Chicago vs. Austrians?

If one carefully reads Arthur Diamond's review [Sept.] of two Austrian economics books, one sees immediately that Diamond's piece is not a review, but rather a debate with one party absent. Why is it that Diamond, a pro-Friedman Chicagoan (coincidentally studying economics at Chicago?) offers us a choice only between Austrian and Chicago methods? Indeed, why does he posit such a choice at all?…

And on what grounds is Chicago economics superior? Although Diamond is not rigorous in his answer, we can divine the general thrust by observing that he approves of Austrian writing only when it does not criticize statistical methods. He finds subjectivism "scientifically nihilistic" but doesn't explain why. In what sense is subjective value theory an example of what Diamond would consider "scientifically" useless? I would argue that subjective value theory, as postulated by the Austrians, is as scientific as anything ever penned by the Chicago school.

Is Chicago economics superior because, as Diamond maintains, it sometimes shows that governments can be more "efficient" at providing certain goods and services than the market, and is, therefore, neither the "handmaiden of libertarianism" nor dogmatic and excessively theoretical? But where is the laboratory where the "test" can be made? What advanced, industrialized nation practices "laissez-faire"? And even if Chicago could show that some government program, e.g., the public schools, was more efficient, what would that say? Clearly, if we are all agreed upon the "a priori" definition of "efficient," then we can make certain normative suggestions. Does that let us, as libertarians, advocate the establishment of a public school system? To ask the question is to answer it.…

Diamond seems to like free markets and is probably sympathetic to libertarianism. But this is a philosophical and not an economic judgment. Chicago economics tells us nothing about what we ought to do; it tells us what is. But does not Austrian economics do the same? So what? Is Diamond maintaining that cardinal measurement is the way the "fruitfulness of a method" is to be judged? If so, so long to Chicago. Is he maintaining, along with Friedman, that prediction is the goal of economics? Again, this approach has problems in that it rests upon the entirely "a priori" assumption that prediction is the goal of economics. Could a truer example of a useless tautology be postulated?

One is free to take what one wishes from any economic theory. Like most of us, Diamond would like to believe that those things he advocates are based on "reality." The Austrians, to their infinite credit, although they advocate and strive for value-free economics, state their assumptions and prescriptions openly and without claiming, as "scientific economists" do, that "reality" and "experiments" contrived to "explain" things to them do so. It is not necessary to shotgun straw men made from the components of the theories of one's opponents in order to appreciate that no such choice as Diamond offers us is necessary or advisable. After all, is it not Milton Friedman himself who never tires of reminding us that there is only good and bad economics? Much of Austrian economics is good, and will remain so despite the attempts of the narrow-minded proselytizers who advocate empiricism as the one road to "true science."

Robert L. Formaini
San Francisco, CA

Diamond Blind to Austrian Gold

Instead of reviewing a book, Mr. Diamond told us much about what is wrong with Austrian economics without, however, telling us much of what Austrian economics is about. Given Mr. Diamond's attitude toward abstract argument (he is agnostic about its value), I doubt he knows very much about Austrian economics. Certainly no Austrian economist has ever advocated falsifying economic theory to justify libertarian principle, as Mr. Diamond's obliquity suggests. On the other hand, if economic theory supports liberty, or any other political or moral virtue, where is the gain in denying it?

The Chicago school has not gained by denying the connection between ethics and economics. Their protestations of value-free economics amidst their repeated support of the value of freedom come across as mere cant. Paul Samuelson once derided an able member of the Chicago school as a "bigoted devotee of laissez faire," and sardonically asked if, "despite all denials, Chicago is not so much a place as a state of mind."

Once we understand Mr. Diamond's agnosticism, his challenge to "show me the explanatory power of Austrian economics" rings a little flat. He proclaims agnosticism toward the human psyche and rails at a science built on human intelligence. He refuses to acknowledge the gold, yet bids to see the glitter. Little wonder that Mr. Diamond overlooks not only the explanatory power of Austrian economics, but also its logical structure, its common sense, its subtle insight, and its solid tradition.

Jack High
Los Angeles, CA

Austrian Revolution

In the September issue Arthur M. Diamond continues his chosen profession of publishing hokey criticisms of the Austrian school.…

Diamond criticizes the axiomatic method of the Austrian school—in particular, that (a) tautological propositions cannot yield explanatory propositions, and (b) the Austrian reliance on deduction and disdain of empiricism is invalid since a priori laws provide as much constraint on free will as empirical laws.

With regard to (a) one need only, like Rothbard, point to the whole of Human Action. Diamond may remain unconvinced, but 90 percent of those willing to take an unbiased look will be convinced.

In regard to (b) Diamond is both partly correct and horribly wrong. It is true that some Austrians, particularly Lachmann, have taken too far the unpredictability deduced from human choice. Without a certain degree of predictable quantitative regularly in demand, for example, entrepreneurs could not do what they do. But it remains true that the law that, ceteris paribus, quantity demanded varies inversely with price, does not have the same quantitatively constant character as the law that relates the pull of gravity between two objects, that it does not because human beings have choice whereas planets and molecules do not, and that the predictability inherent in the latter law is therefore much greater than that in the former.…

Diamond seems to have a strange view of free will, such that any postulated regularity in human nature or behavior constitutes a denial of its existence. But supposing, for example, the demand law to be universally correct, people can (1) still choose how much more/less to buy at the lower/higher price, or (2) choose to reorder their values and shift the demand curve, even if they cannot choose to violate their nature and buy less at a lower price ceteris paribus. So Diamond is incorrect, since a quantitatively constant empirical relation between price and quantity demanded, holding for all time, would constitute a denial of free will in a way the a priori law does not.

Diamond's last criticism is that, in essence, present Austrians are not as technically sophisticated as present Chicagoans, so the Austrian paradigm must not be as good. This is hardly fair. The Austrian school is rebuilding, and the members of the latest generation have not been at it long. Over time the school has had an amazing record of attracting and developing great minds. The next Mises, Hayek, Bohm-Bawerk, or Menger is probably in training right now. My money is on Roger Garrison. At any rate, look for the Austrian revolution in economics in about 15 years.

James Rolph Edwards
Lake City, UT

Compliment to Mises

It is discouraging to see that after all the effort in recent years—the books, essays, conferences, and summer study programs—to raise the level of scholarship regarding the crucial Austrian-Chicago methodological debate, we are back to first base. It is discouraging because Dr. Diamond, in his review of Mises's Ultimate Foundations, ignores the Austrian objections against the Chicago method, the Austrian rebuttals to the Chicago criticisms, and the Kirzner/Rothbard (the "neo-Austrian") refinements on Mises's presentation. There is some reason for Friedman to have done this in his seminal 1956 essay; there is far less reason for Dr. Diamond to have repeated the performance in 1979.…

As all the positivists before him, Dr. Diamond unwittingly uses the Austrian method to make his points against the very same method! Notice that nothing is statistically tested or suggested to be tested. Rather, he uses the appeal to common sense to argue that Mises's common sense method is nonsense. So even though the book review is highly critical of Mises, Dr. Diamond has given the dean of the Austrian economists a backdoor show of support.

Robert Bradley, Jr.
Houston, TX

Losing Amendment

Imagine if you will the following improbable scenario: Democrat leaders sit down with a list of objectives in hand and say, "Let's first implement the program that will cause the most possible economic disruption, aggravate the most voters, and discredit our philosophy the fastest."

Well, that seems to be the direction our friends at the National Taxpayers Union are taking, with support in the pages of REASON from heavyweights such as James Dale Davidson [Viewpoint, Apr.] and Tim Condon [Taxes, May] and without perceptible dissent. I'm talking about the very serious drive to bring an amendment to the constitution, which would require a balanced federal budget. Successfully mandating a balanced federal budget without first correcting related economic problems has two possible outcomes.

A) The Federal Reserve could ignore us and continue to create credit, only now instead of buying meaningless government paper, the Fed begins assuming a genuine financial involvement in corporate paper and even corporate stock. Inflation roars on unabated, nothing is solved, and the whole process goes down as an example of just how ineffective we really can be.

B) Alternatively, the Fed can, at a time of its choosing, stop increasing the money supply, thus raising the interest rate dramatically and plunging our economy into a long overdue but still painful adjustment. The length and painfulness of the recession can be prolonged indefinitely by the ruling class via increased minimum wages, price supports, fair trade laws, and trainloads of welfare goodies. The ruling class/liberal elite would easily be able to transfer all the blame for the ensuing misery to conservatives (and libertarians?), whose idea it was to balance the budget in the first place.

Either way, we lose. Scenario B has the possible consolation of embarrassing both conservatives and liberals, but we should reverse our position unless we want to be permanently injured along with the conservatives. Moving toward liberty will require doing things in some sort of a logical order. It would be more sensible, and much more humane, to revive the economy first. Libertarians should work to cut taxes, cut government spending, deregulate everything, and the budget will balance itself. In short, Mr. Davidson, the proposed amendment to force a balanced federal budget now is a bad idea.

David E. Stevens
Enon, OH

Force Is the Problem

It was a bit surprising to read in the September issue of REASON an article on education such as that by Louis Segesvary. It doesn't take a long attack on one book to win agreement to the statement that someone has to teach students to write and that some directed or organized thinking has to go into teaching. But the conclusion would not follow that three kinds of diploma would do more than cover up the fact that there are better ways to encourage learning and describe accomplishment than grading systems and graduating symbols.

There are two things I find wrong with the article beside its length. One is the implication that teachers and school leaders read, understand, and know how to carry out what they may read in books, especially Dewey or even Postman and Weingartner. They mostly don't. The second thing is that the explanation for school failure, wherever it can be observed, is much more complicated than some theory of perception or inviting student participation in their own education.

The author says that compulsory education is another question. But it isn't. It is probably the main question, like so much in American life that is forced without knowing how to reach the goal. One great principle of teaching is to be reasonably sure you have cooperation, compliance, or authority before you proceed to teach. When you have none of these, you may do what teachers do today: look for school communities where conditions are favorable or look out for yourself in unionism or try to join the rebellion. For rebellion is what has been the reaction of youth to compulsion. Behavior usually has a meaning. And uncooperative or delinquent behavior in school is a sign of rebellion against very unsatisfying conditions.…

In the main, the compulsory public schools are subject to the misfortune of not knowing how to win cooperation or respect if it doesn't already exist in good measure in the life surrounding them. And government money or planning is no substitute.

George Beecher
Belleair, FL

Humanistic Illiteracy

I am sorry that Louis Segesvary, in condemning the educational trends that emphasize the ability to "shoot the breeze" at the expense of literacy, did not lay the blame on a group of people who were highly instrumental in furthering illiteracy. I am ashamed to say that these people were known during the late '60s, early '70s as humanists and humanistic psychologists (I say ashamed, because I am a psychologist). Their patron was St. Carl Rogers. They were not only responsible for the total breakdown of education in many areas of the country but also promoted various pseudosciences and sanctioned the totalitarian thugs of the SDS, Yippies, Weathermen, and others. There is a crying need for some scholar to go through the sewer of that era and gather together all the little incidents which they were responsible for, particularly since they are still around, and waiting for a chance to turn the clock back to when they were unquestioned.

Armando Simón
Petal, MS

Open Education

Louis Segesvary [Sept.] does a hatchet job on student-centered open education, but tells us very little about that educational philosophy. The article is a review of Postman and Weingartner's Teaching as a Subversive Activity, but the book, especially in the few of their subjectivist notions Segesvary brings up, hardly is representative of open education. When this duo advocates dismantling learning (not just schools—in a later publication they contend that children no longer need to read because reading is obsolete) it has nothing whatsoever to do with open education, which is education.

It is a shame that Segesvary doesn't get into some of the real philosophical and pedagogical differences between authoritarian, by-the-book teaching and open education. Briefly, the thrust of open education is to provoke understanding in a learner by having the learner discover facts by experiencing the processes which lead to those facts. It is an attempt to lend perspective to knowledge, both by making knowledge of personal importance to the learner and by developing pieces of knowledge in their relation to other disciplines and to the rest of the world. It is a process for taking advantage of the wonderful fact that learning is both aesthetically enjoyable and practically useful, to build on the natural motivation of students to learn.

Segesvary recognizes that compulsory education creates two distinct groups: those who are already motivated to learn and do learn, and those who aren't motivated (at least to learn what is taught in school, or who have had their motivation killed by forced schooling) and just put in their time. And yet he proposes we maintain the essentially coercive, anti-individual factor, "basic curriculum requirements." One wonders who will decide what is basic. Maybe we'll vote on it along with millage, because surely Segesvary is talking about public schools; we already have private schools offering basic requirements curricula and just about any other one might desire.…

The real problem with open education is that it would require teachers to be real professionals. They'd have to be able to actually teach and have a wide repertoire of pedagogical techniques at their command. They'd have to be able to inspire learners to develop their natural love of learning and they'd have to be able to match teaching strategies to individual student needs. We'd need good teachers. We have few of them now; those who might be good are frustrated by the traditional system, unable, as are students, to express or implement their creativity, and those who might have been good have left the profession or avoided it entirely. Where are we going to get good teachers? Not from the traditional university education schools—experience shows us that—and certainly not from an educational system based on Segesvary's semi-authoritarian ideas.

Rev. Christopher Brockman
Dryden, MI

Fire the DOE

The typical Democratic response to all problems is TAX, SPEND, and CONTROL. Carter's energy proposals up the ante with punitive, confiscatory, discriminatory, counterproductive taxation, massive inflationary, megalomaniacal pork-barrel spending, and rigid authoritarian controls. He is certainly in the right party.

While his July energy speech was in my judgment the most rhetorically eloquent of his career, it would have been eloquent in substance if he had merely taken 60 seconds to say: "It was statist solutions to problems that didn't exist which have resulted in problems which are now very real. From this moment on, therefore, the production and distribution of energy will cease to be a concern of bureaucrats. Rather than subject energy to the same fate as our regulated railroads, I have decided that energy is an important enough product that it should be handled by a free market. Food, for instance, seems to be produced and distributed remarkably well despite a relative lack of direct taxes, price ceilings, government boondoggle research, protective tariffs, allocation systems, food lines, odd/even restraints, ration coupons, and supermarket police. The 18,000 employees of the Department of Energy, whose employment costs taxpayers more per year than all our imported oil and who curiously have managed to preside over the initiation and exacerbation of our energy problems, are hereby dismissed."

Robert R. Prechter, Jr.
Stamford, CT

Novel Freedom

Some legal moves down here in Florida might be of interest to REASON readers.

On July 1, the Florida legislature did not renew the power of the Florida Board of Psychology Examiners. This bureaucratic board had existed for the purpose of deciding who would and who would not practice psychology in Florida. The board met its end under the sunset law which requires that the legislature continually review and justify the existence of government boards and agencies. Rep. George Sheldon, chairman of the House Regulatory Reform Committee, pointed out that the board prevented the licensing of many qualified psychologists with overly restrictive requirements.

Unfortunately, no legislator has expressed the libertarian view that no board should exist in the first place.…If the legislators act in their predictable fashion, it won't be long before new guidelines are schemed up to take the place of the old ones.

So far there has been a rush for the unregulated licenses by Florida citizens and citizens from throughout the U.S. It seems that these new-found psychologists are eager to grab whatever freedom is allowed them. The novelty appeal is tremendous, since freedom is a novelty these days. The occupational license tax collector's office is reaping the reward—each license issued brings in $7.50.

Some Florida psychologists filed a class action suit to halt the licensing in Dade County. They were moaning about "quackery" in the field and were no doubt concerned about their protected source of income. Some counties have passed regulations preventing the licensing of "school children, pranksters, and pets."

So I have printed up some flyers and started a campaign to promote the concept of unregulated psychology.

Rex Curry
Plant City, FL

Nontraditional Education

In response to Ms. Pruden's remarks [Oct.] about my treatment of the John Singer case [July]:

The merit or lack of merit of the beliefs and practices of the Church of Jesus Christ of Latter Day Saints (for convenience the "L.D.S." or "Mormon" church) is not a question considered by the article. The ultimate issue here is who has the right to direct children's learning experiences—the State, or the family and individual child?…

To establish a legal authority to mandate attendance at certain schooling experiences requires compulsion of those who would not choose to attend freely. That compulsion is wrong, or that it may even reach nightmare proportions, is an issue long argued between statists and libertarians. The Singer case reveals how far the State might go in attempting to control the learning experiences of children and their intellectual development.

Polygamy is a secondary issue in the Singer case. The majority of State action centered around education. Polygamy was first introduced into the Mormon church in 1843. It was introduced into Utah in 1847, as the article states. This being the year of the first religious settlement by the followers of Brigham Young.…

The figure of up to 50,000 people presently living in plural marriage was issued this year by Utah attorney general Robert Hansen. There is an "underground" polygamist movement in Utah with a newspaper. Since polygamy is now officially against church policy, those who practice it either leave the formal L.D.S. church structure, basing their actions on the writings in the Book of Mormon, or they practice plural marriage secretly and remain within the formal church.

The racial beliefs and practices of the L.D.S. church have been a matter of controversy for some years. Specifically, blacks were not allowed to hold the "priesthood" until June 1978. This office has been open to all adult males who are members in good standing with the church. In 1977 a Mormon bishop was excommunicated for ordaining a black into the priesthood. The church had held that blacks bore the mark of Cain and thus could not hold the priesthood. On this count, John Singer had few differences with those Mormons who practice within the church structure.

The movement of parents seeking to provide learning experiences outside of the traditional schools is rapidly growing. The case of John Singer is certainly not an example for those who wish to do this successfully themselves. It is an example of what they may be up against. I urge those who wish to pursue home schooling to subscribe to Growing without Schooling, 308 Boylston St., Boston, MA 02116. G. W. S. is edited by Mr. John Holt, who has contributed much to liberating the learning process.

Gerald M. King
Inverness, FL

Movement Perils

There are some criticisms that need making in regard to Thomas Hazlett's treatment of the Jonestown massacre [July].

For one thing, it is not plausible to assume that the socialism of Jim Jones' ministry was a major cause or indispensable element of the massacre itself. Jones was a paranoid megalomaniac who was able to charismatically manipulate a congregation that was predisposed to religious fanaticism. Such a combination of leader and followers can gravitate to disaster under many guises, socialism being only a convenient vehicle. To wax wroth over Jones' socialism makes as much sense as holding Hitler's "socialism" responsible for the evils of Dachau and Buchenwald. The issue of overriding importance is that Jones capitalized on the American obsessions with sex and death—a cultural heritage left over from the Puritans.

Rather than attempt to penetrate the psychological and religious causes for the massacre, Hazlett exploits the horror of Jonestown as nothing more than an opportunity to hold up socialism for self-righteous libertarian contempt. Such journalism is scarcely more than ambulance-chasing.

It would be very unwise to dismiss the events of Jonestown as being merely an aberration of statism. The mentality of Jim Jones and his congregation can occur in any movement—even the libertarian movement. This possibility is not remote: I can personally attest to the occurrence of an attempted tavern robbery committed by self-proclaimed libertarians who rationalized their actions as an attack against the State. Moreover, there remain a scattering of charismatic cults within the movement today, whose members espouse doctrines of varying rationality, some going so far as to style themselves violent revolutionaries. Admittedly, the number of such fanatics is small—but the mischief they could perform can have far-reaching and decidedly unwholesome effects.

In consequence of the above, I believe the Jonestown massacre is far too important an event for libertarians to sniff at with supercilious contempt.

Mike Dunn
Federal Way, WA

USPS Heard From

I just finished reading the article "Denationalizing the Mails" by Jeff Sampson [September].

I believe in the free enterprise system, but because of poor circumstance, lack of political pull, or what have you, I found it necessary to work in the Post Office.

I have personally found much of what Mr. Sampson writes about the inefficiencies and wastefulness of the Post Office untrue, at least as to what I have observed. Most employees do a respectable and adequate job. Things are not perfect, but most employees and management try to upgrade production and quality of work. Also, he states that there is a no layoff clause for the employees who presently work at the P.O. Not totally correct, as the last union contract states that those hired after September 15th (I believe the date is correct) 1978 are subject to being laid off. Furthermore, it was stated that the P.O. is a money-losing organization, but I understand that this year it managed to stand on its own and make a profit. Please correct me on this if I am wrong.

Just wanted to write a few words in defense against Mr. Sampson's article.

Joel Stewart
Van Nuys, CA