I was watching this TED talk last night; it’s a fascinating look at the power of re-framing things and has given me a lot of food for thought on possible ways to begin to change the mindset of fear and uncertainty that we have all adopted. But the talk itself and the issues arising therefrom are not the subject of this post (that will come later); what I want to talk about today is something that happened to me when the talk got to 13:10. Rory Sutherland introduced an economist called Ludwig von Mises, with a slide on his presentation saying “Ludwig von Mises is my hero”. Straight away my fur bristled and my tail did its bottlebrush impression. Now this is something usually reserved for the dog, not TED talks. It was harder after that for me to agree with Mr Sutherland; there were a few other things in the talk with which I would disagree, or perhaps put differently, but in general I had been taken in by what he was saying. Until he mentioned Von Mises. After that I found myself, against my innate sense of reason, looking for things to disagree with, picking apart things he had said prior to this that I had been prepared to gloss over. Why? Because I hate the economic thinking of Von Mises and the Austrian School. I won’t (in this post anyway) go into the many reasons why, other than to briefly say that these people were the pioneers of economic libertarianism, a.k.a. “f**k you, I got mine” economics. I despise them and their supercilious, patronising offspring, the Chicago school, that gave us monetarism and neoliberalism.
But then I had to check myself. What did I really know about Von Mises and what he said? I realised that I had fallen into a trap for which I had already formulated a name, but not yet written about: Either-or disease. Because already I was thinking: “this guy likes Von Mises and wants us all to study him – he obviously can’t know what he’s talking about.” And that’s irrational, but we all do it, don’t we? We all have our prejudices and ideologies, and we’re far too quick to dismiss isolated points that people are making because we lump everything they are saying into either one thing or another. We seem incapable of realising that people can hold points of view that cross into the territory of another ideology, without necessarily identifying wholesale with that ideology. You know, favour higher taxes on the rich? – you must be a socialist. In favour of restricting illegal immigration? You’re a Nazi. Government spending in a recession? Pinko liberal. Look for ways to reduce the welfare burden on society? Heartless Neocon.
I should know, because I hold a wide range of views on economic and political issues. Some things I say would leave you with the (thoroughly inaccurate) impression that I’m a dyed-in-the-wool conservative; other things might leave you thinking I’m a left wing extremist (closer, but still wrong). But I’ve always taken some measure of pride in my willingness to look at all sides of an issue, examine the history thereof, and take time to read and do research. Last night I failed, and I can’t even use the excuse that I’m human.
So as penance I did a bit of work on Von Mises. I didn’t discover anything that changed my opinion of the Austrian School in general. I still dislike their bleak definition of economics, their offhand dismissal of classical empiricism, their support for the barbarous gold standard (a.k.a “kick the economy when it’s down”) and their circular reasoning of the so-called “economic calculation problem” that was supposed to disprove socialism. But I was surprised to find some common ground, in particular the subjective theory of value. I’ve always had a fascination with retail, and one of the things drummed into me was “always sell something for what you think you can get for it.” This doesn’t have to necessarily bear any relation to a scientifically calculated price (cost plus required mark-up). Clever merchants will achieve financial leverage through buying and selling products which have a perceived value that is higher than the accounting value. Also, it was one of these Austrians who developed the concept of opportunity cost, which I consider to be the key to measuring human well-being.
There is a proviso, however. The axiom I stated above: “always sell something for what you think you can get for it” has a deadly converse: “something is only really worth what someone is prepared to pay for it.” Now think of the misery that has resulted from this converse being applied to the labour market, something which is at the heart of the widening gap between productivity and wage levels in today’s economy.
I suppose at heart I’m a classical economist, but one who, like Keynes (hopefully!), knows that in the real world, under certain conditions, the classical theories break down. Sometimes graphs don’t always slope the way we think they should, and sometimes the simple can’t inform the complex. Sometimes.