A More Piecemeal Case against Intervention

     

At the heart of our disagreement is a methodological issue.  Let me explain how I see the matter – from which it should then become clear why I wrote as I did in some aspects of my criticism of Sandy to which he takes exception. (Other points will require a separate response.)

In both the social and the natural sciences, there are some claims about which we can usefully argue in a purely theoretical way, because they are related to the necessary characteristics of structures.  We are familiar with these in the context of Mises’s and Hayek’s arguments about the role of prices in a large-scale economy with an extended division of labor.  Clearly there are empirical issues here (i.e., does the description being given of the characteristics of the economy apply?).  But once one has agreement about that, the argument can be purely theoretical.  One finds similar issues in aspects of physics. (Compare, say, Karl Popper’s discussion of an issue of a similar kind exemplified by Leibniz’s criticism of Descartes’s theory of the atom: Popper offers a useful brief description of this in his “Philosophy and Physics,” in his The Myth of the Framework, London: Routledge, 1995.)

By contrast, there are other issues which involve us in both theoretical and empirical argument.  To argue effectively here, one needs to put forward claims concerning some phenomenon, where these need to be able to withstand theoretical criticism, and also to show that they can offer good explanations of actual empirical and historical phenomena.  What we produce here will typically be guided by a “paradigm” or (better, because this way of describing things stresses that rational argument can take place about it), a “research program,” of which Austrian economics is one example.

What is needed here is: (i) to offer theoretical explanations which will, in themselves, withstand criticism and (ii) to be able to offer explanations of empirical and historical phenomena which do better than the alternatives.  Here, the ability to account for what has taken place and to make predictions of things which we would not otherwise expect to occur, which are then confirmed, are widely regarded as important.

It is in the light of this that my earlier comments should be understood.

It seems to me that Mises himself presents his arguments against intervention as if they had the same purely theoretical status as do his arguments about economic calculation.  But this is surely not the case.  There is nothing offered which has any inevitability to it – other than the unlikely case in which a government pursues some goal by way of an economic intervention and then progressively takes over control of everything that prevents its goal from being realized.  While there may be examples which illustrate the early stages of this, just because of its problematic economic consequences, it is unlikely that governments would go all the way.  (It is something of a cliché from studies of pluralistic systems of political science that governments typically accord weight to lobbying from industry because their popularity depends on good economic performance.)  More typically, inept intervention seems simply to stick with the production of a limited range of problematic consequences which governments judge that they can handle politically – as in the case of rent control.  In addition there are the claims – which both Sandy and I agree give rise to concern for the classical liberal – about East Asian governments being able to intervene in ways which have been productive of economic growth.

It was this that stood behind the rather general claims that I made, to the effect that if one was going to set out to reconstruct and defend Mises’s arguments about the problems of intervention, one would need to do so in a way that treated them not as claims of pure theory, but as theoretical claims the correctness of which as explanations would have to be argued in terms of empirical and historical phenomena.  As I suggested above, if one is advancing a theory in this context, one needs to defend its cogency in general terms, as well as to show that it really delivers the goods – and, crucially, performs better than competitors – in specific cases.

It is in the context of the general cogency of Mises’s theory that I raised two points: first, that it would seem as if what Mises allows for, in terms of the limited role that he accords to government, involves things that, in the course of his discussion of interventionism, he would rule out (see my initial paper); second, that it would have to be the case that the economy itself can function without intervention, in which context I mention Robbins’s abandonment of his earlier Austrian position.

Now in response to this last point, and to my argument that the case had to be made on empirical and historical grounds, Sandy pointed to the fact that work has been done in the tradition of Austrian trade-cycle theory, and applications have been made of Mises’s ideas elsewhere.  To this my response is: it is good, and important, that such work is taking place.  But what needs to be done to vindicate a Misesian position is to argue that it offers better explanations than alternative views.  It is not clear to me that this has been done, and it would clearly require work of a different kind from what Sandy was able to do in his interesting paper.

All told, it would seem to me that all of Sandy’s commentators agree that there are problems about Mises’s argument.  In saying this, and also that I am not an admirer of this aspect of Mises’s work, I am not saying that I am a proponent of governmental intervention -- only that the case against it, it seems to me, would have to be more piecemeal, making use of rational-choice arguments (which can allow for a range of different motives), institutional arguments, and also moral arguments.