Ideas for the New Year

Today is the last day of the year. What topics would you like to see covered over the next year?

Austrian Economics Daily

I tweet every article. Which has gotten us into Austrian Economics Daily. Twice.

London, Christmas, 1843

From what work does the following come:

The poulterers' shops were still half open, and the fruiterers' were radiant in their glory. There were great, round, pot-bellied baskets of chestnuts, shaped like the waistcoats of jolly old gentlemen, lolling at the doors, and tumbling out into the street in their apoplectic opulence. There were ruddy, brown-faced, broad-girthed Spanish Friars, and winking from their shelves in wanton slyness at the girls as they went by, and glanced demurely at the hung-up mistletoe. There were pears and apples, clustered high in blooming pyramids; there were bunches of grapes, made, in the shopkeepers" benevolence to dangle from conspicuous hooks, that people's mouths might water gratis as they passed; there were piles of filberts, mossy and brown, recalling, in their fragrance, ancient walks among the woods, and pleasant shufflings ankle deep through withered leaves; there were Norfolk Biffins, squab and swarthy, setting off the yellow of the oranges and lemons, and, in the great compactness of their juicy persons, urgently entreating and beseeching to be carried home in paper bags and eaten after dinner. The very gold and silver fish, set forth among these choice fruits in a bowl, though members of a dull and stagnant-blooded race, appeared to know that there was something going on; and, to a fish, went gasping round and round their little world in slow and passionless excitement.

The Grocers'! oh the Grocers'! Nearly closed, with perhaps two shutters down, or one; but through those gaps such glimpses. It was not alone that the scales descending on the counter made a merry sound, or that the twine and roller parted company so briskly, or that the canisters were rattled up and down like juggling tricks, or even that the blended scents of tea and coffee were so grateful to the nose, or even that the raisins were so plentiful and rare, the almonds so extremely white, the sticks of cinnamon so long and straight, the other spices so delicious, the candied fruits so caked and spotted with molten sugar as to make the coldest lookers-on feel faint and subsequently bilious. Nor was it that the figs were moist and pulpy, or that the French plums blushed in modest tartness from their highly-decorated boxes, or that everything was good to eat and in its Christmas dress; but the customers were all so hurried and so eager in the hopeful promise of the day, that they tumbled up against each other at the door, clashing their wicker baskets wildly, and left their purchases upon the counter, and came running back to fetch them, and committed hundreds of the like mistakes, in the best humour possible; while the Grocer and his people were so frank and fresh that the polished hearts with which they fastened their aprons behind might have been their own, worn outside for general inspection, and for Christmas daws to peck at if they chose.

This unapologetic celebration of the market is from Charles Dickens' A Christmas Carol. An odd thing, for those who believe this work to be an anti-capitalist diatribe. The problem with Scrooge isn't that he's a capitalist, but that he doesn't enjoy his life, that he's not generous, and that he has replaces all human affection with mere accumulation. The market is life; accumulation for the sake of accumulation is death, as Scrooge learns.

Take a look at some of the things listed above. It is Christmastime and, thus, winter, yet in the market are pears, apples, and grapes, oranges and lemons -- all out of season for winter London. From whence did they come, then? Through trade with distant lands in which they were in season. Free trade allowed winter London to have summer fruits. There are also "French plums" and cinnamon -- from the Far East -- and sugar, from the West Indies, no doubt, and figs from the Middle East. All of these things are in London exclusively due to free trade. The Ghost of Christmas Present shows Scrooge just how wonderful and joyous the market economy can be.

Of particular note is when Scrooge accuses the Ghost of Christmas Present of depriving people of the market on Sundays:

"Spirit," said Scrooge, after a moment's thought, "I wonder you, of all the beings in the many worlds about us, should desire to cramp these people's opportunities of innocent enjoyment."

"I!" cried the Spirit.

"You would deprive them of their means of dining every seventh day, often the only day on which they can be said to dine at all," said Scrooge. "Wouldn't you?"

"I!" cried the Spirit.

"You seek to close these places on the Seventh Day," said Scrooge. "And it comes to the same thing."

"I seek!" exclaimed the Spirit.

"Forgive me if I am wrong. It has been done in your name, or at least in that of your family," said Scrooge.

"There are some upon this earth of yours," returned the Spirit, "who lay claim to know us, and who do their deeds of passion, pride, ill-will, hatred, envy, bigotry, and selfishness in our name, who are as strange to us and all our kith and kin, as if they had never lived. Remember that, and charge their doings on themselves, not us."

The Ghost points out that those who would shut down the economy on Sundays are of the same mindset as Scrooge. Note that those who shut down the free market economy on Sundays and, as a rule, oppose the market itself, are described as having "pride, will-will, hatred, envy, bigotry, and selfishness." I agree with the Ghost that this is a perfect description of anti-market people in general.

The bottom lines is that Scrooge is not targeted because he is a capitalist -- he is targeted because he is a misanthrope. The grocers are celebrated in no small part because, having to deal with the public directly, there is no way they can be misanthropic. If Scrooge ran a grocery store, he would have gone out of business long ago. Fortunately for him, he went into a business where he did not have to deal with people to make money. Or, perhaps more accurately, he was attracted to that business for that reason. No doubt Scrooge will nonetheless discover that his newfound love for humanity will nevertheless be quite profitable. The market, after all, is a social network, and the more pro-social you are in it, the wealthier -- in every way -- you will become.

The Rathouse

We have been added to Rafe Champion's The Rathouse, which deals with critical rationalism -- Karl Popper and Austrian Economics. Thanks, Rafe!

J. Neil Schulman

Those interested in Austrian Economics should find the work of J. Neil Schulman of interest, as he directly integrates Austrian Economics into the plots of his works, which include screenplays and novels such as Alongside Night and Escape From Heaven. He also wrote and directed (and acted in) Lady Magdalene's.

Some Thoughts on Game Theory and Literature

Game theory is one approach to helping one uncover the rules of complex social systems. It shows that complex social systems can be understood as games, meaning they have rules. In postulating that games have rules, game theory goes against certain postmodernist-anarchist views that insist on opposing the very concept of rules. They see rules as limiting, as preventing freedom. They do not understand that it is the very presence of rules that give us “degrees of freedom.”

Nietzsche points out in Beyond Good and Evil that rules are absolutely necessary for every form of morality and art form has used and needed rules. “What is essential and inestimable in every morality is that it constitutes a long compulsion: to understand Stoicism or Port-Royal or Puritanism, one should recall the compulsion under which every language so far has achieved strength and freedom—the metrical compulsion of rhyme and rhythm” (188). He then goes so far as to say that “all there is or has been on earth of freedom, subtlety, boldness, dance, and masterly sureness, whether in thought itself or in government, or in rhetoric and persuasion, in the arts just as in ethics” developed only because of rules – and that the use of rules lies in nature itself, that rules are natural. It is through living by rules that we make it “worth while to live on earth; for example, virtue, art, music, dance, reason, spirituality.”

Nietzsche rejects living without rules. But which rules? The tacit question asked by game theory is: “what rules make for the best games?” But it also asks: “what rules would evolve to ensure survival of the game?” – whether that game is a species or a ritual, an economic system or a work of literature. Further, “Game theory shows how people make decisions about what to purchase and when and the rationale for seeing goals or rewards” (Richmond, et al, Science 11 July 2003, 179). That is, “Our sense of which behavior to choose to reach a goal or obtain a reward is based on the perceived value of the reward, the effort needed to obtain it, and our previous experience about the likelihood of success” (179). Which raises the questions of what is the “goal” of a work of art, and what “reward” that work of art gives us, since behavior’s existence suggests there is a goal and/or reward to be achieved/received that must have been important enough for us to have been pursuing it from prehistory to the present day. We will not act if we do not perceive that the reward we will receive is sufficient.

Action is always directed toward the future; it is essentially and necessarily always a planning and acting for a better future. Its aim is always to render future conditions more satisfactory than they would be without the interference of action. The uneasiness that impels a man to act is caused by a dissatisfaction with expected future conditions as they would probably develop if nothing were done to alter them. In any case action can influence only the future, never the present moment that with every infinitesimal faction of a second sinks down into the past. Man becomes conscious of time when he plans to convert a less satisfactory present state into a more satisfactory future state. (Mises, Human Action, p. 100)

We would not create works of art of literature or participate in viewing/reading/listening to art/literature/music if it did not reward us. That is why l’art pour l’art is neither achievable nor desirable. But each of the questions raised by game theory are really the same question. Formulating it the first way makes it clearer regarding how it can be applied to art and literature. It helps us to see the critic as the uncoverer of the rules the artist used (consciously or not) to create their work of art or literature. Formulating it the second way helps us understand how game theory can help us understand the source of rules, from the laws of physics to the rules of grammar. It shows that more rules are needed for more complex games. Only a few are needed at the quantum level, but with each movement up in complexity, more rules emerge – and are needed – until one gets to complex human social systems, which need thousands, if not millions, of rules. And it shows how necessary rules are if one is going to have any sort of game at all. It is the existence of rules that give us freedom – making us more creative, often far more creative than we are otherwise. Many good rules (note the word “good” here – it is not the number of rules so much as the kind, those that generate more moves, not less) give us many more degrees of freedom. Chess is a better, more complex game, with many more degrees of freedom, than checkers, though both are played on the same board. It is better because more complex. Complexity gives us more freedom. Rules are necessary, but the more complex the system, the more and more complex the rules that are necessary.

This brings us to the question of what distinguishes Rules from Laws (this is similar to Hayek's distinction between law and legislation). Both Rules and Laws are used to delineate what one does. However, Rules are flexible, which means they can be bent; they are prescriptive, which means they say what you can do (as, say, the rules of chess) and, as such, are positive in nature; they act as strange attractors, meaning they are dynamic, they deepen and grow more complex over time, and they increase your degrees of freedom, giving you more possibilities. Action is impossible without rules; rules create actions, possibilities of and for actions. Laws, on the other hand, are inflexible and cannot be bent, but only broken; and they are broken under threat of punishment (laws can be changed – but in the sense that they are changed, they no longer exist as laws and other laws now exist); thus, they are restrictive, saying what you cannot do; they are static, unchanging (especially in philosophy), they decrease your freedom by being restrictive, and give you fewer possibilities. Action is cut off with Laws; laws prevent actions, possibilities of and for actions.

In Individualism and Economic Order, F. A. Hayek points out the dangers found in the radically individualistic view of human nature – showing that it can and usually does lead to the collectivist view (too fine a texture looks like a solid color). Hayek shows that taking the exclusively individualistic view of human nature (vs. the social-individualistic view of human nature) leads to bad games (social systems, economic systems, government), since no information can be shared among players. A good game-system is one where communication – and, thus, community – is possible.

Hayek suggests that there are two kinds of individualism, one based on rational philosophy, which started with Descartes and was further developed by Rousseau, Voltaire, Kant, Hegel, Schopenhauer, and by the existentialists, including Heidegger, Sartre, and de Beauvoir, and which I will call Cartesian Individualism, and the other based on the Scottish philosophical tradition of David Hume, Bernard Mandeville, Josiah Tucker, Adam Ferguson, Adam Smith, and John Locke, and further developed by Edmund Burke, Alexis de Tocqueville and Lord Acton (which is the social-individualistic agonal view). Cartesian Individualism is based on the idea that man is rational and can thus rationally construct society, while the Scottish tradition does not see man as being fully rational, but also, perhaps primarily, influenced by his drives and wants and needs of the moment. These quite different views give rise to quite different forms of individualism. Perhaps the best way of explaining the differences would be to put the two traditions of individualism side by side in a table showing what Hayek sees as the difference between the two traditions, and the consequences of each of these traditions:

Scottish (Social-Individualistic) Individualism

the individual is found within the social, leading to free markets

man is not always rational, or even capable of always being rational – man also has impulses and instincts

since man is not rational, he cannot design or plan something like a society or economy

the individual participates in the social (cooperates) through being selfish

“If left free, men will often achieve more than individual human reason could design or foresee” (11).

It is not necessary to find good men to run the society, meaning anyone can play

it is not necessary for us to become better than we already are, making it easy to enter the game to play it

freedom is granted to all

no one group never always wins, which keeps people playing

reason is seen “as an interpersonal process in which anyone’s contribution is tested and corrected by others” (15)

inherently unequal people are treated equally

inherent inequality allows diversity

hierarchical – intermediates encouraged

Cartesian (Radical Individualistic) Individualism

radical individualism, leading (ironically (?)) to socialism

man is rational and has no instincts and can always control his impulses

since man is rational, he can create through planning the ideal society or economy

individual vs. the social – i.e., selfishness vs. cooperation – therefore need coercion

“social processes can be made to serve human ends only if they are subjected to the control of individual human reason” (10)

only the best can or should run society and make economic decisions – few can play

men need to be improved (presumably made more rational) before a good economy or society can be created – hard to play

freedom granted only to the good and wise

the “good and wise,” “rational” rulers always win – no reason to play the game

reason found in the individual, especially in certain “good and wise” individuals

people are made equal in actuality – thus, have to arbitrarily assign tasks

only State and Individual, thus flattening society – intermediates suppressed

We can see in this comparison that the Scottish form of individualism, by being simultaneously social, provides us with a much broader, more inclusive set of game rules. Anybody can be involved in the social and economic games – making these systems more complex, containing as they do more constituent parts acting in coordination and cooperation. Man does not have to be “improved” for the kinds of systems that would be set up using Scottish principles as he does using Cartesian principles (historical examples of attempts to “improve” man to make him more suitable for “rationally” designed societies include the Holocaust in Nazi Germany, the Terror of Revolutionary France, and the slaughters of millions in the Marxist states of the Soviet Union, Maoist China, and Cambodia, just to name a few). In the Cartesian view, there is only one rationality, but in the Scottish view, there are many rationalities, which can often come into conflict.

Scottish philosophy gives us far more complex social game rules than does the (radical individualist) rationalist philosophical tradition. One may think this rationalist approach would allow a given individual’s influence to extend throughout a society and create a more interesting game, but what it actually does is flatten out society, making it less complex, less interactive. A radically individualistic world view leads, ironically, to a collectivist outcome. “All unity is unity only as organization and co-operation: no differently than a human community is a unity – as opposed to an atomistic anarchy; it is a pattern of domination that signifies a unity but is not a unity” (Nietzsche, WP 561).

If we take the Scottish view that a person’s knowledge and interests are limited, making our actions limited to a tiny sphere of influence – our family and friends, our churches and schools and businesses, the intermediate social groups the rationalists suppress and the Scottish encourage – we see a highly complex society emerging, with the individual influencing the small social groups, the small social groups influencing the individual, and both interacting to influence larger social groups, which themselves feed back to the smaller groups. We have a series of nested hierarchies where each person acts in a social-individualistic way through the communication of information to other individuals to create smaller cultural subsystems of the larger culture. The same individual can have an effect on a school, a church, a business, and a local government, each of which will have larger effects on the society at large. More people have more influence over society. And man does not have to be “improved” because the worst among us can be canceled out by the best. These principles, upon which the free market is based, are “an effective way of making man take part in a process more complex and extended than he could comprehend” (Hayek, 14-5). One does not have to have perfect knowledge to participate. One can participate while having a considerable amount of uncertainty, and still do well. Which is good, since no person is omniscient. We can reduce uncertainty through education, increasing our own individual knowledge, but we will still be left with a plethora of things which we will never have the time to learn.

There needs to be a way for individuals, with their limited information, knowledge, etc., to enter into a highly complex game, to be able to participate in the game itself. The way to allow someone into a highly complex game is by simply not having barriers to their entering and playing the game in the first place. And, if you do choose to play, and to take large risks while playing, you should be able to reap a correspondingly larger reward. To have a good game,

any workable individualist order must be so framed not only so that the relative remunerations the individual can expect from the different uses of his abilities and resources correspond to the relative utility of the result of his efforts to others but also that these remunerations correspond to the objective results of his efforts rather than to their subjective merits. (Hayek, 21)

And the game must not be constructed of iron-clad laws/legislation, but of more flexible rules. These are also good guidelines for creating works of art and literature, and for writing works of philosophy, theory, and criticism.

An example of good game rules are our “traditions and conventions . . . [which] evolve in a free society and . . . , without being enforceable, establish flexible but normally deserved rules that make the behavior of other people predictable in a high degree” (Hayek, 23). Most social rules should be those agreed upon and practiced by most of the people most of the time, enforced by subtle social pressures, not the use and threat of physical force. “In the social sciences the things are what people think they are. Money is money, a word is a word, a cosmetic is a cosmetic, if and because somebody thinks they are” (Hayek 60). They are rules because we agree they are – they are socially constructed. With these kinds of rules, those we find in the free market, we have various choices – while with orders or iron-clad laws, we get no real choices. This is what Nietzsche is getting at in his “On Truth and Lies in a Non-Moral Sense” when he says words are metaphors we have forgotten are metaphors, not Truth (words are not congruent with things – they are not attached to things through iron clad laws). Any choice is better than none. “It is better to have a choice between several unpleasant alternatives than being coerced into one” (Hayek 24).
Of course, just because the world has a socially constructed element, it does not follow that all the world is socially constructed. To claim it is brings us to the problems with pragmatism, where no system at all can be constructed. Hayek says pragmatism is “the preference for proceeding from particular instance to particular instance,” where the rule-maker “decides each question “on its merits””(1). With pragmatism, expediency and compromise lead us “to a system in which order is created by direct commands” (1). “Without principles we drift,” and we are led “to a state of affairs which nobody wanted” (2). Pragmatism makes it possible to change the rules with each move in the game – one could imagine some game master watching a game being played between two people, and changing the rules whenever he wished. This would lead to the game players in each move trying to gain the game master’s favor. They would end up trying to bribe the game master rather than paying attention to playing the game at hand. If this sounds like how too much business is conducted, with the government as the game master, we can see why. How much money do businesses waste trying to influence “pragmatic” government officials? With the use of basic principles, everyone is clear what the rules are and that they cannot – or, at the very least, are very difficult to – change. The game players concentrate on the playing of the game itself rather than coming up with strategies to influence some game master. With the use of general principles, the game master can all but be done away with.

There are a set of “basic principles” that are not socially constructed, a reality that exists even if we are not around to observe it which we have to deal with (though our attitude toward it, meaning our perspectives on it, are certainly socially constructed and thus inherited and modified based upon that inheritance). This is physis. On this world we have increasingly superimposed, with the introduction of such technologies as (especially fiat) money and writing, a socially constructed reality. This is nomos. This social reality, these social facts, “are accessible to us only because we can understand what other people tell us and can be understood only by interpreting other peoples’ intentions and plans. They are not physical facts, but the elements from which we reproduce them are always familiar categories of our own mind” (Hayek, 75). We have this socially constructed reality because “we all constantly act on the assumption that we can . . . interpret other people’s actions on the analogy of our own mind and that in the great majority of instances this procedure works. The trouble is that we can never be sure” (64). Which is what makes it all a game in the first place. But if we want this socially-constructed reality to work best, we need to allow it to structure itself as the rest of the world is structured – as a complex, dynamic emergent system.

Hayek has given us strong evidence against taking a collectivist-exclusive (unity-only) or an individualist-exclusive (pluralist-only) view. Hayek gives an alternative in his argument for a combination of individual and social – and even of a naturalistic and a socially constructed reality – that create a hierarchy of social interactions. What he argues for is a social-economic system that is in fact a system – a dissipative-structure system scalarly similar to every other system found in the universe, with the principles/game rules as the strange attractors of that system. It is a social system that reflects Francis Hutcheson’s definition of beauty unity in variety and variety in unity – which should not be surprising.

Hayek in Mind: Hayek's Philosophical Psychology

The issue of Advances in Austrian Economics I am in, Hayek in Mind: Hayek's Philosophical Psychology, is now published! You can find it here, where you can download each individual chapter. My chapter, which is titled "Getting to the Hayekian Network", is the final chapter of the book. The book itself can be purchased here. Enjoy!

How the Grinch Stole the Free Market

How the Grinch Stole the Free Market a Christmas poem by Sarah Skwire. Enjoy!

Thoughts on the Artistic Order in Light of O'Driscoll's 1978 Paper on Spontaneous Order

Here is an article by Gerald O'Driscoll on spontaneous order from 1978. In it he makes several observations we should keep in mind.

The principle of spontaneous order—or of “undesigned order,” as it might more properly be called—can be viewed as the first principle of economics. Indeed, James Buchanan has recently gone so far as to suggest that it is the only principle of economics. The principle is, in any case, a cornerstone of modern economics, whether we trace modern (i.e., post-mercantilist) economics back to Adam Smith and the other Scottish moral philosophers, or to the Physiocrats. With this principle, scholars for the first time could see economic phenomena as interdependent events. Indeed, this principle made it possible to reason systematically and coherently about economic phenomena. Much of nineteenth century economics can be seen as consisting of developments of this principle (along with minority criticisms of the principle and the systems of thought deduced therefrom).

On the other hand, most of twentieth century economics has consisted of reactions against systems in which this principle plays a central role. In this, Keynesian economics is but one among a family of theories that deny the existence of a spontaneous or undesigned market order in which plans are coordinated. The reaction has been so complete that what was taken by earlier economists to be an empirical law—the existence of a spontaneous market order—is now frequently viewed as the product of ideological bias or prejudice.

It seems notable that at the same time that most economists were giving up on the concept of spontaneous order in understanding the economy, that it had been taken up by the biologists, after Darwin's embracing the idea. His final point also helps us see perhaps why sociobiology, which attempted to reapply spontaneous order theory to sociology, including human sociology, was deemed to be an ideological move.

Indeed, O'Driscoll's point that Keynesianism is anti-spontaneous order in nature is another reason why we are not "Keynesianism and Economics." And anti-sociological theory cannot be of any use to understanding the sociology of artistic production.

The fact that spontaneous order theory is now taken to be evidence of ideology rather than of good science also suggests that we who are taking up this approach are in danger of being accused of being ideologues -- no matter the merits of the approach. This is more a warning than anything. (It now occurs to me that this may be the central reason why Literary Darwinism is also considered "illegitimate" by most literary theorists.) We who choose these sorts of scientific approaches to the humanities face an uphill climb.

Why pick up this theory of spontaneous order? Because "the question of the existence of a spontaneously generated order remains the central question of economics—and of social theory generally—even thought it is seldom recognized as such." Thus, if we truly want to understand the sociology of artistic production, we must understand the nature of spontaneous orders -- including the specifics of the artistic order. Denying the ability of spontaneous orders to coordinate behavior is to deny that we are social beings at all. Yet, there is little question these forces work well in the arts -- as the fact that artistic movements emerge, that canonical works emerge and are recognized and have long-term stability, etc. -- even if such forces are denied by market interventionists within the economy. It seems odd that somehow such coordination takes place easily in the arts, in science, and in other spontaneous orders, which all lack that wonderful coordinator of the economy, prices, but fails within the economy.

O'Driscoll observes that

That nonpurposive social organizations will naturally evolve and that an undesigned order can be the product of self-regarding acts are radical ideas in Western thought. These ideas run counter to the dominant approach to social questions and were in ascendency for only a brief period in Western intellectual history. It is not, then, entirely surprising that in economics these ideas have not gained complete acceptance; and that among the general public, even the so-called educated public, they are scarcely understood at all.

Indeed, spontaneous order thought is in direct opposition to constructivist thought, both the strong (creatonist/socialist) and the weak (intelligent design/interventionist) versions. One of the benefits, I believe, in developing spontaneous order theory in other orders, such as the arts and science, is that people mistakenly believe that the economic order is the most important one. There is much that can be said about this kind of materialism, and how it leads us to misunderstand human nature and misinterpret historical events, but that's not what I want to focus on here. The good thing about this failure to value other spontaneous orders as much as the economy is that spontaneous order theory can be more fully developed -- and observed in some of its purest forms -- without too many political issues being raised. I say "too many," but the fact is that there is some recognition that acceptance of spontaneous order theory in any area is to reject constructivism everywhere.

The fact of coordination -- even in the fact of the constant threat (and reality) of discoordination -- results in emergent patterns of behavior:

Do different and disparate individuals have a common reaction to shared experience? We certainly would not want to say they always do, or there would be little sense in referring to “individuals.” Yet, there are obvious cases in which people do react to shared experiences in the same or similar ways: the perception of a fire in an enclosed room will lead to virtually everyone’s making for an exit. Each person could form a reasonable expectation about what the others will do.

Moreover, many events are implicit demonstrations of the degree to which expectations do coincide. Changes in clothing fashion might be cited as an example. The “agreement” among separate manufacturers of apparel can be amazing, though clearly retail customers do not register their preferences for new fashion in a clothing futures market. Apparently individual entrepreneurs, experiencing the same signals and trends, will often form similar expectations.

He again makes my point about artistic movements in his observation about changes in clothing fashion. The emergence of movements and fashions is evidence of widespread coordination of plans/projects/ideas.

I must criticize, however, O'Driscoll's claim that because "Lachmann is critical even of theories espousing a tendency toward overall equilibrium" that he therefore "denies the principle of spontaneous order". As it turns out (in much work done in other sciences since 1978, so O'Driscoll is hardly to blame -- not having has access to knowledge discovered since he wrote this paper) far-from-equilibrium states give rise to complex, creative, self-organizing processes. Equilibrium states are simple and entropic. Thus, equilibrium is not an indication that one has a spontaneous order -- rather, it is the presence of a far-from-equilibrium state that indicates such is present. Coordination and discoordination both are present in such systems.

In the end, though, it is because "Austrian economists tend to view most economic questions as issues involving the principle of spontaneous order" that I believe Austrian economics is the one approach most valuable for understanding artistic production.

Finally, I would like to note a Lachmann quote from O'Driscoll's paper:

Experience shows that in the real world of disequilibrium different persons will typically hold different expectations about the same future event. If so, at best one person’s expectation can be confirmed and all other expectations will be disappointed. Hence the “assumption that all other expectations are confirmed” cannot possibly hold. Nobody can take his equilibrium bearings if he does not know how others will act. In such a situation, which we have every reason to regard as normal, his equilibrium, as Hayek admits, cannot serve as a source of a “feedback mechanism.”

Can we not use this in helping us understand character actions and motives -- both in tragic and comic (and tragicomic) works? Another example of the benefits of Austrian-school insights.

5 Best Books That Incorporate Economics

We all know that teaching someone something in the form of a story can be a great way to learn anything. In keeping with that thought, there are many books that also include valuable lessons in economics. To prove it, we have gathered just five works of fiction that incorporate valuable lessons in economics.

1. The Grapes of Wrath – John Steinbeck’s masterpiece was the winner of both the Pulitzer Prize and the Nobel Prize in Literature in 1962. It tells the story of a family living during The Great Depression and is an essential read for learning how economics can affect everyone.

2. Murder at the Margin – If you love murder mysteries, check out this book. It is by Marshall Jevons, a Harvard economist, and teaches essential lessons in economy surrounded by a murder mystery. Also a good choice if you are an undergraduate or high school student.

3. The Invisible Heart – If love stories are more your thing, then check out this book. It is a love story involving business, economics, and regulation through the eyes of two teachers at an exclusive school.

4. The Price of Everything – Get a “parable of possibility and prosperity” by author Russell Roberts. In the book, a Stanford student’s world is turned upside down by the opening of a mega store. The following is an interesting read and lesson on economics.

5. The Dharma Bums – Because wealth isn’t everything, check out this book. Jack Kerouac tells the story based on true events. It follows the travels of Ray Smith as he gets in touch with the outdoors and recalls what is truly important.

Bonus! The Wealth of Nations – Published in the landmark year of 1776, it was actually written by Scottish author Adam Smith. It focuses on how economics fits into the industrial revolution and is a strong proponent of the free market. It isn’t actually a fictional work, but it has been read and cited various times by scholars such as John Adams.

Molly Mitchell is a Economics graduate student and also owns the site Economics Degree. Her site helps students find the right Economics Degree to fit their needs.

Crowd Sourcing

If you saw a process description which those involved were described as "making mistakes, going down wrong paths, getting their hands dirty following up the most mundane of details, relentlessly pursuing a solution," you would surely ask if there were not a better, more efficient way of doing things. Of course, as it turns out, this is an almost perfect description of the actions of scientists, inventors, business people, and artists at work. And, in this particular case, it is the description of an experiment done by mathematician Tim Gowers, who started a blog he called the Polymath Project, beginning with "an important and difficult unsolved mathematical problem." After 37 days of the process described above, during which "27 people wrote 800 mathematical comments, containing more than 170,000 words" and involving people ranging from Fields Metalists (besides Gowers) to a high school math teacher, the problem was solved (Michael Nielsen, "Reinventing Discovery", p. 1-2). This is spontaneous order at work -- harnessed to discover solutions to problems -- known in such cases as "crowd sourcing."

Elsewhere I mentioned crowd sourcing in relation to auto design and I have started my own crowd sourcing project for my own poetry, where I am hoping people will come by and make recommended changes so I can improve my poetry. And of course this blog is intended to get people to discuss the ideas, to refine them and hopefully improve them. It is certainly clearer in math and the simpler fact-based sciences whether or not you have a solution than in the more complex social sciences, let alone in regards to normative or aesthetic claims, as one finds in the humanities, but difficulty is hardly a reason to not use crowd sourcing to solve problems. Quite the contrary -- it is precisely these kinds of problems crowd sourcing may be uniquely able to solve.

Of course, within the humanities, normative claims and aesthetic claims have been crowd sourced for centuries or more. It is why we have the morals we do during certain times and in certain places. And it is why we have a canon of great artistic works. Those are the results of offline crowd sourcing. With the internet -- another spontaneous order which allows even broader, potentially more complex social interactions -- online crowd sourcing will of course move even faster.

Coordination and Discoordination in Plays

Kirzner emphasizes coordination; Lachmann emphasizes discoordination. But both are present in the world.

Tragedies are exemplars of knowledge problems and discoordination: Romeo and Juliet die because their plans are discoordinated; Othello makes bad decisions based on bad information (bad information leads him to rationally reach a false conclusion -- similar to how ABCT works); MacBeth makes bad decisions because he misunderstands the information given him. Hamlet, on the other hand, has good information, but because he is uncertain about its trustworthiness, he delays acting. The delays result in the death of Polonius, leading to the insanity and suicide of Ophelia, and the tragic duel between Laertes and Hamlet, when Laertes seeks to avenge his father's death. Hamlet is thus a tragedy of regime uncertainty.

Comedies, on the other hand, are exemplars both of knowledge problems and of both discoordination and coordination. Love's Labor's Lost shows that even the most well-coordinated plans can, nevertheless, fail to come to fruition -- though in this case, in untragic fashion. The women are called away before the plans can be coordinated, by something having nothing at all to do with those plans. These things happen, of course. Most other comedies, though, follow the pattern of ending in coordination, in bonding, commitment, and promises kept.

Overall, though, plays demonstrate/enact the kind of communicative action/argumentation described by Habermas (Moral Consciousness and Communicative Action, 2001) and Hayek (in his work on spontaneous orders), the aim of which is to coordinate action. In the larger social sphere, one is likely to see more patterns of coordination than discoordination (certainly if this is not the case, the society in question will collapse), but in particular cases, one can find a variety of patterns, from near-perfect coordination of plans to complete discoordination of plans. The former are unlikely to be found in plays or any sort of story, since conflict is a necessary element of plot. We are rather likely to find discoordination dominant in plays -- as the dominant, necessary element in tragedies, and as the necessary element before plan coordination finally wins the day in comedies, as noted above.

In novels, it is possible to get "inside" the characters -- but in plays, one has to judge the characters more by their actions, since it is impossible to get "in the heads" of the characters (the occasional "aside" aside). Thus, economists need to spend more time at the theater . . . but I plan to save most of those thoughts (aside from those just shared above) for a paper I'm working on: "Why Economists Ought to Go to the Theater." As we can see, Austrian insights coordinate well with the way stories themselves work. Which should hardly be surprising.

The Laws of Spontaneous Orders

It seems to me that those who study a subject should be primarily interested in determining what the laws underlying the object of study are. The proper work of a physicist is to discover the laws of physics. The proper work of a chemist is to discover the laws of chemistry. The proper work of a biologist is to discover the laws of biology.

This is equally true of the humane sciences -- and of the humanities. The proper work of an economist should be to discover the laws of economics. How many, though, in fact do that, rather than trying to impose their own ideologies on the science? The same could be said of social scientists, political scientists, etc. They need to focus on IS and keep the SHOULDS out of it. Biologists find it ridiculous when someone brings "should" into biology in the form of intelligent design or creationism, but nobody seems to find it ridiculous when economists do the same. The Austrian economist Ludwig von Mises observed that,

"The laws of the universe about which physics, biology, and praxeology [the study of human action] provide knowledge are independent of the human will, they are primary ontological facts rigidly restricting man's power to act.
Only the insane venture to disregard physical and biological laws. But it is quite common to disdain praxeological laws. Rulers do not like to admit that their power is restricted by any laws other than those of physics and biology. They never ascribe their failures and frustrations to the violation of economic law" (Human Action, 755-56).

This is no doubt because few economists are in fact trying to even understand economic law. They are instead trying to find out how they can manipulate this or that element of the economy. The result is dismal failure. Worse, they even use the wrong methodology -- mathematics. Math is great for simple systems, like physical systems, but almost useless for complex systems like economies. Some statistics is no doubt useful, but even statistics can be misleading -- and often are. What Hayek warned us about scientism is doubly true of mathematics: it provides a false view of reality when it comes to complex systems. True, there have been impressive advancements in complex systems mathematics, but even with those, we only ever get grossly over-simplified models that bear almost no relation to reality. If we treat the models as conceptual starting-off points, then they are useful. But when we use them as too many who use math do and assume that the math is a precise description of a precise reality, rather than a precise approximation of reality (something John Pierce, in "An Introduction to Information Theory," warned against). That mathematicization of the field of economics is what in no small part led to this current depression, the same way scientism led to the Great Depression and the various failed experiments in socialism.

In the end, we necessarily come to know about the laws of economics using methods appropriate to its level of complexity. The same is true of any of the social/humane sciences, as well as of the humanities. And we need to learn what these laws are so that we are not forever falling into error. The knowledge of such laws may not ever tell us what we should or should not do (that is the realm of moral laws), but they can tell us what is and is not possible. However, as Mises observes:

"Despots and democratic majorities are drunk with power. They must reluctantly admit that they are subject to the laws of nature. But they reject the very notion of economic law. Are they not the supreme legislators?… In fact, economic history is a long record of government policies that failed because they were designed with a bold disregard for the laws of economics.
It is impossible to understand the history of economic thought if one does not pay attention to the fact that economics as such is a challenge to the conceit of those in power. An economist can never be a favorite of autocrats and demagogues. With them he is always the mischief-maker.…
In the face of all this frenzied agitation, it is expedient to establish the fact that the starting point of all praxeological and economic reasoning, the category of human action, is proof against any criticisms and objections.… From the unshakable foundation of the category of human action praxeology and economics proceed step by step by means of discursive reasoning. Precisely defining assumptions and conditions, they construct a system of concepts and draw all the inferences implied by logically unassailable ratiocination" (Human Action, 67).

And anyone who knows the history of Leftist thinking knows that they have even tried to deny the validity of biology for human behavior. So they don't even have to "reluctantly" admit to being subject to the laws of human nature, having denied such laws exist. But what else is the role of the human sciences and the humanities but to find out what those laws are, and what the laws of the spontaneous orders to which we give rise are? Or to what laws give rise to spontaneous orders in the first place are?

This then opens up an interesting question: what theories are truly valid for what spontaneous orders? And what do we mean by "valid"? I mean by valid, what theories deal with the nature of the spontaneous order they are theories of qua spontaneous order? Theories give rise to immanent criticism of the spontaneous order. Keynes and Mises provide different theories of economics, meaning they are trying to figure out what IS the case. One theory is right, the other is wrong, but both are proper to analyzing economics as such. Marx, on the other hand, by his own admission, does not provide a theory valid to analyzing economics. When he admits that he's not interested in what is, but in what should be, he admits to being an ethicist, with a theory applicable to the ethical spontaneous order, and not an economist.

Let me put this in another way. Literature has many theories literary analysts can use. Some, such as Aristotle's theory, New Criticism, Structuralism, and Poststructuralism, are all theories of literature qua literature. Others, however, are imported theories. Marxism, feminism, and queer theory are all ethical theories used to analyze the content of works of literature. None of these can be used to determine whether or not a work of literature is a great work of literature qua literature -- but the first set of theories can be. The first set help us to understand how a work of literature comes to mean, how it provides information to the reader/listener/viewer. The second set only tell us things about the content, about how characters interact, what the author may have meant or intended (or meant despite his intentions). If we try to say one of these other theories is in fact the true theory of literature, we are trying to impose another rationality, another theory applicable outside the spontaneous order, to that particular order. That would be like saying, for a work to be literature, it must be feminist. Though there are no doubt some out there who would like that, we should all recognize that this is a ridiculous requirement. Yet, we make the same claim for other spontaneous orders -- the economy being a favorite. Outside theories might help us understand the specific content of a given work, but they cannot be used to understand the spontaneous order of literature qua literature. When we do, the result too often sounds conspiratorial in a rather grandiose, irrational sense.

There is much work to be done, across the several spontaneous orders, if we are to find the laws of those orders. The good news is that they will all be there to be discovered, for they do no change. Different sets of rules make for different kinds of orders -- and that fact alone should make us excited for the possibilities.

Librabase

We can now be found on librabase. They were kind enough to invite us to join!

Entrepreneurship, Austrian Economics, and the Quarrel Between Philosophy and Poetry

Here is an article from Tyler Cowen on "Entrepreneurship, Austrian Economics, and the Quarrel Between Philosophy and Poetry". The connections among entrepreneurship, Austrian economics, philosophy, and aesthetics he draws is precisely why I believe Austrian economics is the ideal economic theory for understanding literature. The fact that it related to so many aspects of the world, without being guilty of "economic imperialism" suggests its scientific accuracy.

Some Thoughts on the Relations Among Government, Religion, and Spontaneous Orders

Literature is a dangerous business. It can save or condemn one's soul. It tells us something about who we are and how we related to one another, acting as critique of one's soul, one's culture, one's society. That is why so much literature has been censored throughout the centuries -- by both religious authorities and governments. Literature is important and dangerous, or else pro-government and other religious people would not be so up in arms over it.

Science is a dangerous business. It can save or condemn one's soul. It tells us something about the fundamental nature of things -- of the universe, of life, of mind, of society. That is why so much science has been censored or misinterpreted or misused throughout the centuries -- by both religious authorities and governments. Science is important and dangerous, or else pro-government and other religious people would not be so up in arms over it.

Religion is a dangerous business. It can save or condemn one's soul. It tells us something about our relationships to each other, the universe, and the divine. That is why so many religions have been censored throughout the centuries -- by both religious authorities and governments. Religion is important and dangerous, or else pro-government and other religious people would not be so up in arms over it.

The arts were the first of these spontaneous orders to decouple from government and religion. The argument for that decoupling was that the arts are far too important to be controlled by government or religion. This decoupling has become so complete in the West that many now consider the arts to be completely unimportant -- precisely because they are decoupled from government and religion.

The sciences were the next of these spontaneous orders to decouple from government and religion. The argument for that decoupling was that the sciences are far too important to be controlled by government or religion. This decoupling is not quite so complete in the West, but in those areas where it is completely decoupled, that science has been declared not very important, while in those areas where government and religion are still involved, the science is declared vitally important. (Yes, I know many will challenge me on this, and argue the causality is backwards -- but consider the history of the arts and, below, of religion.)

Religion is a more recent of these spontaneous orders to decouple from government and religion. The argument for that decoupling was that religion is far too important to be controlled by government (or the religion that government would make the state religion). In places where religion has become decoupled from government, and where government is considered the proper replacement for religion, religion has been declared not very important (consider those who argue that economics, not religion, is the driving force behind al Qaida!).

Of course, during the time when these spontaneous orders were becoming decoupled from government and religion, many in both argued that the arts, the sciences, and religion were too important not to have strict political and religious controls over them. This is the situation with the economic spontaneous order at the present time. Yet, one could argue, as was done with the arts, science, and religion, that it is too important to be controlled by either. Once decoupled from them, it is likely that the economic order, over time, will come to be seen as "not very important" as well. Of course, once there is a separation of economy and state and the freed market makes us all wealthy, it won't be all that important.

The Cost of Humanities Scholarship

Mark Bauerlein raises some interesting questions regarding the economics of literary scholarship. I'm not sure Google Scholar is the best way of gathering the data he does -- I know there is a scholarly citation index, which would have worked far better -- but the real issue involves the funding of research. In many ways, the issues he brings up are the same as those many conservatives bring up in regards to some scientific research.

Do we really need another article on the biophysics of nucleotide stacking in single-stranded hairpin DNA? How will such knowledge benefit mankind? Of course, we cannot know the answer to that, until it happens -- and there are some who insist that having the knowledge is, itself, of value.

Of course, the latter is probably the strongest argument for having yet another article or book on Shakespeare's Hamlet. How does it benefit mankind? Well . . . such things are far less tangible. Is not knowledge itself a benefit? Or understanding? Why does the transformation of knowledge into technology have to be the standard?

Of course, all of this skirts the issue of the source of the funding itself. A professor is being paid from money from tuition and from government funding. Who complains about research done with private funding? Few, if any. It is when the funding comes from taxes that people begin to question it. Those in favor of government funding of any sort of research have to learn to put up with the criticisms, or go find private funding.

Along these lines, I recently received a rejection letter for a position that was being paid for by an Australian government program that supported humanities research. The man in charge of the program told me that he was surprised -- and a little saddened -- by the sheer number of people who applied for the position from around the world, noting that many governments did not value humanities research. Of course, Australia is in much better financial shape than much of the rest of the world, which is one explanation. Another is that too many in the humanities over here (Stanley Fish particularly comes to mind) insist that the humanities have no value. Well, if people like Fish make that argument, we shouldn't be surprised that university presidents begin to think that, and begin cutting funding to humanities departments.

But there is also the point that in places like the U.S., government support for a humanities program would be immediately politicized. The conservatives would hate it because it would be dominated by progressives, and progressives would go out of their way to come up with the most offensive, ridiculous research agendas imaginable, just to insist that failing to fund them is a violation of their 1st Amendment rights (a position so absurd that only a postmodernist could make it, and believe it) and to annoy the conservatives. Libertarians, of course, would be against it because government is doing it -- and thus would align themselves with the conservatives, whose anti-cultural cultural wars are deeply offensive to libertarians.

It is a shame that there are not private humanities organizations out there providing jobs. I think it would answer some of the issues raised by Bauerlein. More, it would raise the value of the humanities. Libertarians in particular should be interested in such organizations, as those of us who are in the humanities feel like we have no real home. If we can get hired into a humanities department, we immediately feel marginalized in them. And, of course, if we want free markets, we need to cultivate a pro-market culture. That is the potential job of libertarian humanities scholars. It is what we try to do here. It is what I would do even more if I could get a full time position somewhere, where I could do more scholarly work.

Without the U.N. There Wouldn't Be Music, Art, Film, Dance, Theater and Books?

David Boaz at Cato takes on Herbie Hancock on whether or not we would have culture without the U.N. That may sound like an absurd argument to make (on the part of Hancock), but the fact that the Washington Post actually published such an argument suggests that there are some who do not think it to be. I suppose that one should not be too surprised that an artist mistakes symbols for reality (as we artists all deal in symbols), especially when we have people like Baudrillard arguing for the separation for symbol and reality, but nobody is going to like jazz because there is now an International Jazz Day. People are going to like jazz because people like Herbie Hancock are making music people want to hear -- rather than wasting their time talking about illusionary positive connections between government and culture.

Science Fiction and Liberty

Kosmos Online has collected all of their Science Fiction and Liberty podcasts.