Posts Tagged Friedrich Hayek
“The only one with the power to create presents out of thin air is Santa himself.”
Or, if you prefer an even more sobering realization, there’s always the Creator himself.
Check out this new video from the brilliant folks at EconStories.tv:
From the EconStories.tv website:
Recovery and growth in the classical and Austrian view is driven by restructuring production so that entrepreneurs discover again the best — i.e. the most valuable and sustainable — ways to serve customers. That process is lead by new entrepreneurs and driven by savers who make capital available to fund new investments and new ventures. Sustainable saving and investment means creating more value for others while using fewer resources. This process lies at the core of healthy economic growth, including better job opportunities and Read the rest of this entry »
The Irish singer and co-founder of ONE, a campaigning group that fights poverty and disease in Africa, said it had been “a humbling thing for me” to realize the importance of capitalism and entrepreneurialism in philanthropy, particularly as someone who “got into this as a righteous anger activist with all the cliches.”
“Job creators and innovators are just the key, and aid is just a bridge,” he told an audience of 200 leading technology entrepreneurs and investors at the F.ounders tech conference in Dublin. “We see it as startup money, investment in new countries. A humbling thing was to learn the role of commerce.”
I’m a bit skeptical about the broader significance of these remarks on Bono’s activism, but I do think they’re illuminating. Over at the Acton Institute, I argue that Bono’s new humbled attitude is precisely what we need in our attempts to improve economic development:
Although I’m not overly confident that Bono’s sudden self-awareness is enough to radically shift his aid efforts away from fostering dependency, this small admission helps illuminate one of our key obstacles to doing good in the world: overzealousness paired with overconfidence.
Bono describes his realization as a “humbling thing,” and “humbling” is precisely what the foreign aid experts and economic planners could use. As Friedrich Hayek famously wrote, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” As the story of the Tower of Babel well confirms, man has a natural disposition to think he knows more than he knows and can construct beyond what he can construct—all to make a name for himself. The juice of righteous anger is a powerful enabler, and once it’s pumping through our veins it takes even less time for our human tendencies to escalate. After all, we’re only out to deliver humanity to heaven’s doorstep.
Such overconfidence in our own designs can be particularly destructive in the realm of economics, a science that’s in a constant battle over whether it should seek to explain human action, control it, or bypass it altogether. Such planners find a perfect match in eager activists such as Bono. “We can build your tower to heaven,” they’ll say, “and you can make a name for yourself. If only the right policy buttons are pushed and the right economic equilibrium is arranged, the world can be set to rights.”
Of all people, Christians should be aware of the deeper spiritual questions we should be asking, cautious not to be wise in our own eyes:
The economic engineer’s intrusion goes well beyond barging into more natural and effective social institutions. For in doing so, he treats dignified man and the unpredictable, invaluable relationships in which he engages as the mere mingling of predictable pieces in a larger static game. Such an intrusion should cause great alarm for those of us seeking restoration among the suffering. For how can we hope to improve conditions for the human person if we skip past what it means to be a human person? For the Christian in particular, God instructs each of us to do what the Lord wills. Are we really to Read the rest of this entry »
The topics of self-interest and sacrifice are commonly discussed on this blog—my own view being that any form of either is bound to lead to selfishness unless both are aligned to God’s will (through good, old-fashioned obedience).
I’m currently reading Love & Economics: It Takes a Family to Raise a Village, in which author and economist Jennifer Roback Morse takes a unique approach to the subject, arguing that our views of “rational” man have been severely lacking on both sides (if your ideological buckets are that neat and tidy, that is).
Without incorporating love into our usual assumptions about the self and the other, argues Morse, we will structure a philosophy of life around a fantasy and be doomed to a mechanistic, regressive society.
First, the not unique part—i.e. a summary of the context:
The decentralized market economy is probably the most celebrated self-regulating social institution. Adam Smith’s “invisible hand” insight shows that people pursuing their own self-interest can actually end up furthering the public interest through no intention of their own. Since Smith’s time, free market economists have developed the Invisible Hand concept further through a construct called homo economicus, or economic man. Economic man is a rational person who calculates the costs and benefits of each potential action and chooses the action that brings him the most happiness.
The obvious problem is that we are not, and can never be, fully rational, no matter how much Ayn Rand wishes it were so (though we can certainly be more rational than we are).
On the other side is a similar problem, one which, though more obvious, is plagued by increasingly abundant misunderstanding: other people have an even smaller chance of being “fully rational” on our behalves.
The lofty bureaucrat on top of the hill may think he has a better idea than we do about the appropriate price of an orange (or a cup of coffee), but our personal preferences would likely differ if Grocer Bob had the chance to experiment. Of course, the implications lead to deeper struggles than the prices of oranges and coffee, which is why more fundamental, philosophical variations on Rousseau’s “natural goodness of man” have long served as platforms upon which many a tyrant has constructed his moralistic authoritarian palaces.
Yet even critiques of centralized approaches to knowledge and decisionmaking—Hayek’s, most notably—seem to only get us back to square one: that individual choice would be better (and it would!).
Yes, our knowledge is limited, and yes, our definitions of the “good” will not naturally conform. These are crucial realities to confront, but do they mean that Read the rest of this entry »
The books I read in 2011 are listed below (alphabetically by author).
I didn’t read as much as I would’ve liked in 2011, and I also didn’t write about what I read as much as I would’ve liked. I hope to provide more reviews and “nuggets” from these books in the upcoming year, as many were impactful in the development of ideas discussed on this blog.
Here were some of my favorites:
- The Victory of Reason – Rodney Stark
- For God So Loved, He Gave – Kelly Kapic & Justin Borger
- The White Man’s Burden – William Easterly
- Living in God’s Two Kingdoms – David VanDrunen (enjoyment does not equal agreement!)
- Money, Greed, and God – Jay Richards
- The Holy Spirit in Mission – Gary Tyra
What did you read? What were your favorites?
In a previous post examining the scientific pretentions of many atheists, I briefly mentioned that “in economic science, we are constantly confronted with theories and policies based around a denial, dismissal or subversion of the spiritual side of man and nature.”
F.A. Hayek would call it “scientism,” which, in The Counter-Revolution of Science, he describes as a “slavish imitation of the method and language of science” — one that improperly conflates the physical and the nonphysical. (Hayek would be unlikely to use the word “spiritual,” as I most often do.)
This week at The American, Arnold Kling explores the approach as it relates to your typical economist’s faith in macroeconomic models (and the media’s lemming-like trail behind him).
How many jobs will the latest stimulus package create? What will it do to GDP?
For answers to questions like these, the press always turns to the usual suspects: the proprietors of macroeconometric models, which are maintained by some economic consulting firms and by the Congressional Budget Office (The Federal Reserve Board also maintains a model, but the Fed tries to refrain from injecting its model into fiscal policy debates.)
I think that if the press were aware of the intellectual history and lack of scientific standing of the models, it would cease rounding up these usual suspects. Macroeconometrics stands discredited among mainstream academic economists. Applying macroeconometric models to questions of fiscal policy is the equivalent of using pre-Copernican astronomy to launch a satellite or using bleeding to treat an infection.
If you aren’t aware of the “intellectual history and scientific standing” of the models, Kling is glad to inform you, and does so with precision. His conclusion: “economists must be more forthcoming about what they can and cannot estimate.”
This means no more guarantees of “X number of jobs by year Y-thousand.” This means no more predictions of “gas at $Z per gallon” if you choose candidate W. This means no more manufactured certainty (gasp!).
Kling closes with this handle:
Imagine if somehow we knew how to launch satellites but still believed in pre-Copernican astronomy. We would have no choice but to send satellites into space using Read the rest of this entry »
Leigh Buchanan recently wrote a piece for Inc. Magazine titled, “How Entrepreneurs Think,” exploring a recent study on entrepreneurial psychology by Saras Sarasvathy, a professor at the University of Virginia’s Darden School of Business. (HT)
Sarasvathy likes to compare expert entrepreneurs to Iron Chefs: at their best when presented with an assortment of motley ingredients and challenged to whip up whatever dish expediency and imagination suggest. Corporate leaders, by contrast, decide they are going to make Swedish meatballs. They then proceed to shop, measure, mix, and cook Swedish meatballs in the most efficient, cost-effective manner possible.
But this doesn’t mean that entrepreneurs are wandering aimlessly through life. Their approach is simply not static. Like an Iron Chef, they are highly mobile and highly adaptable.
The distinction here, according to Buchanan, is as follows:
That is not to say entrepreneurs don’t have goals, only that those goals are broad and — like luggage — may shift during flight. Rather than meticulously segment customers according to potential return, they itch to get to market as quickly and cheaply as possible, a principle Sarasvathy calls affordable loss. Repeatedly, the entrepreneurs in her study expressed impatience with anything that smacked of extensive planning, particularly traditional market research. (Inc.’s own research backs this up. One survey of Inc. 500 CEOs found that 60 percent had not written business plans before launching their companies. Just 12 percent had done market research.)
…Sarasvathy explains that entrepreneurs’ aversion to market research is symptomatic of a larger lesson they have learned: They do not believe in prediction of any kind. “If you give them data that has to do with the future, they just dismiss it,” she says. “They don’t believe the future is predictable…or they don’t want to be in a space that is very predictable.”
Jim Manzi, in his commentary on the article, points out that one must make another distinction between risk and uncertainty, with risk being somewhat quantifiable and uncertainty more Read the rest of this entry »
Here’s a start:
- Gigantic transnational corporations are out of control, exploiting their workers and rendering consumers and governments powerless to their manipulative forces.
- Venerable local cultures, along with their esteemed mom-and-pop shops, are under attack, besieged by an ever-homogenizing monster, eager to suck away their uniqueness and transplant it with Western saliva.
- Economic globalization — the root of such evils — is fattening the pockets of the rich, emptying the pockets of the poor, and threatening earth’s most vital life support systems in the process.
On the whole, modern-day capitalism and free trade have resulted in rampant greed and moral depravity, leading society to sacrifice its most vulnerable members on an altar of economic neoliberalism.
Oh, and when I say that all of us can agree on this, I mean all of us Christians.
I wish I could say that the above rant was constructed from articles in the Daily Kos, The Huffington Post, or The New Republic. Unfortunately, it was compiled from ideas found in the recent proclamations of three major ecumenical organizations: the Lutheran World Federation (LWF), the World Communion of Reformed Churches (WCRC), and the World Alliance of Reformed Churches (WARC). (Yes, I did have a bit of fun with them.)
The problem, of course, is that all of us don’t agree — a point not lost on theologian Jordan Ballor, author of the new book, Ecumenical Babel: Confusing Economic Ideology and the Church’s Social Witness.
For Ballor, the ecumenical movement has become far too narrow in its ideological underpinnings and far too politicized in its public stances. Although its role should be focused on fostering church unity around a set of grounded beliefs, the movement’s overt participation in Read the rest of this entry »