. . .distributed intelligence

Steve Horowitz channels Hayek and Sowell in his posting over on the NPR blog. The ASET book club is reading Knowledge and Decisions and I see echoes of Sowell's thesis throughout Horowitz.

Sowell compares and contrasts informal decision making processes (marriage) with formal decision making process (the draft. His point, I believe is not to judge the desired ends or even the process, but to evaluate the process in terms of costs and benefits. And, he takes the Hayekian stance that individual agents, voluntarily and independently acting will typically select the process that aligns both with value in society and with wealth creation, while a centralized, hierarchial, tops down selection will typically result in decisions withe perverse and unintended consequences that are, clearly unintended by the man or woman at the top making the decision.

I am excited to be reading this book and looking forward to our discussion.

Greg

Realizing Freedom: Libertarian Theory, History, and Practice | Cato Institute: Book Forum

BOOK FORUM
Tuesday, December 1, 2009

This forum can be viewed live or in archive form.

Featuring the author, Tom G. Palmer, General Director, Atlas Global Initiative for Free Trade, Peace, and Prosperity, and Senior Fellow, Cato Institute; with comments by Tyler Cowen, Professor of Economics, George Mason University, and General Director, Mercatus Center.

Realizing Freedom: Libertarian Theory, History, and Practice | Cato Institute: Book Forum

Progressive Claptrap

Vintage Robert Higgs, important to examine his point in the day of Michael Moore.

http://hnn.us/blogs/entries/117604.html

Thinking about Boyes' post of Oct. 13th I would recommend a read of Bob Higgs posting over on HNN. Higgs is really getting at the importance of rhetoric in the "discourse" about the role of liberty and freedom in society. Samuel Gregg argues that civil discourse is a natural outcome of a commercial society, while Higgs implies that as the state expands in scope and scale in society civility is a casualty.

Both of these complimentary views are key to an appreciation of the importance of the media in the economic change of society. This change, to paraphrase North, is gradual and incremental and both formal and informal institutions shape this change. The institution of information diffusion is a key one as it shapes informal norms and beliefs and is shaped by these informal norms and beliefs.

I am thinking of a conversation with my brother, who considers himself a believer in liberty. I had given him Higg's classic - Crisis and Leviathan, my brother read the book and said that Higgs was a nut job. I had a similar conversation with a brother in law during the last election - he said that Ron Paul was a nut job.

Why does this happen? I think part of the answer might be in rhetorical choices by advocates of liberty. Higgs and, to a lesser extent Paul, seem to be to be reasonable, civil and accurate in their articulation of the importance of liberty and the consequences of its loss. However, an audience that is not convinced of these two issues (in my limited sample) finds them to be extremists. Oddly enough, one of these relatives applauds Michael Moore's latest film while the other condemns it.

In a previous post, I mentioned my reading of Samuel Gregg's The Commercial Society in which he models civil discourse. Perhaps advocates of liberty would benefit from a consideration of Gregg's rhetoric.

Adam Smith's Lost Legacy

Gavin Kennedy writes:


Smith did not write in favour of “enterprise”; he wrote in favour of “commercial society”. The former is a projection of a modern word onto the past; in fact, he displayed throughout Wealth Of Nations strong suspicions about the conduct of “merchants and manufacturers”.

The entire post is well worth a read and it reminded me of Samuel Gregg's book of the same title - The Commercial Society.

From a review of the book on the Acton site

Gregg explains the centrality for a commercial society of the healthy human attribute of trust. The centrality of trust is found in Adam Smith’s Wealth of Nations. Gregg examines the contributions of Adam Smith’s fellows of the Scottish Enlightenment. In the section Peace and Tolerance, Gregg expands upon the contribution of French philosophers to those principles. He quotes the letter of Archbishop Francois Fenelon of Cambrai to Louis XIV on the destructive impact of his wars. Voltaire, Montesquieu, Constant, and Tocqueville developed the theme of the contribution of commercial society to peace and toleration. Gregg quotes the French classical liberal Benjamin Constant: “It is clear that the more the commercial tendency prevails, the weaker the tendency to war must become.”

Rescues Unlimited: Government as Wall Street’s Enabler

By DEVIN LEONARD
Published: August 2, 2009
In “Bailout Nation,” Barry Ritholtz argues that the American financial system has been twisted beyond recognition by cynical bankers and Washington politicians.

Mold Society Anew?

Bob Higgs makes the point that the assault on liberty takes two forms - the extension or expansion of government powers. It is this ratchett effect the is the mechanism that diminishes our liberty.

This ratchett effect is celebrated by statists and, in an interesting book, I came across the following sentiment about WW I:

"For Dewey, the growing drumbeat for war seemed to present a glorious opportunity: mobilization he predicted, would shake up the status quo, expand state power, and give progressives the chance to mold society anew." (p 107 Gage).

All war is an opportunity to "expand the state" and the attitude expressed is disturbingly familiar, the expansion of the state is perceived in some way to be glorious. And what is glorious? The dictionary tells us that it is characterized by splendor; magnificent; delightful; wonderful. So, to the extent that the population finds expanded state power wonderful, the ratchett effect that leads to diminished liberty accelerates - for it is only a tenacious belief in liberty and individual freedom that keeps Leviathan at bay.

What is this glorious state power used for? It is used to "mold society anew". Terrifying words that evolve the Inquisition or the Holocaust and yet the wider population seems to find this wonderful and delightful prospect.

Thinking about the process of economic change, it seems to me that this fundamental change in thinking - state power is glorious rather than a ultimate evil - poses the greatest threat to future progress. This belief system will be far more pernicious than the looming deficits and debt, the health care "debate" or any other goofy scheme concocted by the republicans or democrats.

Amity Shlaes: The Forgotten Man

A great review

Mises Daily by C.J. Maloney | Posted on 9/3/2009 12:00:00 AM

So to me, while The Forgotten Man may occupy a place in the reviews as an economic history of the Great Depression — which it is up to a point — more than anything else it is a character study of the one man who above all defined and shaped the New Deal: Franklin Delano Roosevelt. And the book reads as a 383-page indictment of him.

Considering what we face today, this book is a must read, for example:

"With the possible exception of Al Capone's Chicago gang, 1930s America saw no greater pile of buccaneering stickup men and rogues than those with whom FDR surrounded himself. As one of the book's central themes, Amity Shlaes condemns them for introducing "regime uncertainty" into the economy, thereby exacerbating the Great Depression. Keep in mind that "regime uncertainty" is but a euphemism for "utter lawlessness."

This "regime uncertainty" was a direct result of the ideological underpinnings of FDR and his Brain Trust.

. . .

Throughout the book, Shlaes demonstrates that FDR considered the law not as something to be respected and adhered to, but as something to be cynically manipulated or ignored at leisure. In his hands, the law became a weapon to be used against his enemies and other, arbitrarily chosen targets. During his first year of rule alone, "10,000 pages of law had been created" (p. 202), and an army of bureaucrats and police had been raised to enforce them.

. . .

H.L. Mencken once observed that the great thing about democracy is that the people get what they deserve — good and hard. Mrs. Shlaes never lets the reader lose sight of the fact that while FDR ushered in the final destruction of the Republic, the American voters, for whatever reason, wanted FDR, loved the New Deal — and still do to this day.


. . .

And, like all socialist systems of government, everything quickly began to harden into an immovable inflexibility. Mrs. Shlaes tells us "the New Dealer's economic failures were working to their own political advantage" (p. 267). The massive increase in the size of the federal government allowed FDR to build himself a formidable political machine, so well-oiled by patronage jobs, bribes, and handouts that "millions of voters [were] under obligation to him" (p. 375), making an election defeat impossible.

As Mrs. Shlaes persuasively argues, the Great Depression did not end because of the New Deal. Quite the opposite, "the New Deal was causing the country to forgo prosperity, if not recovery" (p. 263). FDR and his New Deal became vampires, living high off a Great Depression that his policies were feeding and keeping alive.

Violence and Social Orders - Cambridge University Press

Violence and Social Orders - Cambridge University Press

A Neglected Masterpiece of Economic Analysis

Bob Higgs writes:

I recently read a book titled Banking and the Business Cycle: A Study of the Great Depression in the United States, by C. A. Phillips, T. F. McManus, and R. W. Nelson. It was originally published by Macmillan in March 1937, later became a hard-to-find, almost-forgotten book, and in 2007 was reissued by the Mises Institute in an inexpensive paperback edition.

I am willing to say that I know of no better book on the economic dynamics of the 1920s boom and early 1930s bust in the United States. I know about several other excellent books that every student of economics and economic history should read on the same topics, but if I could recommend only a single book to an aspiring economist, or even to an interested lay reader, this is the one I would recommend.

It is tempting to characterize its theoretical framework as Austrian, as indeed it is in many respects (Mises and Hayek are cited favorably, along with many other sound economists, many of them now forgotten), yet Phillips, McManus, and Nelson’s framework is broader and more eclectic than a strictly Austrian analysis would be. Moreover, besides being packed with excellent economic analysis in a great variety of applications, the book contains a wealth of quantitative evidence, which the authors handle with admirable caution and good sense. They present many tables and charts, but not a single equation. For modern mainstream economists, who can scarcely move a muscle without writing a raft of equations, this book stands as a brilliant reproach.

Read more here

Greg Ransom's Frosh reading list

10 Books For A Freshman Seminar In Economics

This post was written by Greg Ransom on August 31, 2009
Posted Under: Economics Profession

Here is Greg Mankiw’s list. Here is Arnold Kling’s list. And here is my list:

• The Rise of the Western World by Douglass North & Robert Paul Thomas

• Looking Backward by Edward Bellamy

• The Ascent of Money Niall Ferguson

• Discovery, Capitalism and Distributive Justice by Israel Kirzner

• A Farewell to Alms by Gregory Clark

• Dream Machines by Philip Mirowski

• Economics — Mathematical Politics or Science of Diminishing Returns? by Alexander Rosenberg

• Individualism and Economic Order by F. A. Hayek

• The Making of an Economist, Redux by David Colander

• The Elusive Quest for Growth by William Easterly

Mankiw's frosh reading list

For those blog readers who might be interested in what the seminar will be reading, here is the list of books:

• The Worldly Philosophers, by Robert Heilbroner
• Spin-Free Economics, by Nariman Behravesh
• Capitalism and Freedom, by Milton Friedman
• Equality and Efficiency: The Big Tradeoff, by Arthur Okun
• Nudge, by Richard Thaler and Cass Sunstein
• The Return of Depression Economics, by Paul Krugman
• Animal Spirits, by George Akerlof and Robert Shiller
• The Myth of the Rational Voter, by Bryan Caplan
• Economic Gangsters, by Raymond Fisman and Edward Miguel
• The Price of Everything, by Russell Roberts

Moral Rules Are To Check Power

Moral Rules Are To Check Power

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Jeffrey Rogers Hummel: Review of George Selgin's Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775-1821 (University of Michigan Press, 2008)

Jeffrey Rogers Hummel: Review of George Selgin's Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775-1821 (University of Michigan Press, 2008)

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The Cause of the Scottish Enlightenment

The Cause of the Scottish Enlightenment

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The Not So Wild, Wild West: Property Rights on the Frontier

Subject: ASET Book Club Event - August 2009

Thursday, August 27

The Not So Wild, Wild West: Property Rights on the Frontier
5:45 p.m. - 7:15 p.m.

RSVP by Friday, August
The authors emphasize that ownership of resources evolves as those resources become more valuable or as establishing property rights becomes less costly. Rules evolving at the local level will be more effective because local people have a greater stake in the outcome. This theory is brought to life in the colorful history of Indians, fur trappers, buffalo hunters, cattle drovers, homesteaders, and miners. The book concludes with a chapter that takes lessons from the American frontier and applies them to our modern "frontiers"-the environment, developing countries, and space exploration.

It’s Our Turn to Eat: The Story of a Kenyan Whistleblower

Michaela Wrong’s gripping latest book, It’s Our Turn to Eat: The Story of a Kenyan Whistleblower, is the antidote for anyone who knows the weariness of wading through the jargon of implementation plans and institutional treatises on governance and anticorruption. It’s the anti-boredom serum, the potion that brings you the real consequences of what happens when those plans are ignored.

Steve Horwitz

Two Recent Publications Available Online

My two recent papers published in The Independent Review are now available online.

“Fascism: Italian, German, and American,” review of Jonah Goldberg, Liberal Fascism: The Secret History of the American Left from Mussolini to the Politics of Meaning, The Independent Review, 13 (3), Winter 2009, pp. 441-46.

and

“Wal-Mart to the Rescue: Private Enterprise’s Response to Hurricane Katrina,” The Independent Review, 13 (4), Spring 2009, pp. 511-28.

Enjoy.

David Warsh's Economic Principals

David Warsh, author of Knowledge and the Wealth of Nations, has a very intriguing blog. It is actually more of an online column dealing with contemporary economic issues. For example:

The View from the 23rd Century

People continue to try to find the horizon. The Economist last week warned that in seeking to assign new tasks to government, President Barack Obama risks stifling the dynamism of the American economy. Business Week began a series of contributed essays building towards a special issue in August, “The Case for Optimism.” In August, too, will appear In FED We Trust: Ben Bernanke’s War on the Great Panic– a book that may propel Wall Street Journal columnist David Wessel into a Bob Woodward-like role as a chronicler of US economic policy.

I turned briefly to two books that are directly influential in disseminating the recent changes in our view of growth: The Economics of Growth, by Philippe Aghion, of Harvard University, and Peter Howitt, of Brown; and Introduction to Modern Economic Growth, by Daron Acemoglu, of the Massachusetts Institute of Technology. Both are textbooks, the former intended for advanced undergraduates or beginning graduate students, the latter for graduate students well along in their training. Both contribute substantially to the professional debate. But neither is easy reading.



The current book that comes closest to communicating a modern view of growth, I think, is The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World, by Amar Bhidé, professor of business at Columbia University., Bhidé, who is not an economist, compares his method to the evidentiary proceedings of a common law trial: he interviews experts from many disciplines, and then makes up his mind. The last author to make a substantial contribution to this literature was AnnaLee Saxenian, author of The New Argonauts: Regional Advantage in a Global Economy. Her method was frankly journalistic, but she came back with the goods. So does Bhidé.



The burden of the argument of Venturesome Economy is that that an inevitable expansion is taking place in the quantity of high-level know-how that is being developed in countries around the world – not just Japan and Korea, but India and China, Israel and Australia. If the US learns to relax and take advantage of new knowledge developed offshore, everything will be fine. But if “technonationalism” gains the upper hand – in the form of, say, a commitment to a strong US automotive industry, no matter what the cost – then a world carved into trading spheres could experience slower growth than otherwise would be the case.

Hayek's 109 birthday

From Cafe Hayek:

F.A. Hayek was born on this day in 1899. To mark this occasion, I offer a brief passage from page 104 of Hayek's 1973 book Law, Legislation, and Liberty, Vol. 1: Rules and Order:

Maintaining the overall flow of results in a complex system of production requires great elasticity of the actions of the elements of the system, and it will only be through unforeseeable changes in the particulars that a high degree of predictability of the overall results can be achieved.

Reading Russia

On the topic of reading, the following sources (short and long) are informative of Russia today and very reflective of what we are studying:

The Economist - Smoke and mirrors

The BBC - The Putin Project

The New York Times - Now Comes the Tough Part

Two books that I am currently reading may well be of interest for your summer reading list. These are for the generalist, if you are a history teacher I suspect that none of this will be new, although the presentation is provocative.

The first is Niall Ferguson's - The War of the World

Part 1 of the book deals with Stalin's USSR and extends and explains in depth the extent of the cultural, economic and legal impact of the command system on Russian society. Much of these deals with the period of WW II, although Ferguson does an excellent job of providing an historical context.

As you know, Ferguson is controversial and the reviews of this book were mixed, I suspect based upon ideological considerations. Part of a negative review from The New Yorker:

Ferguson's eight-hundred-page reevaluation of the Second World War presents itself as a grand theory about ethnic conflict, the end of empire, and the postwar triumph of the East. The exact contours of the theory, however, remain unclear. Ferguson argues that the central story of the twentieth century is "the descent of the West," but he never really clarifies what "the West" means - Russia sometimes qualifies, sometimes not, depending upon what point Ferguson is trying to make. Ferguson is a skilled storyteller, and he offers many striking reflections on the bloodiest years of the past century, including a compelling analysis of appeasement.

Jan Winik's - The Great Upheaval: America and the Birth of the Modern World, 1788-1800 takes an interesting and in the end very enlightening view of this critical period. Winik organizes his book with alternating chapters on The United States, France and Russia. The result is a set of connections that the general reader may never have made and a perspective that the historian may find useful.