 1986), 307–24.
• 91Ludwig von Mises, Theory and History (New Haven: Yale University Press, 1957), p. 294.
• 92R. Raico, Die Partei der Freiheit (Stuttgart: Lucius & Lucius, 1999). The book is available online at http://docs.mises.de/Raico/die_partei_der_freiheit_raico.pdf
• 93Methodological individualism has been a keystone of Austrian economics from the start (Christainsen 1994). In his Investigations, Menger wrote:
• 94Methodological individualism was endorsed by the other leaders of Austrianism to the point where Fritz Machlup (1981: 9) could list it as the first of “the most typical requirements for a true adherent of the Austrian school.”
• 95It is certainly possible for someone to adopt methodological individualism and not endorse liberalism (Böhm 1985: 252–53). Jon Elster, for instance, is able to insist on the necessity of methodological individualism in the social sciences, while continuing to view himself as a kind of Marxist (1985: 4–8). Yet it is significant that Elster dismisses certain claims of Marx on the grounds of their incompatibility with methodological individualism. In general, it seems clear that the Austrian approach in methodology tends to preclude certain holistic ideologies that are also inconsistent with liberalism, such as classical Marxism and some varieties of racism and hyper-nationalism. To this extent, then, it is not simply methodological individualism.
• 96It is certainly possible for someone to adopt methodological individualism and not endorse liberalism (Böhm 1985: 252–53). Jon Elster, for instance, is able to insist on the necessity of methodological individualism in the social sciences, while continuing to view himself as a kind of Marxist (1985: 4–8). Yet it is significant that Elster dismisses certain claims of Marx on the grounds of their incompatibility with methodological individualism. In general, it seems clear that the Austrian approach in methodology tends to preclude certain holistic ideologies that are also inconsistent with liberalism, such as classical Marxism and some varieties of racism and hyper-nationalism. To this extent, then, it is not simply methodological individualism.
• 97Political factors played a role in the debate over Austrian methodology from the start. The very fact that “nation” and “state” understood as holistic entities were not primaries in his system set Menger apart from important currents of economic thought in the German-speaking world of his time. Indeed, it was on the basis of Menger’s methodology that Gustav Schmoller, leader of the German Historical School, instantly politicized the whole debate at the very start of the famous Methodenstreit (dispute over methods) (Bostaph 1978 and 1994). Reviewing the Investigations, Schmoller (1883:241) charged Menger with the cardinal sin of adhering to Manchestertum (laissez-faire), since his abstract and “atomistic” method might better be called “the Manchesteristindividualist” method.
• 98Furthermore, according to Hayek, the supposed discovery of such laws has resulted in the construction of philosophies of history on which major socialist projects have been erected—Marxism, of course, but particularly Saint-Simonianism, the system he dissects in his book. The followers of the early “utopian” socialist, Henri de Saint-Simon, were practitioners par excellence of scientism, the illegitimate application to the study of society of the methods of the natural sciences. And it is scientism—the negation of methodological individualism—that “through its popularizers has done more to create the present trend towards socialism than all the conflicts between economic interests . . .” (1955: 100–01). Opponents of liberalism, in criticizing Hayek for his methodological individualism, have also assumed that it was closely connected to his political philosophy.
• 99This Marxist complaint is misguided, however. The abstracting approach of Austrianism pertains—necessarily—to its theory. Some Austrians, it may be conceded, have neglected to apply their theory to the understanding of concrete, “real-life” issues. That this failing is not intrinsic to Austrian economics, however, was demonstrated—to cite only one example—by the outstanding Austrian economist, Murray N. Rothbard, who devoted much of his extremely productive career not only to “pure economics,” but also to highly important questions of political economy, both on a theoretical level and in specific historical contexts (see, e.g., Rothbard 1963, 1970, 1995a, 1995b, 2002).
• 100the thought design, the economic calculation or economic plan of the individual, always stands in the foreground of theoretical interest. . . . The significance of the Austrian school in the history of ideas perhaps finds its most pregnant expression in the statement that here man as an actor stands at the center of economic events. (1978: 47, 51; emphasis in original)
• 101This standpoint may be contrasted to that of neoclassical theory, of which Lachmann went so far as to declare: “Fundamentally, we cannot really speak of economic activity here. As in nature, people react to the current external conditions of their economic existence: they do not act.” In support of this rather severe judgment, Lachmann cited the statement of Vilfredo Pareto: “The individual can disappear, provided that he leaves us this photograph of his tastes.” Incensed by such a depreciation of individual acting man, Lachmann assailed the “arid formalism” of neoclassical economics, which treats “the manifestations of the human mind in household and market as purely formal entities, on par with material resources” (1978: 51, 56, 181; emphasis in Lachmann).
• 102This standpoint may be contrasted to that of neoclassical theory, of which Lachmann went so far as to declare: “Fundamentally, we cannot really speak of economic activity here. As in nature, people react to the current external conditions of their economic existence: they do not act.” In support of this rather severe judgment, Lachmann cited the statement of Vilfredo Pareto: “The individual can disappear, provided that he leaves us this photograph of his tastes.” Incensed by such a depreciation of individual acting man, Lachmann assailed the “arid formalism” of neoclassical economics, which treats “the manifestations of the human mind in household and market as purely formal entities, on par with material resources” (1978: 51, 56, 181; emphasis in Lachmann).
• 103Israel Kirzner, too, has noted the uniqueness of the Austrian outlook. Both the earlier Ricardian and the current neoclassical economics exhibit a “mechanical quality,” whereby “human aspirations, human errors, and human discoveries are downplayed, ignored, or simply assumed away.” Austrian economics, on the other hand, highlights the alertness, inventiveness, fallibility, and resourceful creativity of all the participants in the market process, especially in the case of the entrepreneur and the entrepreneurial function. This is a distinctive Austrian outlook which Kirzner traces back to Menger, whose originality consisted in his “vision of an economy created and shaped by human action” (Kirzner 1994, 1: xiv, xxiv). For neoclassical economic theory, on the other hand, as one practitioner has ruefully admitted, entrepreneurs and entrepreneurship simply do not exist (Rosen 1997: 148–49).
• 104Israel Kirzner, too, has noted the uniqueness of the Austrian outlook. Both the earlier Ricardian and the current neoclassical economics exhibit a “mechanical quality,” whereby “human aspirations, human errors, and human discoveries are downplayed, ignored, or simply assumed away.” Austrian economics, on the other hand, highlights the alertness, inventiveness, fallibility, and resourceful creativity of all the participants in the market process, especially in the case of the entrepreneur and the entrepreneurial function. This is a distinctive Austrian outlook which Kirzner traces back to Menger, whose originality consisted in his “vision of an economy created and shaped by human action” (Kirzner 1994, 1: xiv, xxiv). For neoclassical economic theory, on the other hand, as one practitioner has ruefully admitted, entrepreneurs and entrepreneurship simply do not exist (Rosen 1997: 148–49).
• 105Israel Kirzner, too, has noted the uniqueness of the Austrian outlook. Both the earlier Ricardian and the current neoclassical economics exhibit a “mechanical quality,” whereby “human aspirations, human errors, and human discoveries are downplayed, ignored, or simply assumed away.” Austrian economics, on the other hand, highlights the alertness, inventiveness, fallibility, and resourceful creativity of all the participants in the market process, especially in the case of the entrepreneur and the entrepreneurial function. This is a distinctive Austrian outlook which Kirzner traces back to Menger, whose originality consisted in his “vision of an economy created and shaped by human action” (Kirzner 1994, 1: xiv, xxiv). For neoclassical economic theory, on the other hand, as one practitioner has ruefully admitted, entrepreneurs and entrepreneurship simply do not exist (Rosen 1997: 148–49).
• 106In this whole area there is a strong link to an important element of classical liberalism, as exemplified, for instance, in the early Wilhelm von Humboldt, Benjamin Constant, and Herbert Spencer. In combating authoritarian ideologies, liberal thinkers focused on the individual human being per se (i.e., irrespective of class, race, etc.) as the fountainhead of creative response to an ever-changing world. From this they derived the basic liberal demand for as wide a latitude as possible for individual freedom of choice and action.
• 107On the level of policy, Austrianism’s individualist and subjectivist methodology tends, indirectly at least, to sway decisions in a liberal direction. Austrian economists are skeptical of the macroeconomic models devised by “mainstream economists,” with their assumption that various global magnitudes act upon one another. There appear to be affinities between a macroeconomic approach and anti-liberal policies. Hayek, for example, wrote, of the heightened interest in macroeconomic statistics associated with the Keynesian revolution:
• 108It was largely a growing demand for greater deliberate control of the economic process (which required more knowledge of the specific effects to be expected from particular measures) that led to the endeavor to use the obtainable statistical information as the foundation of such predictions. (1973: 12)
• 109Besides having implications for policy, the Austrian concern with the diversity of human beings and their situations is strongly congruent with liberalism’s view of the nature of man. The epigraph which John Stuart Mill placed at the beginning of his On Liberty, from Humboldt’s Limits of State Action, epitomizes this liberal outlook: “The grand, leading principle towards which every argument unfolded in these pages directly converges is the absolute and essential importance of human development in its richest diversity” (quoted in Mill 1977: 213).
• 110“False” as well as “True” Individualism has been very much present among modern Austrian views on the philosophy and method of economics . . . it is important that [the Austrians’] methodology, or epistemology, should be clearly, logically, and explicitly compatible with their political principles. As well as its ethics, politics, and economics, freedom has its epistemology, which must surely be one of its most fundamental aspects and requirements. (1981: 224).
• 111. . . his fundamental idea was that we knew things about “human action” (the title of his famous book) because we are human beings. As a result, he argued, we have absolutely certain knowledge of the motivations of human actions [sic] and he maintained that we can derive substantive conclusions from that basic knowledge. Facts, statistical or other evidence cannot, he argued, be used to test those conclusions. . . . That philosophy converts an asserted body of substantive conclusions into a religion. . . . Suppose two people who share von Mises’s praxeological view come to contradictory conclusions about anything. How can they reconcile their difference? The only way they can do so is by a purely logical argument. One has to say to the other, “You made a mistake in reasoning.” And the other has to say, “No, you made a mistake in reasoning.” Suppose neither believes he has made a mistake in reasoning. There’s only one thing left to do: fight. (1991: 18)
• 112How such an argument could emanate from such a distinguished source is simply baffling. Among other problems with it: Friedman’s theory would predict the occurrence of incessant bloody brawling among mathematicians and logicians, the non-occurrence of which falsifies that theory in Friedman’s own positivist terms. Friedman’s position also entails that no religious person who felt certain about his religious beliefs could have any principled reason to respect the conflicting religious beliefs of others, which is absurd. Finally, Friedman’s “explanation” of Mises’s alleged personal “intolerance” fails to account for the personal “tolerance” of other practitioners of apriorism in economics.
• 113As for Hutchison, he really offers no argument at all for his strange attack on Mises. Instead, there is the endorsement, without argument, of Hayek’s very dubious distinction between “false,” French individualism, and “true,” British individualism, and of the confusing account of intellectual history Hayek builds on this imagined dichotomy. (See the essay on “Liberalism: True and False,” in the present volume.) Hutchison also makes the unsupported and no means obviously true assumption that “freedom” (presumably meaning liberal theory) must have a single epistemological (as well as ethical) foundation. Clearly, Hutchison’s candidate for the “epistemology of freedom” is the theory of knowledge of Karl Popper.
• 114As for Hutchison, he really offers no argument at all for his strange attack on Mises. Instead, there is the endorsement, without argument, of Hayek’s very dubious distinction between “false,” French individualism, and “true,” British individualism, and of the confusing account of intellectual history Hayek builds on this imagined dichotomy. (See the essay on “Liberalism: True and False,” in the present volume.) Hutchison also makes the unsupported and no means obviously true assumption that “freedom” (presumably meaning liberal theory) must have a single epistemological (as well as ethical) foundation. Clearly, Hutchison’s candidate for the “epistemology of freedom” is the theory of knowledge of Karl Popper.
• 115To what extent Hayek accepted Popper’s methodological views remains unclear. In his Nobel lecture, in 1974, Hayek continued to argue that a fundamental difference exists between the subject matter of the natural and social sciences. Since the complexity of the phenomena studied in the latter usually renders empirical testing impossible, most attempts to apply the characteristic methods of the natural sciences in the social sciences are ruled out (Christainsen 1994: 14). Hutchison himself (1994: 233, n. 7) labels the claim that Hayek became a “falsificationist” as “exaggerated and misleading.” One wonders, though, what a Popperian is supposed to be if not a falsificationist.
• 116In his most famous work on social philosophy, The Open Society and Its Enemies, he asserts—argues for would be putting it much too strongly—that the state has an obligation not only to provide the usual welfare services, but beyond that to guarantee a livelihood to everyone willing to work, and, topping it all, to protect everyone from “inequitable arrangements” arising out of differential “economic power.” Even in 1974, Popper was advocating that the state should take over a controlling share of all “public companies” (Shearmur 1996: 51–52, 36).
• 117Most damaging to any claim that Popper represents authentic liberalism is the fact that he accepted the traditional mythology of industrial capitalism as a system of oppression of the working class, only gradually made tolerable by social reforms effected in part through socialist agitation. In The Open Society and Its Enemies, Popper wrote that Marx’s protests against capitalist oppression “will secure him forever a place among the liberators of mankind.” He contrasted Marx’s “invincible humanitarianism and sense of justice” with the “cynical” defense of “shameless exploitation” of workers by “hypocritical apologists,” i.e., the laissez-faire liberals of the time (1950: 310–12; see also 675 n. 13). As late as 1973, he declared that, although he had decisive disagreements with Marx, he respected him highly “as a fighter for a better world” (1984: 167).
• 118That Popper uncritically embraced the most negative interpretation of the industrial revolution is not surprising, considering that his source for the condition of workers in that period was Marx’s Capital (Shearmur 1996: 52). But it is remarkable that Popper never reconsidered that interpretation, given that it was his friend Hayek himself among liberal theorists who led the fight to bring more historically correct views on this subject to the general public (Hayek 1954). One wonders why Popper, the fearless critical thinker, didn’t just read Capitalism and the Historians and a few of the works cited in that collection.
• 119The sustained theoretical attack on the possibility of rational economic planning under socialism initiated by Mises in the early 1920s and then led by him and Hayek doubtless played a major role, and rightly so, in associating the school with the liberal doctrine. In the decades that followed, the common opinion among economists, that Mises and Hayek had been bested by their socialist adversaries, tended to confirm the sense that the Austrian position in general was antiquated and obsolete. However, recent scholarship (Lavoie 1985; Boettke 1990; Steele 1992)—as well as certain well-known world events—has served to overturn the older verdict. Indeed, the revolution in thinking has prompted one scholar to remark that “it is really scandalous to observe how decades of ridicule poured upon Mises’s ‘impossibility thesis’ [on rational planning under socialism] suddenly give way to an appreciation of his views as if they had been part of conventional wisdom all along” (Böhm, 1990: 231).
• 120The sustained theoretical attack on the possibility of rational economic planning under socialism initiated by Mises in the early 1920s and then led by him and Hayek doubtless played a major role, and rightly so, in associating the school with the liberal doctrine. In the decades that followed, the common opinion among economists, that Mises and Hayek had been bested by their socialist adversaries, tended to confirm the sense that the Austrian position in general was antiquated and obsolete. However, recent scholarship (Lavoie 1985; Boettke 1990; Steele 1992)—as well as certain well-known world events—has served to overturn the older verdict. Indeed, the revolution in thinking has prompted one scholar to remark that “it is really scandalous to observe how decades of ridicule poured upon Mises’s ‘impossibility thesis’ [on rational planning under socialism] suddenly give way to an appreciation of his views as if they had been part of conventional wisdom all along” (Böhm, 1990: 231).
• 121The sustained theoretical attack on the possibility of rational economic planning under socialism initiated by Mises in the early 1920s and then led by him and Hayek doubtless played a major role, and rightly so, in associating the school with the liberal doctrine. In the decades that followed, the common opinion among economists, that Mises and Hayek had been bested by their socialist adversaries, tended to confirm the sense that the Austrian position in general was antiquated and obsolete. However, recent scholarship (Lavoie 1985; Boettke 1990; Steele 1992)—as well as certain well-known world events—has served to overturn the older verdict. Indeed, the revolution in thinking has prompted one scholar to remark that “it is really scandalous to observe how decades of ridicule poured upon Mises’s ‘impossibility thesis’ [on rational planning under socialism] suddenly give way to an appreciation of his views as if they had been part of conventional wisdom all along” (Böhm, 1990: 231).
• 122a system driven entirely and independently by the choices and valuations of consumers—with these valuations transmitted “upwards” through the system to “goods of higher order,” determining how these scarce higher-order goods are allocated among industries and how they are valued and remunerated as part of a single consumer-driven process. (Kirzner 1990: 99)
• 123In his Investigations, Menger broaches the issue in Chapter 2, Book 3, devoted to “The Theoretical Understanding of Those Social Phenomena Which Are Not a Product of Agreement or of Positive Legislation, but Are Unintended Results of Historical Development.” He poses the question: “How can it be that institutions which serve the common welfare and are extremely significant for its development come into being without a common will directed toward establishing them?” Menger points out that “Law, language, the state, money, markets, all these social structures are to no small extent the unintended result of social development,” and goes on to provide a brilliant and famous explanation, based on methodological individualism, of the origin of money (1985: 146, 152–55; see also Menger 1981: 256–85).
• 124But never, and this is the essential point in the matter under review, may science dispense with testing for their suitability those institutions which have come about “organically.” It must, when careful investigation so requires, change and better them according to the measure of scientific insight and practical experience at hand. No era may renounce this “calling.” (1985: 234).
• 125The lawgiver is the engineer who invents the machine; the prince is merely the mechanic who sets it up and operates it. . . . Whoever ventures on the enterprise of instituting a people must be ready, as it were, to change human nature. . . . A sublime reason, which soars above the heads of the common people, produces those rules which the lawgiver puts into the mouth of the immortals. . . .The lawgiver’s great soul is the true miracle which must vindicate his mission. (1968: 84–87)
• 126Their “intellectual distress” was instantly alleviated, however, when they happened to discover Menger’s Principles. It should be stressed that Wieser gives no hint of bad faith. He states that both he and Böhm-Bawerk became convinced that socialism, in consistently applying the classical concept of value as stemming from labor, was fallacious (Wieser 1923: 88).
• 127Like Wieser, Fetter is quick to point out that no bad faith was involved in propagating the subjective theory. Yet he asserts, as against Hayek, that even a “casual examination of the works of Jevons, Menger, Clark, and of their most influential colleagues reveals from first to last evidences of this undercurrent of interest in the political bearings of the value theory.” The story, however, ends happily from Fetter’s point of view. The subjective-value theory left Marxism in the dust: “it would be difficult to find in the whole history of economic thought a more complete victory of one idea over another” (1923: 600–02, 605; on Fetter, see Herbener 1999).
• 128Like Wieser, Fetter is quick to point out that no bad faith was involved in propagating the subjective theory. Yet he asserts, as against Hayek, that even a “casual examination of the works of Jevons, Menger, Clark, and of their most influential colleagues reveals from first to last evidences of this undercurrent of interest in the political bearings of the value theory.” The story, however, ends happily from Fetter’s point of view. The subjective-value theory left Marxism in the dust: “it would be difficult to find in the whole history of economic thought a more complete victory of one idea over another” (1923: 600–02, 605; on Fetter, see Herbener 1999).
• 129From the opposing camp, a long line of socialist critics, from the 1890s on, pilloried marginalism as a mere rationalization for the exploitative capitalist system. The Italian socialist Achille Loria assailed the marginal approach for precluding “the possibility of a deep analysis of social relations” and eliminating “any theoretical threat against the established economic system” (Barucci 1972: 529). Karl Kautsky, the Pope of German Marxism before the First World War, took note of the Austrian challenge in the form of Böhm-Bawerk’s work, declaring: “Böhm-Bawerk’s and Marx’s theories of value are mutually exclusive. . . . That means, therefore: either-or” (cited in Chaloupek 1986: 198–99). Nikolai Bukharin (1927), who attended Böhm-Bawerk’s lectures, labeled Austrianism “the economic theory of the rentier class.” Decades later, Ronald L. Meek claimed, citing Menger and Jevons, that “the founders [of marginalism] were very well aware of the dangerous uses which were currently being made of these doctrines [of classical economics] in certain quarters” (1972: 503).
• 130From the opposing camp, a long line of socialist critics, from the 1890s on, pilloried marginalism as a mere rationalization for the exploitative capitalist system. The Italian socialist Achille Loria assailed the marginal approach for precluding “the possibility of a deep analysis of social relations” and eliminating “any theoretical threat against the established economic system” (Barucci 1972: 529). Karl Kautsky, the Pope of German Marxism before the First World War, took note of the Austrian challenge in the form of Böhm-Bawerk’s work, declaring: “Böhm-Bawerk’s and Marx’s theories of value are mutually exclusive. . . . That means, therefore: either-or” (cited in Chaloupek 1986: 198–99). Nikolai Bukharin (1927), who attended Böhm-Bawerk’s lectures, labeled Austrianism “the economic theory of the rentier class.” Decades later, Ronald L. Meek claimed, citing Menger and Jevons, that “the founders [of marginalism] were very well aware of the dangerous uses which were currently being made of these doctrines [of classical economics] in certain quarters” (1972: 503).
• 131The history of economic thought in the first half or three-quarters of the nineteenth century was and still is often portrayed in very Anglo-centric terms, as though the theories which achieved for so long in Britain such an extraordinary dominance and authority. . .enjoyed a similar hold and authority elsewhere in Europe. This was not the case.
• 132Of the founders—Menger, Böhm-Bawerk, and Wieser—it is Wieser’s views that seem to be the least problematical (Mayer 1929; Streissler 1986: 86–91). Though not a socialist, Wieser firmly believed that the private property, market economy was rife with flaws that cried out for interventionist remedies. Robert B. Ekelund, Jr., has noted that, for Wieser, both consumers and workers were typically tyrannized by the possessors of great concentrations of wealth, and that in Wieser’s view it was the duty of government to reduce the power of these property owners and provide for the “victims of acquisitive capitalism.” Detecting power operating everywhere in market exchanges, Wieser even favored protective tariffs for less developed nations in order to counteract the economic and political domination of the wealthier countries. He tried to deploy marginal utility theory to justify not only progressive taxation, as Hayek noted, but also state subsidies for “projects productive of high total utility” (Ekelund 1992). There seems little reason to dissent from Streissler’s characterization of Wieser as “a statist, who believed in the wisdom of the state machinery guided by a wise bureaucracy (coming from his own caste)” (1987: 14–15).
• 133Of the founders—Menger, Böhm-Bawerk, and Wieser—it is Wieser’s views that seem to be the least problematical (Mayer 1929; Streissler 1986: 86–91). Though not a socialist, Wieser firmly believed that the private property, market economy was rife with flaws that cried out for interventionist remedies. Robert B. Ekelund, Jr., has noted that, for Wieser, both consumers and workers were typically tyrannized by the possessors of great concentrations of wealth, and that in Wieser’s view it was the duty of government to reduce the power of these property owners and provide for the “victims of acquisitive capitalism.” Detecting power operating everywhere in market exchanges, Wieser even favored protective tariffs for less developed nations in order to counteract the economic and political domination of the wealthier countries. He tried to deploy marginal utility theory to justify not only progressive taxation, as Hayek noted, but also state subsidies for “projects productive of high total utility” (Ekelund 1992). There seems little reason to dissent from Streissler’s characterization of Wieser as “a statist, who believed in the wisdom of the state machinery guided by a wise bureaucracy (coming from his own caste)” (1987: 14–15).
• 134Wieser’s last book, The Law of Force, intended as his magnum opus, has been open to widely varying interpretations (Streissler 1986: 86–91; Morgenstern 1927: 673–74; and especially Samuels in Wieser 1983: xiii–xxxvi). In any case, as a confusing hodgepodge in which all of history is explained and the whole future of mankind sketched through an obsessive application of the concepts of “power” and “leadership,” this work is fundamentally outside the tradition of the Austrian school. Menger’s political orientation, on the other hand, has been the most studied and remains the most disputed.
• 135Mises (1969: 18) conveyed the impression that Menger was more or less a classical liberal, asserting that he “heartily disapproved of the interventionist policies that the Austrian Government—like almost all governments of the epoch—had adopted.” Streissler has also argued for a virtually laissez-faire Menger, seeing him as the source of the school’s commitment to the free market. Emil Kauder, on the other hand, saw Menger as a sympathizer with Sozialpolitik (social reform) and a critic of laissez-faire (1965: 62–64).
• 136Mises (1969: 18) conveyed the impression that Menger was more or less a classical liberal, asserting that he “heartily disapproved of the interventionist policies that the Austrian Government—like almost all governments of the epoch—had adopted.” Streissler has also argued for a virtually laissez-faire Menger, seeing him as the source of the school’s commitment to the free market. Emil Kauder, on the other hand, saw Menger as a sympathizer with Sozialpolitik (social reform) and a critic of laissez-faire (1965: 62–64).
• 137But, according to Kauder, the underlying intellectual tradition in Austria was one of state paternalism, to the point where even the expression of the concept of a spontaneous economic order had been actively suppressed. The founders thus “tried to compromise between British [i.e., Smithian] and Austrian tradition.” In the end, Böhm-Bawerk held that social stability was more important than progress, preaching a “social quietism akin to the ideals of the Austrian past” (Kauder 1958: 421–22). To make matters worse, Stephan Böhm points out that “Böhm-Bawerk’s outstanding achievement as Minister of Finance was the introduction of the progressive income tax on the total income of individuals.” (1985: 256; see also Weber 1949: 667)
• 138But, according to Kauder, the underlying intellectual tradition in Austria was one of state paternalism, to the point where even the expression of the concept of a spontaneous economic order had been actively suppressed. The founders thus “tried to compromise between British [i.e., Smithian] and Austrian tradition.” In the end, Böhm-Bawerk held that social stability was more important than progress, preaching a “social quietism akin to the ideals of the Austrian past” (Kauder 1958: 421–22). To make matters worse, Stephan Böhm points out that “Böhm-Bawerk’s outstanding achievement as Minister of Finance was the introduction of the progressive income tax on the total income of individuals.” (1985: 256; see also Weber 1949: 667)
• 139His purpose, Weiss declared, was “to establish that a number of notable representatives [of the Austrian doctrine], among them its founders, did not draw from it the conclusions for economic policy that [Mises] believes he must draw.” Mises’s brief response to Weiss’s critique: “I am not so pious towards authority [autoritätsgläubig] and quotation-minded [zitatenfreudig], and I base my argumentation on logic and not on exegesis.” The interesting implication is that the political consequences of Austrian economics are to be gathered not from the particular views of its major early proponents, subject to the climate of opinion of their times, but from the inner logic of the system itself (Mises and Spiethoff 1933: 51–53, 131, 118).
• 140Beginning with Ludwig von Mises and F.A. Hayek, the links between liberalism and the Austrian School become intense and pervasive, since these two scholars were themselves at once the outstanding Austrian economists and the most distinguished liberal thinkers of the twentieth century. The American academic world, however, deemed none of this sufficient for them to be accorded the kind of positions to which they were clearly entitled. They, and in particular Mises, were also responsible to a greater degree than is generally appreciated for the upsurge of the free-market philosophy in the second half of the century.
• 141Beginning with Ludwig von Mises and F.A. Hayek, the links between liberalism and the Austrian School become intense and pervasive, since these two scholars were themselves at once the outstanding Austrian economists and the most distinguished liberal thinkers of the twentieth century. The American academic world, however, deemed none of this sufficient for them to be accorded the kind of positions to which they were clearly entitled. They, and in particular Mises, were also responsible to a greater degree than is generally appreciated for the upsurge of the free-market philosophy in the second half of the century.
• 142What follows refers to Hayek’s political attitudes, not to his contributions to economic science. These were highly significant and valuable in the earlier part of his career, as he together with Mises built the theoretical foundations of the modern Austrian school.
• 143This remained Hayek’s standpoint throughout his long and richly productive scholarly life. It is regrettable, but typical, that a great many confused commentators continue to characterize him as a advocate of laissez-faire. In fact, he always avoided using the term to describe his own views, quite unlike Mises, who gloried in it. Provocatively—and quite misleadingly—Hayek states that the supposed laissez-faire conclusions of classical economics “of course, would have been invalidated by the demonstration that, in any single case, State action was useful” (1933: 134). Here Hayek seems to have lost sight of a principle that otherwise loomed large in his thinking: that with such issues of social policy it could never be a question of “any single case,” but rather of general rules and their overall effect.
• 144Hayek habitually displayed a penchant for a considerable degree of Sozialpolitik. In a radio debate in Chicago, following the publication of The Road to Serfdom, he not only stated that, “I have always said that I am in favor of a minimum income for every person in the country,” but, pressed by two aggressive if uninformed leftist opponents, even made the astonishing assertion: “That the monetary system must be under central control has never, to my mind, been denied by any sensible person” (1994b: 114, 116). Some twenty years later, in the preface to a reprint of his book, Hayek admitted that at the time he wrote The Road to Serfdom, “I had not wholly freed myself from all the current interventionist superstitions and in consequence made various concessions which I now think unwarranted” (1994a: xxiv). It may be that, besides his youthful inclination towards a mild Fabianism and his deep admiration for Friederich von Wieser, Hayek was influenced in this direction by the arrant statism that dominated intellectual life in Britain when he lived there in the 1930s and 40s, often involving starry-eyed admiration for the noble experiment underway in Soviet Russia. In any case, his divergence from the more consistent—or more “dogmatic”—variety of liberalism espoused by Mises endured to the end of his career.
• 145Hayek habitually displayed a penchant for a considerable degree of Sozialpolitik. In a radio debate in Chicago, following the publication of The Road to Serfdom, he not only stated that, “I have always said that I am in favor of a minimum income for every person in the country,” but, pressed by two aggressive if uninformed leftist opponents, even made the astonishing assertion: “That the monetary system must be under central control has never, to my mind, been denied by any sensible person” (1994b: 114, 116). Some twenty years later, in the preface to a reprint of his book, Hayek admitted that at the time he wrote The Road to Serfdom, “I had not wholly freed myself from all the current interventionist superstitions and in consequence made various concessions which I now think unwarranted” (1994a: xxiv). It may be that, besides his youthful inclination towards a mild Fabianism and his deep admiration for Friederich von Wieser, Hayek was influenced in this direction by the arrant statism that dominated intellectual life in Britain when he lived there in the 1930s and 40s, often involving starry-eyed admiration for the noble experiment underway in Soviet Russia. In any case, his divergence from the more consistent—or more “dogmatic”—variety of liberalism espoused by Mises endured to the end of his career.
• 146The state, Hayek insisted, is not solely “a coercive apparatus,” but also “a service agency,” and as such “it may assist without harm in the achievement of desirable aims which perhaps could not be achieved otherwise.” This opening to an extensive welfare state in cases where it “involves no coercion except for the raising of the means by taxation” (sic) (Hayek, 1978: 144), has been criticized by Anthony de Jasay. De Jasay cogently remarks that Hayek put his proposal “a touch naïvely,” and adds:
• 147Here is a clear call, or what anyone might be excused for taking as one, to re-create something like the “Swedish model” under the liberal banner. Horrified as Hayek would be by the imputation of such a proposal, his exposition is fully consistent with it, and must be classed as “loosely liberal” for that reason. (1991a: 15–16; see also 1996)
• 148Tributes to the faculty of human reason are strewn throughout his works, e.g., reason is “the mark that distinguishes man from animals and has brought about everything that is specifically human”; and, “Man has only one tool to fight error: reason” (Mises 1949: 91, 187; see also especially Salerno 1990). This stands in stark contrast to Hayek’s disparagement of reason in his later works (especially Hayek, 1988).
• 149History looks backward into the past, but . . . it does not teach indolent quietism; it rouses men to emulate the deeds of earlier generations. . . . Faithfulness to tradition means to the historian observance of the fundamental rule of human action, namely, ceaseless striving to improve conditions. It does not mean preservation of unsuitable old institutions and clinging to doctrines long since discredited by more tenable theories. (1957: 294, 296)
• 150If anything reconciles me to Schmoller’s activity in the field of our science, odious in so many respects, then it is the circumstance that he is fighting with an unmistakable devotion on the side of honorable men against social evils and for the fate of the weak and the poor. This is a struggle in which, as different as the direction of my researches may be, my sympathies lie entirely on the side of such efforts. I may devote my meager power to the investigation of the laws in accordance with which the economic life of men is shaped; but nothing is further from the trend of my thinking than service in the interest of capitalism. No accusation of Schmoller’s is more contrary to the truth, no reproach more frivolous, than that I am a supporter of the Manchester party . . . (Menger 1935c: 93)
• 151On the other hand, Menger was surely aware that terms like Sozialpolitik and Kathedersozialismus denoted support for a quite activist state in economic affairs. If Menger was “a classical liberal of the purest water,” as Streissler claims, why did he write so favorably of Sozialpolitik and Kathedersozialismus—to the point of conceding Schmoller’s great services in furthering the cause of “social reform” in the midst of a diatribe against him? Why did he attack Manchesterism so vehemently? Unless the explanation is to be found in political opportunism, these statements represent a great mystery, given Streissler’s interpretation.
• 152In the period of his association with the Censeur Européen, Augustin Thierry shared the Industrialist philosophy of Comte and Dunoyer, with perhaps even more radical emphases. His review-essay on Destutt de Tracy’s Commentaire sur l’Esprit des Lois de Montesquieu is particularly important in this connection. Thierry seconds Destutt de Tracy’s firm adherence to laissez-faire:
• 153Government should be good for the liberty of the governed, and that is when it governs to the least possible degree. It should be good for the wealth of the nation, and that is when it acts as little as possible upon the labor that produces it and when it consumes as little as possible. It should be good for the public security, and that is when it protects as much as possible, provided that the protection does not cost more than it brings in. . . . It is in losing their powers of action that governments improve. Each time that the governed gain space, there is progress.
• 154As against Montesquieu, Thierry sides with Destutt de Tracy: “commerce consists in exchange; it is society itself”; and “taxation is always an evil.”
• 155As for the alleged greediness that commerce, rightly understood, inspires in those who make it their social estate: it is a vague reproach, which should be classed with the most insipid and meaningless rantings. Greediness consists in ravishing the goods of another through violence or cunning, as in the two noble professions of conqueror and courtier. But the merchant, like all other industrious men, seeks his benefit only in his talent, in virtue of freely arrived at agreements, and appealing to faith and the laws.
• 156its actions can be classed with the action exerted upon the inhabitants of a land when it is invaded by soldiers; it degenerates into domination, and that occurs regardless of the number of men involved, of the arrangement in which they order themselves, or what titles they take . . .
• 157Sharing the horror of militarism of the other Industrialist authors, Thierry quotes Destutt de Tracy with approval on “the absurd and ruinous wars which have been too often waged to maintain the empire and exclusive monopoly over some faraway colonies.” This is not true commerce, he declares, but “the mania for domination.”
• 158An invisible and ever-active power, labor, spurred on by industry, will precipitate at the same time all of the populations of Europe into this general movement. The productive force of the nations will break all its fetters. . . . Industry will disarm power, by causing the desertion of its satellites, who will find more profit in free and honest labor than in the profession of slaves guarding slaves. Industry will deprive power of its pretexts and excuses by recalling those the police keep in check to the enjoyments and virtues of labor. Industry will deprive power of its income, by offering at less cost the services which power makes people pay for. To the degree that power will lose its actual force and apparent utility, liberty will gain and free men will draw closer together (emphasis supplied).
• 159the passage from one society to another will scarcely be felt. Federations will replace states; the loose but indissoluble chains of interest will replace the despotism of men and of laws; the tendency towards government, the first passion of the human race, will cede to the free community. The era of empire is over, the era of association begins.
• 160Thierry highlights the role of historical writing in aiding in the great struggle. “We are the sons of these serfs, of these tributaries, of these bourgeois that the conquerors devoured at will; we owe them all that we are.” History, which should have transmitted memories of this tradition to us, “has been in the pay of the enemies of our fathers. . . . Slaves emancipated only yesterday, our memory has for a long time recalled to us only the families and acts of our masters.” As if presaging his own work on the chartered towns of the Middle Ages, he adds:
• 161If a skillful and liberal pen were finally to undertake our history, that is, the history of towns and associations . . . all of us would see in it the meaning of a social order, what gives it birth and what destroys it.
• 162Second, by concentrating on production rather than on exchange of rightful property, they create false targets of attack. Thus, “monks”—they really mean the religious orders altogether—are deemed “idlers,” placed in the same category as feudal lords and brigands, and, quite deliberately, no distinction is made among paupers between those who live on voluntary charity and those who live from state aid. It would seem that the Industrialists did not understand the implications of their own insistence on the existence of “immaterial” as well as “material” values.
• 163Although François Guizot has often been placed in the same category as Thierry as a historian of class conflict, especially by Marxists, his views were crucially different. Guizot had no connection with the Censeur group, being a supporter instead of the juste milieu (roughly, golden mean) views of the Doctrinaire, Royer-Collard. As a leader of the Doctrinaires (of whom it has been said that no school of thought ever deserved the name less), Guizot lacked any guiding theory, such as Industrialism, to apply in his historical works. Always an eclectic, he wrote for a while in the 1820s in the then popular idiom of classes and class conflict. But he never held that one of the competing classes would or should triumph. On the contrary, the struggle, according to Guizot, was already in his own day eventuating in a grand synthesis, whereby aristocracy and Third Estate would combine in the “French Nation.”
• 164As a thinker—and, of course, in his political role—Guizot was essentially oriented towards the state. A major purpose of his account of French history was to show that “the bourgeoisie and the power of the Crown were not only allies but forces pressing towards each other.” He thoroughly endorsed the historical collaboration of Crown and the Third Estate, which reached a kind of apotheosis in the July Monarchy of Louis Philippe (1830–48), particularly under Guizot’s own ministry.
• 165All the old aristocratic armies of Europe had succumbed to these bourgeois, at first disdained and then feared, who, forced to take up the sword and having made use of it as before of the word, as previously of thought, had become heroic soldiers, great captains, and had added to the formidable power of their ideas the prestige of military glory and the authority of their conquests.
• 166forgot that the greatest advances of humanity have had as their representatives and defenders the greatest captains . . . that Napoleon’s sword had, for fifteen years, led to the principle of modern equality penetrating all of Europe. He likewise disputed the difficult art of governing the peoples . . .
• 167Eventually, Thierry exchanged his sophisticated Industrialist analysis of class conflict for a considerably coarser one. At some point, he came to believe that the Industrialist view “falsified” history by subjecting it to too rigid a theoretical scheme.
• 168The type of general and purely political considerations to which I had confined myself up until then seemed to me for the first time too arid and limited. I felt a strong inclination to descend from the abstract to the concrete, to envisage the national life in all its facets and to take my point of departure in solving the problem of the antagonism of the different classes of men in the bosom of the same society the study of the primitive races in their original diversity.
• 169The “tinge of politics was effaced,” Thierry explains, as he devoted himself more to “science.” In fact, he did not cease altogether to write as the historian of the oppressed and downtrodden, as the chronicler, first, of the sufferings of the defeated “races” like the Saxons at the time of the Norman Conquest, then of the rise to power and pride of the despised Third Estate in France.
• 170Over and over again, the French kings are praised for having worked to elevate the Third Estate, largely by providing bureaucratic jobs for its members, and, in the traditional manner, for have “created” France. Richelieu is eulogized both for his foreign and domestic policies, equally admirable, and for “multiplying for the commons, besides offices, places of honor in the State.” Colbert, the architect of French predatory mercantilism, is glorified as a commoner who planned “the industrial regeneration of France,” and is applauded for his distribution of its tax-funded largesse to writers, scholars, and “all classes of men.” One could go on.
• 171Over and over again, the French kings are praised for having worked to elevate the Third Estate, largely by providing bureaucratic jobs for its members, and, in the traditional manner, for have “created” France. Richelieu is eulogized both for his foreign and domestic policies, equally admirable, and for “multiplying for the commons, besides offices, places of honor in the State.” Colbert, the architect of French predatory mercantilism, is glorified as a commoner who planned “the industrial regeneration of France,” and is applauded for his distribution of its tax-funded largesse to writers, scholars, and “all classes of men.” One could go on.
• 172How to explain this radical shift of perspective? The chief reason is to be sought in Thierry’s experience of the socialist agitation of 1848 including the violence of the June Days, and the specter of social revolution haunted him to the end of his life. He was anxious that the socialist troublemakers should not be able to draw sustenance from his work on the role of classes in French history. In the Preface to the Essay, Thierry implies that now, in 1853, there is no further need for the concept of classes: “the national mass” is “today one and homogeneous.” Only “the prejudices spread by systems that tend to divide” the homogeneous nation into “mutually hostile classes” could suggest otherwise. The present-day antagonism between bourgeoisie and workers, which some wish to trace back for centuries, is “destructive of all public order.” Thus, ironically, one of the thinkers who was a major inspiration for the socialist concept of class conflict ended by categorically denying any class conflict in the modern world, and he did so in part out of fear of the dangers posed now that it had been reshaped by the socialists. He put this in the form of the statement that there could no longer be a history of the Third Estate—now the Third Estate was in reality, as the Abbé Siéyes had announced it programmatically in 1788, “everything.”
• 173How to explain this radical shift of perspective? The chief reason is to be sought in Thierry’s experience of the socialist agitation of 1848 including the violence of the June Days, and the specter of social revolution haunted him to the end of his life. He was anxious that the socialist troublemakers should not be able to draw sustenance from his work on the role of classes in French history. In the Preface to the Essay, Thierry implies that now, in 1853, there is no further need for the concept of classes: “the national mass” is “today one and homogeneous.” Only “the prejudices spread by systems that tend to divide” the homogeneous nation into “mutually hostile classes” could suggest otherwise. The present-day antagonism between bourgeoisie and workers, which some wish to trace back for centuries, is “destructive of all public order.” Thus, ironically, one of the thinkers who was a major inspiration for the socialist concept of class conflict ended by categorically denying any class conflict in the modern world, and he did so in part out of fear of the dangers posed now that it had been reshaped by the socialists. He put this in the form of the statement that there could no longer be a history of the Third Estate—now the Third Estate was in reality, as the Abbé Siéyes had announced it programmatically in 1788, “everything.”
• 174How to explain this radical shift of perspective? The chief reason is to be sought in Thierry’s experience of the socialist agitation of 1848 including the violence of the June Days, and the specter of social revolution haunted him to the end of his life. He was anxious that the socialist troublemakers should not be able to draw sustenance from his work on the role of classes in French history. In the Preface to the Essay, Thierry implies that now, in 1853, there is no further need for the concept of classes: “the national mass” is “today one and homogeneous.” Only “the prejudices spread by systems that tend to divide” the homogeneous nation into “mutually hostile classes” could suggest otherwise. The present-day antagonism between bourgeoisie and workers, which some wish to trace back for centuries, is “destructive of all public order.” Thus, ironically, one of the thinkers who was a major inspiration for the socialist concept of class conflict ended by categorically denying any class conflict in the modern world, and he did so in part out of fear of the dangers posed now that it had been reshaped by the socialists. He put this in the form of the statement that there could no longer be a history of the Third Estate—now the Third Estate was in reality, as the Abbé Siéyes had announced it programmatically in 1788, “everything.”
• 175[The middle class] entrenched itself in every vacant government job, prodigiously augmented the number of such jobs, and accustomed itself to live almost as much upon the Treasury as upon its own industry.
• 176Many of the liberals were major beneficiaries of the new regime, rewarded for the support they had given, and continued to give, to Louis Philippe. Dunoyer was made prefect in Moulins and Stendhal consul at Trieste, while Daunou was reappointed as director of the National Archives. Others of the liberal party under the Restoration did as well or better. Guizot, of course, was one of the chief figures of the new order. With Mignet, Thiers, Villemain, he “shared the highest offices of the state, the most brilliant favors of the regime.” Thierry himself, however, now blind and in poverty, was reduced to pleading for assistance, until Guizot awarded him a small pension.
• 177Many of the liberals were major beneficiaries of the new regime, rewarded for the support they had given, and continued to give, to Louis Philippe. Dunoyer was made prefect in Moulins and Stendhal consul at Trieste, while Daunou was reappointed as director of the National Archives. Others of the liberal party under the Restoration did as well or better. Guizot, of course, was one of the chief figures of the new order. With Mignet, Thiers, Villemain, he “shared the highest offices of the state, the most brilliant favors of the regime.” Thierry himself, however, now blind and in poverty, was reduced to pleading for assistance, until Guizot awarded him a small pension.
• 178Many of the liberals were major beneficiaries of the new regime, rewarded for the support they had given, and continued to give, to Louis Philippe. Dunoyer was made prefect in Moulins and Stendhal consul at Trieste, while Daunou was reappointed as director of the National Archives. Others of the liberal party under the Restoration did as well or better. Guizot, of course, was one of the chief figures of the new order. With Mignet, Thiers, Villemain, he “shared the highest offices of the state, the most brilliant favors of the regime.” Thierry himself, however, now blind and in poverty, was reduced to pleading for assistance, until Guizot awarded him a small pension.
• 179John Taylor was outraged by the betrayal of the principles of the Revolution by a new aristocracy based on “separate legal interests,” the bankers privileged to issue paper money as legal tender and the beneficiaries of “public improvements” and protective tariffs. American society has been divided into the privileged and the unprivileged by this “substantial revival of the feudal system.”
• 180Have we not, too, our privileged orders? our scrip nobility? aristocrats, clothed with special immunities, who control, indirectly, but certainly, the power of the state, monopolise the most copious source of pecuniary profit, and wring the very crust from the hard hand of toil? Have we not, in short, like the wretched serfs of Europe, our lordly master? . . . If any man doubts how these questions should be answered, let him walk through Wall-street.