On the Austrian School

13 07 2011

Three very different essays from very different sources:

Israel Kirzner’s explanation of the Austrian approach to crisis.

A Marxist critique of the Austrian School.

And finally, an article from Slate on libertarianism in general. The money quotes:

To my critique of the Chamberlain example, a libertarian might respond: Given frictionless markets, rational self-maximizers, and perfect information, the market price for Wilt’s services could not stay separable from the market price to see Wilt play. (Visionary entrepreneurs would create start-up leagues, competing leagues would bid up prices for the best players.) In a free-market paradise, capital will flow to talent, until rewards commensurate perfectly with utility. Maybe; and maybe in a socialist paradise, no one will catch the common cold. The essence of any utopianism is: Conjure an ideal that makes an impossible demand on reality, then announce that, until the demand is met in full, your ideal can’t be fairly evaluated. Attribute any incidental successes to the halfway meeting of the demand, any failure to the halfway still to go…

Buccaneering entrepreneurs, boom-and-bust markets, risk capital—these conveniently disappeared from Nozick’s argument because they’d all but disappeared from capitalism. In a world in which J.P. Morgan and Cornelius Vanderbilt have been rendered obsolete, reduced to historical curios, to a funny old-style man, imprisoned in gilt frames, the professionals—the scientists, engineers, professors, lawyers and doctors—correspondingly rise in both power and esteem. And in a world in which the professions are gatekept by universities, which in turn select students based on their measured intelligence, the idea that talent is mental talent, and mental talent is, not only capital, but the only capital, becomes easier and easier for a humanities professor to put across. Hence the terminal irony of Anarchy: Its author’s audible smugness in favor of libertarianism was underwritten by a most un-libertarian arrangement—i.e., the postwar social compact of high marginal taxation and massive transfers of private wealth in the name of the very “public good” Nozick decried as nonexistent.

And the screw takes one last turn: By allowing for the enormous rise in (relative) income and prestige of the upper white collar professions, Keynesianism created the very blind spot by which professionals turned against Keynesianism. Charging high fees as defended by their cartels, cartels defended in turn by universities, universities in turn made powerful by the military state, many upper-white-collar professionals convinced themselves their pre-eminence was not an accident of history or the product of negotiated protections from the marketplace but the result of their own unique mental talents fetching high prices in a free market for labor. Just this cocktail of vanity and delusion helped Nozick edge out Rawls in the marketplace of ideas, making Anarchy a surprise best-seller, it helped make Ronald Reagan president five years later. So it was the public good that killed off the public good.

Credit for the first link is given to the Ius Honorarium blog.


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