Dead Men Walking

Why 2009's truly top thinkers are yesterday's news.

BY NIALL FERGUSON | DECEMBER 2009

There is nothing like a really big economic crisis to separate the Cassandras from the Panglosses, the horsemen of the apocalypse from the Kool-Aid-swigging optimists. No, the last year has shown that all is not for the best in the best of all possible worlds. On the contrary, we might be doomed.

At such times, we do well to remember that most of today’s public intellectuals are mere dwarves, standing on the shoulders of giants. So, if they had e-mail in the hereafter, which of the great thinkers of the past would be entitled to send us a message with the subject line: "I told you so"? And which would prefer to remain offline?

It has, for example, been a bad year for Adam Smith (1723-1790) and his "invisible hand," which was supposed to steer the global economy onward and upward to new heights of opulence through the action of individual choice in unfettered markets. By contrast, it has been a good year for Karl Marx (1818-1883), who always maintained that the internal contradictions of capitalism, and particularly its tendency to increase the inequality of the distribution of wealth, would lead to crisis and finally collapse. A special mention is also due to early 20th-century Marxist theorist Rudolf Hilferding (1877-1941), whose Das Finanzkapital foresaw the rise of giant "too big to fail" financial institutions.

Joining Smith in embarrassed silence, you might think, is Friedrich von Hayek (1899-1992), who warned back in 1944 that the welfare state would lead the West down the "road to serfdom." With a government-mandated expansion of health insurance likely to be enacted in the United States, Hayek's libertarian fears appear to have receded, at least in the Democratic Party. It has been a bumper year, on the other hand, for Hayek's old enemy, John Maynard Keynes (1883-1946), whose 1936 work The General Theory of Employment, Interest and Money has become the new bible for finance ministers seeking to reduce unemployment by means of fiscal stimuli. His biographer, Robert Skidelsky, has hailed the "return of the master." Keynes's self-appointed representative on Earth, New York Times columnist Paul Krugman, insists that the application of Keynesian theory, in the form of giant government deficits, has saved the world from a second Great Depression.

HANOCH PIVEN

 
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BGSFOREIGNPOLICY

11:13 PM ET

December 1, 2009

"Dead Men Walking"

Jolly good, esp. needed recognition of Polanyi's contributions.
But the Adam Smith here is the popularized caricature. It was Smith of the invisible hand who also warned us that (caveat: rough paraphrase) "scarce do you see two businessmen in conversation than they are not out to defraud the public" via price fixing, restraint of trade, and such. Smith was not -- not by a long shot -- averse to government using its police powers to constrain such behaviors since he was quite clear in W of N and Moral Sentiments about the importance of institutional frameworks to guide social and economic practices.

 

DGALBRAITH

2:17 AM ET

December 2, 2009

Dawkins not a Political Darwinian

Dawkins goes to great pains and at length to explain that when it comes to politics and economics he is not a Darwinian.

As Dawkins helps communicate, Darwinism is a fact, a wonderful description of design without the need for a creator. But it is not an ideology.

He does indeed suggest it might apply outside of biology through the concept of the meme, but the orginal analogy was pejorative - to describe ideas which were successful but destructive, like viruses of the mind.

Every single tiny accumulated feature in a Darwinian eco-system is the result of failure and suffering, something that Dawkins finds abhorrent when applied as an ideology and an abrogation of social responsibility particularly when you accept Darwinism as a fact.

In other words, (and its a shame because the rest was a terrific read):

"Thanks in no small measure to the efforts of his modern heirs, notably Richard Dawkins, we are all Darwinians now -- except in the strange parallel worlds of fundamentalist Christianity and state-guaranteed finance."

Is completely wrong, and perpetuates a catastrophic misunderstanding between science and social science.

 

AR

7:31 PM ET

December 15, 2009

Dawkins is a tool. One can

Dawkins is a tool. One can neither prove nor disprove the existence of God, to attempt to do so is a foolhardy attempt.

 

TOMOYA

5:44 PM ET

December 2, 2009

Really

Mr Ferguson is a hopeless case. Truth is of no importance to draw the world's attention.

 

WILLIAM R. HAWKINS

8:28 AM ET

December 7, 2009

Milton Friedman, Right and Wrong

Perhaps one should “throw away” some of Milton Friedman’s works as Naill Ferguson suggests, particularly his latter writings which had degenerated into libertarian screeds for deregulation and “free trade” rather than serious analysis. However, Ferguson is wrong to dismiss A Monetary History of the United States. Friedman’s interpretation of what made the “great contraction” so severe still stands, as well as his criticism of the failure of the Federal Reserve to take stronger action to save the financial system. During the years 1930-33, a wave of bank failures reduced the money supply by a third. Federal authorities did not act vigorously enough to counteract the resulting deflation and a decade of depression resulted. Friedman declared their dilatory attitude “confused and misguided” and argued that the Fed should be abolished if it could not do what it was created to do, support the banks in a crisis.

Federal Reserve Board chairman Ben Bernanke is a student of Friedman, and his decision to pump trillions of dollars into the economy to offset the trillions lost in toxic assets was a successful effort to avoid the mistakes of the 1930s. The losses were too large to replace with the fiscal measures of debt and taxes used to combat a normal recession. A financial crisis required a financial response. The threat was deflation, not inflation.

It may be ironic that Friedman’s lasting lesson is for more Fed intervention, but there it is.

 

NMOUTINHO

8:58 PM ET

December 15, 2009

Libertarians are people too

Perhaps if you looked at the Austrian lit for deregulation and free trade, namely Mises's "Interventionism: An Economic Analysis", you wouldn't dismiss these ideas as "not serious analysis". If that book catches your attention, another good read about Boom-Bust cycles is "The Austrian Theory of the Business Cycle", which points out that the creation of booms lies in artificially low interest rates, creating a misallocation of capital towards long-term investments, that over time inevitably gets corrected by the bursting of the bubble. After the bubble bursts, we MUST spend time rebuilding our economy and re-allocating capital, or else we just re-inflate the bubble.

I'll look for you when our double-dip comes.

 

JAMESFRED

12:51 PM ET

December 21, 2009

Bernanke not such a great student

Though opposed to the existence of the Federal Reserve, Friedman argued that, given that it does exist, a steady expansion of the money supply was the only wise policy, and he warned against efforts by a treasury or central bank to do otherwise. Bernanke is not increasing the money supply steadily Milton Friedman would not have agreed with he’s policy. The Fed in the 30’s decreased the money supply making the situation worse, what might have been a garden-variety recession, although perhaps a fairly severe one, into a major catastrophe. Friedman argued if the money supply was steady then the free market would have corrected the situation as so in the early 20’s. Far from the depression being a failure of the free-enterprise system, it was a tragic failure of government.

 

JAMESFRED

12:51 PM ET

December 21, 2009

Bernanke not such a great student

Though opposed to the existence of the Federal Reserve, Friedman argued that, given that it does exist, a steady expansion of the money supply was the only wise policy, and he warned against efforts by a treasury or central bank to do otherwise. Bernanke is not increasing the money supply steadily Milton Friedman would not have agreed with he’s policy. The Fed in the 30’s decreased the money supply making the situation worse, what might have been a garden-variety recession, although perhaps a fairly severe one, into a major catastrophe. Friedman argued if the money supply was steady then the free market would have corrected the situation as so in the early 20’s. Far from the depression being a failure of the free-enterprise system, it was a tragic failure of government.

 

OJNABIEOOT

7:39 PM ET

December 15, 2009

Just war?

I'm surprised to see that Reinhold Niebuhr didn't make the list. Certainly Obama's foreign policy has caused people to reassess his legacy.

 

LOGICISBASIC

11:15 AM ET

December 16, 2009

On Friedman's citation and Madoff's scam

"Inflation," wrote Friedman in a famous definition, "is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output."

Friedman's citation clearly implies that money growing faster than output is a NECESSARY condition for inflation. It does not, in any respect, imply that it is SUFFICIENT. I don't care about the many caricaturist descriptions of thinkers in the article, but you really need to get the logic right.

Regarding Ponzi scams. Game theoretic mainstream economics accounts for that kind of phenomenon even when every individual is perfectly rational.

 

ALBY FLUGZEUG

12:09 PM ET

December 18, 2009

"ill-advised government actions"

Ferguson neglects, as they all do, to specify that government actions in this country arise from Lobbyists, campaign finance laws.

The government by the people for the people is really by very few of the people, the ones with the most dough, the most vested interests to protect their businesses from the vagaries of a truly "free"-market!

They don't mind when they can dominate the market as Oligopolists, as happens in any unfettered market, but they sure don't want anti-trust prosecutions to open the field up to new competition, and keep it open!

There is no invisible hand in this market. There are invisible hands behind curtains! And, they're all connected to pretty similar minds, that have run out of ideas in the marketplace for ideas. Too bad that marketplace isn't free to rise up to the occasion with some new ideas!