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Source link: http://archive.mises.org/11087/the-ethics-of-freedom-and-climate-change/

The Ethics of Freedom and Climate Change

November 24, 2009 by

The possible damages of climate change should be compared with the possible damages of governmental bureaucratic intervention and political oppression. FULL ARTICLE by Francisco Capella


Gary Hall November 24, 2009 at 6:07 am

Good article, reminds me of this video:


His logic is flawed as he begs the question that ‘doing something’ is morally sound, which it isn’t because ‘doing something’ involves state coercion.

Shay November 24, 2009 at 6:16 am

“Externalities can become important due to the cumulative and persistent effects of small actions of many agents. In a clear aggression it is possible and relatively easy to determine who is doing what to whom, who must be stopped or who must compensate whom for what. In diffuse externalities it can be very difficult to determine and connect agents, actions, effects and receivers of effects.”

I couldn’t help but think of the cumulative and persistent effects of interference by the state, daily reducing the efficiency of things in countless ways, but with no clear big thing to point to as the cause, except the existence of the state at all. The most destructive climate change that’s been occurring over hundreds of years is the expansion of the state. Everyone has had to spend time and energy dealing with the harsh and constantly changing climate it creates for most people.

itsmysea November 24, 2009 at 8:02 am

Quote”..there is no natural duty to preserve the environment, which has no intrinsic value because valuations are products of the mental activity of cognitive emotional agents” Unquote

The above text fragment is not good as it is,- taken out of context.

Of course we have a duty as humans to not simply destroy the environment around us. Whether global warming or climate change is a real issue is an another matter.

John Deal November 24, 2009 at 9:37 am

Gary Hall,

I own an ice company in the Rocky mountains. You open a mine that creates a lot of heat and destroys my ice. I believe I am morally sound in stopping you with or without my friend’s help.

As long as there is agression, defensive coercion can be justified.

Fed Up November 24, 2009 at 10:58 am

Isn’t life as we know it an agression against the soul ?

The universe traps a poor soul in an overspecialized and weak life form called flesh. Decides it’s sex, species, date of birth, place of birth, genetic makup etc.

Of course evolutionists and scientists from a materialistic view point will see that life is the result of random mutations and physical processes.

But still, I view life as we know it as the abduction of our souls, the ultimate agression.

Why can’t I own my own soul. How can you claim to own anything if you don’t even own your own soul and consciousness.

The universe owns us and nudges us through pulses and instincts. We are the perfect slaves.

Fed Up November 24, 2009 at 11:00 am

Try to repress your sex-drive for several months and then come back and tell us if you have free-will or not !

I think it’s time for mankind to claim back it’s soul in a psychic war against God.

Carpe Anima !

Eric November 24, 2009 at 11:08 am


I think the main flaw in the argument in that video is that he assumes there’s only 1 worst case scenario on the horizon to deal with. There’s plenty more scary end of the world possibilities that have just as much of a doomsday result.

And given that anything not certain that can cause fear fits into his little chart, what should be done about asteroids hitting the planet, people suspected to have super powers, a plan to defend against a real live V invasion, etc.

If he’s going to assume the worst might happen, then he has to assume all the above as well. He hand waved over placing probabilities on things and making more columns, then concludes with only one choice – the worst that could happen.

And he also assumed that action would work. And we all know what kind of action he’s calling for – hello, we’re the government(s) and we’re here to help.

Pretty lame presentation. But I can see why so many people tend to fall for that sort of argument.

Oderus Urungus November 24, 2009 at 11:12 am

Fed Up,

No one cares.

Fed Up November 24, 2009 at 12:05 pm

Oderus Urungus,

“No one cares.”

YOU don’t care.

Walt D. November 24, 2009 at 12:33 pm

I agree. The video sounds like the old insurance agent pitch to get you to buy insurance than you need. If you are bothered about worst case scenarios, you would never get on a plane, or even drive to work – whatever benefit you get is eclipsed by the possibility of death.

Gary Hall November 24, 2009 at 12:43 pm

John Deal,

Not entirely sure what your argument was meant to prove. I would agree with the example you gave, but I fail to see how it relates to the video I posted or the call for ‘government action’ – ie: coercion of the citizenry into ‘positive change’ – in combatting AGW.

Matt Robare November 24, 2009 at 1:11 pm

A very intelligent and well written article.

The problem with climate change in the context of Austrian economics is that various legal machinations and traditions view property as two dimensional. Unless a propery owner improves on the property through building, the property is considered only the land area it covers.

Bodies of water and volumes of air are not considered part of the property. While the water and air, unless taken out of their context (i.e bottling water), cannot be considered property, the volume they fill can be. Climate change and pollution in general will be much easier to deal with by the individual if their air and water rights were recognized.

John Deal,
I don’t see how it is possible in any way, shape or form for you to blame an indirect action for your ice melting. Climate is a complex system, the opening of a mine could have a net effect in either direction on the climate.

Old Mexican November 24, 2009 at 4:27 pm

Re: John Deal,

I own an ice company in the Rocky mountains. You (Gary Hall) open a mine that creates a lot of heat and destroys my ice. I believe I am morally sound in stopping you with or without my friend’s help.

You have to prove that Gary’s actions affect your operations directly, in order to justifiably find him liable.

newson November 24, 2009 at 5:35 pm

to matt robare:
well, here in australia, water is property. see this recent singaporean acquisition to secure water rights.


Clay Barham November 25, 2009 at 10:57 am

Here’s an example of human climate change.
Martha Stewart, in a recent TV interview, demonstrated why the elite hate ordinary people who stray into the public eye. She earns the title of Mean Martha with her demeaning responses to questions about Rachael Ray and Sarah Palin. She did us a great service, however, because she gave us a concrete example of the differences between the elite herding class and the herd, them and us. The few elite rule the many, as is tradition in the world outside of America. The elite herding class has moved into most all levels of government, the law, media, entertainment and the big city cocktail circuit. Ordinary working class men and women, their children and parents, are the fly-over herd they are to manage, like polished cowboys circling the cattle. In the terms of the Transactional Psychologists, Mean Martha and her elite are the I’m OK, you are not OK crowd. That is what happened to America since its founding, when everyone had to work and create to survive, stand on their own two feet and depend on their neighbors in times of stress. We have a lot of Mean Martha’s with us today assuming positions of importance where they believe they decide how the herd is to live. Claysamerica.com.

Gab Bois November 25, 2009 at 4:06 pm

1. Aggression is not tolerated (because of property of self)
2. Climate change is not necessarily an aggression, because its consequences are “unknown”, “uncertain” and affect people differently.
4. Climate change may not be an aggression
5. So nothing must be done to prevent climate change.

Is that the argument ? I won’t discuss of the first premise, it’s ok. Science do not posses truth, of course, but it usually helps us to understand our natural world. I can read in the article that “the official mainstream climate science may well be correct”. Good, then if you follow the evolution of what scientists are saying, you are well aware of the consequences of letting the climate evolve as it is now. It is not because the consequences of climate change, like flooding or desertification are affecting mostly the poor people that it should not be called “aggression”. So, if you change those premises, it goes like that :

1. Aggression is not tolerated (because of property of self)
2. Climate change is an aggression, although an indirect one, but still an aggression.
3. So nothing must be done to prevent climate change.

I forgot ! We should adequately determine property rights. Is that the right thing to do in that situation ? “Property rights work very well when reality is easily separable, and when the effects of actions are direct […] But elements of reality are often intertwined in messy ways.” This is so true. And I agree also with you that governments are not exactly the best to solve any problems we have, because they are mostly aware of their own interests. We cannot have any perfect government, and thus we cannot have any perfect property rights, because « An ideal market, moreover, presuppose an ideal government to perfectly define and defend property rights » (SAGOFF, MARK, Free-Market versus Libertarian Environmentalism, Critical Review (New York), 6:2/3 (1992:Spring/Summer)). There is nothing like a “natural market” that could save us, because markets are artificial institutions made by humans.

If neither the market nor the government can help us, what should we do ? There are two possible positions. One can could just do nothing and try to save himself (and continue to believe in market efficiency, which is of course the ultimate goal of all human kind… naturally). Or one can assume its responsibility and try to change things. But this means talking with others, debating in the community. Yes, it means exchanging opinions and arguments. And then acting. If there are some people (like the government) that allow aggression, I say we should act against it as a mean of self-defense. But acting can’t be done individually. You just lie to yourself thinking you’ve done something. In the meantime, people suffer.

SailDog November 25, 2009 at 4:43 pm

This article is like a sermon, it is long on principles and wishful thinking and short on data. I have reached much the same conclusion though. Nothing much will be done about our energy crisis. That is not because we lack the ability, but because we lack the political will. Certainly nothing that is substantive and effective will be done. Now that oil production has peaked, the effects of decline will begin to manifest themselves. One impact I suspect is that the whole climate gravy train will grind to a halt.

Let me be clear, AGW is real, we did it, it is happening, it is happening faster than we thought; and the effects are accelerating. That doesn’t mean that we will do anything about it. That Peak Oil and the AGW debate are happening at the same time means we will not have the resources to deal with it anyway.

Ecologists call this process overshoot. It is when a species grows so rapidly that it depletes its resources (frequently damaging its environment too) and suffers a die back. Some people are even talking about human extinction this century. I disagree, but I think we could see a population decline of 80%. I am not sure any kind of economics, even Austrian, is relevant in this scenario. Maslow and his famous hierarchy will be the limit of sophistication. Property rights will not be respected; and governments, to the extent they continue to exist, will be powerless.

Note that this is just the way I see things. I do not for one second think this is good or desirable, or that anything should be done about it. It is meant only to be a passive snapshot of one narrow (but fairly fundamental) aspect of the current human state.

newson November 25, 2009 at 8:03 pm

saildog says:
Let me be clear, AGW is real, we did it, it is happening, it is happening faster than we thought; and the effects are accelerating.

well, if you say so…

matskralc November 25, 2009 at 9:41 pm

That is not because we lack the ability, but because we lack the political will.

If only our masters were more determined to further enslave us. :-(

SailDog November 25, 2009 at 11:52 pm


Not me actually. Peer reviewed science; and lots of it. Lots of scientists and millions of data points. Too many scientists from too many institutions, including the science academies of all the G-8 nations. Also the data points cannot be fudged eg the TAO-Triton bouys in the Pacific run by NOAA. Way too much to be a conspiracy. In fact the idea that it could be a conspiracy is plain whacko. Or ignorant.

Show me one peer reviewed article refuting AGW. Just one.

newson November 26, 2009 at 5:02 am

happy confluence of interests, or conspiracy? we’ll just have to wait and see how this scandal plays out.

DarkCatalyst November 27, 2009 at 1:58 pm

saildog says:
Let me be clear, AGW is real, we did it, it is happening, it is happening faster than we thought; and the effects are accelerating.


ehmoran November 27, 2009 at 2:10 pm

Amazing STILL:

These released emails state “We can’t explain the Lack of Warming”.

But Man-Made Global Warming not only is happening, but accelerating?

Don’t quite understand the logic……..

Walt D. November 27, 2009 at 3:08 pm

saildog says:
“Let me be clear, AGW is real, we did it, it is happening, it is happening faster than we thought; and the effects are accelerating.:
Sounds like saildog’s AGW accelerator pedal has gotten stuck under the floor mat. I suggest he takes his AGW model to the nearest Toyota dealership to get it fixed. (The recall is free).

ehmoran November 27, 2009 at 3:10 pm

Walt D,

Probably, since there just about the only non-nationalized company in America.

Austinite November 28, 2009 at 2:38 am

I wonder if there have been any studies of the effects of wars on climate change? I wonder how much oil is being consumed/wasted by the wars in Afghanistan,Iraq, Pakistan, etc?

One thing we do know is the waste wars cause, human, economic and environmental.

David Drumheller November 30, 2009 at 2:27 am

This was a good article, albeit terribly written (even taking into account that English might be a foreign language for this author).

What is needed to conceptualize this issue properly is a kind of flow chart, a series of questions all of which must be affirmatively answered before the current Congressional ‘climate change’ bill should be considered. Here is my (rough and rapid) attempt at condensing this issue to its essentials:

1. Is global warming occurring?
2. If yes, is GW a problem?
3. If yes, is GW man-made?
4. If yes, can it be stopped?
5. If yes, is stopping it less burdensome than mitigating (adapting to) the damage from letting it continue?
6. If yes, can we be assured that other countries will also proportionately reduce their carbon emissions (ie, we don’t want to do nationally what the governor and legislature did in CA, unilaterally imposing massive new costs on business and ultimately increasingly impoverished consumers in order to reduce GW, when that merely will allow other countries to increase their carbon emissions)?


7. Even if we can answer in the affirmative to #1-6, is the current Obama/Pelosi plan the most effective way to reduce GW, and is it more important to do so than to pursue other issues, like deficit elimination, meeting future pension liabilities, etc.?

I’m not convinced that these technical and economic questions have been adequately answered thus far.

Paul Stephens November 30, 2009 at 10:04 pm

As a long-time Green (Party and otherwise) activist and Libertarian, I compliment the author on tackling this most intractable subject.
I think there are several problems with his analysis. The first is the idea of “property rights.” Libertarian, “free market” economics and other public policy always begins with some absolute defense of “property rights” – as though everyone understands and agrees to what we are talking about.
In the first place, “property rights” always require a state to enforce them, they are not “natural” or self-evident, and under existing political systems, they are almost always the result of theft or other expropriation of what was once a commons or simply Nature, itself.
Has the author read Proudhon, Henry George, and some of the other people who challenged the existing feudalistic, conquest-derived, and (in modern times) corporate privilege-derived origin of just about everything we consider “property,” today?
I can’t find any rational basis for private ownership of land, for example – especially considering that everything here was stolen from Native Americans (who also had no such concept) by the most egregious force and fraud.
Property for use (with stewardship) is another matter. One can rightfully claim enough land to build a house and grow one’s own food, for example. In a complex urban environment, there are many kinds of property, all of them subject to state control and taxation, as well as regulation about what sort of activities may go on, there.
As for corporations owning thousands of acres (or city blocks), vast factories, mines, power plants, dams across rivers, etc., that, too, seems far removed from any sort of “libertarian” principles – especially if it amounts to the enslavement of workers and reducing them to serfdom, etc.

2nd point:
General rules vs. regulation and management by the state.
This idea was developed by Hayek in his final major work, “Law, Legislation, and Liberty.” (I was privileged to attend the seminars at UCLA where this material was first presented).
This is the major mechanism by which environmental sustainability can be maintained. Simply apply a universal rule that no technology or economic activity is permitted which cannot be “undone”, or which will deprive future generations of similar resources and opportunities. This applies to populations, as well. People don’t have any “right” to procreate freely, for example – even if they can afford to take care of their offspring. Maybe we need a “cap and trade” system for human reproduction. But, as one commentator indicated, it seems likely that the earth is presently 5 times overpopulated by human organisms. We need to reduce human population by 80% to have an environmentally sustainable world.
As for depletable resources like metals, petroleum, etc., such uses should certainly be absolutely minimized.
Most of this can be accomplished with simple taxes. A high carbon tax would soon result in vast reductions of consumption of fossil fuels. This may or may not result in halting or reversing global warming – eventually, it would. But we would have to reduce CO2 emissions by probably 80% or more within 10 years. Some countries are already on track for that.
All the rest of the rhetoric about the state being the major cause of environmental degradation, etc. is sound.
There are many Green Libertarians out here, looking for the solutions which save the planet and human civilization as well as maintaining political freedom and diversity. I admit, I am not optimistic about any of this happening. We seem to be on a doomsday course, and few if any people with “authority” are going to do anything about it, except to try to blame someone else – especially environmentalists and advocates of social justice.

newson December 1, 2009 at 2:38 am

georgism…well, that’s a new and exciting theory.

Bruce Graeme December 1, 2009 at 5:37 am

Paul Stephens said: “property rights” always require a state to enforce them”
William Henry Van Ornum, “Why Government at All?: A Philosophical Examination of the Principles of Human Government … “(1892)

Part II. Chapter VI. On Property

Webster defines property as “that which is peculiar to any person, that which belongs exclusively to an individual; that to which a person has a legal title, whether in his possession or not; thing owned”.

According to that, in order to know what property is, one must be familiar with the laws of property at the time and in the place where the inquiry is instituted, or determined. The answer to the question to-day might not be a correct one to-morrow, because the law might change. … Property has two sources, or bases. One is in nature, and the other is in the law. One is fixed, and the other changeable. One enforces itself unless interfered with by the other, while the other requires courts, juries, police-men, detectives, militia,armies, navies, politicians, and taxes to enforce it, and then it doesn’t succeed very well.

Natural property is what would be recognized as property even if human law were entirely abolished. Examining the subject, we find three things necessary: the first is, the person, because there can be no possession without a possessor, second the thing, or subject which is possessed; and third, the condition of possession; that is, occupation.

In the absence of law I am free to go to nature and produce whatever pleases my fancy. I will not stand idle in want, while all nature invites me to come and take freely. There is no law to take the product of my labor from me in taxes, and if a landlord claims a share, I will laugh at him, because he cannot call the law to his aid to enforce his claim. … In a community where all have an equal show — perfect freedom — there is no need of a law to punish crime, for there will be no crime to punish where there is no organized force in society capable of overcoming all opposition, and compelling obedience: no power sufficiently strong to systematically violate the rights of individuals. … There being no laws of property, property has no special rights, and consequently the possessors of property have no more power than those who have none (if we can conceive of there being any such under those conditions.) Property, conferring no power, can bring no distinction nor impart any influence; so that no one will seek it for those purposes. Its real purpose being to gratify desire, it will be sought solely for that end….

I said that there are three things necessary to the condition of natural property. The first two are obvious enough; but the third requires a little consideration. Why do we say that occupation, or possession, is a requisite? If, in the absence of law, I am in possession of a thing, and there exists no organized force to take it away, I may fairly, in nature, be said to own it. It is the natural state of ownership. I may part with it to another; but by so doing, I abandon my ownership, because there is no natural means whereby I can compel him to restore it. If he does so, it is of his own free will, and of the same nature as my abandonment to him. In the absence of any law of property, I may lay claim to any number of things which may be in the possession of another, but as I have no possession, and as there is no organized force which I can summon to my aid to get possession, there is no way in which I can enforce my claims; and consequently I have no natural property in those things. This is what is meant by possession, or occupation, as a requisite for natural property.

With possession as a necessary condition for property, the oppression of one man by another becomes impossible. No man can actually possess more than about so much. If one were to enclose a large tract of land, more than he could immediately use, and others needed that land, they would take it, irrespective of his claims.

The human hog would have no means of keeping others from the feed, as he does now. But if he confined himself to his reasonable needs, and held only so much as he could fairly use and occupy in the then existing state of society, no one would have any inducement to interfere with him, because there would remain enough for all the others. As population, civilization, and subdivision of labor increase, the average area of land needed by individuals decreases; so that in a state of freedom, there can never he any overcrowding. Population can never become congested where all the land is open to use and where there is no external pressure preventing population from spreading.

This natural condition of property, that of possession, or occupancy, is the first one that the law violates; and this violation is the key to the whole monstrous injustice of property rights. It is the foundation of all the inequalities of condition among the people in any country in this world; and the attempt to enforce that violation leads to most of the misery, wretchedness, brutality, and crime which afflict society…. There is where inequality begins, by setting up artificial rights of property. For instance, by the privilege of holding what they do not directly possess, men can and do obtain a constructive possession of land merely to compel others to pay them for the privilege of using it….

Suppose we take a little closer look at the rights of property! If they depend upon the law, as they most certainly do, and if the law is the expression of the will of the people, (a pure fiction) then the people may, and will change it, when they change their will, which they are liable to do at any time; or they may repeal it altogether. And they are just as competent to abrogate it, if they choose, in any other way, without taking the trouble of a formal repeal. But if law is the expression of the will of a few favored ones who hold special privileges, called monopolies, and who control the courts, legislatures, and administrations in secret and subtle ways for their own advantage, which is certainly the case, then it is not entitled to even this consideration. In either case the people have a perfect right to change it in part, or in whole, as they see fit; and they cannot be accused of violating any proper code of morals, whatever may be the result of the change. If the morals depend upon the law, and the people make the law, then the morals must change when the people change the law. But if the morals depend upon the law made by monopoly, in the interest of monopoly, they are but false morals at best, and are not binding upon the conscience of any man. If by the abolition of the law every so-called “vested right,” every bonded or mortgage indebtedness, every special privilege, every title to land not actually occupied by the claimant, and every tax were wiped out, it would not violate natural property in the slightest; nor would it violate any correct standard of good morals. It would only be a declaration of independence by the slaves; and few people at this day will deny to slaves the right to declare their independence.
Every restriction imposed by some men upon the actions of other men, either through religion, or the law, is precisely of the same nature as the restriction imposed by the master over his chattel slave. It has the same object in view, the living of some men off the earnings of other men.

If it is the restraints of religion, it has for its object the support of the church, which means, the authorities of the church. If they preach submission to God they mean, in all cases, submission to his representatives, the priests. Where those restraints have been imposed by the secular law, they had their origin in the supposed “divine right” of kings to govern, the present veneration for law under a republican form of government being only a substitution of the political boss for the king, and the investing of his acts with the same sanctions as those which were formerly accorded to the sovereign, under the mistaken idea that it is the people who do the governing. Those restraints too have been to establish and perpetuate inequalities; to enable idlers to live luxuriously off the earnings of the industrious; to build up a rich class at the expense of a poor class, and to protect the rich in the possession and enjoyment of their wealth.

The means primarily employed have been the conferring upon property of special rights and the granting of special privileges whereby the land, in fact the whole resources of the country, were parcelled out to a horde of monopolists.

Law, government, or special privilege may have served a good purpose in the early development of man. When the infinite resources of nature were all but unknown, the production of wealth slow and laborious, man a savage, satisfied with the gratification of the grossest animal needs, the enterprising men were then the slaveholders, robbers, and pirates. They obtained and enjoyed more wealth because they did not depend upon their own production, but took the product of others. Their enterprise gave new scope and opportunity for the pursuit of knowledge, which knowledge still further increased their power. Their example was a constant invitation to others to do likewise. Afterwards it became, in many cases, easier and safer to obtain what they wanted by trading than by force; so the merchants were developed, who found most of their profit in producing things for the robber chiefs. They were their principal customers and, as a partial return, they received special favors, privileges, and advantages from those chiefs. These grants of privilege aimed to increase the opportunities for gain of those who were favored. The effect was to stimulate enterprise, which again promoted the acquirement of knowledge. Government itself had its origin in the rule of these robbers, and pirate chiefs. Law was their will, expressed in their edicts, or commands.

While men needed such a stimulus to enterprise, and to the acquirement of knowledge, there is no doubt that government, law, and privilege did have that effect; but the need for government disappears whenever it hinders enterprise, and the pursuit of knowledge more than it promotes them.

See Van Ornum, op. cit., Part II., Ch. VIII. and Ch. IX.

Paul Stephens December 1, 2009 at 9:46 pm

Thanks, Bruce. I hadn’t heard of Ornum, before. It’s amazing, the diversity and complexity of the late 19th century American Anarchists.
The whole text of this book is available at

I’ve also just been reading a lecture by Tony Judt from the current New York Review of Books. I was going to send it to Professor Capella, because it also addresses some of these same issues.

Volume 56, Number 20 · December 17, 2009
What Is Living and What Is Dead in Social Democracy?
By Tony Judt

The following is adapted from a lecture given at New York University on October 19, 2009.

Americans would like things to be better. According to public opinion surveys in recent years, everyone would like their child to have improved life chances at birth. They would prefer it if their wife or daughter had the same odds of surviving maternity as women in other advanced countries. They would appreciate full medical coverage at lower cost, longer life expectancy, better public services, and less crime….

We have been here before. In 1905, the young William Beveridge—whose 1942 report would lay the foundations of the British welfare state—delivered a lecture at Oxford in which he asked why it was that political philosophy had been obscured in public debates by classical economics. Beveridge’s question applies with equal force today. Note, however, that this eclipse of political thought bears no relation to the writings of the great classical economists themselves. In the eighteenth century, what Adam Smith called “moral sentiments” were uppermost in economic conversations.

Indeed, the thought that we might restrict public policy considerations to a mere economic calculus was already a source of concern. The Marquis de Condorcet, one of the most perceptive writers on commercial capitalism in its early years, anticipated with distaste the prospect that “liberty will be no more, in the eyes of an avid nation, than the necessary condition for the security of financial operations.” The revolutions of the age risked fostering a confusion between the freedom to make money…and freedom itself. But how did we, in our own time, come to think in exclusively economic terms? The fascination with an etiolated economic vocabulary did not come out of nowhere.

On the contrary, we live in the long shadow of a debate with which most people are altogether unfamiliar. If we ask who exercised the greatest influence over contemporary Anglophone economic thought, five foreign-born thinkers spring to mind: Ludwig von Mises, Friedrich Hayek, Joseph Schumpeter, Karl Popper, and Peter Drucker. The first two were the outstanding “grandfathers” of the Chicago School of free-market macroeconomics. Schumpeter is best known for his enthusiastic description of the “creative, destructive” powers of capitalism, Popper for his defense of the “open society” and his theory of totalitarianism. As for Drucker, his writings on management exercised enormous influence over the theory and practice of business in the prosperous decades of the postwar boom.

Three of these men were born in Vienna, a fourth (von Mises) in Austrian Lemberg (now Lvov), the fifth (Schumpeter) in Moravia, a few dozen miles north of the imperial capital. All were profoundly shaken by the interwar catastrophe that struck their native Austria. Following the cataclysm of World War I and a brief socialist municipal experiment in Vienna, the country fell to a reactionary coup in 1934 and then, four years later, to the Nazi invasion and occupation.

All were forced into exile by these events and all—Hayek in particular—were to cast their writings and teachings in the shadow of the central question of their lifetime: Why had liberal society collapsed and given way—at least in the Austrian case—to fascism? Their answer: the unsuccessful attempts of the (Marxist) left to introduce into post-1918 Austria state-directed planning, municipally owned services, and collectivized economic activity had not only proven delusionary, but had led directly to a counterreaction.

The European tragedy had thus been brought about by the failure of the left: first to achieve its objectives and then to defend itself and its liberal heritage. Each, albeit in contrasting keys, drew the same conclusion: the best way to defend liberalism, the best defense of an open society and its attendant freedoms, was to keep government far away from economic life. If the state was held at a safe distance, if politicians—however well-intentioned—were barred from planning, manipulating, or directing the affairs of their fellow citizens, then extremists of right and left alike would be kept at bay.

The same challenge—how to understand what had happened between the wars and prevent its recurrence—was confronted by John Maynard Keynes. The great English economist, born in 1883 (the same year as Schumpeter), grew up in a stable, confident, prosperous, and powerful Britain. And then, from his privileged perch at the Treasury and as a participant in the Versailles peace negotiations, he watched his world collapse, taking with it all the reassuring certainties of his culture and class. Keynes, too, would ask himself the question that Hayek and his Austrian colleagues had posed. But he offered a very different answer.

Yes, Keynes acknowledged, the disintegration of late Victorian Europe was the defining experience of his lifetime. Indeed, the essence of his contributions to economic theory was his insistence upon uncertainty: in contrast to the confident nostrums of classical and neoclassical economics, Keynes would insist upon the essential unpredictability of human affairs. If there was a lesson to be drawn from depression, fascism, and war, it was this: uncertainty—elevated to the level of insecurity and collective fear—was the corrosive force that had threatened and might again threaten the liberal world.

Thus Keynes sought an increased role for the social security state, including but not confined to countercyclical economic intervention. Hayek proposed the opposite. In his 1944 classic, The Road to Serfdom, he wrote:

No description in general terms can give an adequate idea of the similarity of much of current English political literature to the works which destroyed the belief in Western civilization in Germany, and created the state of mind in which naziism could become successful.

In other words, Hayek explicitly projected a fascist outcome should Labour win power in England. And indeed, Labour did win. But it went on to implement policies many of which were directly identified with Keynes. For the next three decades, Great Britain (like much of the Western world) was governed in the light of Keynes’s concerns.

Since then, as we know, the Austrians have had their revenge. Quite why this should have happened—and happened where it did—is an interesting question for another occasion. But for whatever reason, we are today living out the dim echo—like light from a fading star—of a debate conducted seventy years ago by men born for the most part in the late nineteenth century. To be sure, the economic terms in which we are encouraged to think are not conventionally associated with these far-off political disagreements. And yet without an understanding of the latter, it is as though we speak a language we do not fully comprehend….

Perry Murphy December 17, 2010 at 10:13 am

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