PRESTOPUNDIT -- "must readings" says Nick Schutz

Jean-Francois Revel on Europe's anti-American obsession.

America's dependence on foreign lending to subsidize spending we can't pay for may be reaching the end of its rope as foreign investors lose confidence in America's Ponzi scheme of massive public and private debt accumulation. Quotable:

The wide range of declining currency inflows into numerous types of US financial assets makes it almost certain that the dollar, beset by global security concerns, trade-war anxiety and the crushing weight of the twin US current-account and fiscal deficits, is heading for a serious plunge against other currencies.

The declining inflows, if they were to continue beyond the current month, would ripple ominously across the globe. A substantially cheaper dollar means serious trouble for the export-led economies that have traditionally depended on the United States as importer of last resort, making their goods more expensive. It is already causing a feeding frenzy in the shark-like world of currency traders, who have the ability to wreck entire economies through currency speculation.

The latest US Treasury Department figures, released on Wednesday, show that net capital inflows into the country fell precipitously, from about US$50 billion (42 billion euros) in August to $4.2 billion in September, the lowest since the near-collapse and bailout of the Long Term Capital Management hedge fund rattled markets in 1998.

The new data are raising fears that the US may have difficulty funding its current-account deficit, which ran at about $46 billion a month in the first half of the year and is expected to reach $550 billion by year-end. The fiscal deficit reached $374 billion in the fiscal year ended in October, by far the largest in US history, although off-budget expenditures could carry that as high as $450 billion.

With crucial foreign investor confidence waning, foreign purchases of US Treasury bonds have fallen to their lowest level on a monthly basis since February. The Treasury report said foreigners bought a net $5.6 billion of treasuries in September, down from $25.1 billion in August.

Foreigners engaged in net selling of "agency" debt sold by the quasi-governmental agencies Freddie Mac (Federal Home Loan Mortgage Corp) and Fannie Mae (Federal National Mortgage Association), both of which package and sell domestic home mortgages of various kinds, for the first time since October 1998, getting rid of a net $3.2 billion after buying $8.9 billion the previous month. The lack of interest in bonds was not replaced by buying of equities. Private accounts and central banks sold some $6.3 billion of equities.

Via Robert Blumen who writes:

Due to the status of the dollar as the world's reserve currency, Americans have enjoyed decades of consumption at the expense of the rest of the world. They export, we import. They save, we spend. In return, we send them dollars that ... the Fed create with their confetti machines. And what do foreigners do with these dollars? They turn around and invest them back into US securities, forming a capital inflow that offsets the current account deficit. They are also kind enough to fund a big chunk of our Federal deficit through their purchase of Treasury securities. But this process seems to be gradually slowing. Purchases of US Treasuries have fallen ... If this trend continues the dollar must suffer a depriciation.

Bill Hobbs serves up Carnival of the Capitalists #8.

Christopher Caldwell on the decline of France. Quotable:

Today France has the highest youth unemployment in Europe, at 26 percent ... Its employment rate of 58 percent is at the bottom of the developed world ... And this grim employment picture is worsened--some would even say caused--by a political inequity. Over the past decade, public-sector employees have been able to enrich themselves in ways that private-sector ones cannot. Government employees can retire after 37.5 years on the job, versus 40 for private workers; they get 75 percent of their salary as a pension, versus 62 percent in the private sector; and the salary in this calculation is based on the best-paid six months for government workers, versus an average of their last 25 years for workers in private industry. So the latter wind up subsidizing the former ...

Germany and France -- lenders of last resort for thugs and butchers.

The philosophy -- and neuroscience -- of colors.

Elliott Sober -- are evolutionary patterns inevitable?

Conceiving man's genetic -- and social -- ancestors:

Fossil bones record the history of the human form but they say little about behavior. A richer source on the way human social behavior evolved may come from chimpanzees, with whom people shared a common ancestor as recently as five or six million years ago.

From knowledge of chimp behavior, biologists can plausibly infer the social behavior of the shared human-chimp ancestor, and from that reconstruct the evolutionary history of human social behavior ...

A major surprise has been that chimps turn out to live in territories whose borders are aggressively defended by roving parties of males. Jane Goodall, who pioneered long-term studies of chimps at Gombe, at first believed she was watching a single peaceful community. But as researchers started to follow animals throughout the day and watch their interaction with others, they found that groups of male chimps went out on border patrols, ready to attack and kill the males of neighboring communities.

The males in each community are related to one another because they spend their lives where they were born, whereas the females usually migrate to neighboring communities soon after reaching puberty, a practice that avoids inbreeding. This patrilocal system, of a community based on male kin bonding, is unusual, but familiar to anthropologists because it is practiced by most hunter-gatherer societies.

The males' operational strategy seems to be to defend a territory as large as possible so as to improve the community's food supply, which is principally fruit, and thereby their reproductive success. Dr. Anne Pusey of the University of Minnesota has found that the larger the female chimp's home feeding area, the shorter the interval between births.

In two known cases, a chimp community has wiped out all of a neighbor's males. Though the females may be absorbed into the victors' community, the basic goal seems to be getting rid of a rival rather than capturing females, since male chimps often attack strange females.

Within a community, there is a male hierarchy that is subject to what primatologists euphemistically call elections. Alpha males can lose elections when other males form alliances against them. Losing an election is a bad idea. The deposed male sometimes ends up with personal pieces torn off him and is left to die of his wounds.

Very few other species live in male-kin-bonded communities with female dispersal. And only two practice lethal raids into neighbors' territory to kill off vulnerable enemies. "This suite of behaviors in known only among chimpanzees and humans," Dr. Wrangham and Dale Peterson write in their book Demonic Males ...

A community size of 80 to 100 people, typical among chimps and hunter-gatherers, is one feature inherited from the common ancestor. Another is a society formed on the basis of male kin bonding ...

Andrew Sullivan gets a letter on Hayek and gay marriage:

I have very mixed feelings about the push for gay marriage. Principal among my reservations is the notion proposed by Hayek and echoed by conservative thinkers such as Russell Kirk that the institutions, morals, customs and habits of society are not merely arbitrary choices. They have evolved, below the radar of abstract reason, across many generations and through many cultures. The social patterns that have survived until now are those that most guaranteed cultural fitness (in the evolutionary sense), and have thus created civilization as we know it. We must be very cautious in concluding then that we fully understand them, and more cautious about abandoning these customs simply because we can pose excellent intellectual arguments against them.

Much as some economists have recognized that no elite group of planners can ever equal the knowledge contained in the sum total of thousands of individual market decisions, no elite group of judges or legislators should feel so wise as to toss out what has taken thousands of years to develop. Why not? What harm could possibly come from such hubris? Well, that's the point, isn't it? We don't know the unintended consequences of creating massive social changes by fiat. And we will only find out by engaging in an experiment that cannot be undone ...

The three factors which have taken today's Republican Right "far from the conservatism of most of the 20th century".

Gridlock -- it beats the heck out of one-party rule by Republicans.

Reason's Nick Gillespie takes on Hayek and gay marriage:

In The New Republic in 1996, during the debate over the awful Defense of Marriage Act, [Jonathan] Rauch argued that Hayek, whom he admires greatly, would indeed have been in the conservative locker room on this issue. Rauch wrote, "The Hayekian view argues strongly against gay marriage. It says that the current rules may not be best and may even be unfair. But they are all we have, and, once you say that marriage need not be male-female, soon marriage will stop being anything at all. You can't mess with the formula without causing unforeseen consequences, possibly including the implosion of the institution of marriage itself."

However, I think Rauch and [Jonah] Goldberg are mistaken. Hayek is ambivalent on many things (and inscrutable on many others). But as I argued in this 1996 piece for Reason, attempts such as The Defense of Marriage Act --and current attempts to keep states from having to recognize same-sex marriages performed in other states -- exemplify an anti-Hayekian view toward social evolution:

F.A. Hayek defined a free society as one in which people "could at least attempt to shape their own li[ves], where [they] gained the opportunity of knowing and choosing different forms of life." Hayek emphasized that such individual empowerment is absolutely necessary to maintain an "extended order" vibrant enough to generate opportunities for its members. It is the means by which society adapts to constantly changing circumstances, needs, and desires. He also underscored that the outcomes of such a "discovery" mechanism would not always be "good" or "just," in either a moral or utilitarian sense, but that trying to "wrest control of evolution...only damages the functioning of the process itself."

While stressing that social institutions --themselves the result of an evolutionary process-- cannot and should not be simply thrown out and redesigned at will, Hayek insisted that we run terrible risks when we seek to limit the choices people make. That's because the act of choosing is the very basis of a flourishing society.

... [The Defense of Marriage Act] is designed to foreclose governmental recognition of gay marriage. It is a misguided attempt to define for all time an institution that is constantly, if slowly, evolving. Its supporters may think they can stop social evolution in its tracks and enforce a singular vision of the good society. But such people misunderstand the very nature of a free society and its dependence on choice and change.

Read the full 1996 Gillespie article here.

Some admire the gay-marriage ruling in Massachusetts. Some don’t. But surely the heart of the story is the stupefying arrogance of the state’s Supreme Judicial Court. If you are going to stretch a state’s constitution beyond all previous understanding, and impose what many people believe is a fundamental redefinition of marriage, you don’t do it in a 4-to-3 vote ...

Why do judges behave this way? One reason is “landmarkism.” The loudest applause from the legal academy tends to come after a far-reaching allegedly progressive decision unsupported by public opinion, and with no real basis in the U.S. Constitution or case law. No judge gets to be admired by the legal and media elites by simply following law and precedents. No glamour there. You have to make something up ...

more John Leo.

Fear of a Right planet -- more Brian Anderson on the how conservatives and true liberals have smashed the Leftist media monopoly.

Stalinist fellow-traveller Walter Duranty of the NY Times as victim. Will the whitewash of leftist history never end?

George W. Nixon? Are we reliving the economics of the early 1970s? Well, G.W. is spending to get re-elected like a Nixon And it appears the bond market may be preparing for future stagflation. I don't remember well -- was Nixon also into trade wars?

George Mason economist Peter Boettke on Bruce Caldwell's Hayek's Challenge:

I just want to say to the readers of this list [HAYEK-L] that we all have to take off our hats to Bruce [Caldwell] for this book [Hayek's Challenge: An Intellectual Biography of F. A. Hayek] l-- it is wonderful and a real page turner. It is by far the best thing written on Hayek and a real contribution to not only Hayek studies, but to Austrian economics in general.

I don't have a blog, but I do have a What's New paper off my webpage (due to numerous request from readers of my webpage to keep them up to date on my whereabouts). I wrote the following on Bruce's book ---

But on the plane to San Antonio I encountered the best book written in Austrian economics in a generation -- Bruce Caldwell's Hayek's Challenge (University of Chicago Press, 2003). Caldwell, as to be expected, is a master historian of thought and constructs a narrative of Hayek's evolution of a thinker that is simply better than any alternative account. And, in the process, Caldwell tells the story of the development of Austrian economics from Menger to today better than I have ever seen. This is a phenomenal work of scholarship and a beautifully written book. This is the history of economics as it should be written --- a subtle treatment of economic doctrine, contextualization of the evolution of argument within its broader history of philosophical, political and economic debates, and engagingly written. As far as economics goes, this book is a page turner. It is nothing short of a brilliant. Congratulations to Bruce Caldwell for writing in my opinion the best book of 2003, and perhaps the best book in Austrian economics in a generation.

During the Dean Smith days at UNC it used to be said that if God wasn't a Tarheel than why is the sky Carolina Blue, I think that motto for the hour should be that if God supports the Austrians (because of truth and justice) than Bruce should be seeing lots of green ---- buy this book, enrich your mind and send a signal to publishers and to Bruce that such work is highly valued by the community of scholars, and interested laymen. Bruce has proven without a doubt that you can write an engaging book, tell the truth and be subtle about economic reasoning as well. Caldwell's book passes the "wow" test when few books really do, and in doing so sets a standard for the rest of us to live up to.

Boettke is editor of The Review of Austrian Economics

I'm back. The server had a CGI problem -- now fixed.

Jonah Goldberg gets a letter from Hayek scholar Steve Horwitz on Hayek and gay marriage:

I think your state U poli sci prof has Hayek right. I've wanted to write a Hayekian defense of gay marriage paper for a few years, and eventually will. The key to the argument, it seems to me, is that Hayek has a quasi-functionalist view of social institutions - institutions have evolved for reasons, namely that they fulfill some social function. But in the "sifting" process of determining how a particular institution comes to be, certainly human judgments about the abililty of alternate institutions to do the job matter. The long-standing prohibition on homosexual acts/marriage may well be due to incorrect facts that people have held, and now with better factual knowledge, the old prohibitions aren't seen to perform their function any more, or better yet: allowing people to engage in the prohibited behavior doesn't undermine the function of the broader institution.

Perhaps given the economic circumstances of a poorer, agricultural world, and the state of social and scientific knowledge, the various prohibitions on homosexuality made sense to people at the time, and perhaps they made sense in reality. But in a different era, with different knowledge, Hayek would be the first to say that the institution can and should evolve. After all, how different is it from prohibitions on interracial marriage, along these lines? Didn't many people believe that the factual knowledge supported an inequality of the races? Didn't changes in our factual knowledge contribute to the end of such laws?

Lastly, as early as the early 70s, Hayek had a footnote about homosexual acts being an example of behavior that should not be prohibited, and spoke specifically of the British commission who examine it in the 50s or 60s (I don't have my book with me). Also, Hayek argued that the job of the social scientist was to assess critically each institution of society, but just not all of them at once. Yes, he argued for the importance of traditions, but he did not revere them. I think the gay marriage issue is a case where his evolutionary half would have won out over his traditional half.

Would Hayek approve gay marriage? Worth noting -- portions of Hayek's The Fatal Conceit were written by the editor of the book -- who happened to have been gay -- when Hayek fell ill before the final completion of the manuscript. There has yet to be a full scholarly accounting of these non-Hayek passages in the book, which can be found throughout the text.

Hayek biographer Alan Ebenstein has called for a new edition of the book -- one actually written by Hayek -- and I'm in complete support of the idea. Until then, the publisher should be printing some sort of "reader beware" notice in the book, warning readers that all of the ideas in the book are not necessarily those of Friedrich Hayek.

Ebenstein discusses the Bill Bartley / Fatal Conceit matter in his new book Hayek's Journey

The appalling Paul Krugman of Princeton now gives us VP of the U.S. Richard Cheney as Adolf Hitler. Thanks Paul.

UPDATE: The picture of the cover has just been yanked from Amazon's web page for Krugman's book.

The first 17 volumes of the complete works of Ludwig Wittgenstein are now being published, and to the mark the event -- the premiere of Wittgenstein's only known musical work.

The facts vs. lefty historians on FDR's dismal economic performance as President -- by Jim Powell, author of FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression.

Bush's Budget Betrayal. Enough said.

Just an accident? When the news is concocted by a socialist institution is it any wonder that the news comes out deeply biased against America? Well, it's no accident if you're talking about the increasingly dubious BBC. David Frum reports. Quotable:

Before the three of us got to business, “Newsnight” broadcast an introductory video clip. It was that clip that was my perfect moment of news slanting. A reporter at the gates of Buckingham Palace told us that a small crowd was waiting for President Bush, and that its mood was mixed. Cut to clips from three members of that crowd: all negative. (One of the negative voices was American – that was apparently all the balance the broadcaster required.) Now here’s the punchline: I recognized one of the three – I’d seen him earlier that day at an anti-Bush rally in Lincoln’s Inn Fields. In the interim, he’d changed into casual tourist clothes – and the BBC was now presenting him as a representative of ordinary British opinion.

I pointed out this distorting selection bias in my first answer to one of moderator Jeremy Paxman’s questions. He was very impatient with me. But I persisted. How can you do a program that purports to study why British people are so hostile to President Bush – without taking note of the state broadcaster’s role in creating and magnifying that hostility? The BBC is not just reporting this story; it is in many ways the story’s most important actor.

Sabine Herold leads a freedom revolution in France. France? Yes, France:

Some conservatives liken Sabine Herold, a 22-year-old student, to Joan of Arc, and others nickname her "Mademoiselle Thatcher" after she took on France's left-wing labor unions this summer. Many in France see her as a symbol of a growing revulsion among young French libertarians against a ruling class that punishes excellence and rewards mediocrity.

"A generation of reformers, who can't bear the blocking of the [French] society anymore, is emerging. There will be soon an electoral power of people who really want to change the status quo," said Miss Herold.

In March 2001, she co-founded the group Liberté, J'Ecris Ton Nom, or "Liberty, I Write Your Name," which now has about 2,000 adherents. "We are in favor of the freedom of business, but we consider that the market is not an end in itself," Miss Herold told The Washington Times. "It is a means in the duty of individual liberty."

She first came to public attention in May during a nationwide strike that had paralyzed her hometown in France's Champagne region, Reims. In the shadow of the Notre Dame Cathedral — where Joan of Arc once crowned a king — Miss Herold began denouncing the bus drivers, schoolteachers and other union members who were striking for pension reform.

The French newspapers reported that about 2,000 people cheered and applauded as she spoke. Within a month, she stood before an estimated 80,000 cheering Frenchmen in Paris with the same message. She castigated the trade unions as "terrorists of the social action" and "strongholds of egoist conservatism."

"In France, we are unable to have negotiations before strikes," she said. "The principle of preventive strikes prevails. The contract proposal is still not written, and there are already union members in the streets."

When the British news media found out, they crowned Miss Herold the new symbol of the free-market conservatives in Europe ...

Born into a family of teachers in a small village near the northern Champagne-producing city of Reims, she said she was not interested in politics until only two years ago. Lots of reading, including works of Alexis de Tocqueville and her favorite, the Nobel economics prize-winner Friedrich Hayek, inspired her political ideas.

"Libertarianism is not anarchy. It implies liberty and responsibility" she said ...

HAYEK STUFF. Kelson, Hayek, and the Economic Analysis of the Law by Richard Posner. Or read it in PDF (recommended).

How awful are the human beings who run the California legislature? Well, this awful. The more I learn of these folks, the more I come to conclude that some of these folks are just flat out hideous people. And no wonder that 80% of Californians simply don't like them, a truly astounding negative opinion rating for a central institution of society.

Euro reaches all-time high against the U.S. dollar. As the U.S. dollar continues to loose its value, Gold soars in value topping $400 an ounce for the first time since 1996.

Pumping Iron, the film which made Arnold Schwarzenegger a star, is now available again -- newly released on DVD with new material, including 2003 interviews with Schwarzenegger and the director George Butler.

I well remember sitting with the football team in Junior High watching the film -- for some reason the pot-smoking scene left no impression on me. We were just at the point where coaches and athletes had begun to appreciate the benefits of serious weight training. Even so, many of us kids were still a bit uncomfortable with the whole "body-building" thing. How things quickly things changed in the next half-dozen years. By the time I was in college more than a few of us where lifting -- not as a means of training for some other sports -- but as an end in itself. What most of us got out of it was a bit of recreation with buddies -- only a rare few trained enough to really turn the heads of females. Indeed, I was in better shape after a summer slinging a quarter side of beef 10 hours a day than I ever got lifting weights in a gym. There were simply too many good books to be read for that.

Linda Chavez is bringing down the hammer on racist segregationists across the country. Who are these folks? Did you guess the academics in charge of America's leading colleges and universities?

If you've had trouble visiting PrestoPundit or the various other Hayek Center web sites yesterday or today, my apologies. The Hayek Center server has been hit with a DOS attack over the last two days. With luck this too will pass.

Fallacious economic thinking encourages the Fed to open wide the floodgates of inflation. Bruce Bartlett has the story:

The Fed is now arguing that these [empirical] indicators [of yet more inflation] do not forecast inflation mainly because there is unused capacity. For example, on Nov. 6, Fed Governor Ben Bernanke, said this: "I believe that the current low level of inflation, the expansion of aggregate supply by means of ongoing productivity growth, and the high degree of slack in resource utilization together leave considerable scope for a continuation of the currently accommodative monetary policy without undue risk to price stability."

Last week, Michael Moskow, president of the Federal Reserve Bank of Chicago, made a similar point. "Economic output is determined by an economy's available labor and capital resources and their productivity," he said. "If actual economic output persistently lingered below its potential, which economists refer to as an output gap, inflation would decline."

Continuing, Mr. Moskow said, "In the past two years, the unemployment rate has increased and capacity utilization rates in the U.S. have declined. Both movements suggest that the level of actual output has been falling short of potential, so there is an output gap."

Translated into English, the Fed is saying that it will continue pumping up the money supply and maintaining easy credit conditions for a "considerable period," as it said in a recent statement. Its view is that the economy is like a bucket that has been partially drained. Until the bucket is full again, there cannot be inflation. Therefore, the Fed will continue stimulating demand indefinitely.

The problem with this theory is that it is not borne out by experience. In the 1970s, there was high unemployment and low capacity utilization, yet high inflation. A key reason is that labor, plant and equipment are not homogeneous. When demand is stimulated, it may require workers with different skills in different places to satisfy. Similarly, producers may not have the right equipment to make the things people want. Therefore, new investment must take place first before production can rise.

Although the Fed's capacity utilization index may be at a historical low of about 75 percent, much of that unused capacity is worthless. It is malinvestment that simply must be written off. This means that inflation could easily reemerge well before capacity hits 82 percent, generally considered the tipping point. It also means that unused capacity is no barrier to new investment.

I believe that the message of markets, which is showing signs of inflation, is a more accurate indicator of future prices than the capacity utilization index or the unemployment rate. If the Fed continues easing, it runs the risk letting the inflation genie out of the bottle. A little tightening now would be prudent, forestalling more severe tightening later.

Margaret Thatcher discusses Friedrich Hayek (from the newly opened online archive of the papers of Margaret Thatcher.):

I am a great admirer of Professor Hayek. Some of his books are absolutely supreme— "The Constitution of Liberty" and the three volumes on "Law, Legislation and Liberty" — and would be well read by almost every hon. Member .. source

The Second World War, even more than other wars, had given an enormous boost to government control. Indeed, oddly enough when you consider that it was fought against totalitarian states, the War provided in many people's minds convincing proof that a planned society and a planned economy worked best. The sixties and seventies in Britain were decades during which this illusion was gradually, painfully dispelled. Social and economic planning led to larger, cumulative failures, and these in turn produced disillusionment and despair - even among those who once thought that socialism could achieve heaven on earth.

As the results of all this multiplied, commentators spoke wearily of the so-called "British disease". By this they meant an affliction of restrictive practices, low productivity, trade union militancy, penal taxes, poor profits, low investment - in short economic decline. And hardly less corrosive was the mentality which underlay, and which was itself encouraged by that decline. To put it simply, there was a resigned acceptance that Britain was finished.

This discouraged some politicians on the Right, who felt that damage limitation was the only sensible strategy, that managing decline made best sense. But a number of us felt differently. We did not believe that Britain was down, let alone out. We felt that it was socialism that had failed the country, not the country that had failed socialism. And we were determined to prove it.

Let me emphasise again: my journey along this path was never a solitary one. Keith Joseph gave the best political analysis of what was wrong, and what had to change. But behind him lay the wisdom of people like Friedrich Hayek, bodies like the Institute for Economic Affairs, and a host of thinkers who had swum against the tide of collectivism which at one time threatened to sweep away our national foundations.

If I were to use one phrase to sum up what had to be done - and what indeed was done - it is that we had to "reverse the ratchet" ... source

Not surprisingly, therefore, the most powerful critique of socialist planning and the socialist state which I read at this time [as a student at Oxford] and which I have returned to so often since, F.A. Hayek's The Road to Serfdom, is dedicated famously "To the socialists of all parties".

I cannot claim that I fully grasped the implications of Hayek's little masterpiece at this time. It was only in the mid 1970s, when Hayek's works were right at the top of the reading list given me by Keith Joseph , that I really came to grips with the ideas he put forward. Only then did I consider his arguments from the point of view of the kind of state Conservatives find congenial - a limited government under a rule of law - rather than from the point of view of the kind of state we must avoid - a socialist state where bureaucrats rule by discretion. At this stage it was the (to my mind) unanswerable criticisms of socialism in The Road to Serfdom which had an impact. Hayek saw that Nazi-ism - national socialism - had its roots in nineteenth century German social planning. He showed that intervention by the state in one area of the economy or society gave rise to almost irresistible pressures to extend planning further into other sectors. He alerted us to the profound, indeed revolutionary, implications of state planning for Western civilisation as it had grown up over the centuries.

Nor did Hayek mince his words about the monopolistic tendencies of the planned society which professional groups and trade unions would inevitably seek to exploit. Each demand for security, whether of employment, income or social position, implied the exclusion from such benefits of those outside the particular privileged group - and would generate demands for countervailing privileges from the excluded groups. Eventually, in such a situation everyone will lose. Perhaps because he did not come from a British Conservative background and did not in fact ever consider himself a Conservative at all, Hayek had none of the inhibitions which characterised the agonised social conscience of the English upper classes when it came to speaking bluntly about such things.

Hayek was unusual and unpopular, but he was not quite alone in root and branch criticism of socialism. I also read at this time and later the polemical journalist Colm Brogan 's writings. Where Hayek deployed philosophy, Brogan relied on withering irony and devastating wit. source -- from Margaret Thatcher The Path to Power, pp. 50-51.

The kind of Conservatism which he and I — though coming from very different backgrounds — favoured would be best described as "liberal", in the old-fashioned sense. And I mean the liberalism of Mr Gladstone not of the latter day collectivists.

That is to say, we placed far greater confidence in individuals, families, businesses and neighbourhoods than in the State.

But the view which became an orthodoxy in the early part of this century — and a dogma by the middle of it — was that the story of human progress in the modern world was the story of increasing state power.

Progressive legislation and political movements were assumed to be the ones which extended the intervention of government.

It was in revolt against this trend and the policies it bred that Hayek wrote The Road to Serfdom, which had such a great effect upon me when I first read it — and a greater effect still, when Keith suggested that I go deeper into Hayek's other writings.

Hayek wrote:

"How sharp a break — with the whole evolution of Western civilisation the modern trend towards socialism means — becomes clear if we consider it not merely against the background of the nineteenth century, but in a longer historical perspective. We are rapidly abandoning not the views merely of Cobden and Bright, of Adam Smith and Hume, or even of Locke and Milton, but one of the salient characteristics of Western civilisation as it has grown from the foundations laid by Christianity and the Greeks and Romans. Not merely nineteenth- and eighteenth-century liberalism, but the basic individualism inherited by us from Erasmus and Montaigne, from Cicero and Tacitus, Pericles and Thucydides is progressively relinquished."

So, Ladies and Gentlemen, against that background, it is not surprising that the Left claimed all the arguments of principle, and that all that remained to the Right were the arguments of accountancy — essentially, when and how socialism could be afforded.

It was this fundamental weakness at the heart of Conservatism which ensured that even Conservative politicians regarded themselves as destined merely to manage a steady shift to some kind of Socialist state. This was what — under Keith's tuition — we came to call the "ratchet effect".

But all that was not just bad politics. It was false philosophy — and counterfeit history.

Let me remind you why this is so .. source

British Chancellor of the Exchequer Nigel Lawson spreads word of Friedrich Hayek and the new Conservative revolution to the Swedes in 1980.

And here is a draft of Thatcher's Conservative Manifesto from 1978 (pdf).

Both documents are from the newly opened online archive of the papers of Margaret Thatcher.

Here's the new governor's web site. Maria has one too.

(via Angry Clam)

Have the courts gone to far? The latest outrage from the Federal circuit courts. Quotable:

A federal judge today rejected an appeal on behalf of the American people to restore 'sovereignty' to the citizens of the United States. In a 12-page ruling the unnamed judge said, "the United States is governed by laws, not by men, and must therefore be ruled by those appointed to interpret the laws, not by the elected representatives of the people."

The plaintiffs, emboldened by the Bush administration's decision to more rapidly return power to the citizens of Iraq, had cited the Declaration of Independence and Article I, Section 1 of the U.S. Constitution to justify their contention that government derives its power from the "consent of the governed" through their elected representatives. They also argued that Article III, Section 2, calls on the courts to decide cases under the laws created by Congress, rather than to create law using cases brought by activists.

However, the judge found neither of those assertions compelling, and ruled that "the United States will continue to live under the sovereignty of the judiciary .. "

MORE

The New York Times Review of Leftist Books.

A fascinating insiders look at Ronald Reagan.

Jim Puplava on good inflation, bad inflation and the current trade cycle. Great stuff, lots of handly graphs. (via Mises Econ Blog)

As governor Arnold Schwarzenegger has cut taxs, called the legislature back into session, and blocked all pending state regulations. Not bad for a days work.

The LA Times staked its reputation on the claim that no governor could repeal the 300 percent increase in the car tax -- but in the first hours of his governorship, Arnold Schwarzenegger did just that, adding yet another pile of shreds to what little is left of the journalistic reputation of the Times.

Nick Denton is making several thousand dollars a month with his various blogs -- and that's not even counting his new sex blog, which pulled in a million plus visitors in its first week.

Still working on my first 100,000 here at PrestoPundit, perhaps because you'll find a lot more Hayek than sex -- althought the two have been known to get friendly at this site.

Racists can be identified with a brain scan researchers at Dartmouth claim.

The truth about academia, part II. Quotable:

State Sen. John Andrews .. has begun a formal probe into whether Colorado's 29 colleges and universities have policies to protect academic freedom. In a letter to the presidents of each institution, Andrews asked for responses by Dec. 1 to four questions, including what steps are being taken to promote intellectual diversity in the classroom and in the recruitment of faculty ..

"I would like to believe that the necessary protections are in place," Andrews said in the letter. "I must admit, however, that in light of a stream of recent communications I've received from individuals on various campuses across the state, I am not so sure." Andrews said students and faculty have told him they fear for their grades or their careers "if they don't keep a lid on their patriotism or their faith."

Anyone who's spent much time in the bowels of academia can't doubt these letters are both authentic and chillingly accurate representations of realities on campus.

Lingering southern racism likely cost Bobby Jindal the governor's office in Louisiana.

The leftist press (e.g the NY Times) has a bad habit of stamping ideological labels on those it doesn't much like. David Brady and Jonathan Ma present a decades worth of data to prove it.

"Anti-Americanism in the Islamic world and anti-Americanism in Europe are in fact linked, and both bear an uncanny resemblance to anti-Semitism ... "

P.J. O'Rourke is reporting on the war in the December issue of The Atlantic, which includes this brilliant bit of writing / reporting:

Aid seekers in England would queue automatically by needs, disabled war vets and nursing mothers first. Americans would bring lawn chairs and sleeping bags, camp out the night before, and sell their places to the highest bidders. Japanese would text-message one another, creating virtual formations, getting in line to get in line. Germans would await commands from a local official, such as the undersupervisor of the town clock. Even Italians know how to line up, albeit in an ebullient wedge. The happier parts of the world have capacities for self-organization so fundamental and obvious that they appear to be the pillars of civilization ... But here — on the road to Ur, in the Tigris-Euphrates Valley ... nothing was supporting the roof ...

There was no reason for people to clobber one another. Even assuming that each man in the riot — and each boy — was the head of a family, and assuming the family was huge, there was enough food in the truck. Mohammed al-Kandari, a doctor from the Kuwait Red Crescent Society, had explained this to the Iraqis when the trailer arrived.... Al-Kandari had persuaded the Iraqis to form ranks. They looked patient and grateful, the way we privately imagine the recipients of food donations looking when we're writing checks to charities. Then the trailer was opened, and everything went to hell ...

O'Rourke is interviewed here. Quotable:

The problems of the Middle East are the problems of mankind since we came out of the trees. They just happen to be a little more intense. When you look at a chaotic region like the Middle East, what you're really seeing is most of human history, and some parts of America and some parts of Europe and a few parts of Asia are glaring exceptions. The kind of peaceful, productive, incredibly wealthy life that we live in these few areas around the world—this has only been going on for a nanosecond as time goes. It's so exceptional I'm not even sure what it means. The whole world might degenerate back into the Middle East, because that's what it's always been. And you can't solve the problem of the Middle East, because it's not a problem, it's a condition. It's the normal condition of mankind.

If you read Donald Kagan's The Peloponnesian War, it's all there. It's been going on like this, time out of mind. Little islands of human happiness, peace, and prosperity are so exceptional at this point in history that I'm not even sure we can draw lessons from them.

(link via Instapundit)

Bruce Caldwell's Hayek's Challenge: Intellectual Biography of F.A. Hayek is now available from Amazon. Caldwell is the leading academic authority in America on the evolution of Hayek's economic ideas. Here's more on the book:

Buy it.

"Hayek's Challenge represents a career's worth of thinking and writing on F. A. Hayek's contributions to the social sciences. Because of the breadth and depth of Hayek's work, evaluating it or even summarizing it is a reach for anyone; yet, because of his own specialization in methodology and his willingness to delve into fields well outside his own, Caldwell is uniquely qualified to undertake the challenge. His book has to be judged a dramatic success. Hayek's Challenge should easily gain a reputation as one of the most and possibly the most significant contributions to the literature on F. A. Hayek." — Roger Garrison, author of Time and Money: The Macroeconomics of Capital Structure

"A highly original work. Caldwell's scholarship is impeccable, and in fact extraordinary. Written lucidly and eminently readable, Hayek's Challenge is likely to become one of the leading works in the field. It will be consulted again and again for the wealth of incidental information that it contains." — Israel M. Kirzner

Table of Contents
Acknowledgments
Introduction

I. The Austrian School and Its Opponents---Historicists, Socialists and
Positivists
1. Menger's Principles of Economics
2. The German Historical School
3. The Methodenstreit
4. Max Weber and the Decline of the Historical School
5. Positivism and Socialism

II. Hayek's Journey
6. Hayek in Vienna
7. Monetary Theory and Methodology
8. Hayek at the London School of Economics
9. Some Methodological Debates of the 1930s
10. "Economics and Knowledge" and Hayek's Transformation
11. The Abuse of Reason Project
12. Individualism and the Sensory Order
13. Rules, Orders and Evolution

III. Hayek's Challenge
14. Journey's End---Hayek's Multiple Legacies
15. Epilogue: A Meditation on Twentieth-Century Economics

Appendixes
Bibliography
Index

From the publisher:

Friedrich A. Hayek is regarded as one of the preeminent economic theorists of the twentieth century, as much for his work outside of economics as for his work within it. During a career spanning several decades, he made contributions in fields as diverse as psychology, political philosophy, the history of ideas, and the methodology of the social sciences. Bruce Caldwell -- editor of The Collected Works of F. A. Hayek -- understands Hayek's thought like few others, and with this book he offers us the first full intellectual biography of this Hayek's Challenge: Intellectual Biography of F.A. Hayek by Bruce Caldwellpivotal social theorist.

Caldwell begins by providing the necessary background for understanding Hayek's thought, tracing the emergence, in fin-de-siècle Vienna, of the Austrian school of economics--a distinctive analysis forged in the midst of contending schools of thought. In the second part of the book, Caldwell follows the path by which Hayek, beginning from the standard Austrian assumptions, gradually developed his unique perspective on not only economics but a broad range of social phenomena.

In the third part, Caldwell offers both an assessment of Hayek's arguments and, in an epilogue, an insightful estimation of how Hayek's insights can help us to clarify and reexamine changes in the field of economics during the twentieth century. As Hayek's ideas matured, he became increasingly critical of developments within mainstream economics: his works g ew increasingly contrarian and evolved in striking -- and sometimes seemingly contradictory -- ways. Caldwell is ideally suited to explain the complex evolution of Hayek's thought, and his analysis here is nothing short of brilliant, impressively situating Hayek in a broader intellectual context, unpacking the often difficult turns in his thinking, and showing how his economic ideas came to inform his ideas on the other social sciences.

Hayek's Challenge will be received as one of the most important works published on this thinker in recent decades.

Hayek's Challenge: Intellectual Biography of F.A. Hayek by Bruce Caldwell

John Leo on the end of the leftist media near monopoly:

The [leftist] worldview still dominates the news business, the arts, the entertainment world, publishing, the campuses, and all levels of schooling. It’s the media and educational status quo. But five years ago, CBS probably could have gotten away with a cheap-shot miniseries on the Reagans. Now it can’t ..

[One] reason for the ditching of the Reagan miniseries is that the conservative media world is now good at gang tackling. From Matt Drudge’s Drudge Report (which framed the issue of the miniseries) to Fox, the bloggers, talk radio hosts, and the columnists, everybody piled on. New York Times columnist David Brooks touched on this point some time ago, writing that the new conservative media have “cohered to form a dazzlingly efficient ideology delivery system that swamps [leftist] efforts to get their ideas out.” For liberals, this is an ominous development ...

I once asked a thoughtful [leftist] friend: “Why does the message of the left seem to penetrate the whole of pop culture?” His answer -- “We make the culture; you don’t” -- doesn’t seem so obvious now.

The showpiece of [antileftist] humor is one that appalls a good many conservatives: South Park, Comedy Central’s wildly popular cartoon saga of four crude and incredibly foul-mouthed little boys. The show mocks mindless lefty celebrities and takes swipes at the gay lobby and the abortion lobby. Some examples: Getting Gay With Kids is a homosexual choir that descends on the school. And the mother of one South Parker decides she wants to abort him (“It’s my body”), despite the fact that he’s 8 years old. The weekly disclaimer on the show says it is so offensive “it should not be viewed by anyone.” This is a new paradigm in pop culture: conventional [leftist thinking] is the old, rigid establishment. The [antileftists] are brash, funny, and cool ...

Some of the new conservative success is due to the rise of a large crop of commentators the left has not been able to match. Mostly young and often very funny, they include Mark Steyn, Jonah Goldberg, Michelle Malkin, and Jeff Jacoby. But most of the conservative gains have been in new media. Fox News’s large audience skews young, and half its viewers are either [leftist] or centrist. So Fox isn’t just preaching to the choir. It’s exposing nonconservatives to conservative ideas.

As mentioned here several times, the “blogosphere” -- the world of Internet commentators -- tilts strongly to the right. Bloggers like Andrew Sullivan, Mickey Kaus, and Glenn Reynolds of InstaPundit have a heavy impact. No excess of the [leftist] media seems to escape their attention. Among other things, they have mercilessly attacked Paul Krugman, the New York Times columnist and idol of America’s angriest [leftists]. It has been an amazing and, I think, largely successful campaign of informed detraction.

It was obvious that the democratization of the media would bring new voices into the field, but who knew that so many of those voices would be conservative, libertarian, or just cantankerously opposed to entrenched [leftist] doctrine? The conservative side is far from winning the culture wars, but the debate is broader and fairer now. The near monopoly is over.

Get your hot, juicy Carnival of the Capitalists hosted this week by Professor Bainbridge.

A highlight of this weeks Carnival -- Steve Verdon on The Theory of the Second Best.

George Will on steel tarriffs and Bush's Trade War. Quotable:

Thirteen months after winning an excruciatingly close election, Bush proved himself less principled than Bill Clinton regarding the free-trade principles that have fueled world prosperity since 1945 ...

Since then various studies, not all of them disinterested, have reached the same conclusion: By raising the cost of goods manufactured from steel, the tariffs have cost more jobs than they have saved. Duh.

It's Bruce Bartlett vs. the IMF on Russia and the flat tax. Bartlett provides lots of good links, as usual.

OSAMA BIN LADEN and Saddam Hussein had an operational relationship from the early 1990s to 2003 that involved training in explosives and weapons of mass destruction, logistical support for terrorist attacks, al Qaeda training camps and safe haven in Iraq, and Iraqi financial support for al Qaeda--perhaps even for Mohamed Atta--according to a top secret U.S. government memorandum obtained by THE WEEKLY STANDARD ...

MORE.

The Bear Flag League rallies behind Calblog's battle with a sleazy company and its cretin attorneys.

Consumer spending down, inflation surges. So much for "the Federal Reserve's fears about deflation, an economically dangerous and widespread price decline". Note well how dubioius economic theory has become economic fact in the reporting of this AP writer.

Once again with feeling: when productivity rises, and the money supply is not devalued, prices will and should -- quite harmlessly -- fall. More goods produced for less cost -- purchased by the same dollars. This is "deflation" and there is not a thing in the world "dangerous" about it.

Broadband internet connection -- $45 month

Web server -- $25 month

MovableType software -- free

Membership in the California Bear Flag League -- free

Linkage from CalBlog, Instapundit, The Washington Post, the California Insider, Rough&Tumble, The LA Times, and throughout the blogosphere -- free

Blogging the removing a sitting governor from office -- priceless

And the winner is ... California declares Arnold Schwarzenegger winner of the recall election. Quotable -- "The number of votes cast Oct. 7 exceeded by 1.6 million the number of people who voted in the November 2002 general election." Schwarzenegger becomes governor of California this Monday.

.. where does a downward spiral of politicization [of the law] end? What happens when we complete the conceptual reorientation and see judging as a mere extension of ordinary politics? Nothing good. The bottom of a downward spiral of politicization is a thoroughly politicized judiciary. We know what that looks like. It exists in odd corners of the United States, where lawyers know that winning--even in a run-of-the-mill tort case--is almost entirely a function of how much you have contributed to the local political machine. A thouroughly politicized judiciary is the norm in much of the third world, and the result is that the transparency required for well-functioning markets cannot be achieved--at enormous costs in human welfare. In a thoroughly politicized judiciary, every case is a patronage opportunity or a chance to score political points.

-- the money quote from an important post by Legal Theory blogger Larry Solum. Solum has a host of links to the large discussion this topic has generated in the blogosphere.

Instapundit has great blogosphere coverage of the Ninth District's Commerce Clause decision ruling that the Feds can't prohibit homemade machine guns including links to Legal Theory Blog and the Volohk Conspiracy. Note well -- the decision comes from a three court panel headed by Judge Kozinski.

Kenneth Timmerman, author of Preachers of Hate: Islam and the War on America, on what's gone wrong in the Arab world, including these important remarks on the homeland of the terror war against Americans:

The Saudis express surprise that they are under attack. And yet, just as Arafat has done in the Palestinian Authority, they are responsible for spawning a culture of race-hatred, bigotry and violence that is now reaching back to consume them. Saudi school books teach young Saudis that there is a “malicious Crusader-Jewish alliance striving to eliminate Islam from all the continents.” They teach their children that “the West in particular is the source of the past and present misfortunes of the Muslim world, beginning with the Crusades.” Saudi government-appointed clerics exhort young Saudis to murder Jews and Christians.

The Saudis appear to have woken up to the fact that their regime has become a target of terrorist attack. But there will always be more terrorists until the Saudis change the basic teachers of their schools and mosques, which continue to breed hate in new generations of children.

Larry Kudlow is channelling interest rate theorist Knut Wicksell. Quotable:

Interest-rate futures markets are signaling a higher Fed policy rate next year, perhaps a fed funds rate as high as 2.5 percent. But there is no need for the Fed's policy rate to be set at a deep discount to the economy's natural rate.

The combination of the Fed's successful easy-money program and the Bush tax cuts have pushed real investment returns, real profits, real wages and real economic growth nicely upward. Hence, the so-called natural (or real) interest rate is likely to rise in the period ahead. The Fed should follow this and gradually shift its policy rate from highly accommodative to neutral.

Look for the central bank to begin this process in March or April of 2004. Assume a Greenspanian gradualist approach: one-quarter-point at a time.

And now back to the worrywarts: As Fed rate-hiking proceeds, economic activity will accelerate, not decline. Working Americans will make use of higher after-tax returns by spending and investing ahead of future financing rate hikes. This is the reverse of what happened in 2001 and 2002, when falling rates caused folks to defer activity until they could capture the lowest possible financing costs for homes, businesses, or personal use.

Interest-rate jitters seem to have infiltrated the stock market sometime in late June. But rising interest-rate expectations have not inflicted any real damage on the market's optimism. Importantly, rate rises will come from higher real returns, not higher inflation.

Sure, some will argue that faster economic growth is inflationary, but this is a classical demand-side view. Supply-siders know that more people working, investing and prospering cannot possibly be inflationary. In fact, more goods chasing the available money supply will actually hold inflation down. So will rapid productivity gains and low unit-labor costs. So will lower taxes, which are also counter-inflationary.

Strong growth at a time of more normal interest-rate levels is a very prosperous outlook that will carry share prices higher. Periodic market corrections will occur, but smart investors will buy on the dips.

And the markets will thank the Fed for following the Wicksellian paradigm. As Greenspan & Co. bring the policy rate into balance with the economy's natural rate (probably about 3 percent over the next 18 months), the dollar will stabilize and inflationary fears will be minimal.

At least that's what Knut told me when we last spoke.

Charles Krauthammer gives a big thumbs up for "Master and Commander", the Russell Crowe seafaring epic -- including praise for the scene which gives American audiences "the particular satisfaction of seeing Anglo-Saxon cannonballs puncturing the [French] Tricolor."

I'm sold.

Robert Samuelson rips Bush's needless trade war. Samualson has some interesting data on the improved productivity of the U.S. steel industry. Quotable:

In 1974, industry employment exceeded 500,000; at the end of last year, it was 124,000. But it's untrue that the United States is leaving the steel business. In 1970 American mills shipped 91 million tons of steel, and imports supplied 14 percent of U.S. demand. Since 1996 U.S. mills have shipped an average of 103 million tons annually and imports have averaged 21 percent of demand. Bigger, more labor-intensive mills have gradually closed, to be replaced by smaller, more efficient mini-mills ...

Plants of bankrupt steel companies have been purchased at low prices by healthier firms, including the new International Steel Group (ISG). For example, ISG bought the mills of bankrupt Bethlehem Steel. In 2002 these mills employed 12,100 people. ISG renegotiated the labor agreements. Job classifications dropped from 30 to five; by June 2003 the mills were run with roughly 30 percent fewer workers.

Shelby Steele identifies a problem with (classical) liberalism:

When Howard Dean brought Confederate-flag whites into identity politics, he implied one terrible thing: that whites, like other racial identity groups, have the right to pursue power in the name of their race. He inadvertently sanctioned one of history's most destructive formulas: race alone justifying power. And yet, had he reached out to angry black separatists, he would have been hailed as a racial healer. Why the difference? And how does it affect our politics?

The answer goes back to the fundamental conflict between democracy and atavisms--those tribal elements of ourselves that we inherit like a fate from our group and that we share with our grandfather's grandfather. I am a black American, I say, and thus announce my atavistic connection to all others who live as black Americans, to all who ever lived as black Americans. Religion, caste, class, gender and race can all be atavisms, and they are inherently anti-democratic because they exclude all outside the atavism.

Embracing atavistic identities too strongly leads to three great sins: asserting the inherent superiority of one's group over others, excluding others as inferiors, and invoking an enemy to fight in the name of one's superiority. White racism, black separatism, Islamic extremism and Nazism are all atavistic identities gone too far, gone to where one's When Howard Dean brought Confederate-flag whites into identity politics, he implied one terrible thing: that whites, like other racial identity groups, have the right to pursue power in the name of their race. He inadvertently sanctioned one of history's most destructive formulas: race alone justifying power. And yet, had he reached out to angry black separatists, he would have been hailed as a racial healer. Why the difference? And how does it affect our politics?

The answer goes back to the fundamental conflict between democracy and atavisms--those tribal elements of ourselves that we inherit like a fate from our group and that we share with our grandfather's grandfather. I am a black American, I say, and thus announce my atavistic connection to all others who live as black Americans, to all who ever lived as black Americans. Religion, caste, class, gender and race can all be atavisms, and they are inherently anti-democratic because they exclude all outside the atavism.

Embracing atavistic identities too strongly leads to three great sins: asserting the inherent superiority of one's group over others, excluding others as inferiors, and invoking an enemy to fight in the name of one's superiority. White racism, black separatism, Islamic extremism and Nazism are all atavistic identities gone too far, gone to where one's superiority is confirmed only by the denigration and even annihilation of an enemy. Whenever power is pursued in the name of an atavism--my blackness, your whiteness, his Catholicism, her gender--enemies arise and our democracy of individuals is injured. This is true even when oppressed minorities pursue power in the name of their atavism rather than in the name of freedom.

No group in recent history has more aggressively seized power in the name of its racial superiority than Western whites. This race illustrated for all time--through colonialism, slavery, white racism, Nazism--the extraordinary human evil that follows when great power is joined to an atavistic sense of superiority and destiny. This is why today's whites, the world over, cannot openly have a racial identity.

White guilt--the need to win enough moral authority around race to prove that one is not a racist--is the price whites today pay for this history. Political correctness is a language that enables whites to show by wildly exaggerated courtesy that they are not racist; diversity does this for institutions. But white guilt's greatest taboo is the one that Howard Dean violated--assigning whites a racial identity out of which they can pursue power as whites.

Yet Mr. Dean did not cross this taboo as a racist; he crossed it as a hard-core liberal, a supporter of race-based affirmative action, who in the name of racial progress has learned to mentally compartmentalize Americans by atavisms. So used was he to acknowledging the atavistic identity of every minority in the country, it was no doubt a small leap to "include" Confederate-flag whites.

The underlying irony here is that white guilt has given America a liberalism that revives as virtue the precise moral formula at the core of fascism: power justified by race alone. Today a wealthy black will be preferred over the son of a white mailman at all of America's best universities. This of course is illiberalism of the same sort that segregation was.

Classic liberalism (today's conservatism) sees atavistic power as illegitimate because it always steps on individual freedom. The mailman's son is not free if his race is held against him. But the problem with classic liberalism is that there is no room in it for white redemption. American institutions simply want easy ways to show that they are not racist. Their selfishness in this demands the glibness of visible atavisms--black and brown faces more empowered to be present in institutions than other colors. Justice Sandra Day O'Connor recently called this selfishness "a compelling state interest," which is a rather good characterization of white guilt ...

Read more here.

A visit to Disney Hall in Los Angeles -- "one of the most agreeable modern concert halls I have been in".

The WSJ explains why Bush must abandon his economically disastrous anti-free trade policy.

More on the Bush generated TRADE WAR.

Can a person write well and be a philosopher at the same time? Edward Feser proves that one can, and he does so again in an important essay titled "Hayek on Tradition". Feser is that rarest of fine writers -- one who writes well while at the same time thinking well. Not a common thing, that. And it his essay Feser is in top form, explicating uncommon wisdom in common language -- making here the important point that the very idea of tradition has long been under fierce assualt from a critical viewpoint which itself lacks the justification which is demanded of those who perceive the significance of tradition in the make-up of who and what we are. Correctly understood, however, tradition itself might be said to have made possible even such things as critical inquiry itself. A critical tradition which condemns tradition is one advocating the philosophy of the tail-swallow. Only fools need follow there.

So who is Feser? Feser teaches philosophy at Loyola Marymont in Los Angeles and is the author of a solid little introduction to the moral and political philosophy of Robert Nozick titled On Nozick. He's also perhaps the world's leading expert on Friedrich Hayek's philosophy of mind -- no small challenge that (take a look some time at Hayek's landmark work in neuroscience and philosophy titled The Sensory Order if you'd like some sense of the difficulties involved).

Debra Saunders -- Lockyer is the new king of puke politics.

Dan Peruchi, father of four, enjoyed fixing up old cars and reselling them. Because the dealers he worked with dealt mainly in cash, he usually had lots on hand. Peruchi was driving home to Ft. Worth, Texas when he noticed the flashing lights of a police car behind him. After pulling him over, the officer asked to search Peruchi's car. Peruchi had about $19,000 in a satchel, but nothing criminal to hide, so he consented. The officer found Peruchi's cash, and immediately suspected Peruchi was involved with drugs. He called in drug-sniffing dogs, who then reacted suspiciously to Peruchi's satchel (most all of the U.S. money supply carries faint amounts of drug residue, mostly cocaine).

The dogs' reaction, no more, was enough for the West Memphis police department to seize Peruchi's money. When Peruchi protested, the police officer retorted, "Carry checks next time."

Peruchi was never arrested. He was never even charged. But his money was gone, under the absurd premise that property can be guilty of a crime, even if its owner isn't. The police department deposited Peruchi's money into its own operations budget, as it was permitted to do under Arkansas' drug forfeiture laws. Peruchi was told that if he tried to fight the county, his case would be turned over to the Drug Enforcement Administration. "Try fighting the feds," he was told. Even if Peruchi had won in court, his legal costs would likely have amounted to more than the $19,000 he was fighting for, and it's improbable that he would have been reimbursed for his legal fees.

Peruchi is but one of many similarly outrageous stories told the new book Mugged by the State, by Randall Fitzgerald ...

-- just one of several nightmare stories teased by Radley Balko.

A nation apart -- "America is not exceptional because it is powerful; America is powerful because it is exceptional. And because what makes America different also keeps it rich and powerful, an administration that encourages American wealth and power will tend to encourage intrinsic exceptionalism."

The Economist:

"Another hangover in the making?"

America's spurt in growth is being fuelled by a dangerous cocktail ... Early last century, economists such as Ludwig von Mises and Friedrich Hayek argued that, if interest rates were held below their "natural rate" (at which the supply of saving from households equals the demand for investment funds by firms), credit and investment will rise too rapidly and consumers will not save enough.

Sound familiar? America displayed many of those features in the late 1990s. Faster productivity growth raised the natural rate of interest, but because inflation was low (and because Austrian economics had long been out of fashion) the Fed failed to lift interest rates by enough. Investment and borrowing boomed.

Strict Austrian-school disciples would argue that, because America's recent downturn was due to overinvestment and overborrowing, slashing interest rates to encourage yet more borrowing was wrong because it delayed the need for households to save more. Central banks can postpone a downturn only by injecting more and more credit. The inevitable downturn is then deeper or longer ...

(via Mises Econ Blog)

As researchers have in the past, scientists at this meeting told Ms. Baron they had a simple solution to their problems with reporters. "I don't take their phone calls" was a common refrain. Their unwillingness to talk to us is not mysterious. Far too often, talking to reporters is a no-win proposition for scientists ...

The NY Times on challenge of reporting science -- -- including dealing with scientists who are distressed that reporters insiste on presenting "both sides", a concept foreign to most scientists.

The 25 most provocative questions facing science -- the NY Times. From question #18, quotable:

Dr. Stephen Jay Gould, the late Harvard paleontologist, crystallized the question in his book "Wonderful Life." What would happen, he asked, if the tape of the history of life were rewound and replayed? For many, including Dr. Gould, the answer was clear. He wrote that "any replay of the tape would lead evolution down a pathway radically different from the road actually taken."

In fact, to many scientists, it would seem impossible to re-evolve anything like life on earth today, given how life has been shaped by accidents large and small.

But 12 flasks of bacteria in East Lansing, Mich., are beginning to challenge such notions. In 1988, Dr. Lenski and his colleagues set up a dozen genetically identical populations of E. coli bacteria in bottles of broth and have followed their evolutionary fates.

Now, more than 30,000 bacterial generations later, Dr. Lenski and colleagues have what is becoming one of the most striking examples of repeatability yet. All 12 populations show the same patterns of improvement in their ability to compete in a bottle and increases in cell size. All 12 have also lost their ability to break down and use a sugar, called ribose.

More surprising, many genetic changes underlying these adaptations are very similar. Every population, for example, lost its ability to break down ribose by losing a long stretch of DNA from the same gene.

Other scientists studying cichlid fish have observed how the same varieties of cichlids evolve anew every time they invade a new lake. And Dr. Rieseberg and colleagues have found evidence that evolution can repeatedly produce the same species.

These scientists found that one sunflower species on sand dunes has evolved independently three separate times. And each time one of the species newly evolves, genetically it appears to turn out much the same. "With these species, there seems to be only one way to do it," Dr. Rieseberg said.

Some scientists, like Dr. Simon Conway Morris, a paleobiologist at the University of Cambridge and ardent critic of Dr. Gould's view, say the evidence for repeatability is rampant. He argues in his new book, "Life's Solution: Inevitable Humans in a Lonely Universe," that some features are so adaptive that they are essentially inevitable — like the ability to see and, as his title suggests, the intelligence and self-awareness that are the hallmarks of humanity.

And note well question #9 -- "When will the next Ice Age Begin?"

IT'S WAR! Bush's steel tarrifs are ruled illegal -- costing America billions in sanctions and further damaging the world economy, and America's economy most of all. "First do no harm" would be a good rule of thumb for politicians as well as doctors.

The super rich simply don't understand how the little people live in California -- just ask Dianne Feinstein:

One of the reasons given by California's liberal Senator Dianne Feinstein for opposing the confirmation of state Supreme Court Justice Janice Rogers Brown to the federal judiciary is that Justice Brown has refused to put property rights on a lower plane than other constitutional rights and has criticized the destruction of property rights in San Francisco.

Senator Feinstein has said that it is "simply untrue" that property rights have been sacrificed in San Francisco. According to Senator Feinstein, private property "is alive and well" in San Francisco, "with property values making it one of the highest cost-of-living cities in the United States."

It might be humorous, if it were not so sad, that a senior United States Senator has so completely missed the point of discussions about the destruction of property rights that have been going on for decades in legal and intellectual circles.

One of the main reasons for the outrageous housing prices in San Francisco and the surrounding Bay area is precisely the over-riding of property rights. Endless restrictions, obstructions, and bureaucratic delays facing anyone who is building anything on their own property in this area have forced housing costs to astronomical levels.

The issue is not the prosperity of property owners, many of whom benefit enormously from the restrictions on building that cause the value of their own existing property to skyrocket. San Francisco property owners like Senator Feinstein have made out like bandits from these restrictions on property rights.

Justice Janice Rogers Brown noted pointedly during her nomination hearings that she cannot afford to live in San Francisco, but has to commute from far away for court hearings held there. That is part of the cost of politicians ignoring property rights and courts letting them get away with it.

The costs are even higher when rent control laws over-ride property rights and create housing shortages in the process. Homelessness is particularly acute in cities with severe rent control laws, such as San Francisco and New York ..

The main victims of the politicians and courts over-riding property rights are people who own no property. The main proponents of these violations of property rights are often people who do ..

It was front-page news recently that an 18-story condominium building is to be constructed in South San Francisco. It took two decades for the builders to fight their way through all the politicians, courts, bureaucracies and environmental activists.

All of this costs money and all that money is going to come out of the hides of the people who move into that building. Meanwhile, the value of Senator Feinstein's home in San Francisco will keep on rising, which she regards as proof that property rights are being protected.

Far down the income scale from Senator Feinstein is a nurse who, according to a local newspaper, "has finally bought her dream house" near the long-delayed condominium. This is a 2,400 square foot house selling for $850,000. High housing costs in California are not due to people living in mansions but to bungalows costing what mansions cost elsewhere.

How many members of her family will have to sacrifice how much of their paychecks to carry this crushing mortgage burden is a question that doesn't bother most liberals. Senator Feinstein doesn't seem to understand why such things bother Justice Brown.

-- it's Thomas Sowell.

Robert Novak -- can California be saved?

Step right up for Carnival of the Capitalists FIVE.

A letter from Michael Moore to the German people. Quotable:

Should such an ignorant people [i.e. Americans] lead the world? How did it come to this in the first place? 82 percent of us don't even have a passport! Just a handful can speak a language other than English (and we don't even speak that very well.) ...

Ok, come on, you Germans, you really know better! You are well-read. Your media also reports on things south of the Alps. You travel. You value education. And in the past year you took over the moral leadership in the question of war or peace.

Unbelievable.

David Friedman takes the are you an Austrian? -- or are you from the Chicago school? economic theory quiz.

Marginal Revolution has more on Roosevelt and the Great Depression, including a truly disturbing quote from Roosevelt's first inaugural address. No wonder liberty lovers like H.L. Mencken genuinely loathed FDR and what he represented for America.

Despite jobs growth "spurt" and massive GDP growth business executives The New York Times remains downbeat on the economy.

Edmund Morris on Ronald Reagan and his malicious, nay, insensitive side. Quotable:

Behind the soft exterior, I repeat, was hard metal, and not all of him was nice. But more of him was nice than is normal in men that powerful. Even in ruminations like the above, and in the very funny stories he told (many of them politically incorrect), there was never any hint of malice. Well, maybe there was, when he leveled his wit against the one thing he really did hate: totalitarianism. Aides cringed at plenary sessions with Mr. Gorbachev as Mr. Reagan chucklingly told (again and again and again) jokes that ridiculed everything the Soviet leader stood for. It was insensitive, it was moral, and it was magnificent.

Bruce Bartlett on his Talking Points blog snags this good bit on estate taxes from Greg Mankiw:

N. Gregory Mankiw, Chairman of the Council of Economic Advisers, recently gave an excellent speech on why the estate tax should be abolished. He made two key points. First, the presumption that the tax falls on the rich is wrong because it assumes that the burden of the tax falls on the deceased, which is obviously wrong. In fact, taxes can only fall on the living, namely decedents, who are almost always less well to do.

Second, the estate tax is a direct tax on capital, which not only punishes the thrifty while relieving the profligate, but hurts workers and others far removed from the direct effects of the tax by reducing capital formation and, hence, productivity and living standards.

Mankiw concludes: "The estate tax unfairly punishes frugality, undermines economic growth, reduces real wages, and raises little, if any, federal revenue. There are no principles of good tax policy that support this tax, and I support the President's calls for its permanent repeal."

Why do they hate us? part II. "Thirty percent of Germany's top ten political, biographical and historical book sales [at Amazon.de][are by] Michael Moore". This also helps explain why many Eurpeans are so -- how do you say -- unsophisticated. OK, I meant stupid, ignorant, ah, let's see ill-informed, factually challenged .. dumb. Did I leave anything out?

Oh, yah, lots of American's are on all fours with the German's on this one. So, so sad, but sadly true. Isn't there a web site somewhere called "Michael Moore is a Moron" or somesuch? Or was I thinking of that new documentary "Michael Moore Hates America".

Goverment agency in Britain wants government ban on "junk food" event sponsorship -- e.g. Pepsi would be prohibited by law from sponsoring a Britney Spears concert. My question -- if the government can ban "junk (food) speech", why can't they turn this equation around and ban "junk music", i.e. the Britney Spears concert full stop? Britney Spears and her music can't be good for you, can it?

Pejmanesque has a new reader's poll going. Which philosophers do you like -- and which philosophers don't you like? Here's what I posted in the comments section:

Friedrich Hayek and Ludwig Wittgenstein -- for the same reason. They both understand the primacy of "doing" over "saying" for understanding both meaning and social order. And they both understand that the primacy of "doing" has both a biological basis and a grounding in shared ways of doing things which has been passed down through training. This insight is important for understanding such things as language, law, mathematics, mind science, economic coordination and social evolution. It also allows us to understand how the legacy of Plato in philosophy -- extending even to the work of folks like Hume, Kant, Carnap, Popper, Quine, Fodor, etc. -- is fatally flawed. But that is a topic for another day.

Employment is up and unemployment is down -- a graphical and statistical analysis.

American ideas -- about freedom and democracy, etc. -- provide an answer to the question "why do they hate us?". I'm talking about Old Europe of course. Quotable:

When the topic of the public opinion survey shifts to the spread of “American ideas and customs” — as opposed to attitudes toward the government or the people — the results become even more pointed: 27 percent of the French believe that the spread of American ideas and customs is good, but an overwhelming 72 percent consider it bad. Similarly, 24 percent of Germans think of American ideas as good, while 72 percent see this influence as bad. The attitudes of the British and Italians are, again, somewhat less severe than elsewhere in Europe: 56 percent of the British see the spread of American ideas as bad, as do 45 percent of Italians. When asked specifically about American ideas of democracy, 65 percent of the French, 55 percent of Germans, and 61 percent of Spaniards said they disliked them.

However, the cultural divide between the United States and Europe is not only evident in these measures of European attitudes toward the United States. There are equally pronounced indications of deeply different values and worldviews. Perhaps most telling, when asked to choose between the freedom to pursue one’s goals without state interference and, alternatively, the power of the state to guarantee that nobody is in need, 58 percent of Americans opted for freedom. The results in Europe are very different. In no European country was there majority support for individual freedom as opposed to the power of the state. In Great Britain, only 33 percent chose freedom, in France 36 percent, in Italy 24 percent, and in Germany 39 percent. Interestingly, the importance of individual freedom attracts greater approval in parts of the developing world than in Western Europe: Guatemala is at 61 percent, Ghana at 63 percent, Nigeria at 61 percent, India at 53 percent, and Pakistan at 61 percent—levels of support for freedom that put Europe to shame. On this issue so crucial to the relationship between state and economy, American individualist attitudes are closer to the rest of the world than is the European trust in the role of the state.

The anti-liberalism which haunts Old Europe hasn't been so obvious since the 1930s ...

Historian Paul Johnson on America's New Empire for Liberty. Quotable:

In 1800 it was Asia that produced the majority (57 percent) of world manufactured output, the West only 29 percent; by 1900 the West was producing 86 percent, Asia only 10 percent. Today, America’s production of world wealth, both absolutely and relatively, is accelerating. In the last quarter of the twentieth century, it added $5 trillion to its annual GDP. By 2050 the U.S. share of global output will constitute more than a quarter of the world total and will be as much as three times as big, for instance, as that of the European Union ..

In light of the President's speech on the importance of democracy and freedom to world peace, it is worth red flagging Professor Rummel's web site dedicated to spreading word of the Big Truth that freedom saves lives. Quotable:

It is true that democratic freedom is an engine of national and individual wealth and prosperity. Hardly known, however, is that freedom also saves millions of lives from famine, disease, war, collective violence, and democide (genocide and mass murder). That is, the more freedom, the greater the human security and the less the violence. Conversely, the more power governments have, the more human insecurity and violence. In short: to our realization that power impoverishes we must also add that power kills.

Through theoretical analysis, historical case studies, empirical data, and quantitative analyses, this web site shows that:

Freedom is a basic human right recognized by the United Nations and international treaties, and is the heart of social justice.

Freedom is an engine of economic and human development, and scientific and technological advancement.

Freedom ameliorates the problem of mass poverty.

Free people do not suffer from and never have had famines, and by theory, should not. Freedom is therefore a solution to hunger and famine.

Free people have the least internal violence, turmoil, and political instability.

Free people have virtually no government genocide and mass murder, and for good theoretical reasons. Freedom is therefore a solution to genocide and mass murder; the only practical means of making sure that "Never again!"

Free people do not make war on each other, and the greater the freedom within two nations, the less violence between them.

Freedom is a method of nonviolence--the most peaceful nations are those whose people are free.
The purpose of this web site, then, is to make as widely available as possible the theories, work, results, and data that empirically and historically, quantitatively and qualitatively, support these conclusions about freedom. This is to invite their use, replication, and critical evaluation, and thereby to advance our knowledge of and confidence in freedom--in liberal democracy. It is to foster freedom.

Drop in and take a look around. Thought provoking stuff.

The Great American Job Machine. Quotable:

A century ago, 40 of every 100 Americans worked on farms to feed a nation of 90 million. Today, after one of history's most brutal downsizings, it takes just two agricultural workers out of 100 workers to supply an abundance of food to a nation more than three times as large. Suppose we'd kept 40 percent of our labor on the farm. Absurd, yes, but if we had, we wouldn't have had enough workers to produce the new homes, computers, movies, medicines and the myriad other goods and services of our modern economy .. the telecommunications industry employed 421,000 switchboard operators in 1970, when Americans made 9.8 billion long-distance calls. Thanks to advances in switching technology, telecommunications companies have reduced the number of operators to 78,000, but consumers ring up 98 billion calls .. To handle today's volume of calls with 1970's technology, telephone companies would need 4.2 million operators, or 3 percent of the labor force. Without the productivity gains, a long-distance call would probably cost 40 times what it now does ..

Even with the net decline in jobs over the past three years, during the past decade total United States employment has risen to 130 million from 91 million since 1980, a net gain of nearly 40 million jobs. Productivity, measured by output per worker, increased a staggering 56.2 percent.

Do you have the character and temperament of a Founding Father? So which one are you? (via Right on the Left Beach)

What sort of economics makes sense to you?

Larry Solum on Dworkin on John Rawls and the law. Live from the Rawls and the Law conference at Fordham.

Bring down that wall -- the power of rock'n roll. Quotable:

When not practicing diplomacy, Andras Simonyi practices blues-rock on his guitar, just as he did as a teenager.

Hungary's ambassador to the United States is coming to the Rock and Roll of Fame to explain his belief that when rock 'n' roll found its way into his country, it helped spark a yearning for freedom and an eventual end to a communist government.

Simonyi contacted Rock Hall Chief Executive Officer Terry Stewart last May and asked whether there might be interest in what he had to say. Stewart was thrilled. He arranged Simonyi's appearance to an invitation-only audience of about 250, planned for Saturday night at the hall's main stage.

"I think it's a firsthand account from the point of view of someone whose life was changed by this art form," Stewart said. "It's quite exciting for us. It speaks to the influence of this art form called rock 'n' roll and what it has meant to the world since its inception. It's unusual to have someone of this high a rank to say what it has meant personally."

In 1989, the Hungarian Socialist Workers Party - the communist and Soviet-backed controller of Hungary since shortly after World War II - started abdicating power in a peaceful transition. Other Soviet bloc communist regimes in Central and Eastern Europe similarly collapsed.

Simonyi, 51, an economist, is convinced rock music was as key as any political or economic factor involved in the Hungary's change.

Born in Hungary, Simonyi had lived with his family for a few years in Denmark, where he became acquainted with Western-style music. When the family returned to Hungary, he still wanted the music. He found out he was not alone.

"Not only for me but also for other Hungarians of my generation, this became the stuff that really linked us to the free world," he said. "As I listened to this kind of music, I felt I was part of the free world myself."

In a nation where the governing party frowned upon rock music, Simonyi said he and his friends always found a way to gather collections. They would trade or borrow tapes and records smuggled into the country. They also would try to listen to Voice of America, Radio Free Europe and other foreign stations.

"I started out with the Beatles, but then I pretty much moved on," Simonyi said. "I embraced the really exciting and progressive part. I became a great Cream fan and Jimi Hendrix fan. There was one hero that I had, and this was Stevie Winwood, who established the group called Traffic."

In 1969, during a brief easing of government cultural control, Traffic performed in Hungary.

"They came to Hungary 35 years ago and I met Stevie. We had a little chat and I hung out with the rest of the band. Two weeks ago he was playing in Washington, and I met him again and we had a long talk," Simonyi said.

It wasn't the lyrics that were important, but the sound and feel of the music, Simonyi said.

"It was the power of music that was really exciting," Simonyi said. "It was the rock generation of the 1960s that said, 'Listen, we don't like to be separated from Europe, and we don't like this dictatorial system.' That is how I feel about it. Of course, that might not be true for everyone, but for a big part of Hungary, the Czech Republic and Poland, this is definitely the case."

"resistance fighters" "Resistance fighters"? -- not in the news pages of the LA Times. But it seems the editorial page writers at the Times have -- let us say -- a different sensibility.

A quarter million new jobs created in the U.S. economy. The economy finally begins to re-coordinate after the artificially generated boom and inevitable bust created over the the last few years by the Federal Reserve. The worry now is that the Fed Reserve and the Fed government have thrown so many artificial -- and unneeded-- "stimulus" monkey-wrenches into the natural operation of the price system that there are no genuinely solid and sustainable price signals left in those markets which take us across and though time -- such as the money and capital markets. Phony-baloney economic thinking generates nothing but phony-baloney price signals -- of the sort that make economic coordination completely unreliable over and across time.

Bruce Bartlett on the flat tax. If it's good for Iraq, Russia, Estonia, Latvia, Ukraine and Slovakia, perhaps it might be good for California, America -- or a Democrat candidate for President. And is China next?

Darwinian psychologist David Barash examines the world of reason and logic. Quotable:

the evolutionary design features of the human brain may well hold the key to our penchant for logic as well as illogic. Following is a particularly revealing example, known as the Wason Test.

Imagine that you are confronted with four cards. Each has a letter of the alphabet on one side and a number on the other. You are also told this rule: If there is a vowel on one side, there must be an even number on the other. Your job is to determine which (if any) of the cards must be turned over in order to determine whether the rule is being followed. However, you must only turn over those cards that require turning over. Let's say that the four cards are as follows:

T 6 E 9

Which ones should you turn over?

Most people realize that they don't have to inspect the other side of card T. However, a large proportion respond that the 6 should be inspected. They are wrong: The rule says that if one side is a vowel, the other must be an even number, but nothing about whether an even number must be accompanied by a vowel. (The side opposite a 6 could be a vowel or a consonant; either way, the rule is not violated.) Most people also agree that the E must be turned over, since if the other side is not an even number, the rule would be violated. But many people do not realize that the 9 must also be inspected: If its flip side is a vowel, then the rule is violated. So, the correct answer to the above Wason Test is that T and 6 should not be turned over, but E and 9 should be. Fewer than 20 percent of respondents get it right.

Next, consider this puzzle. You are a bartender at a nightclub where the legal drinking age is 21. Your job is to make sure that this rule is followed: People younger than 21 must not be drinking alcohol. Toward that end, you can ask individuals their age, or check what they are drinking, but you are required not to be any more intrusive than is absolutely necessary. You are confronted with four different situations, as shown below. In which case (if any) should you ask a patron his or her age, or find out what beverage is being consumed?

#1 #2 #3 #4
Drinking Water Over 21 Drinking Beer Under 21

Nearly everyone finds this problem easy. You needn't check the age of person 1, the water drinker. Similarly, there is no reason to examine the beverage of person 2, who is over 21. But obviously, you had better check the age of person 3, who is drinking beer, just as you need to check the beverage of person 4, who is underage. The point is that this problem set, which is nearly always answered correctly, is logically identical to the earlier set, the one that causes considerable head scratching, not to mention incorrect answers.

Why is the second problem set so easy, and the first so difficult? This question has been intensively studied by the evolutionary psychologist Leda Cosmides. Her answer is that the key isn't logic itself -- after all, the two problems are logically equivalent -- but how they are positioned in a world of social and biological reality. Thus, whereas the first is a matter of pure reason, disconnected from reality, the second plays into issues of truth telling and the detection of social cheaters. The human mind, Cosmides points out, is not adapted to solve rarified problems of logic, but is quite refined and powerful when it comes to dealing with matters of cheating and deception. In short, our rationality is bounded by what our brains were constructed -- that is, evolved -- to do.

Why is the U.S. government in the business of stamping humanities professors with a $1 million dollar official government seal of approval? It's a rotten idea, but someone's going to receive it, so it might as well be Leszek Kolakowski, the historian of Marxist thought.

VIRGINIA POSTREL on the monetary legacy of Milton Friedman.

Americans call for increased governmental protection. Quotable:

NEW YORK—Alarmed by the unhealthy choices they make every day, more and more Americans are calling on the government to enact legislation that will protect them from their own behavior.

"The government is finally starting to take some responsibility for the effect my behavior has on others," said New York City resident Alec Haverchuk, 44, who is prohibited by law from smoking in restaurants and bars. "But we have a long way to go. I can still light up on city streets and in the privacy of my own home. I mean, legislators acknowledge that my cigarette smoke could give others cancer, but don't they care about me, too?"

"It's not just about Americans eating too many fries or cracking their skulls open when they fall off their bicycles," said Los Angeles resident Rebecca Burnie, 26. "It's a financial issue, too. I spend all my money on trendy clothes and a nightlife that I can't afford. I'm $23,000 in debt, but the credit-card companies keep letting me spend. It's obscene that the government allows those companies to allow me to do this to myself. Why do I pay my taxes?"

Beginning with seatbelt legislation in the 1970s, concern over dangerous behavior has resulted in increased governmental oversight of private activities. Burnie and Haverchuk are only two of a growing number of citizens who argue that legislation should be enacted to protect them from their own bad habits and poor decisions.

Anita Andelman of the American Citizen Protection Group is at the forefront of the fight for "greater guardianship for all Americans."

"Legislation targeting harmful substances like drugs and alcohol is a good start, but that's all it is—a start," Andelman said. "My car automatically puts my seatbelt on me whenever I get into it. There's no chance that I'll make the risky decision to leave it off. So why am I still legally allowed to drink too much caffeine, watch television for seven hours a day, and, in some states, even ride in the back of a pick-up truck? It just isn't right."

Rev. Ted Hinson, founder of the Christian activist group Please God Stop Me, said he believes that the government will listen ..

More.

Saudis fear sand shortage reports the BBC. I kid you not. (via the Adam Smith blog).

A page of quotes from Friedrich Hayek collected by the Adam Smith Institute. Here are two that caught my eye:

The part of our social order which can or ought to be made a conscious product of human reason is only a small part of all the forces of society.

Human reason can neither predict nor deliberately shape its own future. Its advances consist in finding out where it has been wrong.

Madsen Pirie -- "Why Hayek is a Conservative" (pdf).

Bernanke vs. Kohn -- Robert Novak on inflation targetting and the politics behind the war for control of the Federal Reserve.

Alan Reynolds on the economics of the cross-border prescription drug trade. The bottom line?

Drug companies are and should be free to offer big discounts only to foreigners if they wish. But U.S. consumers are and should be free to shop the world for a better deal.

[ex]Communists still control the economy of Romania, where markets struggles to survive the death grip of the state bureacracy. At what point does a bribe simply become part of the market, rather than an act of corruption? For Romanians, it's when your child is sick and your [state owned] health center needs a "contribution".

There are large hoards of academics who love few things more than the ability to control the thoughts and speech of others. The latest victim of the attempt to eliminate diversity of thought on campus is blogging economist Eric Rasmusen at the U. of Indiana. Rasmusen has yet to be effectively silenced -- although his blog was forced to move here.

Does organic food cause cancer? It does in the UK.

Law professor David Bernstein has an interesting posting on the Lochner decision.

Pro Justice Brown TV ad targets Sen. John Edwards, the Breck girl.

Justice Brown defended. Quotable:

Brown writes with a flair that can delight laymen and law students while disgruntling stodgier observers. In her San Remo dissent, she turned the full rhetorical force on the power-tripping bureaucrats in the City by the Bay:

"Private property, already an endangered species in California, is now entirely extinct in San Francisco," she observed. The City had become a "neo-feudal regime." She reprimanded fellow jurists who automatically give a pass to confiscatory land-use restrictions. "Once again a majority of this court has proved that 'if enough people get together and act in concert, they can take something and not pay for it.' But theft is theft. Theft is theft even when the government approves of the thievery."

In one of the few uses of the word, ever, in the history of American case law, Brown called San Francisco a "kleptocracy." She excoriated the city's refusal to acknowledge that "the free use of private property is just as important as ... speech, the press, or the free exercise of religion."

Brown's judicial philosophy amounts to what is sometimes called the "Madisonian" view, because it reflects the allegiance to higher law and transcendent rights embraced by the "Father of the Constitution." Not everything is open to majority rule, and courts must ensure that the majority does not run roughshod over groups that are unpopular or lack political power. As Brown put it in another dissenting opinion, "Courts must be especially vigilant, must vigorously resist encroachments that heighten the potential for arbitrary government action."

This almost too stupid to be believed. The U.S. government is burning millions in cash to create make-work jobs in Iraqi government owned companies which, as a result, are operating completely outside the market system of profit and loss price signals. The boneheads in the U.S. government seem to be intentionally generating the classic knowledge problem of socialist calculation -- the worst disaster which can possibly befall any economy or enterprise. If you want real growth and real economic advance, the thing you need most are genuine prices and genuine profit and loss signals. Economic growth and coordination are impossible without these. Quotable:

The state-owned shoe factory here was once sophisticated enough to make shoes for Bally, the Swiss luxury goods company.

But that was 20 years ago, before wars and sanctions, before Saddam Hussein's army became the factory's biggest customer. Now, with Mr. Hussein and most of his army gone, production has plunged to 1,800 pairs of shoes a day from 5,000 at the start of the year, according to Riadh Hassan Ali, the company's design manager. There are scarcely any customers.

Six months after President Bush declared major military operations in Iraq over, the economy here is largely in stasis, propped up by American cash but showing little progress. The privatization of Iraq's decrepit state-owned industries like the shoe factory, is on hold ..

The shoe factory illustrates just how much ground the country must make up. The state-owned company that runs the factory employs 3,000 people around Iraq to make shoes, as well as a few other leather goods.

Plant No. 7, where the company makes men's dress shoes, is clean and cheery. Under high ceilings, men stamp out pieces from shiny leather hides, while women stitch together shoe tops at sewing machines. With the scattering of the army and the police, a search for new clients has begun.

With the collapse of Mr. Hussein's rule, Iraq no longer subsidizes imports of leather hides, a subsidy that the company passed along to its customers. "Because we bought it very cheap from the government, we sell it very cheap to the citizens," said Mr. Ali, the design manager. "The profit was controlled."

Now, however, the company must buy its hides on the open market, and pass those increased costs along to customers. So prices have risen, and sales have dropped, Mr. Ali said.

But the company has not had to fire anyone, because the United States does not want to put more unemployed Iraqis on the streets and risk worsening the security crisis. So the occupying authorities are paying the salaries of all 3,000 workers, even if they have nothing to do.

In this, the shoe company is no different from any of Iraq's 53 state-owned companies, whose workers are all still being paid by the occupation, at a cost of several million dollars each month. The cost is small compared with the others the occupation is incurring, but the payments show that for now, security considerations have topped the United States' hope of making the state-owned companies more efficient.

With wages subsidized but the shoe company forbidden to fire anyone, estimating profit or loss is impossible, much less planning long-term investments in new equipment, said Ali Hadi, a manager. "We can't calculate these things now," he said. "When next year comes, we will calculate next year."

(via Mises Econ Blog)

Is the citation of Friedrich Hayek and his The Road to Serfdom a disqualifying condition for sitting on the Federal Bench? Professor Bainbridge wants to know -- in a proper fisking of Prof. Michael Froomkin, who has read Justice Brown right out of America on the basis of a speech which cites Dr. Hayek. Professor Bainbridge goes on to note:

if some of Justice Brown's opponents knew more conservatives, they might realize that her views are not that far from the middle of American political culture as a whole

Read the whole thing, as they say. (via Calblog)

UPDATE: Professor Bainbridge fisks again -- same Brown speech, new Bainbridge victim.

Brad DeLong posts this interesting bit on the significance of reputation in economic coordination -- an important theme from Hayek:

Abstract: Under central planning, many firms relied on a single supplier for critical inputs. Transition has led to decentralized bargaining between suppliers and buyers. Under incomplete contracts or asymmetric information, bargaining may inefficiently break down, and if chains of production link many specialized producers, output will decline sharply. Mechanisms that mitigate these problems in the West, such as reputation, can only play a limited role in transition. The empirical evidence suggests that output has fallen farthest for the goods with the most complex production process, and that disorganization has been more important in the former Soviet Union than in Central Europe.

Olivier Blanchard and Michael Kremer (1997), "Disorganization," Quarterly Journal of Economics 112:4 (November), pp. 1091-1126.

Even low level alcohol use is shown to cause serious fetal brain damage. Quotable: "in recent decades, scientists have discovered that alcohol can be remarkably toxic — more than any other abused drug — to developing fetuses." Spread the word.

Chandran Kukathas on John Rawls and his critics.

The circulation of the LA Times is down a little over 1% -- and that is thru Sept. 30 2003, just days before the Times lost another 9-10 thousand readers outraged by the behavior of the Times during the final days of the recall election. In the last 7 months the Times has lost something in the neighborhood of 20,000 subscribers. When a paper sucks, the people notice. And the truly good things about the Times simply can't overcome the large sucky parts. At some point the folks in Chicago are going to notice as well.

The Federal Reserve has set out to measure the Natural Rate of Interest -- Bruce Bartlett links and reports. Funny, I haven't noticed that the Fed in recent years has though one wit about the natural rate of interest.

Brian Greene discusses String Theory with Scientific American.

Here's a book I'll be putting on my Christmas wish list. I've been wanting to read a book like this for years -- and now I can.

UPDATE: Google found me Thomas Sowell's discussion of the book:

They say "truth will out" but sometimes it takes a long time. For more than half a century, it has been a "well-known fact" that President Franklin D. Roosevelt got us out of the Great Depression of the 1930s. That view was never pervasive among economists, and even J.M. Keynes -- a liberal icon -- criticized some of FDR's policies as hindering recovery from the depression.

Only now has a book been written in language that non-economists can understand which argues persuasively that the policies of the Roosevelt administration actually prolonged the depression and made it worse. That book is FDR's Folly by Jim Powell. It is very readable, factual and insightful -- and is endorsed by two Nobel Prizewinning economists.

If the word "folly" seems a little dismissive, read the book first. Someone described FDR's trust-busting Assistant Attorney General Thurman Arnold as being like one of the Marx brothers who went into government by mistake. That description would apply to many of the others around FDR, including his much-vaunted "brain-trust" of presumptuous and self-righteous people.

It is painfully obvious that President Roosevelt himself had no serious understanding of economics, any more than his Republican predecessor, Herbert Hoover, had. The difference was that Roosevelt had boundless self-confidence and essentially pushed some of the misconceptions of President Hoover to their logical extreme.

The grand myth for decades was that Hoover was unwilling to use the powers of government to come to the aid of the people during the Great Depression but that Roosevelt was more caring and did. In reality, both presidents represented a major break with the past by casting the federal government in the role of rescuer of the economy in its distress.

Scholarly studies of the history of these two administrations have in recent years come to see FDR's New Deal as Herbert Hoover's policies writ large and in bolder strokes.

Those who judge by intentions may say that this was a good thing. But those who judge by results point out that none of the previous depressions -- during which the federal government essentially did nothing -- lasted anywhere near as long as the depression in which the federal government decided that it had to "do something."

In "FDR's Folly," author Jim Powell spells out just what the Roosevelt administration did and what consequences followed. It tried to raise farm prices by destroying vast amounts of produce -- at a time when hunger was a serious problem in the United States. It imposed minimum wage rates that priced unskilled labor out of jobs, at a time of massive unemployment.

Behind both policies was the belief that what was needed was more purchasing power and that this could be achieved by government policies to raise the prices received by farmers and workers. But prices do not automatically translate into greater purchasing power, unless people buy as much at higher prices as they would at lower prices -- which they seldom do.

Then there were the monetary authorities contracting the money supply in the midst of the biggest depression in history -- when the economy was showing some signs of revival, until their monetary contraction touched off another big downturn.

With policy after policy and program after program, "FDR's Folly" traces the high hopes and disastrous consequences. It would be funny, like the Keystone cops running into one another and falling down, except that millions of people were in economic desperation while this farce was being played out in Washington.

Perhaps worse than any specific policy under FDR was the atmosphere of uncertainty generated by incessant new experiments. Billions of dollars of investment were needed to create millions of jobs for the unemployed. But investors were reluctant to risk their money while the rules of the game were constantly being changed in Washington, amid strident anti-business rhetoric.

Some of the people who most admired and almost worshipped FDR -- poor people and blacks, for example -- were hurt the most by amateurish tinkering with the economy by Roosevelt's New Deal administration. This book is an education in itself, both in history and in economics. It is also a warning of what can happen when leaders are chosen for their charm, charisma and rhetoric.

In a classic fisking, Andrew Sullivan unmasks Andy Rooney as a completely dishonest hatchetman.

When I was a young economist working in the forecasting section of the Federal Reserve Board, one of my most memorable experiences was when Governor Lyle Gramley sat down at our table in the staff cafeteria (the only time I ever saw a Governor sit down in the cafeteria rather than the executive dining room) to dispute our forecast for a tepid economic recovery.

"When a recovery comes, it really comes," Governor Gramley said, sternly. "You don't see 1 or 2 percent growth. You see much stronger growth." He turned out to be right.

My instinct is that the third quarter growth rate of GDP of 7.2 percent is an instance of recovery coming on strongly. I would bet that the recovery is real.

-- Arnold Kling

Democrat legislators in California fear Schwarzenegger -- and the voters. Good.

Bush's "recovery" feels more than a bit like the "Roosevelt recoveries" of the 1930s. Jim Puplava of the Financial Times has a must read on The 'OK' [unbalanced and at risk] Economy". Don't miss Puplava's "Economic Recovery Model". Great stuff -- lots of data, interesting analysis.

Carnival Of The Capitalists #4

Nat Hentoff gives the nuts and bolts showing how the NY Times, the Dems in the Senate, and the NAACP are not people of "good faith". They are nasty, dishonest, knife-in-the-gut folks without an ounce of honesty or simple decency. Sad to say, but the plain as day truth.

"The left's near monopoly over the institutions of opinion and information" is D E A D -- with libertarians and conservatives now kicking butt in the culture wars. Example -- 22% of Americans now get most of their news from FoxNews. And then there's the Internet ..

The Internet's most powerful effect has been to expand vastly the range of opinion--especially conservative opinion--at everyone's fingertips. "The Internet helps break up the traditional cultural gatekeepers' power to determine a) what's important and b) the range of acceptable opinion," says former Reason editor and libertarian blogger Virginia Postrel. InstaPundit's Glenn Reynolds, a law professor at the University of Tennessee, agrees: "The main role of the Internet and blogosphere is to call the judgment of elites about what is news into question."

But there's much more to the cradle strangulation of the Left's media monopoly. A long and good article on today's media revolution.

Chief Wiggles has a web site which will transform your donations into toys for Iraqi children. Please consider helping out with a few dollars -- or you can send in a toy directly for distribution in Iraq. See the site for details.

Now available -- California Bear Flag League stuff. The League store was set up for Bear Flaggers and Bear Flag fans by fellow Leaguer SoCalLawBlog. Proceeds will be be used by the Bear Flag League for as yet undetermined ends -- good and legal ones, I trust. Maybe a party or some such for Bear Flaggers and friends. Who knows? Maybe we'll use it for one big tip to the blogfather. The League is one part benevolent monarchy and one part chaotic democracy, and this is something we'll likely vote on.

The flat tax -- first it transformed the Russia economy -- now it will transform the Iraqi economy. (via Calblog).

Buy it.

Hayek's Challenge: Intellectual Biography of F.A. Hayek by Bruce J. Caldwell -- Chapter One:

Hayek is a puzzle. Certainly he started out as one for me, now some twenty-odd years ago.

It was the spring of 1982, and I was finishing up a postdoctoral year at New York University (NYU). An assistant professor, I had received my doctorate in economics a few years earlier with a specialization in the history of economic thought. My thesis had carried the earnest and pedantic title "The Methodology of Economics from a Philosophy of Science Perspective," and part of the reason I was at NYU was to try to transform it into a book that people might actually want to read. But I was also there to study Austrian economics or, more precisely, to learn more about the distinctive methodological views of the Austrians. These differed radically from, and, indeed, directly criticized, the positivistic pronouncements of mainstream economists. In particular, I wanted to know more about the rather strange-sounding apriorist methodology that had been advocated by Ludwig von Mises. I knew next to nothing about Hayek.

NYU was very much the place to go if you wanted to learn about the Austrian movement. There was (and still is) a formal program dedicated to the study of Austrian economics there, with courses, a weekly seminar, and funding for faculty positions, postdocs, and graduate students. The faculty members present that year included Israel Kirzner, Mario Rizzo, Jerry O'Driscoll, and (in the spring) Ludwig Lachmann. Larry White was a visiting professor, Richard Langlois held another postdoc, and among the dozen or so students were Don Boudreaux, Mark Brady, Sandy Ikeda, Roger Koppl, Kurt Schuler, and George Selgin. It was a great gathering of minds and personalities and, for me, a very rich experience.

That spring, Jerry O'Driscoll handed me a book by Terence Hutchison and said, "So what do you think of his argument about Hayek's U-turn?" Hutchison had claimed that Hayek underwent a "methodological U-turn" in the mid-1930s. More precisely, he had argued that the publication in 1937 of an article by Hayek titled "Economics and Knowledge" marked Hayek's turning away from Mises's apriorist approach and toward the falsificationist methodology propounded by the philosopher Karl Popper (Hutchison 1981, chap. 7; see also Hayek [1937] 1948a).

The claim certainly seemed strange to me. I had studied Popper's thought carefully for my dissertation and now knew more about Mises's ideas, and, frankly, it is hard to conceive of two viewpoints more at odds with one another. How could anyone change so much as to switch from one to the other? Yet it was also evident that Hayek was close friends with both men. Hutchison was a leading historian of thought who had lived through the period in question, and he provided detailed textual evidence to support his argument. So Hutchison's interpretation presented a puzzle, and it was in trying to solve that puzzle that I began to do research specifically on Hayek. I have been at it ever since, even though people who care about me have warned me against putting so many of my eggs in one basket. I hope that, in this introduction, I am able to convey some of the reasons why I ended up doing so.

•

For the first eight or nine years of his academic life, the economist F. A. Hayek wrote in German. Afterward, he wrote principally in English, at least until he moved to Germany in 1962. Perhaps because of the novelty and challenge of trying to communicate ideas in a new language, he chose his titles with considerable care. Sometimes he made allusions to other works. Thus "The Trend of Economic Thinking," his 1933 inaugural lecture at the London School of Economics, alluded to The Trend of Economics, a volume edited by Rexford Tugwell that had appeared in America a decade before (see Hayek [1933] 1991c; Tugwell [1924] 1930). He got the idea for the title of his most famous book, The Road to Serfdom ([1944] 1976b), from a phrase used by Alexis de Tocqueville, "the road to servitude" (see Hayek 1983b, 76). And I offer as a conjecture that the title of his Finlay lecture, "Individualism: True and False" ([1946] 1948c), was a reference to passages about individualism in Oscar Wilde's "The Soul of Man under Socialism."

On other occasions, titles had multiple meanings. The paper that gave rise to Hutchison's claim about Hayek's "methodological U-turn," "Economics and Knowledge," was one of these. Its subject was the assumptions that are made in economic theories about agents' knowledge, but it was also about what economists themselves could know. It would seem that Hayek's Nobel address, "The Pretence of Knowledge" ([1975] 1978e), can be similarly interpreted. My own title, Hayek's Challenge, follows Hayek's lead; it refers to the multiple challenges that surround his work.

Hayek himself, of course, faced challenges. Economists are used to the pose of being bearers of bad news. (I say pose because demand for our services, like that for those of undertakers and therapists, is highest when times are bad.) For Hayek, however, it was less of a pose than for most. It is not enough to say that some of his views were unpopular. For most of his life his economic and political positions were completely out of sync with those of the rest of the intelligentsia. He attacked socialism when it was considered "the middle way," when seemingly all people of good conscience had socialist sympathies. He disavowed the Keynesian revolution—even before it had properly taken place. In the latter half of the twentieth century, when some form of welfare state existed within virtually all the Western democracies, he criticized the concept of social justice that provided its philosophical foundations. Although a small group of libertarians and conservatives always read him with enthusiasm, for much of the century Hayek was a subject of ridicule, contempt, or, even worse for a man of ideas, indifference. Because of his political views, Hayek faced many challenges in trying to find an audience for his ideas among the thinkers of his day.

Hayek also presents challenges to those who try to interpret his thought. (Since I am one of these, I may as well share the secret title of my book: Caldwell's Challenge.) There are multiple problems here.

First, there is the simple fact that Hayek's writings lie within the Austrian tradition. Now, to be sure, in the 1930s that tradition was part of the then-developing mainstream in economics. In the postwar era, however, economics changed. One way to characterize the changes is to say that the discipline moved from interwar pluralism to postwar neoclassicism (Morgan and Rutherford 1998). Another is to point out that the mainstream experienced a number of "revolutions": the Keynesian revolution, the econometrics revolution, the general equilibrium or formalistic revolution, and so on. However one might choose to characterize the changes, it is clear that the Austrians did not participate in them. More strongly, people like Hayek and Mises actively opposed them. It may, therefore, be difficult for modern-day economists (who I hope make up at least a portion of my audience) to make much sense of the Austrians. Part of my task is to provide the necessary background to make the Austrians' viewpoint comprehensible to those unfamiliar with their tradition.

The volume of Hayek's work provides another daunting challenge for interpreters. Hayek lived from 1899 to 1992, and his writings span seven decades. Worse, he was incredibly prolific. Even worse, he did not restrict himself to economics, making contributions in fields as diverse as psychology, political philosophy, the history of ideas, and social-science methodology. I joke, of course, when I use the word worse, for part of Hayek's fascination is that he contributed, at times significantly, to so many fields. Studying Hayek forces you to read outside your field, and that can be a liberating experience. But, in this age of specialist training, it is also difficult not to feel inadequate when reading him, and his sheer reach makes any attempt at assessment of his ideas dicey, to say the least.

An even more serious challenge for those who would interpret him arises from the fact that Hayek seems to have changed his mind about certain things over the years or, put in another light, that his work appears to contain contradictions. We will see, for example, that, in the course of one decade, Hayek seems simultaneously to have held the views that what he called equilibrium theory is necessary if one is to do economic science at all and that it is also a highly misleading model for understanding the workings of a market system. Within the covers of the same book he will both argue that policies that aim at income redistribution violate the rule of law and endorse the provision of a "safety net" that is itself an instrument of redistribution. He will trumpet both methodological individualism and group selection, positions often viewed as mutually exclusive. Now, if one disagrees with Hayek on ideological or other grounds, these apparent contradictions are not, of course, a problem. They are a solution, for they provide grounds for dismissing him. But, for someone who wants, as I do, to make sense of Hayek, to provide a plausible reading of the development of his ideas, they pose real difficulties.

There is a huge secondary literature on Hayek, and it produces challenges as well. Part of the problem derives from the fact that Hayek was, and is, a controversial figure. Many who write about him have strong opinions about whether he was right or wrong, and this affects their readings. Furthermore, the enormous scope of his corpus makes for multiple interpretations, as writers draw on different parts of his work. Finally, some people use Hayek's writings as input into their own substantive theories, and, in such cases, the temptation is great to interpret Hayek himself as participating in the same project. As a result, very different interpretations of what Hayek was up to exist—probably more so than for most writers. As I said, I hope to provide a plausible reading of the development of Hayek's thought. But part of my job will also be to confront my own readings with others that exist in the secondary literature.

Another set of challenges has to do with what Hayek has said about himself. Hayek occasionally introduced autobiographical elements into talks and papers, and he even gave a few interviews, but the degree of autobiographical revelation changed dramatically when he was awarded the Nobel Prize in economics in 1974. A few years later, under the auspices of an Oral History Project at the University of California, Los Angeles, Hayek agreed to sit for an extensive set of interviews. The sessions stretched over a number of weeks in late 1978, with nine different people asking him questions. The topics covered ranged far and wide, and there appears to have been little attempt to coordinate what was asked, so sometimes he repeated himself. Hayek discussed his personal life, his academic history, his ideas, his times, his interactions with and impressions of the many great and near-great figures whose paths he crossed. The resulting 493-page transcript (Hayek 1983b) is a wonderful source of information on all aspects of his life and work.

So why is this a problem? As Malachi Hacohen has amply demonstrated in his superb new biography of Karl Popper (see Hacohen 2000), sometimes autobiographical accounts are inaccurate. Popper wrote an autobiographical sketch for the volume on his work in the Library of Living Philosophers series, a slightly revised version of which later appeared in book form as Unended Quest (1976). Popper spent a long time working on the manuscript, producing a number of drafts before he was finally done. Despite this, Hacohen discovered factual errors in Popper's careful reconstruction, some of them serious. Although he was at first inclined to think that Popper had intentionally fudged the record, he later came to the conclusion that the mistakes were not intentional. Popper just remembered things wrong. In this, Hacohen concluded, he was doubtless anything but abnormal: "Autobiographical anachronism is common, and Popper's memory failure may not even be as surprising as I still occasionally find it" (Hacohen 2000, 14).

Hayek had prepared for the oral-history interviews, of course. Still, he was over seventy years old when he gave them, and he was responding extemporaneously about events some of which had taken place forty or more years earlier. It also appears that Hayek had answers for certain questions almost programmed, using exactly the same wording again and again. This is not to suggest that he made things up. But, after a while, what a person recalls may be the story that he told last time, rather than what actually happened. The interviews provide many insights, but they must be handled with care. This is particularly true when the subject matter is sensitive or controversial and when independent verification of his claims is absent.

The final challenge for the Hayek interpreter is the question, Why? Hayek's research path was anything but straightforward. This was a man who, after all, started out as an economist but whose most famous (or, for some, notorious) book, The Road to Serfdom, was in part a political tract. Furthermore, right after he published The Road to Serfdom, he started work on a book on theoretical psychology. He would later say that the resulting volume, The Sensory Order ([1952] 1967h), was extremely important for understanding his later work. But he never said how or why, and, for that matter, subsequent references to The Sensory Order were not particularly prominent. Later in his career, he would turn to political theory, and, ultimately, he would offer an evolutionary theory of the development of human social norms. These sorts of violent twists and turns in research interest cry out for explanation. Is it possible to make sense of Hayek's journey? That is certainly one of the biggest challenges that we face.

The challenges, I can say, have been well worth it. (I speak for myself; I am writing this introduction after having finished writing the book.) Even after all these years, I have at times felt exhausted from, but have never grown tired of, wrestling with Hayek. His mind, of course, fascinates. Anyone with his breadth of interests, with his ability to write on so many different subjects, cannot fail to attract an intellectual historian. Since I was a boy, I have always loved puzzles, so I have enjoyed the puzzling parts, too, the work of trying to piece together, to make sense of, his odyssey. I may as well admit that the controversial nature of his writings also appeals to my contrarian instincts; I have come to enjoy the challenge of presenting his ideas to audiences in which I know there are people who are prepared to dismiss them. In trying to be a good historian, I have been forced in explicating Hayek to confront my own commitments and biases, simply because I have been challenged so often to defend my readings. You can judge for yourself the extent of my self-delusion on this score.

Finally, Hayek's story is, well, just a plain good story. The people he knew and those he corresponded with, worked alongside of, and argued against include many of the most influential economists of the twentieth century. His is, in many ways, the story of the development of modern economics. But, because Hayek so frequently disagreed with those around him, his was a contrapuntal variation, parallel but contrasting, and the more intriguing for it. It is a great tale, one that I will relish recounting, and I suspect that my enthusiasm will shine through my analysis.

•

The plan of the book is straightforward. Part 1 is intended to provide background on the Austrian school. Given that the Austrian approach often differs from that of the mainstream within economics, few are likely to question the need for some sort of background. It may be appropriate, however, for me to offer some justification for the length of this part, for long it is.

Here we will meet Carl Menger, whose 1871 Principles of Economics became a founding document of the school (see Menger [1950] 1976). Because the book is a foundational document, we will explore in detail a variety of its themes. But, to understand the Austrian approach, it is not enough simply to review its proponents ideas. One must also recognize the fundamental fact that the Austrian school was a movement formed in opposition; indeed, its very name was given to it by its detractors and intended as a slur of sorts. We will, therefore, need to spend some time on the Austrians' first rival, the German historical school, and on the battles, methodological, political, and academic, that ensued as the two schools vied with one another for power, prestige, and, not least of all, academic positions. The Germans quickly subdued their Austrian competitors, although, in a way, the Austrian movement became more united for it: as the Viking motto goes, things that do not kill you outright tend to make you stronger. The rivalry between the two schools of thought, known as the Methodenstreit, or "battle over methods," was a defining element in the first twenty years or so of the Austrian school's existence. But it also obscured the many similarities between the two schools, similarities that are the more striking if one compares either school to what passes today for the mainstream of economics. Unraveling all of this is one of the chief goals of the first part of the book.

The battle over methods is, however, only part of the story. If the Methodenstreit provided the initial impetus for the growth and development of Austrian thought, new conflicts were to sustain it. The twin forces of socialism and positivism increasingly became, for the economists of Vienna in the first two decades of the twentieth century, the new opposition. Incredibly, all the forces and personalities came together in a seminar presided over by Eugen von Böhm-Bawerk at the University of Vienna in the years just before the war. Little did the Austrian economists realize the strength of their new antagonists or that the arguments that they were formulating were but a dress rehearsal for disputes that would echo through the coming century. Every one of the arrayed forces, from the positivists to the historicists, from the subjective value theorists to the socialists, would claim for his ideas the mantle of science. Hayek fought in the First World War, then went to university during the cold, hungry, and at times violent days that followed. He would encounter each of the contending sets of ideas during his student days, and the ghosts of Menger and Gustav Schmoller, as well as the larger-than-life influence of seminar participants like Ludwig von Mises and Otto Neurath, would leave their marks. But it would take nearly a lifetime of scholarly work before his particular vision of what it meant to do scientific economics would finally emerge.

In part 2 of the book I tell Hayek's story. If Hayek is sometimes a puzzle for later interpreters, he was also himself a puzzler. Schooled in a university tradition that permitted bright students to explore areas on their own, he was confident enough to plunge into new fields of study when he thought that they might help him discover solutions to his problems. The first puzzle that Hayek encountered had to do with the role of money in an economy. The existence of money obviously conferred substantial benefits—at the most basic level, it facilitates trade, thereby encouraging specialization and growth. Money is a puzzle because its manifold benefits come at a cost: money itself can destabilize an economy, as the hyperinflation that wracked the already-decimated economies of Germany and Austria following World War I amply demonstrated. Hayek's first puzzle was to provide a theory of how a monetary economy works, one that would also explain why at times it fails to work.

By the 1930s, Hayek was working on a second, related puzzle: a theoretical description of how a capital-using monetary economy, one with freely adjusting prices, might operate through time. Hayek was not, of course, the only one to tackle this question, and the answer offered by one of his rivals, a British economist named John Maynard Keynes, would be taken by many economists as definitive during the middle decades of the twentieth century. Keynes was not only a theorist, he was also a man of affairs, and he saw himself as saving capitalism. Others of his rivals among the economists, market socialists like Oskar Lange, thought the rescue mission chimerical and recommended more drastic remedies.

Whatever the many differences that separated Keynes from Lange might be, both of them saw a machine that had broken down when they looked at the economy. This provided another puzzle for Hayek, for, when he looked at the economy, he saw an organism that sometimes failed to work, to be sure, but at other times was able to coordinate the activities of millions of independent human beings. Why did almost everyone else of his day see the world so differently? Hayek began to wonder whether the theoretical tools that economists employed were to blame. He came to the conclusion that even the most advanced theories of the time failed to capture the central features of a market economy, in particular the way it was able to coordinate dispersed knowledge and allow that knowledge to be used by others. Hayek eventually came up with an alternative description that highlighted that fact.

It convinced no one, or virtually no one, at least not at first. And Hayek recognized immediately that changes in economic reasoning alone were not enough. If he was to convince his opponents, he would need to develop a more complete theory of society, to show how a host of social institutions might work together to allow free individuals to put their knowledge to use. This recognition led Hayek into all sorts of new areas of study and to new puzzles. Why did some institutions work better than others? Where did they come from? Could they be altered? At what cost?

Every step along the way, then, Hayek encountered puzzles and opponents who offered alternative solutions to them. But there was one constant: every one of his opponents claimed to be doing "real" science. This provided a final puzzle, one with which Hayek would deal all his life. What was science, after all? What distinguished it from pseudoscience? (This question also engaged one of Hayek's closest friends, the philosopher Karl Popper.) It was clear enough that, for much of the twentieth century, science was regnant. But Hayek felt that many of his opponents, all claiming the mantle of science, were but pretenders to the throne. He constantly encountered people who thought of themselves as objective scientists, people who held ideological views different from his and who immediately felt comfortable attributing their differences to the fact that, whereas they were scientists, he was an ideologue. Hayek developed criticisms of what he called scientism and also tried to explain how his opponents had come to hold their erroneous beliefs. In the process, like Carl Menger before him, he turned to the study of methodology to make his case. And, just as, earlier, he had found that the tools of equilibrium theory did not illuminate the workings of a market economy, he found that the methods of study endorsed by his scientistic antagonists obscured the workings of the complex, spontaneously ordered phenomena that social scientists seek to explain. He therefore proposed alternative methods.

In my intellectual biography of Hayek, then, I trace the development of Hayek's ideas, focusing on the development of his ideas regarding methodology as a unifying theme. Although certain methodological pronouncements were present in Hayek's early work, like most economists (this was also true of Menger) his first love was not methodology. Therefore, when, in his early work, Hayek wrote about methodology, he simply echoed some standard Austrian doctrines, doing so principally to make a case to a German audience for an Austrian approach to business cycle theory. It was only later, as he engaged in numerous debates over how well his and alternative theories captured what he saw as essential features of a market economy, that Hayek began to explore methodological issues more thoroughly. The end result was a distinctive vision of what was possible in the social sciences and of how social phenomena might best be studied.

Hayek's methodological views are of interest in their own right, but they also increasingly came to inform much of his substantive work. Accounts that leave out this part of his thought miss much of the rationale for why he took the specific positions he did. In tracing out the evolution of his ideas, I will try to show the relations between his methodological writings and his contributions to such areas as economics, political philosophy, and psychology. I will not try to provide a systematic and detailed exposition of all his theories. There already exist a number of excellent generalist accounts that provide overviews as well as others that deal with specific aspects of his thought. On the other hand, my book does not presuppose a knowledge of Hayek's work; indeed, it is intended to be accessible to readers who are neither economists nor historians. I also hope that those who wish to undertake a more systematic study of Hayek's thought will, after reading my book, both understand his broader vision and know where in his massive oeuvre to look for specific ideas.

I call the middle part of the book "Hayek's Journey." The title is meant not so much to draw attention to the physical journeys that he took, from Vienna to London to Chicago and beyond—although they too are part of the tale to come—as to emphasize Hayek's intellectual voyage. Where Hayek began was with the Austrian presuppositions, but, after decades of study, where he ended up was in a place that was unique. I hope to offer a plausible account of the many twists and turns that the road to that unique place took. There are, of course, different stories that could be told. More to the point, different stories have been told, and, although some of them complement my account, others clearly compete with it. I will address some of these alternative interpretations, but, to keep to the main thread, I will do so in appendixes to the volume.

History is always like this, of course. It is always a negotiation between the present and our reconstructions of the past, between the evidence and our interpretations of the evidence, a struggle between contending plausible stories offered by different narrators whose own histories, perspectives, and agendas color their accounts. I have puzzled over Hayek's journey for a long time, and I believe the story that I am about to tell you, but I also know that the strength of my convictions matters very little. What perhaps matters most is that, in putting forward my account, I provide a clear target for those who will carry the interpretive task further. That is something that I have tried to do.

I should perhaps say a few words about where my book fits into the now enormous secondary literature on Hayek and on the Austrian school. When I started work on this project over ten years ago, not much had been written on the early history of the Austrian school. This has now been to a considerable extent remedied. Caldwell (1990) contains conference papers on Menger, English translations of some early work are provided in Kirzner (1994a), and Endres (1997) offers a book-length explication of some of the theoretical contributions of Menger, Böhm-Bawerk, and Wieser. The methodological positions of the founding fathers are analyzed in Cubeddu (1993) and Oakley (1997). There has also been a revival of interest in the thought of the German historical school, as documented in Peukert (2001).

Even in the light of the recent additions to the literature, I still feel that, in part 1, I am able to add considerably to our understanding of Hayek's predecessors and their effects on his thought. In particular, I have tried to emphasize the complex interplay of theory and methodology and to highlight the contending ideological, political, and academic rivalries that existed between the Austrians and their historicist, and, later, their positivist and socialist, opponents. This background would help shape Hayek's perceptions of, and responses to, his own opponents, from the American institutionalists to the assorted groups and personalities that he would encounter in England and beyond. An understanding of it will allow us to make better sense, I think, of the unique blending of perspectives and viewpoints that would emerge in his own thought, a blending that resulted in a thoroughly modernist critique of the scientistic pretensions of his age and yet simultaneously pointed toward some surprising (some might even label them postmodern) new directions.

Part 3 of my book contains two chapters. In the first, I review Hayek's journey, in the process trying my hand at assessing his legacy. Although I feel confident about the story I tell about Hayek's journey, I must confess that I feel less certain about my attempt at assessment. Writing that assessment was, for me, the scariest part of the book, for it required me to enter into regions well outside my own areas of expertise. (Indeed, part of the assessment involves pointing the reader toward newly developing literatures in diverse fields that may be read as part of Hayek's continuing legacy.) I have given dozens of talks about Hayek over the years. During the discussion periods that followed the talks, I discovered that people take very different things away from their readings of Hayek. Hayek wrote so much and in so many different areas that that is, perhaps, inevitable. I therefore recognize that my own assessment will equally inevitably be idiosyncratic, reflecting my own readings and interests. Still, I feel that this is something that I owe to the reader.

In the second chapter, one styled as an epilogue, I examine a final challenge that Hayek's work provides, a challenge to the discipline of economics. Hayek had a particular vision of the subject matter studied by economists and was critical of the methods that economists employed in their investigations. If Hayek was right, then some of the directions taken by the discipline in the twentieth century have been wrong. In this final chapter, I try to take those criticisms seriously and use them to reflect, as a historian of economic thought, on the development of economics in the century that has just passed.

Copyright notice: Excerpted from pages 1–20 of Hayek's Challenge: An Intellectual Biography of F.A. Hayek by Bruce Caldwell, published by the University of Chicago Press. ©2003 by The University of Chicago. All rights reserved. This text may be used and shared in accordance with the fair-use provisions of U.S. copyright law, and it may be archived and redistributed in electronic form, provided that this entire notice, including copyright information, is carried and provided that the University of Chicago Press is notified and no fee is charged for access. Archiving, redistribution, or republication of this text on other terms, in any medium, requires the consent of the University of Chicago Press and of the author.

Released today from the U. of Chicago Press:

Hayek's Challenge: Intellectual Biography of F.A. Hayek by Bruce J. Caldwell.

Buy it from Amazon.

416 p. (est.). 2003 Cloth $55.00sp 0-226-09191-0 2003

"Hayek's Challenge represents a career's worth of thinking and writing on F. A. Hayek's contributions to the social sciences. Because of the breadth and depth of Hayek's work, evaluating it or even summarizing it is a reach for anyone; yet, because of his own specialization in methodology and his willingness to delve into fields well outside his own, Caldwell is uniquely qualified to undertake the challenge. His book has to be judged a dramatic success. Hayek's Challenge should easily gain a reputation as one of the most and possibly the most significant contributions to the literature on F. A. Hayek." — Roger Garrison, author of Time and Money: The Macroeconomics of Capital Structure

"A highly original work. Caldwell's scholarship is impeccable, and in fact extraordinary. Written lucidly and eminently readable, Hayek's Challenge is likely to become one of the leading works in the field. It will be consulted again and again for the wealth of incidental information that it contains." — Israel M. Kirzner

Table of Contents
Acknowledgments
Introduction

I. The Austrian School and Its Opponents---Historicists, Socialists and
Positivists
1. Menger's Principles of Economics
2. The German Historical School
3. The Methodenstreit
4. Max Weber and the Decline of the Historical School
5. Positivism and Socialism

II. Hayek's Journey
6. Hayek in Vienna
7. Monetary Theory and Methodology
8. Hayek at the London School of Economics
9. Some Methodological Debates of the 1930s
10. "Economics and Knowledge" and Hayek's Transformation
11. The Abuse of Reason Project
12. Individualism and the Sensory Order
13. Rules, Orders and Evolution

III. Hayek's Challenge
14. Journey's End---Hayek's Multiple Legacies
15. Epilogue: A Meditation on Twentieth-Century Economics

Appendixes
Bibliography
Index

From the publisher:

Friedrich A. Hayek is regarded as one of the preeminent economic theorists of the twentieth century, as much for his work outside of economics as for his work within it. During a career spanning several decades, he made contributions in fields as diverse as psychology, political philosophy, the history of ideas, and the methodology of the social sciences. Bruce Caldwell -- editor of The Collected Works of F. A. Hayek -- understands Hayek's thought like few others, and with this book he offers us the first full intellectual biography of this pivotal social theorist.

Caldwell begins by providing the necessary background for understanding Hayek's thought, tracing the emergence, in fin-de-siècle Vienna, of the Austrian school of economics--a distinctive analysis forged in the midst of contending schools of thought. In the second part of the book, Caldwell follows the path by which Hayek, beginning from the standard Austrian assumptions, gradually developed his unique perspective on not only economics but a broad range of social phenomena.

In the third part, Caldwell offers both an assessment of Hayek's arguments and, in an epilogue, an insightful estimation of how Hayek's insights can help us to clarify and reexamine changes in the field of economics during the twentieth century. As Hayek's ideas matured, he became increasingly critical of developments within mainstream economics: his works g ew increasingly contrarian and evolved in striking -- and sometimes seemingly contradictory -- ways. Caldwell is ideally suited to explain the complex evolution of Hayek's thought, and his analysis here is nothing short of brilliant, impressively situating Hayek in a broader intellectual context, unpacking the often difficult turns in his thinking, and showing how his economic ideas came to inform his ideas on the other social sciences.

Hayek's Challenge will be received as one of the most important works published on this thinker in recent decades.

Easterblogg on fires and forest management. (via Matthew Stinson).