Tuesday, July 16, 2013

Horrific Horwitz and The Regression of the Foundation for Economic Education

Yesterday, I commented on a letter issued by Foundation for Economic Education president Lawrence Read, that called for libertarians to become missionaries marching out to convert the masses. That article was bad enough, but now it appears that the Koch-controlled FEE (FEE seems to be preferred manner by which the management chooses to call the organization these days, almost to the complete exclusion of the Foundation for Economic for Education) wants to dilute and distort what Austrian economics is about.

In 1981, Henry Hazlitt wrote a very important article for FEE's in-house publication The Freeman, In the article, Understanding Austrian Economics, Hazlitt identified a number of unique characteristics of the Austrian School.  Hazlitt listed among them that:
[Autrian school fouder Carl] Menger emphasizes the importance of time and the role of uncertainty in the whole productive process

Menger’s first important successor as an “Austrian” economist was Friedrich von Wieser, who, beginning in 1884, published several books elaborating, rounding out, and refining Menger’s theory of value, clarifying especially problems of cost, “imputation,” and distribution.

After the passing of its three founders—Menger, Wieser, and Bohm-Bawerk—Austrian economics fell for a long time into eclipse. It was not so much refuted as neglected. English- speaking economists began devoting themselves to such matters as mathematical treatment of problems of “general equilibrium.”

It would carry me to too great length to itemize and explain all the contributions to economics that Mises made [...] he made one of the most important contributions of any economist toward solving the problem of “the [business] cycle.”

Perhaps something should be said about the chief differences today between Austrian economics and what we may call “orthodox” or “mainstream” economics. The difficulty here is that “mainstream” economics itself would be hard to define. Economists are still divided into a number of recognizable “schools”—neoclassicists, Keynesians, the Chicago school, the Lausanne school, and so on. The limits of space forbid me to go into the distinguishing doctrines of each of these schools. But one outstanding difference of the Austrians from all of these lies in their method of reasoning. The Austrians emphasize methodological individualism. That is, they not only begin by emphasizing human actions, preferences, and decisions, but individual actions, preferences, and initiatives. Mainstream economists are concerned with “macroeconomics,” with averages and aggregates; and those of the Lausanne school, trying to reduce economics to an “exact” science, and therefore seeking to quantify everything, are obsessed with complicated mathematical equations that try to stipulate the conditions of “general equilibrium.”

Hazlitt identified many of the key players of the Austrian School in his paper, including the founder, Carl Menger, Ludwig von Mises and Murray Rothbard. He also mentioned Friedrich Hayek, but noted:

  Because Mises so uncompromisingly rejected government interventionism in all its forms, he acquired the reputation of a “laissez-faire extremist” during most of his lifetime, and was scandalously neglected by the majority of academic economists. But because Hayek elaborated his own ideas in a more conciliatory form, his writings attracted more attention from the academic world, and he leapt into prominence in 1931 with his own contribution to the theory of the [business] cycle, Prices and Production, along lines similar to Mises’. The result is entitled to be called the “Mises-Hayek” theory.

Contrast this with a FEE video put out just late last year. The video features Prof. Steve Horwitz discussing "What Austrian Economics IS and What Austrian Economics Is NOT."

The video is shocking. He mentions Hayek (twice), who happens to be a Koch-brothers favorite because he is "non-contoverisial," or as Hazlitt put it,  "conciliatory," but fails to mention the founder of the Austrian school Menger, or Mises or Rothbard. Something Hazlitt wasn't afraid to do more than 30 years earlier at FEE. But even worse, Horwitz fails to clearly explain most of the important and unique  characteristics of the Austrian school that Hazlitt lists above. Instead, he discusses only limited Austrian price theory insights that someone from the Chicago School, such as Milton Friedman would feel comfortable supporting or shall I dare say,concepts that even Paul Krugman would support.

Read the above Hazlitt points once again, they are all important, and then listen to this horrific video and try and figure out how it could possibly be titled, "What Austrian Economics IS and What Austrian Economics Is NOT." And think about how much FEE has regressed since the days of Hazlit, Read and, yes, Mises, himself.


  1. Horowitz stated that Austrian Economics is a "set of claims" about how markets work. He seemed to be stressing the word "claims" throughout the presentation. This got on my nerves as a claim can be baseless, and leaving out any qualifier of the word "claim" all but implies that.

    It would be better to have said, if we must use approximately the same structure, that Austrian Economics is a set of propositions, developed by logic from basic assumptions that Austrians judge to be true.

    Or is it just me?