Saturday, September 26, 2009

Keynes and the Ideology of Planning

Tibor R. Machan

In recent months John Maynard Keynes has enjoyed a renewed prominence. In the course of doing so he has been presented to the current population of interested parties as a scientist or at least non-ideological thinker. Several books are out now giving Keynes much praise, despite the arguable failure of his policy recommendations (and the dubious honor of having said the Nazis could make the best use of the policies he advocates). This is in sharp contrast to the alleged lost dominance of so called market fundamentalists, as Paul Krugman likes to refer to those who prefer a free society to one run by the likes of him and other Keynesians.

Just to set the record straight, here are a couple of quotations from Keynes from a book that didn't make him famous and few now mention, The End of Laissez Faire, published in 1927 and based on lectures he gave in Berlin in June of 1926.

“Let us clear from the ground the metaphysical or general principles upon which, from time to time, laissez-faire has been founded. It is not true that individuals possess a prescriptive ‘natural liberty’ in their economic activities. There is no ‘compact’ conferring perpetual rights on those who Have or on those who Acquire. The world is not so governed from above that private and social interest always coincide. It is not so managed here below that in practice they coincide. It is not a correct deduction from the principles of economics that enlightened self-interest always operates in the public interest. Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. Experience does not show that individuals, when they make up a social unit, are always less clear-sighted than when they act separately.

“We cannot therefore settle on abstract grounds, but must handle on its merits in detail what Burke termed ‘one of the finest problems in legislation, namely, to determine what the State ought to take upon itself to direct by the public wisdom, and what it ought to leave, with as little interference as possible, to individual exertion’.” John Maynard Keynes, The End of Laissez Faire (Hogarth Press, 1926; London, L. & Virginia Woolf, 1927.)

The attitude for which Keynes is often praised, of looking at economic matters without bias and only with an eye to how to promote stability, especially in the labor market, is not in evidence here. Keynes shows clearly that he was completely opposed to the free market and considered it perfectly legitimate for government to plan aspects of the economy. He may have even had some sympathies for laissez-faire but these were not convictions, only weak preferences.

What Keynes was eager to promote is the idea of the government's unbridled authority to tinker with economic affairs. That is the point of insisting so vehemently that nothing exists that stands opposed to that authority, no notion of Adam Smith's natural liberty, John Locke's natural rights, and other classical liberal ideas that were at one time beginning to be used so as to pull the rug from under those who saw fit to interfere with other people's economic decisions and circumstances.

In the little book he wrote, way before his General theory, of Employment, Interest and Money (1936) for which he is so famous, Keynes compares the free market to a jungle where some animals have the natural attribute of being able to reach the leaves on top of the trees in the midst of a draught, thus making out far better than fellow creatures who are left hungry, unable to obtain food any longer. In this he was in agreement with another champion of egalitarianism, the recently deceased Harvard political theorist John Rawls, who in his A Theory of Justice (1971) also embraces the idea that men and women are pretty much helpless as to the place they hold in the economy and society in general. No one is really able to escape his or her fate. We are all like those giraffes and gazelles in the wild, with the former naturally advantaged while the letter naturally disadvantages when there is scarcity of food.

Now of course in the wild no one rises to the powerful position of a government to remedy matters, which is what Keynes is clearly lamenting. But he says that people are in much better shape because those unable to fend can be helped by governments if we only empower it to do this.

Without entering a lengthy debate, the one Burke was referring to, it is worth noting that Keynes is contradicting himself. In the first place people are helpless and end up economically disadvantaged but then it turns out that they aren't at all helpless but are able to empower governments to remedy their situation.

Now if they are able to do this complicated thing, why are they unable to improve their lot in the market place, by education, networking, innovation, entrepreneurship, and some luck? It seems that for Keynes the sole avenue for self-improvement is to go to governments and seek their coercive support. Among other things what he fails to notice, as did Burke and other statists, is that government is composed of people and all the people with the power (some) others bestow upon them (or they grab) are susceptible to all the foibles Keynes attributed to people in general. But while in the free market place--and in free societies, more generally--there are checks against people inflicting their will on others--such as the protection of their rights, a minimal government function that may actually be carried out successfully--when governments gain the power to plan an economy they tend not to do this with justice and wisdom but with arbitrary force. And that is indeed inescapable because governments don't really have a clue as to what to do for millions and millions of people from on high. So what is left for them to do? To advance the visions of government officials, that's what, visions that have to do with their agendas and not with any mythical public interest or common good.

Keynes was wrong back then and his followers are wrong now, thinking that our salvation lies with government.

Friday, September 25, 2009


Tibor R. Machan

Nearly everyone has complaints about the way others use words. One of my pet peeves is when people are referred to as "that," as in "the person that wrote this book," instead of "who," as in "the person who wrote this book." Rejecting the distinction between "that" and "who" suggests to me insufficient awareness of what it means to be human and of a willingness to think of persons as objects of some kind, non-human animals, instead of human beings proper. As anyone can gather, this beef of mine rests on certain views I have about the world, views the targets of my complaint appear not to share--such as that human beings are unique enough to deserve to be referred to differently from how other stuff in the world is.

So now I was watching the news recently and the reporters were discussing the several people who have been indicted or are said to be suspects in various terrorist plots. In one report it was mentioned that some suspects in these cases are thought to have been radicalized while in prison. And throughout the report the term "radical" or "radicalize" kept being used as if being indoctrinated into a point of view that can prompt someone to indiscriminately maim and kill hundreds, even thousands of human beings, amounted to being a radical.

In my dictionary a radical is someone who thinks about matters relating to how to conduct oneself and influence public institutions by way of considering the foundations of ethics and politics. Radical is supposed to contrast with conservative because the latter refers to approaches to forging actions and policies by gaining guidance from established, tried and true, traditional ideas. In a certain respect all major scientists are radicals because they think things through thoroughly, from the ground up, all the way from the roots of their discipline. A radical in politics is someone who believes that to find the best approach to problems in the policies of one's community requires one to go to the basics, the fundamentals.

The people to whom the reporters referred as radicals are, in contrast, simply brutal, mindless, dogmatic men and women, quite opposed to thinking things through thoroughly, as radicals are supposed to. So why did they get labeled with this perfectly honorable term?

Perhaps another use of "radical" is in reference to someone who departs completely from the mainstream, who has no respect for any of the ordinary practices civilized individuals would normally consider as they go about planning their conduct and institutions. It is indeed a drastic or radical departure from civilized conduct to kill and maim indiscriminately, with no regard for who has been found guilty by means of due process. That is to say, such people are drastically different in how they act, monsters if you ask me.

But it is too bad that "radical" is used this way. It thus besmirches a very appropriate alternative to dealing with problems, namely, one that goes to the roots, that examines everything very carefully before launching into action. Indeed, the conventional opposition between liberal and conservative fails to capture an important element of the dispute. This is that conservatives recommend a method for dealing with problems, be these private/personal, social, public, or international, that relies heavily on what is learned from traditions, customs, and long established habits of thought. And while, of course, these are very useful shortcuts to what is true and right, they cannot be the best answer since there are so many conflicting traditions, customs, etc. To be able to navigate among these when, as so often, they are in conflict, a firmer source of understanding is required. This, as the Ancient Greeks taught, is human reason which is supposed to be able to help identify, with the aid of experience, what is what, at least as best as possible for the time being. Radicalism is, in turn, reliance on reason.

Conservatives have often scoffed at this reliance. As the most famous conservative thinker, Edmund Burke, put it, "each man's private capital of intelligence is petty; it is only when a man draws upon the bank and capital of the ages, the wisdom of our ancestors, that he can act wisely." Yet, Burke himself uses his own reasoning to arrive at this insight, so it cannot be entirely true even in his own terms.

It would be best, I think, to counsel people to make use of what the past offers but not before they have thought it over and made sure it holds up to reason.

Wednesday, September 23, 2009

The Proper Role of Government

Tibor R. Machan

Most of the time those of us who write columns address fairly specific issues and have only a little space to call upon general principles. But it is such general principles that guide the thinking behind the comments on special topics. Even the most pragmatic among us, who think principles are a myth, implicitly invoke principles, if only the principle that power is the ultimate arbiter of right versus wrong.

In my own reflections and comments about various topics, I do invoke certain basic principles of political life and perhaps it will be useful to lay these out, briefly. Perhaps the most crucial aspect of these principles concerns the nature and limit of a proper, just government. And where the position I hold is most challenged is how much government ought to do for those who lack the ability and resources to get into various areas of social life with some reasonable hope of success.

The government's role in helping to get people into the game, so to speak, when they are virtually or completely out of it, is, as I understand it, nil: this just isn't the state's proper and safe function. Putting it another way, the government isn't there to be generous, kind, helpful, supportive, charitable and so forth -- it exists so as to make sure peace prevails and justice is done. We, as human beings in our various relations to one another, must deal with innumerable challenges as the government protects our rights mainly so we are then free to choose to do what is right on our own initiative. (The government, like referees at a sports event, must take care of the rules, not play the sport, as it were. The players must do that!) And the system of rules, or justice, requires that no one's rights be violated, no one's rights to life, liberty and property and all the derivative rights that flow from these.

Now this is of course something not likely to be fully realized, even if it is in fact realizable. (Here a very handy work is Tom G. Palmer’s Realizing Freedom [2009].) But it is imperative for those who understand it never to give up the fight. That is a duty of citizenship -- to strive to advance and uphold the principles of justice as much as that is possible to do, whatever disagreements and opposition one faces.

It is not that the government might not here and there, now and then, do some extra good besides maintain peace and justice -- even help deserving people. But on average it does so at paying a price that is prohibitive, namely, becoming a criminal organization that subdues and robs Peter to "help" Paul. Government isn't able to produce wealth with which to help -- it must forcibly get people to work and confiscate their wealth to provide its support. And that is plain assault and robbery, however much cost-benefit analysis has gone into the process.

When government gets into helping people by hurting other people, it loses sight of its proper job and that encourages very serious malpractice. One reason so much goes awry in countries around the globe is that the governments do not devote themselves to their proper task of securing individual rights but have gone about doing innumerable other things that destroyed its integrity as a peacekeeping organization. And once the government lends its hand -- its legitimate tool of physical force when properly limited -- to purposes other than keeping the peace -- securing our rights -- there is no end to the corruption. Everyone will want to have the same done for his or her vested or special interest. So, even those exceptions that may seem so minor and have such good reasons behind them contribute to the corruption of the proper function of governments.

As to democracy, its role isn't to set the rules or establish the principles governments should uphold but to select the personnel who will administer the rules and work hard, often valiantly, to protect those principles. Otherwise democracy becomes complicit in perpetrating injustice -- as when people vote to take property from each other, to restraint trade, to set wages or to control peaceful sexual practices and otherwise attempt to regiment people to behave well. This is an assault on the dignity of the human individual and democracy cannot justify that.

Obviously no brief discussion can do this topic sufficient justice. Still, it might be of some use to know where some of us concerned about the growth of the scope and size of government are coming from as we offer our criticisms of its expanding scope and power.

Tuesday, September 22, 2009

No Omniscience or Incorruptibility

Tibor R. Machan

Aristotle was a sage and his reply to Plato's presentation of an ideal society, The Republic, which was to have an incorruptible leader--an idea some think even Plato didn't mean for anyone to try to implement--was to admit that in theory a perfect leader might be swell but no one can guarantee incorruptibility. Actually, corruption is most likely in such cases. So it is better to embrace a system closer to one wherein citizens share in governing themselves instead of relying on the great, wise leader.

This lesson of Aristotle should be kept in mind by the dreamers, such as Professor Paul Krugman of Princeton University and of The New York Times, and some other fans of the early 20th century British economist John Maynard Keynes. Keynes liked free markets up to a point but because he associated them with cyclical problems--failing to see, as the Austrians have taught us, that the business cycle is mostly a government induced phenomenon--he also believed that some regulations, some government tinkering is necessary to keep the system stable. Stability is a big deal to the interventionists and since they do not trust that the spontaneous market place is going to be stable enough, they champion government intervention in the expectation that that's going to avert the problem.

I know a fairly famous individual who has recently rediscovered Keynes and seems, based on his latest writings, sympathetic to these notions now even though in the past he has championed the free market, mostly on grounds of its overall superior productivity. By this is meant that free markets enable, even encourage people to make wealth, more wealth than any alternative system. A utilitarian would find this an irresistible reason for embracing a system since wealth to the utilitarian is nearly everything, including freedom. One can buy freedom if one is wealthy enough, goes the argument, so just get a system that is highly productive and have it done with, no need to argue about the individual's right to economic liberty endlessly. But because in relatively free markets there are occasional ups and downs of the entire system, my pal suggests that the Keynesian policy of injecting (artificial) demand into an economy is a good idea, at least in dire enough circumstances.

OK, it is not in much dispute that if there were some omniscient governmental agent or agency that could tell what needs to be done, it could help an economy to recover from down turns. Never mind what caused these down turns, let's just grant they exist now and then. And a super duper economic czar or committee may be just what could come in handy.

But here is the rub and where Aristotle's teaching, along with modern public choice theory, needs to be taken very, very seriously. For one, if the czar is corruptible, which by a sensible understanding of human nature and politics is undeniable, the expected and hoped for wise intervention is not going to be forthcoming. All the bright Keyneses and Krugmans and whoever will not be able to make sure that the best conceivable approach is taken to rescuing the economy, no sir. The best and the brightest can--and when they have massive power at their disposal will--go bad.

Furthermore there is that fatal conceit of which F. A. Hayek reminded us, the belief by the would be leaders, enamored by their smarts, that they can know what the economy needs--public works here, printing some money there, borrowing more somewhere else, funding infrastructure projects, etc. Oh how promising it all looks until you think it through and realize that, just as public works theory predicts, the funds meant for all this good stuff are going to be ignorantly--as well as and in part because of it corruptly--used. What in the imagination of a Plato or Keynes comes off as God sent turns into a disaster or, at most, a pretty messy effort to do something, anything whatever, to help matters.

My acquaintance, who appears to be a new Keynesian now, may find this too pessimistic, even misanthropic. I just think of it as Aristotelian realism and prudence.

Sunday, September 20, 2009

Survey Says!

Tibor R. Machan

Very, very rarely I am contacted by some survey organization and I usually volunteer to answer the questions posed to me. Just a few minutes ago a taped interviewer, identifying herself as calling for the Rasmussen Group, called me up and I answered all the questions I was asked. Some of these dealt with my views on President Obama's current and expected performance and I answered pretty much as anyone who knows me would expect; I said, in essence, that his economic policies sucked.

I was also asked, however, a bunch of questions unrelated to my views, having to do with my ethnicity, age, income, etc. I reluctantly answered these except for one that I lied about. When asked my race I said "other" instead of "white." That was in my effort to discourage the outfit from taking race into consideration as surveys are being conducted. Answering such questions seem to me to amount to complicity in racial profiling, although the others, about my income or age, came pretty close to doing something like that too.

It is really annoying that a major, by many and by most mainstream news outfits regarded legitimate survey group engages in such profiling, something often condemned when done by, say, the police in the effort to flight crime. Why is it OK to deploy such profiling when people's views are being recorded? For one, I have held my views back when I earned a fraction of my present income, when I was a fraction of my present age, etc., etc. So what do these have to do with what an American citizen thinks about politics or President Obama's performance in office?

I was also asked about taxes, whether I consider raising or lowering them a good thing, as well as government involvement in the economy, ditto. Why would my age or race or income have any bearing on this? (And why was I not asked whether I consider the questions I was asked germane to figuring out what Americans think about foreign policy and the economy?)

OK, so those folks are supposed to know a thing or two about gathering information this way, by phone, on a Sunday afternoon, but some of what they did sounds fishy to me. Especially at a time when much of the citizenry throughout the country has given up on racism, agism, and similar kinds of categorizations with which bigots tend to assess the merits of someone's thoughts and actions. I am convinced that there should be a lot more about why one holds this or that view in the list of questions being posed--"Why do you consider raising taxes wrong?" "Why do you consider it wrong for the government to intrude on people's economic lives?" OK, this would take a bit longer to discover about us all--although they could do what they did here, namely select four or five possible answers and ask you to select from these--but it may be worth it since then it would foster critical thinking rather than political demagoguery.

Yes, that is one purpose of getting this information, namely, for politicians to gauge what the public is like so they can then appeal to their various irrelevant attributes and tempt them with offers they aren't likely to refuse. What age are you? Well, if there are lots of you that age, I will promise you retirement benefits and such. And so it goes for the other attributes that should have no bearing on anyone's political opinions, given that politics is supposedly about public affairs, not one's personal tastes and preferences. Ah, but who cares about what politics should be about? It is about bringing home the bacon, is it not?

Well, these are my reactions to being quizzed in the way the Rasmussen people go about quizzing those whom they contact by phone. I can fully appreciate it, by the way, that when the government takes its census, many people would find it very annoying and even inappropriate to be questioned along these similar lines.

Just thought I would make a public response to the Rasmussen people's approach to recording my views. It sadly tends not to be so much about my views but about the type or kind of sort of person I am, which should be completely off limits for responsible surveyors.