Category Archives: Great Thinkers

Hayek Was No Diplomat, but He Had a Point

Peter Boettke summarizes’ F.A. Hayek’s famous 1974 Nobel Prize lecture on p. 83 of his new book The Struggle for a Better World:

At the start of Hayek’s lecture, he implores his audience to fess up to the fact that those in the economics profession had nothing to be very proud of, as they had made a mess of things.

This is not how one wins hearts and minds. No wonder Hayek was unpopular in his own profession! But he makes an important point that better diplomats still need to make today, again and again:

Hayek goes on to argue that the cause of the mess was the misconstruing of what economics can, cannot achieve as a science. Economics is a science of complex phenomena, yet the modern administrative state demanded an economics of simple phenomena to accomplish the policy tasks conceived.

Economists and the policy makers they work with need to be more humble. But humility does not come easily to people in public policy. In fact, there is a selection bias against it. People tend not to enter the field unless they believe they can come with a plan that’s better than what everyone else has come up with. This audacity is desirable to some extent–things would rarely improve if nobody thought improvement was possible. Market entrepreneurs must have the same audacity to succeed in their world. But many policy makers do not check their ambitions with enough humility. And unlike private entrepreneurs, there is no profit-and-loss system to let them know when they’re wrong.

Who Bears the Burden of Proof in Justifying Regulations?

John Stuart Mill gave his answer on p. 938 of the Liberty Fund edition of his Principles of Political Economy, in volume 3 of his collected works:

“[T]he onus of making out a case always lies on the defenders of legal prohibitions.”

The modern legal scholar Randy Barnett calls this the presumption of liberty. People are presumed to be free to act. If a third party wants to intervene, the burden is on them to prove why they should be allowed to.

Book Review: Walter Williams – Up from the Projects: An Autobiography

Walter Williams – Up from the Projects: An Autobiography (Stanford: Hoover Institution Press, 2010)

Williams, in typically blunt fashion, said that his purpose in writing this short (160 pages) autobiography wasn’t self-aggrandizement. It was to make it harder for people to misquote him. It also gave him something to refer journalists to, rather than waste time answering the same old questions over and over. It pairs well with Suffer No Fools, a documentary on Williams’ life released around the same time.

I wrote about the arc of Williams’ life in my recent tribute to him. The short version is that he was born poor in Philadelphia. He was smart but not necessarily obedient, though he wasn’t afraid of working hard when he wanted to. He worked as a cab driver for a while, spent some time in California with his father, and spent two years in the army in the Jim Crow south. He caused enough good trouble to be shipped off to Korea, and then honorably discharged. Outside of the military, he was also arrested three times for causing good trouble, and was once the victim of a racially motivated police beating in Philadelphia while driving his cab.

Williams eventually discovered economics, and earned his Ph.D at UCLA when its department was ranked 12th in the country. One of his teachers was Armen Alchian, justly considered one of the world’s top price theorists. Williams eventually wound his way to George Mason University in 1980, where he would teach until the day he died.

Williams’ rare gift for clearly communicating economic ideas gave him national prominence, and helped give Mason’s fledgling economics department a national reputation. He wrote a long-running column, frequently appeared on radio and television, and, oddly, was a frequent fill-in host for Rush Limbaugh. Williams also continued to teach George Mason’s first-year Ph.D-level microeconomics course, which became a rite of passage for grad students.

Book Review: Walter Williams – All It Takes Is Guts: A Minority View

Walter Williams – All It Takes Is Guts: A Minority View (Washington: Regnery, 1987)

A collection of Williams’ syndicated columns. He covers a variety of issues including race and gender, regulation, economic policy, and more. While much of the numbers and political personalities are dated at this point, the core debates are very much alive.

Many of the best columns come from William’s overlooked research on apartheid-era South Africa. He went on a research and speaking tour there in 1980. He found that apartheid, as most racism does, had a sharp anti-capitalist underpinning. This directly contradicts many Western activists’ views. If socialism means significant state ownership of the means of production, then South Africa had a socialist economy. Williams argued that “if socialists would convert to Christianity, they would find themselves quite comfortable in South Africa.”

State intervention was necessary to enforce apartheid because discrimination is bad for business. It denies shuts out large numbers of people from the economy for no good reason. A lot of South Africans would not follow apartheid-style rules voluntarily, including many people who were genuinely racist. The South African government overruled markets’ anti-racism with state-owned media, oil, and other industries.

Labor regulations such as minimum wages were enforced for openly racist reasons. Blacks generally were paid less than whites, so minimum wages essentially either shut Black workers out, or gave white workers first crack at any job. Minimum wage regulations in America were passed during the Progressive Era for the same reason. They continue to have similar effects on minority employment, even though this is no longer intended.

Williams also argued that well-meaning American efforts to disinvest from South Africa would backfire for two reasons. One, American investment in South Africa was a small share of total foreign investment there, and an even smaller share of total investment. Few people would notice. Two, the areas where Americans did invest tended to disproportionately involve Black workers, such as mining. American disinvestment would hurt Black workers there, while doing nothing to end apartheid. Fortunately, this became a moot point before too long. Racism remains a severe problem in South African culture, though, and likely will for generations to come.

From a historical perspective, it is interesting to see how far ahead of the curve Williams was during apartheid. He opposed racism the same as everyone else with a conscience. But he took the time to actually research the situation, travel to South Africa, learn about the situation on the ground, and then propose policies—economic and political liberalization and cultural engagement—that would actually do good, rather than just signal good intentions.

Walter Williams, 1936-2020

Walter Williams passed away this week at age 84. He was the rare economist to succeed as both an academic and a popular communicator. His success came both despite and because of his growing up poor in Philadelphia. He and his sister were raised by a single mother. They lived in a housing project for much of his childhood, and they were on and off welfare for much of that time. But she set high standards for her children, and saw that they met them. In the introduction to Williams’s 1987 book All it Takes Is Guts: A Minority View, he thanked his mother, “who taught me to be independent, suspicious of the status quo, and ambitious.”

After a single semester of college in Los Angeles, he worked as a cab driver for a bit back in Philadelphia, then served in the Army. He was stationed in the Jim Crow south, and the experience was eye-opening. He committed several inspired acts of disobedience aimed at fighting the pervasive racism around him, which led to a failed attempt by one of his commanding officers to court-martial him, and a transfer to Korea. He also wrote a letter to President John F. Kennedy about racism in the military, and received a response from a higher-up in the Defense Department. This would not be the last of his writings to draw a response.

After the army, he worked as a probation officer, finished college, and earned his Ph.D. from UCLA at a time when its department was one of the country’s best. Williams spent his days in the company of world-class price theorists such as Armen Alchian, with whom he would remain friends until Alchian’s death in 2013. He also befriended James Buchanan, who would go on to win the economics Nobel for his role in founding public choice theory, and was briefly a UCLA faculty member during this period. He also met Thomas Sowell, who shares Williams’s gifts for clear reasoning and clear writing.

After bouncing around a few different academic positions, including Temple University and a year at the Hoover Institution at Stanford University, he found his home in 1980 at George Mason University, where he would teach for the rest of his life.

Mason had been granted its independence from the University of Virginia less than a decade before, and had no reputation to speak of. The whole school, not just the economics department, was essentially still under construction. Williams played a major role in building up their economics department, which has produced two Nobel Prize winners—Buchanan in 1986 and Vernon Smith in 2002, who also won CEI’s Julian Simon Award in 2015. Many of today’s top economists either attended or teach at Mason.

Williams would not only become the department’s longtime chairman, he would continue to teach the first-year microeconomics course required of all Ph.D students. Most professors who achieve Williams’s level of fame drop their teaching responsibilities like a hot potato. Williams embraced it. His course became something of a rite of passage, and he had a way of pairing a no-nonsense demeanor with a sense of encouragement. He wanted his students to do well, but they had to earn it.

But there is that whole fame part. Like many academics, he had top-notch mentors and colleagues, such as Alchian, Buchanan, and Sowell. But his emphasis on classroom work also sharpened his ability to explain ideas in ways that people can understand them. This is what would give him a national reputation—along with the fact that he was unapologetic about where his reasoning led him, even when it was unpopular. And on issues from minimum wages to labor regulations to fighting racial discrimination, he often was unpopular.

Williams published roughly 150 scholarly articles in his career, which is more than most academics achieve. But this was only a fraction of his output. Of his 13 books, four are collections of his newspaper columns, which he continued to write until the end of his life. Few economists have had more readers than Walter Williams. He had a gift for communication, and he was not shy about using it.

Williams’s first famous book was 1982’s The State Against Blacks, which argued that many well-intended government policies actually made racial discrimination worse. Minimum wages, for example, not only lop off the bottom rungs of the economic ladder, as I’ve also argued, they actually make it easier for racist employers to discriminate. When the price of labor goes up, more people vie for fewer job openings. Employers have an easier time using non-price reasons for choosing whom to hire, such as hiring only people of their own race, or intentionally excluding Blacks or women.

Rent controls reduce the incentive to build new housing or to maintain existing housing. Minorities are worst affected by this, for similar reasons. With fewer housing spots available compared to demand, racist landlords can indulge their bigotry far more easily than they can in a free market.

Ball State University economist Steve Horwitz, who earned his Ph.D at George Mason and was CEI’s 2020 Julian Simon Award winner, said in a Facebook post, “*The State Against Blacks* was formative in my thinking about how markets and race interacted, and what a progressive libertarianism might look like. *South Africa’s War Against Capitalism* helped too.”

That book argued that Apartheid was the opposite of free-market policy. Markets punish discrimination, or at least make it more expensive. Apartheid was government regulation that forced even non-racists to discriminate, on pain of fines or worse. Markets bring people together so they can exchange for mutual benefit. It takes government policies such as Jim Crow and Apartheid to keep people apart—hence the very term “Apartheid.”

Horwitz’s point is an important one for the future of the free-market movement. Williams is an excellent role model here. Most free-market advocates have too narrow a view of things. Economic freedom is only one kind of freedom that markets can help preserve. Markets are also moral playgrounds, as George Mason economists Virgil Storr and Ginni Choi argue. In markets, people learn to trust and to be trustworthy. They learn that openness to strangers is an opportunity, not a threat. Everyone has something to offer, if you let them. Markets teach people that not only is discrimination is bad for business, it is also immoral.

Sound economic reasoning, such as Williams spent a career practicing, shows why the conventional policies people turn to in fighting discrimination are largely counterproductive. It also shows why markets are far more effective for achieving progressivism’s nobler goals than their usual policies. That dialogue needs to be more open; nothing was ever accomplished with silence.

If more classical liberals take the time to show how free markets, and not top-down policy making, can empower women, minorities, and the developing world, they can help reduce poverty, create opportunities for innovation, and reduce racism. Above all, markets create opportunities. For people who lack them, this is incredibly meaningful.

These are not always popular things to say, inside the liberty movement or out of it. But Williams didn’t mind. His reasoning is correct, as was his moral sense. So, he spoke up in print, on radio, and on television. While the fit does not seem natural, he was a frequent guest host for Rush Limbaugh’s talk radio program. Williams’s appearance in Milton Friedman’s 1980 Free to Choosetelevision series on PBS led to his own three-part PBS series in 1982, Good Intentions, based on The State Against Blacks. In his autumn years, Williams was the subject of the documentary “Suffer No Fools,” and wrote his autobiography, “Up from the Projects.” And he continued writing until almost the day he died.

Walter Williams set quite the example in his life and in his work. Now it is up to us to live up to it.

Book Review: Eamonn Butler – Friedrich Hayek: The Ideas and Influence of the Libertarian Economist

Eamonn Butler –  Friedrich Hayek: The Ideas and Influence of the Libertarian Economist (Hampshire, UK: Harriman House, 2012)

Butler has written accessible intellectual biographies of several major classical liberal thinkers. His entry on Hayek does exactly what it intends to. While it does not offer the same depth as Bruce Caldwell’s lengthy Hayek’s Challenge, that isn’t Butler’s goal. Instead, in about 150 pages, students and lay readers can get high-level yet accessible explanations of spontaneous order, the importance of using bottom-up processes rather than top-down planning, and other key Hayekian concepts, plus a tour of Hayek’s major works.

His native Vienna was at its cultural and intellectual peak during his childhood, and most of his family were natural scientists, as were both of his children. This sparked his interest in evolutionary processes, in which intricate designs require no designer. He fought in World War I, earned two doctorates, was a members of Ludwig von Mises’ famous seminars, then joined the London School of Economics faculty and became a friend and rival to Keynes.

He moved permanently when the Nazis made their intentions clear, and wrote his most famous book, 1944’s The Road to Serfdom, from a barn well outside London, which was still under the Blitz. This period marked the end of Hayek’s technical economics work on business cycles and monetary theory. Hayek instead turned to a multidisciplinary approach that contributed to political philosophy, law, history, and science, as well as economics. Serfdom, one of Hayek’s first works from this new approach, is commonly misunderstood as a slippery-slope argument, in which any move away from liberalism will send a country on a one-way street to totalitarianism.

Hayek instead makes a package-deal argument. A planned economy requires getting rid of liberal institutions such as private property, equality before the law, and all the other common rights. Similarly, a society that respects human rights must also have a free economy. For Hayek, economic freedom and personal freedom are a package deal. These two liberalisms cannot be chosen a la carte; it’s both or neither.

Butler goes over the highlights of Hayek’s major early papers, collected in Individualism and Economic Order, though he gives too little attention to Hayek’s larger “Abuse of Reason” project, which was never completed, but include The Counter-Revolution of Science, and influenced much of his later work. Also under-served here is Hayek’s major psychological work, The Sensory Order. One of Hayek’s main arguments in this book is that a mind cannot fully understand something more complicated than itself. A policy implication is that a central planner can never fully understand how millions of individual minds think, interact, and make their own evolving plans.

Butler also tours the Constitution of Liberty, which is Hayek’s positive vision of what a free society’s institutional and legal structures would look like.

Hayek’s later Law, Legislation, and Liberty trilogy also gets a close inspection, with a chapter on Hayek’s views on social justice—which in this reviewer’s opinion, don’t entirely hold up. More important is Hayek’s distinction between higher principles of natural law, and the flawed man-made legislation that attempts to capture its essence—or, just as often, attempts to overrule it. Butler also goes into the usually-overlooked third volume, in which Hayek take a cue from Plato’s Republic and builds his own utopian institutional system. It’s a bit out there, and one of Hayek’s least essential works.

Hayek’s final book was The Fatal Conceit, which haunts every aspiring planner who thinks he can overcome the knowledge problems that have attempted to impose their own top-down philosophy on a bottom-up world.

Butler concludes with a look at Hayek’s legacy and what the future of liberalism might hold.

James Madison on Why Politics Ruins Everything

Politics has a way of ruining everything. Even kind and intelligent people go through an instant metamorphosis when the conversation changes to politics. Their body language tenses up. Their word choices include more intensifiers. They say horrible things about strangers they would never say in a different context. Their mental processes change to in-group-vs.-out-group mode, as though we were hunter-gatherers again.

And this sudden intensity can turn on and off almost instantly, like a light switch, as the conversation veers from topic to topic. It’s certainly unpleasant, and possibly unhealthy.

This very human foible may be what inspired James Madison to write in Federalist No. 55, “Had every Athenian citizen been a Socrates, every Athenian assembly would still have been a mob.”

The median voter is not a wise person, at least about politics. But even if he was, the effects partisan politics has on the brain can shut down rational thought in even the best and brightest.

Happy Election Day, everyone.

Economics Has a Moment of Zen

Frank Knight (1885-1972) was one of the founders of the Chicago school of economics. Three of his students won Nobel prizes: George Stigler, Milton Friedman, and James Buchanan.

One of Knight’s most famous quotes is that “To call a situation hopeless is to call it ideal.”

This is because neither can be improved upon. Almost nothing in the world is ideal; this turns out to be a good thing.

Retro Review: Vlad Tarko on Elinor Ostrom

My review of Vlad Tarko’s excellent intellectual biography of Elinor Ostrom is up at Ostrom was the first woman to win the economics Nobel. In addition to popularizing the concept of polycentric governance, she, along with her husband Vincent Ostrom, co-founded the Workshop at Indiana University, which continues to produce high-quality multidisciplinary scholarship.

Vlad Tarko – Elinor Ostrom: An Intellectual Biography

Vlad Tarko – Elinor Ostrom: An Intellectual Biography 

Tarko is quickly establishing himself as a top-notch economist. In this, his first book, he offers the best available introduction to Nobel Laureate Elinor Ostrom’s work and the concept of polycentrism. Ostrom was the first, and so far the only, woman to win the economics Nobel [Update: I wrote this review before Esther Duflo co-won the 2019 prize in October]. She and her husband Vincent, also an accomplished economist and political scientist, ran a famous Workshop at Indiana University where they paid less attention to disciplinary boundaries than they did to solid theoretical and empirical research.

Elinor Ostrom also popularized the concept of polycentrism. It’s essentially a more finely graded version of federalism. The United States’ federal system has three main levels of government—federal, state, and local, plus a few in-between grades, most commonly counties. But not all services, Ostrom argues, fit cleanly into one of those categories. Services such as parks, police, and schools, have nothing to do with each other. They may also have different optimum characteristics. So why are they often provided at the same fixed level of government? What if a school district’s optimum size extends beyond a city’s boundaries? What if a park district would be better run as multiple, hyperlocal districts? Moreover, these optimum sizes will vary from place to place. A further complication is that these optimum sizes and structures are constantly changing and evolving as culture, technology, and demographics change. Nothing else stays the same, so why should the sizes of government “firms?”

From this polycentric framework, Ostrom teases out some ground rules for institutional design. One is that smaller is usually better. Most federal issues can be more effectively handled at the state level. Many state-level issues can be handled at smaller gradients, whether regional water or irrigation authorities, transportation authorities, or neighborhood-based policing, a term which now means nearly the opposite of what it did when Ostrom began using the term. Two, because times change, institutions need to be designed with flexibility in mind. They need to be able to grow, shrink, merge, separate, and evolve as circumstances dictate. The goal is the service, not this or that corporate structure, so make change easy.

Ostrom was much more than a theorist. She placed a far greater emphasis on field research than most scholars. This empirical backing greatly improved not just her own work, but that of her many students and collaborators. Tarko shares pictures, stories, and the research she conducted across the country and abroad over her long career. For an introduction to her thought and her broader approach, Tarko is an excellent place to start.