Sunday, May 8, 2011

A good comment on another blog's post

The other day I mentioned Pete Boettke's post on Fukuyama and Hayek. Here's a good comment from that post:

"If you think about it, there is a lot of tension between the idea that society should follow principles and the idea that society evolved through experimentation.

When we suggest that society should be guided by principles, we're essentially saying that we should stop experimenting with those principles. But why should we stop? Those principles may have succeeded in the past, but we can say that we will never discover better principles in the future.

Sure private property worked well in the past, but the experiment should continue and see if we can come up with something better some would argue

It reminds me of my comparison of Dewey the experimentalist and Rothbard the remorseless logician.


  1. See, something here doesn't work right.

    If an artist were to stop experimenting, even if he is currently successful, he may pay the price for it in the future. That's one thing.

    But just imagine about the type of experimentation you suggest. Supposing I were some sort of czar who orders all mutual funds to end two-part tarriffs. I claim this experiment may yield good results. The end of two-part tarriffs leads to all mutual funds losing a lot of money very quickly, due to depositors rapidly putting their money in and out of it from mere whim.

    I then end the program. Several frustrated fund managers ask me why I did such a thing.

    "What? Have you no sense of vision?! I was experimenting. I was trying to find a better solution for you!"

    They protest and say my plans didn't work.

    "So what? I have withdrawn it, have I not? It was a small-scale gradual experimentation that was repealed after failure. I was moderate and conservative."

    With bloodshot eyes, they explain that several mutual funds had to shut down, and they all had to work 80 hours a week to keep their funds afloat. They are all nearly ruined, and their family lives have broken down. Even their clients are broke.

    "It's a small price for achieving vision! You should know! You keep playing the markets all the time and take so much risk. It's the same with me, except I don't lose my job for it! Sure, two part tarriffs worked well in the past, but the experiment should continue and see if we can come up with something better."

    I am then promptly thrown out of the window by overworked, undersleeped men whose families have left them.

    I am sorry, Daniel, but crack-brained experimentation with other people's time and money is always crack-brained - whether it is gradual and restrained or whether it is completely radical. Because even gradual social experiments have severe costs on people's lives in that brief amount of time.

    YOU will never bear that cost if you initiate such experimentation.

    Who pays the price for moral vanity? In that given example, I would be trying to destroy the status quo and the very way of living for thousands of people, not for their sake, but for my own utilitarian satisfaction. In fact, it's a real example of C. B. Bhave from here in India.

  2. Prateek,

    Can it also be moral vanity to choose to maintain a status quo?

    Who pays the price for maintaining the status quo? And how do we evaluate its cost?

    Isn't it an experiment to maintain status quo rules and institutions in the context of a constantly changing world?

    I'm somewhat wary of the idea that if we make decision makers 'pay the price' for their mistakes, they will then be able to act appropriately. Decisions frequently have consequences out of all proportion to individuals' ability to bear them, and often out of their capacity to foresee.

  3. We don't need them to act appropriately. We just need to prevent them from acting at all.

    Look at nuclear power as a similar situation. No nuclear power business ever sets up a plant without government bearing the liability for it. Of course, since they don't bear the liability for it, they will take needless risks. See Fukushima.

    You may say, "I'm somewhat wary of the idea that if we make nuclear power businesses 'pay the price' for their mistakes, they will then be able to act appropriately. Decisions frequently have consequences out of all proportion to power plant managers' ability to bear them, and often out of their capacity to foresee."

    So what will happen? They will not set up nuclear power plants in the first place. Which is precisely what anyone should do in such a risky business. Which is precisely what should have happened.

    Much the same way, authorities should have their arms tied up and prevented from reformist activists urges. It's why Clinton fired Brooksley Borns back in the 1990s. They don't have the capacity to foresee mistakes or the ability to handle them.

  4. It's why Clinton fired Brooksley Borns back in the 1990s. They don't have the capacity to foresee mistakes or the ability to handle them.

    That's a very interesting interpretation of events. I think it's possible to interpret the removal of Brooksley Born (and her proposal to expand regulation of derivatives) as a (perhaps foolish) maintenance of status quo rules in the face of a world that was quickly changing. It's hard for me to see Born as lacking in foresight in comparison to any of her peers who remained in the administration(Summers, Greenspan...)

    It is not only reformers who are subject to ignorance, but also those who defend and preserve present arrangements.

    It is not only regulators who make decisions that can have unpredictable and disproportionate consequences, but also market participants themselves. Adam smith used the example of fire walls in urban buildings. At some point, those who proposed mandatory fire walls were busybodies who imperfectly understood the marginal costs of constructing with brick vs wood,and how many lives and livelihoods could be ruined in the process. Thankfully, we have come a long way since nero's time, and such meddling is part of the status quo.

    The nuclear industry, if not for busybody regulators might have constructed plants that are much cheaper and more dangerous. The whole point I was trying to make is that it may be actually impossible for actors to repair damage that they have done, despite any legal liability.

    Mrs. O'leary may have been legally liable for the great Chicago fire, but what does that mean?

  5. Wow! Prateek, for one thing I don't think this needs to take the shape of active experimentation. Institutions evolve over time. People propose specific solutions to specific problems, they don't change things randomly. Sometimes institutional culture shifts. Sometimes certain elements of an institution drop out from disrepair. Sometimes institutions are bolstered in response to specific needs, etc. Institutions evolve.

    People who cling to hard and fast principles don't seem to understand this. The really weird thing is that sometimes the people who cling to inviolate principles and the ones that pay lip service to evolutionary processes are the same people!!!

    Of course you can actively experiment too. I'm not saying it's all passive. But I think you're making an odd critique by pointing out blatantly reckless experimentation as the standard we should measure experimentation by.

    How did mutual funds emerge in the first place? How did nuclear power plants emerge in the first place? Somebody's experimentation - that's how.

  6. The first mutual fund was probably formed by a businessman taking risk with his own money.

    Where we speak of such institutional changes involving

    a) legislative action by legislators and wonks uninvolved in the actual work; AND/OR
    b) making admittedly modest abridgments to the system of property as it currently exists

    we speak of changes that are much more radical and involve a cost borne by many people other than the decision maker.

    Business is run on creative destruction and most startups fail. But to bring social action or legislative action to the same experimental styles is a whole different thing altogether, right?

  7. yes, and I pretty much only advocate government experimentation (which - I should note to all - wasn't even the subject of this post until it was brought up right now) when costs and benefits are NOT borne by the actor in the market. I am very well aware of the importance of the decision maker bearing costs - it informs my entire political philosophy, after all!

  8. Prateek, you realize that all the legal changes that enabled capitalism were of just the sort you are rejecting here, right? Such as allowing usury? That might have worked out really poorly, after all.

  9. Dewey believed in experimentation so long as the experiments confirmed the sort of society he thought was best; when they didn't happen, he quite quickly backed away from such.

    Rothbard believed in experimentation as much as anyone does.

    Your juxtaposition is rather simple-minded Daniel.

  10. Rothbard wouldn't have thought so. Have you read the article by Rothbard in question here?

    The Rothbard/Dewey point was on empiricism, not strictly experimentation. But Rothbard wasn't exactly ambiguous about it. Have you read the article in question, in response to Stigler? Stigler took a pretty reasonable position on it all. Rothbard came out and said "we don't need statistics on the economy because all business men need to know is the quantity they can sell at a given price - any statistics other than that are just a tool for the enemies of laissez faire".

    Gary, this gets old. Everyone that doesn't agree with you always has some sort of hidden depravity and anyone I take any issue with at all is never guilty of what I'm suggesting of them.

    The fact is, Rothbard did vehemently reject empiricism and he was a "remorseless logician" and he - unlike Hayek whom Keynes initially described with that label - would have probably embraced it. This is very broadly understood, and even fellow libertarians point it out and contrast it with other less anti-empirical strains of libertarian (see Virginia Postrel here:

    Don't accuse me of being simple minded or uninformed when you don't even seem to understand the basics of the discussion.

  11. "The Rothbard/Dewey point was on empiricism, not strictly experimentation."

    Then use the term empiricism if that is what you mean.

    Numerous articles by Rothbard over the years talk about experimentation and/or empiricism, and he has no problem with that going on.

    On Rothbard's empiricism:

    "Whether we consider the Axiom 'a priori or 'empirical' depends on our ultimate philosophical position. Professor Mises, in the neo-Kantian tradition, considers this axiom a law of thought and therefore a categorical truth a priori to all experience. My own epistemological position rests on Aristotle and St. Thomas rather than Kant, and hence I would interpret the proposition differently. I would consider the axiom a law of reality rather than a law of thought, and hence 'empirical' rather than 'a priori.' But it should be obvious that this type of 'empiricism' is so out of step with modern empiricism that I may just as well continue to call it a priori for present purposes. For (1) it is a law of reality that is not conceivably falsifiable, and yet is empirically meaningful and true; (2) it rests on universal inner experience, and not simply on external experience, that is, its evidence is reflective rather than physical; and (3) it is clearly a priori to complex historical events."

    What Rothbard wasn't was a "logical-positivist" (which is no confused with empiricism); he was an empiricist however, just not a Popperian (Popperianism equalling what most people think of empiricism these days).

    Shit be a little more complex than you realize as always. It would sort of kind of be helpful if you had actually picked up Rothbard and read him. I mean, I'm not much of a fan of Rothbard, but still...

  12. Daniel,

    No, what gets old is you holding forth on libertarian thinkers without knowing much about them.

  13. Brilliant Gary - provide a point where Rothbard contrasts himself with empiricism to demonstrate he's an empiricist. What did you do, just Google "Rothbard empricism" and copy and paste the first thing that came up? Rothbard is rejecting Kantian terminology here and appropriating the word "empiricism". He's not embracing what we know as empiricism.

    If you don't think there is a notable contrast between Rothbard and Dewey (hell, between Rothbard and just about anyone) on the question of empiricism as it relates to human society, then you have no clue what you're talking about.

  14. Daniel,

    No Daniel, I've actually read Rothbard.

    "He's not embracing what we know as empiricism."

    No, he's not embracing what _you_ think of as empiricism.

    "If you don't think there is a notable contrast between Rothbard and Dewey..."

    What I think is this (and it is obvious from what I wrote earlier): Dewey was a hypocrite when it came to empiricism (it was largely a smokescreen for his agenda - that was a pretty common thing amongst all of the pragmatists of his time - see Oliver Wendell Holmes - I also agree with the main criticism of pragmatism that it is just a rather poorly thought out and bastard form of idealism), and that Rothbard wasn't nearly as anti-empiricist as people like to make him out to be.

  15. Yes, Mr. Callahan, repeal of usury laws is that kind of a radical change.

    Except there were enough loopholes and walk-arounds being used to circumnavigate usury, that it was better the pretense be dropped. There was enough pressure as it is.

    And to take a very un-laissez-faire perspective, I'd say Social Security possibly falls into the same category of a radical change that was probably necessary, due to pressure.

    What I mean is that Norman Thomas and the Socialist Party of America were ascendant and had the chance to use various ongoing crises to implement their even more radical version of total societal change. Franklin Delano Roosevelt managed to outflank the likes of Norman Thomas, passed a watered down version of what radicals like Thomas wanted, and put a modest flesh wound on the existing capitalist system in order to save it.

    Is that not why the likes of Howard Zinn oppose the New Deal - because it was *allegedly* about saving the capitalists from the pitchfork only and not empowering the working man?

    My more clarified conclusion - pressures from changing circumstances of the place and time, not the drive for experimentation, are relatively better grounds for implementing such changes. As with FDR and usury loopholes, better the devil we know.

  16. Daniel,

    Something that ought to clue you into Dewey being a monstrous hypocrite when it comes to empiricism was his claim that what was wrong with the Soviet experiment was the fact that Russians were in charge; Dewey, when he was caught his pants down (as he often was), very often blamed some intrinsic quality of the people or person involved, instead of questioning the experiment itself.


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