How and when did you come to know about Austrian economics?
I had become interested in the ideas of Ayn Rand when I was about 16 years old. In Capitalism: the Unknown Ideal, and in other material published by the old Nathaniel Branden Institute, they referenced and recommended works by Ludwig von Mises, Eugen von Böhm-Bawerk, Henry Hazlitt, Herbert Spencer, William Graham Sumner, Frederic Bastiat, and others. That is how I first found out about the “Austrians” and other free-market economists.
Shortly after this, I learned about the Foundation for Economic Education (FEE) and The Freeman. I began corresponding with long-time FEE staff member, Bettina Bien Greaves, who supplied me with a lot more Austrian material, including hard-to-find articles by Mises. This is how I also found out about Murray Rothbard and his great treatise, Man, Economy, and State.
What convinced you of the merits of the Austrian School of Economics over other schools of economic thought?
Basically it was the logical persuasiveness of the Austrian approach. Compared to the economics courses that I started taking as an undergraduate, Austrian Economics appeared far more realistic and relevant. Market participants were assumed to have imperfect knowledge in a world of uncertainty and change. Markets were seen as a dynamic process in which prices and competition assisted in the discovery of opportunities and the coordination of multitudes of interdependent human actors in an intricate system of division of labor. Human beings were not reduced to abstract mathematical utility functions, but were intentional actors with goals, meanings and expectations that guided them in the selection and application of means, and in their interactions with others in the arena of exchange.
In Macroeconomics, the Austrians insisted upon looking beneath the “aggregates” and analyzing the temporal-sequential impact that changes in money and credit could have on the structure of relative prices and on the allocation of capital and labor in a time-structure of production, which can lead to malinvestments and misdirections of resources resulting in economy-wide imbalances. The Austrians provided a logically coherent and historically persuasive explanation of why recessions inescapably follow inflationary “booms.”
How did Austrian economics change your worldview?
The Austrian approach warned me of what Hayek referred to in the title of his Nobel Lecture as the “pretense of knowledge,” or what Wilhelm Röpke called “the hubris of the intellectual.” Whether it be the pretense of the socialist central planner or the hubris of the political-economic interventionist, it is folly and arrogance to believe that any individual or group of individuals in government can have the wisdom, knowledge, or ability to direct all or part of the decisions and actions of others in society. Only freedom and free enterprise can bring about what Adam Smith long ago referred to as the “wealth of nations,” through the spontaneous interactions of market participants within a general institutional setting of individual rights, private property, the rule of law, voluntary exchange, and open competition with market-generated prices.
The Austrian approach provided me with a powerful analytical framework with which to understand social and economic processes.
Who have been your greatest intellectual influences?
Most generally, I would say that it was reading Ayn Rand. She has permanently influenced my thinking about man, mind, individual rights, and the institutional requirements for a moral society. Her writings continue to offer what is sorely lacking in much political and philosophical discussion: a moral compass with which to think about man and the human condition.
Rand has many critics among classical liberals and libertarians. Nonetheless, she stands out as a major contributor in an illustrious tradition that runs, in one sense, from the ancient Greek thinkers who emphasized reason as the tool to understand reality through the natural law and natural rights tradition that led to the principles upon which the American “experiment” in freedom was grounded.
In a world dominated by moral relativism and epistemological agnosticism, Ayn Rand pulls us back to remind us that there is an objective reality, that man is a part of that reality with a particular nature, and that the human mind has the ability and the obligation to apply itself to understand the personal and social prerequisites for survival and prosperity.
Among the Austrians the greatest intellectual influences on me have been Ludwig von Mises and Friedrich A. Hayek.
What is most impressive about Mises’s contribution is the integrated and comprehensive worldview of man, society and the market order that he developed. There is an interdisciplinary breath and depth to his writings that distinguishes him from virtually any other economist during the last one hundred years. I don’t how anyone can ever be the same, again, if they read The Theory of Money and Credit, Socialism: An Economic and Sociological Analysis, and, of course, Human Action. I might mention that my actual “favorite” among Mises’ other books is Liberalism, which is one of the finest defenses of the classical liberal ideal that I’ve ever read. I often assign it to the students in my classes.
In Hayek’s case, what has greatly influenced me is his analysis of the spontaneous order, decentralized knowledge, and institutions of the market process. While I know that some Austrians and classical liberals/libertarians do not share this view, I consider Hayek’s discussion of freedom and the free society in part one of his Constitution of Liberty and in volumes one and two of Law, Legislation and Liberty to be among the most insightful and profound analyses ever penned in defense of individual liberty and the market economy. It is our limited knowledge and ignorance of most of the circumstances upon which our own material and intellectual prosperity are dependent, that explains why we should respect each others’ liberty so we can all benefit from what others in society know and can do. This is one of the most brilliant justifications of liberal society. I am not claiming that this utilitarian or “consequentialist” argument is the only or primary one upon which to make the case for individual liberty and the free society, but it an extremely powerful explanation of the gains from a free market order.
If you were not a scholar, what would you be doing?
I’d work in a big bookstore, so I could buy all the books I was interested in at the employee’s discount price!
What do you see as the greatest threat to liberty today?
The greatest threat to liberty is the interventionist-welfare state. Its danger is exactly what the French political philosopher, Alexis de Tocqueville, warned about in his famous early 19th century study of Democracy in America. The paternalist state slowly but surely turns a free and independent people into social sheep who increasingly rely upon the political authority to care for them, protect them from the uncertainties of everyday life, and guarantees more and more of their daily wants and desires.
State paternalism has grown gradually, little by little, year-by-year, in the Western democracies. Freedom has been incrementally chipped away as the decades have passed. Most people have not noticed these lost “margins” of liberty, with the result that not many understand any more what a truly free society could or should be like. There needs to be a sea change in the climate of ideas, so we can at some time in the future return to the road to freedom rather than continue down our current road to a new serfdom.
As a professor of economics, how do you go about introducing your students to Austrian economics?
It, of course, depends upon the course that I’m teaching. But, in general, I find that a useful way to start is to have them reflect on the nature of the complex market order that they take for granted. I ask them to think about how the goods we are often looking for get in the stores, and at prices we usually are willing to pay; how do the resources out of which those goods are made get assigned or distributed among their possible uses to make those desired consumer items; and how do billions of people in what is now a global economy communicate with each other to find out what we want as consumers and what we might be able to supply as producers?
This leads to a discussion of the benefits of division of labor and how, as Mises argued, it explains the motives for a permanent association among men. If men do associate for mutual benefit, what is necessary for them to have the incentives to produce and the information to decide what should be done and how? This takes us to the role of private property; the emergence and importance of money; the competitive process and market-based prices; and the meaning and significance of economic calculation, profit and loss, and the place of the entrepreneur in the market process.
From there, the analysis can be extended in many directions, depending upon the particular subject or topic of the specific course.
What do your students think of Austrian economics?
In general, I have found the students consider Austrian economics to be (a) understandable; (b) realistic in both its assumptions about man and the market, and its applicability to various problems in both microeconomics and macroeconomics; and (c) the most logical and consistent explanation of and justification for personal and economic freedom to which they have ever been introduced.
What is your outlook for the future of Austrian economics in academia?
This is a very controversial issue among Austrians. Some Austrians believe that sound scholarly work can successfully penetrate the bastions of mainstream economics.
And even if “Austrian” economics were to never become the new “mainstream,” it could have recognition and legitimacy in the eyes of the profession for being an important and valued approach to economic theory and policy.
Other Austrians believe that the mainstream continues to be so rigidly fixated on mathematical formalism and statistical model-building as the only legitimate and “scientific” languages and methods of economics, that the prejudice against the Austrian approach remains too strong for it to break through the barriers blocking intellectual entry into and acceptance within the economics profession as a whole.
I believe that particular Austrians who make specific contributions can break through and have a degree of personal legitimacy in the eyes of mainstream economists. However, I fear that for the foreseeable future the mathematical and empiricist prejudices among most economists will make it extremely difficult for Austrian Economics (as a way of analyzing the world) to be treated as a respectable approach within the economics profession.
This does not mean that Austrians should not try to convince mainstream economists of the value of their uses and applications of Austrian ideas to deal with theoretical and policy questions. But it will remain an uphill battle for many years and decades to come.
There have been several “crises of economics” in the profession over the last forty years. But each time the mainstream seems to be impervious to all challenges concerning the realism or applicability of its methods and approach. And I am not optimistic that this is likely to change in the foreseeable future.
What advice would you give to a student who is afraid to discuss Austrian economics with fellow students and with professors?
The question is, why would a student have such a fear? Now, if that student has a closed-minded professor who might knock down their grade for advocating a viewpoint different than the one presented by that professor, then obviously the student should speak with discretion.
But, in general, what is that student facing by speaking out? Ridicule, sarcasm, maybe some social ostracism? Well, that’s the price for believing in an unpopular or radically different set of ideas. Explaining and defending what you believe to be true always carries a cost.
I would, however, suggest that if that student finds himself challenged and criticized for presenting an Austrian viewpoint, he should take advantage of that situation and learn from it. What are the arguments being made against Austrian Economics, in general or on a specific topic or policy issue? How can a logical and persuasive reply be formulated in response to those criticisms? Is there something that he doesn’t understand or can’t answer from his Austrian perspective? If so, why? How can he improve his thinking based on this challenge or disagreement? Remember, what doesn’t intellectually kill you, makes you stronger.
What is your favorite film and/or theatrical work?
My favorite movie is the 1942 film, Casablanca, starring Humphrey Bogart, Ingrid Bergman and Claude Raines. I am, in general, a big Humphrey Bogart fan.
I very much like movies directed by Alfred Hitchcock; he was a master of suspense and visual imagery. Also, I can watch over-and-over again, those great 1930s musicals with Fred Astaire and Ginger Rogers. The dance sequences are fantastic; they capture grace and charm.
I like James Bond movies. And, yes, Sean Connery was the best Bond. I also like Westerns, especially some of the “spaghetti Westerns” from the 1960s and 1970s.
My favorite Woody Allan movie is A Midsummer Night’s Sex Comedy. The film opens with actor Jose Ferrer as a university professor in the first years of the 20th century presenting the best caricature I’ve ever seen (and all in about one minute!) of the positivist who rejects the human mind and subjective meaning for physical matter and objective measurement. Here, in a nutshell, is the exact opposite of the Austrian approach to methodology!
What is your favorite literary work?
My favorite literary work is Ayn Rand’s Atlas Shrugged. It is a monumental philosophical and literary achievement in explaining the meaning and values of individualism, rightly understood self-interest, the importance of the free mind for creative work, the dangers from all forms of collectivism, and the psychology of plunder – the plundering of men’s minds as well as men’s material successes.
What music do you enjoy the most?
The music to which I most frequently listen is swing and vocalist music of the 1930s and 1940s. For example, the big band sounds of Glenn Miller, Benny Goodman, Artie Shaw, and Tommy and Jimmie Dorsey.
My absolutely, positively favorite singer is, naturally, and, of course, Frank Sinatra. He was and still is, “the chairman of the board.” Next in line are Dean Martin and Sammy Davis, Jr. I love listening to their live “Rat Pack” performances in Las Vegas from the 1960s – the comedy is great, and very “politically incorrect.”
Among the female vocalists, my favorites are Ella Fitzgerald, Sarah Vaughan, Lena Horne, Carman McRae and Nancy Wilson. And just to assure you that I’m not completely stuck in the past in terms of singers, I also enjoy Diana Krall.
Now, I should mention that my second most favorite music is classical. Beethoven, Mozart, Haydn, Handel, and Vivaldi are among the great composers that I most like listening to.
Can you think of an artwork that symbolizes or depicts human action?
This is not an easy question to answer. I will only say that one of my favorite statues is in Vienna, Austria just off the main boulevard, the Ringstrasse, and about two blocks from the famous Goethe statue. It is a statue of Adam Smith holding a copy of The Wealth of Nations that stands in front of a vocational high school. It is not a great work of art, but I’ve always made a point of stopping to see it whenever I’ve been in Vienna. It is not often that you come across a statue of an economist, let alone a free market one!
Works by Richard Ebeling:
- Austrian Theory of the Trade Cycle and Other Essays, The. Ed. by Richard M. Ebeling, Ludwig von Mises Institute, Auburn, AL, 1996, pp. 125 (pb). (Find it here)