The Home of American Intellectual Conservatism — First Principles

December 14, 2018

Free Markets & Civil Society

ISI recommends reading through the introductory essay before following the embedded hyperlinks or before working through the course itself. The essay can orient your reading and reflection so that like Caleb and Joshua you are calm and perceptive in the face of the intellectual giants you will find in this land.

The exchange of goods and services through markets is as old as human civilization itself—indeed, depending on what one means by “markets” and “civilization,” it may even be older. But the study of the economy, politics, and society as discrete subjects, together with their relationship, is a relatively recent historical development, beginning only in the eighteenth century—about the time of the American Founding. As the American conservative intellectual movement began to coalesce in the early 1950s, it was natural that economics—the “free economy,” or more broadly, the “free society,” with a rich civil society of associations beyond the reach of state control—would be a central theme of conservative reflection. On the one hand, libertarian-minded conservatives were still contesting the welfare state that Franklin Roosevelt had constructed in the 1930s, seeing it as a centralizing, socialist threat to liberty. On the other hand, the global ideological competitor for America and the West was Soviet communism, and of course, Karl Marx had claimed that politics and culture were merely surface phenomena, reflecting the “relationship to the means of production” in the economic “base” of society. Since Marxist-Leninists deployed economic arguments to address political, social, and moral questions, communism’s adversaries would attempt to meet them on their own terrain, mustering economic arguments of their own. As a result, the intellectual project of American conservatives during the period of the Cold War was substantially shaped by classical liberal economic concepts.

Adam Smith, 1723-1790

“Classical” economic theory blossomed in the late eighteenth and early nineteenth centuries with such thinkers as Adam Smith in Scotland and A. R. J. Turgot in France (though antecedents can be found in the sixteenth-century School of Salamanca, and even earlier). These early political economists believed that the self-interested choices of individuals in free markets—that is, markets in which buyers and sellers may trade freely and prices are determined by supply and demand rather than by government edict—would lead to greater prosperity for the whole of society. As Smith famously wrote in The Wealth of Nations, “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.” It was also believed that in a “commercial republic”—a consensual, rights-respecting polity oriented to commerce—the causes of war and civil war would be removed, and so an unprecedented social harmony was to be expected in the new regime. Manners would be “gentled” as “irrational” motives such as glory and religious devotion gave way to the decent, cautious virtues of the secular bourgeoisie.

Since we ourselves are inheritors of the legacy of the classical liberal economists, we too often fail to consider what a moral revolution these ideas entailed. The classical philosophy of the Greeks and Romans had affirmed the warrior virtues and generally contemned mere commerce as a servile occupation. Christian theology was wary of self-interest and considered riches a source of sinful temptation. Given the powerful arguments of these traditional perspectives, the theoretical victory of classical liberal economics has never been entirely secure—however successful liberal economics has been in practice.

In Smith’s day, “civil society” was still a near synonym for “political society” or society in general, including, most decisively, the state. Over the course of the nineteenth century, however, the term came to signify instead those institutions of the social order which were independent of government—the myriad intermediary groups between the individual and the state, such as churches, neighborhoods, trade associations, guilds, labor unions, clubs, and, on some accounts, families. (Some nineteenth-century thinkers, such as G. W. F. Hegel, classified the family as a pre-civil institution, because the family tie is unchosen, involuntary.) Businesses typically were not considered part of civil society, on the theory that they are private rather than civil concerns. As the institutions of civil society came to be distinguished from both the state and the economy, the study of society became a discipline in its own right—“sociology,” as Auguste Comte christened it.

Classical liberalism—the political expression of free-market economics that extends a concern for individual liberty to other spheres beyond the economy—supplied the dominant paradigm of political thought in the nineteenth-century Anglo-American world. Society and the economy, it held, would flourish best with minimal government intervention, and existing impediments to social and economic freedom should be abolished. This school of thought was not without its critics both among conservatives and on the newborn socialist Left. As early as 1790, the British statesman Edmund Burke had warned of the dangers attendant upon replacing an older social order with one conceived by rationalist “sophisters, calculators, and economists”—though Burke, a friend of Adam Smith, appreciated market freedom within its own sphere. Before long a literary backlash against liberalism, utilitarianism, and the “dark satanic mills” of the Industrial Revolution marshaled intellectuals into support for emerging working-class movements and various forms of socialism, including, after 1848, Marxism. Liberalism itself, meanwhile, frequently strayed from its laissez-faire ideals into imperialism (in Great Britain) and plutocracy (in the United States). Nevertheless, it was a liberal age, and as late as 1925 President Calvin Coolidge could justly say, “the chief business of the American people is business.” What was not always acknowledged, nor reflected upon, was that the social context in which business flourished was built upon the civil associations Alexis de Tocqueville had described in Democracy in America.

Already by the time Coolidge spoke, the liberal social and economic order was approaching a crisis. Critics had long attacked the free-market economy along four lines, arguing that it was unjust because of the unequal distribution of wealth it produced; immoral because of the free rein laissez-faire gave to acquisitiveness and selfishness; inefficient relative to socialism, which could marshal much greater economies of scale by nationalizing entire industries; and inherently marred by “market failures” and the business cycle of booms and busts. World War I, which seemed to discredit the liberal dream of world peace through free trade, also gave socialists concrete examples of how governments could centrally plan national economies, and indeed society itself. The Soviet Union, which arose as one consequence of that war, looked to many intellectuals like the wave of the future. Finally, the stock market crash of 1929 and the ensuing Great Depression dealt a near-fatal blow to the free-market system, shattering the American public’s confidence in the market’s ability to provide jobs and goods—and shattering as well the public’s confidence in civil society’s ability to provide independently for the sick, the destitute, and the aged.

food line during the Great Depression

Around the world, the economic downturn of the 1930s fed into socialist movements and new ideologies that proposed to use state power to save society and put people back to work. Benito Mussolini encapsulated the spirit of the age in his description of fascism: “Everything for the State; nothing outside the State; nothing against the State.” This was the very inversion of classical liberalism: instead of the economy and civil society existing independently of the state—which, indeed, was conceived of as merely a framework for supporting the market and society—the economy and daily life would be subsumed under government power. Though nothing like overt socialism or fascism caught on in the United States, the direction of change was similar: Franklin Delano Roosevelt’s New Deal expanded controls on the U.S. economy and erected a welfare state to fulfill functions once served by families and free associations within civil society.

Ironically, the man who would do most to undermine the free-market system in the U.S. and Great Britain was not an avowed socialist but a defender of capitalism. But this man, the British economist John Maynard Keynes, believed that capitalism had grown old and decrepit, in need of life-support from government. His was a vision, as his critic and fellow economist Joseph Schumpeter said, of “capitalism in the oxygen tent.” Keynes believed, among other things, that in “late” capitalism the public had a propensity to save too much, which stalled the engine of the economy. To rev that engine back up, government must stimulate aggregate demand through public spending—particularly deficit spending. Roosevelt’s New Deal, itself a project designed to rescue, rather than replace, the free market, was already well underway by the time Keynes published his seminal General Theory of Employment, Interest and Money in 1936. But Keynes’s theory would provide a coherent philosophy for what had been ad hoc New Deal measures. And Keynesianism would endure as the basis for U.S. economic policy through the 1970s.

Opposition to the New Deal arose in several quarters. The onus of new regulations such as wage and price controls fell disproportionately on small businesses, whose owners banded together to resist Roosevelt’s alphabet soup of government agencies. In the press, a scattered remnant of classical liberals and Jeffersonians, such as Albert Jay Nock, Isabel Paterson, and Henry Hazlitt, objected to the New Deal not just on economic grounds but also because they saw in Roosevelt’s interventions the first steps toward the kind of regimented social order that had overtaken Europe. Meanwhile, in the academy, economists such as Frank Knight at the University of Chicago and the Austrian émigré Joseph Schumpeter at Harvard bucked the tide of Keynesianism and spoke out against the New Deal.

Friedrich A. Hayek

In the 1940s, two other émigré Austrian economists would provide opponents of Keynesianism and the New Deal welfare state with their most valuable ammunition. Ludwig von Mises, the acknowledged dean of the “Austrian school” of economics, emigrated to the U.S. in 1940, and through such works as Socialism, Omnipotent Government, and his magnum opus Human Action he provided a thoroughgoing defense of free markets and a critique of economic planning. Mises’ younger associate and fellow Austrian-school economist Friedrich Hayek would galvanize even greater popular opposition to statism with his 1944 bestseller The Road to Serfdom, in which Hayek argued that socialism led directly to totalitarianism: without private ownership of the means of production, individuals and civil society would not long remain free.

By the 1950s, with the Depression and World War II long over but the welfare state and the “military-industrial complex” firmly entrenched, two poles of opinion had emerged regarding the relationship of the state to the market economy and to civil society. The one pole, whose adherents ranged from socialists to modern liberals—and indeed “modern Republicans” like Dwight Eisenhower, who pledged to preserve the welfare state—believed in an expansive role for government in structuring the economy and civil society. At the other pole were those who believed that increased state power posed a threat to markets and civil society. Among this latter group, the proper relationship between civil society and free markets was a matter of contention: the classical liberals and libertarians wanted unrestricted markets and saw little conflict between the ethos of the market and the needs of civil society. The “New Conservatives” who were attaining prominence in the 1950s, on the other hand, put more emphasis on civil society and argued that free markets themselves must be undergirded and regulated by a traditional social order—though not by an intrusive national government.

One of the “New Conservatives,” sociologist Robert Nisbet, stated the case well in his 1953 book The Quest for Community, which argued that latter-day preoccupations with individual identity and national community arose from the decline of traditional organic authority and the rise of state power. Nisbet contended that the free market itself developed out of the family and civil society:

There is indeed a sense in which the so-called free market never existed at all save in the imaginations of the rationalists. What has so often been called the natural economic order of the nineteenth century turns out to be, when carefully examined, a special set of political controls and immunities existing on the foundations of institutions, most notably the family and local community, which had nothing whatsoever to do with the essence of capitalism. Freedom of contract, the fluidity of capital, the mobility of labor, and the whole factory system were able to thrive and to give the appearance of internal stability only because of the continued existence of institutional and cultural allegiances which were, in every sense, precapitalist.

A question that would come to the fore rather later was whether or not free-market societies had a built-in tendency to erode the civil-social institutions on which capitalist economies (and liberal democratic political practices) ultimately relied.

In his own work of 1953, The Conservative Mind, a book that did much to rehabilitate “conservatism” as a political designation and a school of thought in the United States, Russell Kirk took great pains to distinguish the conservative tradition from the classical liberal or libertarian one. (For his part, Friedrich Hayek, in his famous essay “Why I Am Not a Conservative,” also tried to clarify the terminology.) Kirk lamented many of the effects that nineteenth-century capitalism had upon civil society, as a “network of personal relationships and local decencies was pushed aside by steam, coal, the spinning jenny, the cotton gin, speedy transportation, and the other items in that catalogue of progress which school-children memorize,” and as “personal loyalties gave way to financial relationships.” Yet this critique of nineteenth-century political economy did not entail support for the twentieth-century welfare state or rejection of the free market—only a belief that markets should have social limits.

early 20th century depiction of the marketplace

Kirk and others of the New Conservatives, later often called “traditionalists,” found theoretical (as well as practical) support for their beliefs in the work of the German economist Wilhelm Röpke and Germany’s postwar “Ordo liberal” school of economics, which included such figures as Alexander Rustow, Walter Eucken, and Luigi Einaudi. In works such as The Social Crisis of Our Time (1942), Civitas Humana: The Moral Foundations of Civil Society (1944), and A Humane Economy (1958), Röpke emphasized the religious, moral, and civil roots of economic freedom—as well as economic freedom’s benefits for the individual and civil society. “There is a deep moral reason for the fact that an economy of free enterprise brings about social health and a plenitude of goods, while a socialist economy ends in social disorder and poverty,” he wrote. “Is the system unethical that permits the individual to strive to advance himself and his neighbor through his own productive achievement? Is the ethical system the one that is organized to suppress this striving?” At the same time, Röpke cautioned that “the defender of a ‘liberal’ economy must make plain that the realm of economy in which self-interest develops, constrained by legislation and competition, is not set against but enclosed within the realm in which is developed man’s capacity for devotion, his ability to serve ends that do not look to his own immediate betterment. Society as a whole cannot be based on the law of supply and demand. . . .”

While popular with right-of-center intellectuals, neither the Austrian school nor Röpke and the Ordo liberals (who did influence policy in Germany) found much support within the economics profession. Ludwig von Mises himself held only a privately supported visiting professorship at New York University’s business school, while the University of Chicago’s economics department refused to extend an appointment to Hayek, who instead found a position with the university’s interdisciplinary Committee on Social Thought. (Hayek would eventually win much deserved recognition when he received the Nobel Prize for Economics in 1974—though even then, he had to share the award with the welfare economist Gunnar Myrdal.) Other free-market economists at the University of Chicago met with more mainstream success, however. The “Chicago school” of economics, founded by Frank Knight and perhaps best represented by Milton Friedman, challenged Keynesian and neoclassical policy prescriptions but accepted mainstream economic methodology—unlike the Austrian school, which adhered to an older method. Another key difference between the Chicago and Austrian schools concerned monetary policy: Chicago “monetarists” believed that central banks should suppress inflation and tame the business cycle through control of the money supply; Austrians, on the other handed, tended to favor a gold standard and to see central banks as contributors to, rather than solutions for, business-cycle downturns.

With so much intellectual firepower arrayed against socialism, Keynesianism, and the legacy of the New Deal, one might have expected public policy to move to the Right. In the short term, that did not happen. Instead, in 1971 Republican President Richard Nixon declared, “We are all Keynesians now.” Nixon’s predecessor, Democrat Lyndon Johnson, had actually expanded the New Deal welfare state under the rubric of the “Great Society,” launching new entitlement programs such as Medicare and Medicaid, creating new programs for the poor such as food stamps and Head Start, and declaring a “War on Poverty.” For his part, Nixon instituted unprecedented peacetime wage and price controls and severed the last links between the dollar and the price of gold. But while politicians proved reluctant to listen to free-market economic theorists, before long they were forced to face the consequences of their own policies.

Lyndon Johnson, 1966

The consequences for civil society and the family of decades of welfare economics and social engineering had been objectively disastrous, with rising rates of crime, illegitimacy, and urban decay, evils which afflicted the poor and minorities—the very people that welfare programs were intended to help—much more severely than they did the middle class. Although it became the pretext for further Great Society programs, a 1965 report by Assistant Secretary of Labor Daniel Patrick Moynihan (later a U.S. senator), “The Negro Family: The Case for National Action,” was one of the first documents to call attention to family dissolution, rather than poverty, as a source of social pathology. That same year, journalist Irving Kristol and Harvard sociologist James Q. Wilson launched the Public Interest, a policy journal aimed at rethinking the Great Society and examining its ill effects. Five years later, Wilson’s colleague Edward C. Banfield published The Unheavenly City, a book that further contested the premises of the War on Poverty.

These scholars, unlike libertarians and most old-guard conservatives, were not arguing for a repeal of the New Deal; most of them had begun their careers, and many remained, on the political Left. But their criticisms of the Great Society earned them the hostility of their peers, one of whom, the social democrat Michael Harrington (whose 1962 book The Other America did much to inspire the War on Poverty) dubbed these apostate liberals “neoconservatives.” Neoconservative critiques of the welfare state mounted over the next twenty years, culminating with Charles Murray’s 1984 book Losing Ground: American Social Policy, 1950–1980, which documented the effects of thirty years of government intervention into civil society and gave impetus to the welfare-reform movement. By 1996, when President Bill Clinton signed welfare reform into law, Murray’s arguments had become conventional wisdom.

Keynesian theory itself, meanwhile, failed spectacularly as an explanatory and policy tool in the 1970s, when the United States, mired in low economic growth, experienced simultaneously rising unemployment rates and inflation. This “stagflation” defied the expectations of Keynesian analysts, who believed that inflation and recession should provide natural breaks on one another. At the same time that stagflation shook policymakers’ confidence in Keynesianism, the Carter administration began to deregulate industries such as telecommunications, trucking, and air travel—not, to be sure, out of any commitment to free-market principles, but out of necessity. These measures accelerated during the Reagan era.

Ronald Reagan’s economic advisors included a new school of free-market advocates, the so-called supply-siders. While Keynesianism emphasized the need for government to stimulate aggregate demand, Reagan’s supply-side advisors, who included Arthur Laffer, Jack Kemp, Jude Wanniski, Paul Craig Roberts, and Bruce Bartlett, argued that cutting taxes was a better way to stimulate the economy, by providing incentives for greater capital investment. (Like the Keynesians, however, supply-siders did not see federal deficits as a grave problem.) The “Laffer curve”—as legend has it, sketched by Arthur Laffer on a napkin at a meeting with Wanniski and Dick Cheney—illustrated how cutting taxes, by leading to greater economic growth, could actually increase government revenue. Supply-side economics was not without its critics, even on the Right, but throughout the Reagan administration it enjoyed unprecedented influence for a modern free-market economic philosophy.

By the 1990s, free-market advocates of all schools could claim a number of successes. Although entitlement programs such as Social Security in the United States and national health services in many other countries remained politically untouchable (despite their long-term insolvency) the center of gravity in Western economic thought had moved from Keynesianism and soft forms of socialism to a belief that lighter regulations, lower taxes, and freer economies were generally more conducive to national prosperity. Free trade enjoyed similar support on an international scale; “globalization,” both economic and cultural, became a buzzword of the late 1990s, generating angst in some quarters, rhapsodies in others—even in the op-ed pages of the New York Times, where columnist Thomas Friedman did much to popularize the phenomenon. With tax and regulatory burdens waning, innovation—particularly in computers and telecommunications—boomed, and the United States enjoyed exceptional prosperity.

Solidarity economic movement in Poland, 1980s

Most decisively, of course, the collapse of the Soviet empire in 1989, followed in 1991 by the dissolution of the Soviet Union itself, essentially settled the “great question” of whether or not there should be private property in the means of production. The specter that had “haunted” Europe—and the world—since the middle of the nineteenth century (communism) was dispelled. The fundamental moral legitimacy of free market economics reached an all-time high. But events in the 1990s also showed that traditional conservative qualifications to classical liberalism had cogency. Classical liberalism emphasized the “naturalness” of free-market relations when state restraints on individuals were removed. In the wake of communism’s collapse, however, lawless oligarchies arose in Russia while the economic performance of the nations of eastern Europe was most often disappointing. It quickly became evident that the benefits of a free-market system depend upon habits and virtues that are not immediately elicited by the mere absence of restraints.

What was “missing” in the postcommunist countries was civil society itself, the intermediary institutions with their attendant habits of association that Tocqueville recognized as the “seedbeds of virtue.” Civil society had effectively been destroyed under communist tyranny. At the same time, new empirical work by the Harvard political scientist Robert Putnam reinforced the understanding that democratic political systems and vibrant free-market economies—two of the great achievements of the West—depend in decisive respects upon the richness and depth of the associations of civil society. In both politics and economics, the habits of liberty must be learned.

Lesson 1: Classical and Christian ideas of family and property

  1. Aristotle, Politics, Book I, chapters 8-10
    • How does Aristotle’s consideration of an individual or group’s ultimate end shape his discussion of means? What would his economics be like without such a consideration of ultimate ends?
    • Discuss the terms “natural” and “unnatural.” Do these seem like “economic” categories of thought? Why does Aristotle use them in a discussion of property and trade?
    • There is a boundary fixed to the riches needed for a good life because wealth-getting is an art, according to Aristotle. If wealth-getting is not an art, what is it?
  2. Thomas Aquinas, Summa Theologica, II, 2, q. 66, a. 1 & 2, q. 77, & q. 78
    • Would anti-usury laws be prudent in a modern economy? Why or why not? If not prudent, would they nevertheless be just?
    • Does Thomas write with the individual economic actor in mind? What relationships between the individual and others or between individuals does he consider?
    • Is there such a thing as a just price? If so, what are its conditions? If not, what are the implications for economics?
  3. Johannes Althusius, Politica, “The Family” and “Tyranny and Its Remedies”
    • Compare and contrast Althusius and Aristotle’s respective discussions of the composition and purpose of the family.
    • Can a free market frustrate a tyrant, and if it cannot, what extra-economic conditions are required for a market’s free functioning?
    • What sort of market is required for the prince—as opposed to Althusius’ formulation—to support his people?

Summary question: How is the family an economic institution, and what does the answer to that question mean for both economics and politics?

Further reading:

  1. Richard Velkley, “Being and Politics”
  2. Frederick Wilhelmsen, “The Family as the Basis for Political Existence”
  3. Joseph Pearce, Small Is Still Beautiful: Economics as if Families Mattered

Lesson 2: The Anglophone economists

  1. Adam Smith, The Wealth of Nations, I.i-ii
    • Compare Smith’s account of trade’s purpose to Aristotle’s. Why do these two thinkers come to their different conclusions concerning trade?
    • What motivates man to trade, according to Smith? Compare it to St. Thomas’s account of caritas. How are instinct and duty considered by each man?
    • What place do gifts have in increasing or decreasing the wealth of nations?
  2. Edmund Burke, Thoughts and Details on Scarcity
    • How does Burke’s pietas toward the long tradition of English farming affect his views in this treatise? Does pietas have a proper place in economic thinking?
    • Is the sanctity of contract violated by state interference in the market?
    • What is the connection between government intervention in the market and the welfare of the poor, e.g. the Papal system of granaries that Burke describes? Must the connection be detrimental to the poor, as Burke thinks?
  3. John Taylor of Caroline, Tyranny Unmasked, Section One, “Unmasking the Protecting-Tariff Policy and Its Advocates from Many Perspectives”
    • Why does Taylor distinguish between the government’s interest and the national interest, and what are some possible objections to his distinction?
    • Is it possible for a government to favor one specific group of people, e.g. corn farmers, without indirectly harming any other group? Whether or not it is possible, can patronage exist without the receiving group’s servility and therefore the loss of their freedom?
    • What for Taylor is the economic difference between manufacturers and farmers, on the one hand, and stockjobbers on the other? How does each group relate to the national economy, and what kind of trade (free or otherwise) benefits each?

Summary question: Is the possession of liberty inseparable from the right to private property, and what sort of liberty prevents illiberality, vice, and selfishness?

Further reading:

  1. Paul Gottfried, “Adam Smith and German Social Thought”
  2. Arthur Kemp, “Legacies from Adam Smith”
  3. Frank Petrella, “Edmund Burke: A Liberal Practitioner of Political Economy”
  4. Rod Preece, “The Political Economy of Edmund Burke”
  5. Russell Kirk, Edmund Burke: A Genius Reconsidered
  6. J.W. Cooke, “Old-Fashioned Men”

Lesson 3: The Francophone economists

  1. A.R.J. Turgot, Reflections on the Formations and Distribution of Wealth, § 1-31 & 71-75
    • How and why are men linked to one another in Turgot’s account? Does he consider something more than an individual or a collection of individuals?
    • Does Turgot’s defense of interest successfully refute the points put forward by Aristotle and St. Thomas? Why or why not?
    • What does Turgot’s beginning with a discussion of land mean for economics in comparison with Aristotle’s beginning with household management?
  2. Richard Cantillon, Essay on the Nature of Trade in General, Part Two
    • According to whose knowledge is a price determined? What does this mean for the notion of price controls?
    • Why does Cantillon base a nation’s wealth on its farms? Is such an account of wealth persuasive? How would the Anglophone economists respond?
    • Does a capitalist or entrepreneur have a place in Cantillon’s system? If so, where? If not, is this a decisive defect in his theory?

Further reading:

  1. Jacques Wendel, “Turgot and the American Revolution”

Lesson 4: Statism in the nineteenth century

  1. David Ricardo, Principles of Political Economy and Taxation, XXXI: On Machinery
    • Why should a man pursuing his rational self-interest be concerned that his business decisions “very materially deteriorate the condition of the labouring classes”?
    • Is the rejection of machinery more detrimental to the poor than its development?
    • Would the worker be in a better position if he owned his machine or tools himself? Consider this from several vantage points, e.g. economic, familial, social, political, etc.
  2. Karl Marx, Capital, Vol. 1, IV.XV, sections 1 & 3-5
    • What sort of moral (or immoral) logic does Marx’s capitalist obey? Is this code determined by the pursuit of the material and/or moral goods seen in earlier readings?
    • Does the laborer in a factory possess free will in selling his labor, i.e. is the term “wage slave” applicable to him? Should the capitalist be responsible for the laborer’s well-being?
    • Should working hours be legally restricted? On what basis?
  3. Eugen von Böhm-Bawerk, The Positive Theory of Capital, Book Chapters 1 & 2
    • Compare Böhm-Bawerk’s account of economics’ telos with Aristotle’s, noting both significant and more subtle agreements and disagreements.
    • Given the nature of “capital” as an economic “apple of discord,” how is a definition to be attempted?
    • What implication does Böhm-Bawerk’s account of the powers of men and of nature have for a possible account of how wealth is created and exploited?

Summary question: Is the relationship between man and machinery antagonistic, and does the machine always benefit the already wealthy? Does the spread of capital diminish class antagonism or merely increase strife?

Further reading:

  1. Wladislaw Krasnow, “Karl Marx as Frankenstein: Toward a Genealogy of Communism”
  2. Stephen Tonsor, “Marxism and Modernity”
  3. Joseph Knippenberg, “From Kant to Marx: The Perils of Liberal Idealism”
  4. John Weicher, “Capital and Prosperity”

Lesson 5: Free trade in the nineteenth century

  1. Richard Cobden, Speech on the repeal of the Corn Laws, May 15, 1843
    • Is protectionism fundamentally injurious to the poor?
    • Does a protectionist law assume that all parties affected are “perfectly angelical”?
    • In view of Cobden’s mention of a connection between long leases and good farming, what conditions are generally necessary for economic flourishing, e.g. the rule of law?
  2. Frederic Bastiat, Selected Essays on Political Economy, “Protectionism and Communism”
    • If my property is naturally my own, for me to dispose of according to my will alone, are my government’s taxes on my property a form of plunder?
    • What assumptions about the political order could justify protectionism philosophically?
    • Are Bastiat’s arguments viable if there never was a pre-political “state of nature”?
  3. Friedrich List, The National System of Political Economy, “Political and Cosmopolitical Economy”
    • Is List’s distinction between “national” and “cosmopolitical” economy grounded in economic facts? If not, what is its foundation, and is it logically valid?
    • In light of his commendations of free trade and “a universal confederation and a perpetual peace,” of what does List’s objection to physiocratic theory consist?
    • Does greater peace between nations come about because of greater economic or greater political interdependence? That is, should economic union precede political union or proceed from it?

Summary question: Is unrestricted free trade inseparable from the right to private property and personal liberty, or can economic protections be at times justified (and how)?

Further reading:

  1. Donald Boudreaux and Thea Lee, “Is Free Trade Good for America?”

Lesson 6: Twentieth-century statism

  1. John Maynard Keynes, General Theory of Employment, Interest, and Money, ch. 16: Sundry Observations on the Nature of Capital
    • Compare Keynes’ account of capital with Marx’s capitalist. What do these men or forces have in common, and in what senses are they different?
    • Can the State legitimately enter in “as a balancing factor” in order to ensure full employment? Is interventionism purely a matter of economic necessity, or does it involve moral deliberation?
    • How does someone suffer from another’s saving? What are the implications of this for a theory of economic justice?
  2. Friedrich Hayek, “The Use of Knowledge in Society”
    • Why is “knowledge of the relevant facts” necessarily dispersed among many people? Does such dispersal preclude the existence of Plato’s philosopher-kings?
    • Are there economic decisions that should not or cannot be made in a decentralized fashion?
    • What is the function of a price? Should government determine price? Why, or why not, according to Hayek?
  3. Frank Chodorov, “The Revolution of 1913”
    • What does Chodorov mean by “society,” and what distinguishes it from the state?
    • Articulate the principal points of difference between Chodorov’s two “revolutions.” What does this distinction illuminate?
    • In a democracy, will protectionism necessarily go hand-in-hand with populism? If so, must defense of the free market always be an elitist project in a democracy?

Summary question: Both centralized planning and national taxation assume the flow of revenue to a unitary, authoritative, and final central planner. Why or why not is such a central planner inimical, indifferent, or favorable to liberty?

Further reading:

  1. Bruce Bartlett, “Keynes as a Conservative”
  2. Arthur Kemp, “Post-Keynes & Pre-Keynes”
  3. Arthur Shenfield, “Law, Legislation, and Liberty: Hayek’s Completed Trilogy”
  4. Bettina Bien Graves, “Hayek on the Abuse of Method: A Classic Reissued”
  5. Frank Chodorov, “Debunking the State”
  6. Frank Chodorov, “Rotarian Socialism”

Lesson 7: The Austrian school & the Chicago school

  1. Ludwig von Mises, Human Action, Part 6, XXVII
    • Do all laws enforced by a government carry with them “violent action or the threat of such action”? Is this the essence of law?
    • Compare Mises’ account of natural law to earlier ones. How do differing conceptions of natural law play out in economic thinking?
    • Why does Mises reject “righteousness” as a standard for judging the market? Is his argument persuasive?
  2. Mises, The Anti-Capitalistic Mentality, “The Noneconomic Objections to Capitalism”
    • Is capitalism inimical to beauty in the practical arts such as architecture and furniture design?
    • To what degree does Darwinism appear in this chapter, and to what purpose? Is Darwinism essential to Mises’ thinking about liberty?
    • Must commitment to liberty always go hand-in-hand with a commitment to laissez-faire capitalism?
  3. Milton Friedman, Capitalism and Freedom, II
    • Compare Friedman’s account of the family to Aristotle’s. How does a “believer in freedom” reckon with institutions and groups outside of the individual/state dichotomy, e.g. the family, the religious congregation, etc.?
    • Is the right to property a convention, i.e. positive law, or is it a natural law? Think of Friedman’s account, as well as, for instance, St. Thomas’ defense of property.
    • Does voluntary exchange presume a prior supra-economic order? Is exchange voluntary without the governmental guarantees of safety and liberty that Friedman enumerates?

Summary question: What place do politics and public deliberation have in Mises’ and Friedman’s respective accounts of the relation between government and the market? What could be legitimately debated within each thinker’s proposed public sphere? Is this a smaller, similarly sized, or larger sphere than that found in Aristotle’s Politics? What are the implications?

Further reading:

  1. Ludwig von Mises, “Capitalism versus Socialism”
  2. Ludwig von Mises, “On Equality and Inequality”
  3. Israel Kirzner, Ludwig von Mises: The Man and His Economics
  4. Murray Rothbard, “Austrian Views”
  5. Arthur Kemp, “The Political Economy of Milton Friedman”
  6. William Peterson, “The Humaneness of the Market”

Lesson 8: The ethics of economics

  1. Wilhelm Röpke, “The Economic Necessity of Freedom”
    • Röpke was a proponent of the soziale Marktwirtschaft, a “third way” that Mises specifically attacks in our readings. Are Mises’ criticisms answered in Röpke’s essay? Why or why not?
    • How is Röpke’s self-identification with the “classic-Christian heritage of Europe” borne out in this essay? Would Mises or Friedman also identify with that same heritage?
    • What is the “restricted vision” of the economist? Is such a label a compelling claim on Röpke’s part?
  2. Israel Kirzner, “Philosophical and Ethical Implications of Austrian Economics”
    • Is economics a science? What reasons does Kirzner provide for an affirmative answer to this question? Are these reasons persuasive?
    • Are there instances of value-free economic writing in any of the readings we have considered? Is Mises himself wertfrei, and depending on your answer, how is this achieved or not achieved?
    • Can an economist not “imbued with the value judgment that scientific truth is worth pursuing and disseminating” do economic research?
  3. Anthony de Jasay, Justice and Its Surroundings, “Right, Wrong, and Economics”
    • Is economics necessarily wedded to an instrumental view of reason that forswears morality?
    • Does a free market need virtuous participants or merely utility-maximizers?
    • Does de Jasay imply that economics is not wertfrei because thinking about human action categorically excludes Wertfreiheit?

Summary question: Does economics necessarily eschew ethics or morality? If so, why does it, and what then does that tell us? If not, how are ethics and economics to be integrated?

Further reading:

  1. Wilhelm Röpke, A Humane Economy: The Social Framework of the Free Market
  2. Wilhelm Röpke, “European Economic Integration and its Problems”
  3. Wilhelm Röpke, “The Place of the Nation”
  4. John Zmirak, Wilhelm Röpke: Swiss Localist, Global Economist
  5. Ralph Ancil, “The Romanticism of Wilhelm Röpke”
  6. Israel Kirzner, “Divergent Approaches in Libertarian Economic Thought”
  7. Edward Hadas, Human Goods, Economic Evils

Lesson 9: Individualism and the common good

  1. Murray Rothbard, The Ethics of Liberty, ch. 6 & 7
    • What role does virtue play in Rothbard’s free society?
    • Is Rothbard’s concept of natural law similar or dissimilar to what we encountered in the first lesson? In Mises?
    • How does thinking about unprofitable forms of exchange (e.g. gifts, loans without interest) play into Rothbard’s thinking?
  2. Allan Carlson, ”The Family and Liberal Capitalism” and “Creative Destruction, Family-Style”
    • How does the family support capitalism? Is the support mutual?
    • Does “Creative Destruction” evince an account of the family’s relation to capitalism different from “The Family and Liberal Capitalism,” written twenty years earlier? If so, how?
    • Are feminism and capitalism enemies or allies?
  3. Paul H. Dembinski, “From Cracks in the Liberal Edifice to the Rediscovery of the Common Good”
    • Can “awareness of the Other” come about naturally in a Rothbardian “Crusoe” scenario, and would such an awareness give rise to a notion of the common good?
    • Is the family a communal organization prior to and therefore more important than the individual?
    • Is the “seduction” of the individual by the market ineluctable? Are there familial ties strong enough to escape erasure?

Summary question: How is economic thinking affected by beginning with the isolated rational individual (Robinson Crusoe)? Does this produce a different economics from one that assumes the family’s centrality to human beings or even begins with the family (cf. Aristotle’s household manager)?

Further reading:

  1. Murray Rothbard, “Money, the State, and Modern Mercantilism”
  2. Murray Rothbard, “Freedom, Inequality, Primitivism, and the Division of Labor”
  3. Harry Veryser, “Murray Rothbard: In Memoriam”
  4. Allan Carlson, Third Ways
  5. Allan Carlson, “Agrarianism Reborn: On the Curious Rebirth of the Small Family Farm”
  6. Thomas Woods, “Voices in the Wilderness”
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