Critical Rationalism Blog

Commenter Lee Kelly (and Rafe Champion as well, it looks like?) have a blog called Critical Rationalism that I'd like to share with readers. I've only recently discovered it, and it doesn't look that old anyway (posts start in January).

The blog describes "critical rationalism" as:

"A kind of evolving philosophical tradition concerning how we should approach knowledge. It is the Socratic method only with a little bit of modern awareness. While most philosophical traditions regard knowledge as something that has to be certain and justified, CR takes the view that we don’t have ultimate answers, but knowledge is nevertheless possible. Truth is an endless quest"

I'm not personally familiar with it, but it sounds interesting and I plan on keeping up with their posts. I am severely under-educated when it comes to philosophy. But I am educated enough to locate my general impressions and approach to knowledge within the broader landscape of philosophy. I am generally speaking an empiricist and have an innate skepticism of systems that strike me as being excessively reliant on deduction. I see that critical rationalism draws heavily on Karl Popper. What I know of Popper is his views on falsifiability and on determinism. I've always associated Popperian falsifiability with empiricism, and of course his critique of determinism and historicism as being especially damning for rationalists. So I'm not quite sure how Popper fits in with "critical rationalism". I suppose that's the whole point - that "critical rationalism" tempers the excesses of some other rationalisms? I just don't know - I'll have to read the blog on a regular basis, and probably read more Popper too!

Thoughts from Keynes and Kuehn on Unemployment Insurance

The President recently signed an extension of unemployment insurance, so I thought it was a good time to share a somewhat surprising view of John Maynard Keynes on this sort of program. In the General Theory (1936), he wrote:

"It is curious how common sense, wriggling for an escape from absurd conclusions, has been apt to reach a preference for wholly 'wasteful' forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict 'business' principles. For example, unemployment relief financed by loans is more readily accepted than the financing of improvements at a charge below the current rate of interest; whilst the form of digging holes in the ground known as gold-mining, which not only adds nothing whatever to the real wealth of the world but involves the disutility of labour, is the most acceptable solution of all."

Of course, Keynesians have since reconciled themselves to unemployment insurance, but I thought this was an interesting objection from Keynes. And a very insightful first couple sentences on the irrationality of politicians.

I've generally been in support of strengthening unemployment insurance, but I find the concern about its impact on the unemployment rate to be valid - and it's something that increasingly concerns me as we continue to extend the program. My all-time favorite sentiment on unemployment insurance is from Martin Baily, who wrote that "unemployment may increase as a result of UI, but it matters less". We have to look at the impact on the unemployment rate as a trade off. Unemployment may increase with more generous benefits, but the discussion can't stop there. How does quality of life change as a result of the benefits? How important are the benefits for counter-cyclical spending and macro-stabilization? I'm getting increasingly leery of all these extensions - American unemployment insurance is beginning to look like the European safety net. But we have to be careful about too heavily emphasizing the impact on unemployment rate when the hiring rate is so abysmal. If hiring were stronger, pointing to unemployment insurance as the culprit might be more convincing. For now, it's on my radar but it's hard to get too upset about it. But if I had the choice between another extension or a stronger infrastructure spending bill plus a hiring tax credit, I'd choose the latter over more extensions to UI in a heart-beat.

I also wanted to share this Wall Street Journal piece that makes an important point about the benefits of a robust UI program. In this job market, job seekers jump on any offer that's made to them, regardless of whether it's the right match long-term. That's what's best for them now, but it could be trouble down the road. We want the right employer-employee matches made, and this article suggests that unemployment insurance can help provide the breathing room to make that match. If those matches are made out of recessionary desperation, you could see what Austrians call "malinvestment" of human capital, and what Arnold Kling has called a "recalculation" down the road when the mistake is revealed.

Life is full of trade-offs, and the unemployment insurance program is no exception. Decisions around this program are tough at a time like this - particularly after it has already been repeatedly extended. It's important to be honest about all the costs and all the benefits.

Links on States, Localities, and Federalism

Longer-term readers know I have a deep interest in federalism and the role of the states in American society. Our federal organization provides the opportunity for a lot of experimentation ("laboratories of democracy"), decentralization of power, more responsive government, and the development of distinct regional identities that make our culture more robust. Unfortunately, these opportunities are often wasted.

One thing I've been concerned about is the role that state governments have played in aggravating the downturn. Balanced budget practices that cut spending dramatically at the state level when revenue is down have neutralized much of the federal stimulus. Analysts who don't take the time to look further than the federal budget insist that we've implemented massive fiscal stimulus. But the emphasis on the federal budget is meaningless. Total government spending in the U.S. - spending that includes the state and local governments - has been much less pronounced. That's a huge danger that many proponents of fiscal stimulus seem to be unaware of, and the many opponents of fiscal stimulus seem to ignore when they decry Keynesianism in America today. However, we do have some good news. The Wall Street Journal reports today that state tax revenue has started to stabilize, and since budget cuts have largely been a response to reductions in revenue, this is a good thing. It still probably won't add any deficit spending, but the cuts should stop. Recently, Megan McArdle blogged on state debt levels, although I think her treatment leans too heavily on the very real moral hazard concern and doesn't engage enough of the other important issues that need to be considered. Finally, Veronique de Rugy does an abysmal job engaging the issue of intergovernmental transfers and the stimulus, and draws a lot of misleading conclusions. Thankfully, it's been thoroughly covered and disputed, but it is unfortunate. The last thing politicians need is more sloppy research to work with.

More good news is shared by Coordination Problem. They link to a paper by Robert Nelson on sub-local government. Nelson argues that sub-local governance structures can operate more efficiently than state and federal governments, and should be created more freely. Peter Boettke, highlights the fact that as government gets bigger, it also may very well be getting more decentralized as a result of these sub-local governance structures. This reminds me of something I blogged about last summer: the work that my great-grandfather (H. Vernon Eney) did in the sixties writing a new constitution (which was never ratified) for the state of Maryland. Most of my blog post focuses on the role that the discourse surrounding "states' rights" played in the failure to ratify, but it's also worth pointing out that one of Eney's biggest goals was to make it easier to establish and adjust sub-state governance structures. He wasn't thinking of sub-local organizations in particular. My understanding is that he was thinking of more regional structures. But the idea is the same: local communities can govern themselves better, and hamstringing these governance structures by relying on a more rigid system of states and counties can be counter-productive. Eney always emphasized that states' rights does not have to be a reactionary position. It is a very reformist position. He thought that the federal government demonstrated that it was not up to the task of solving a lot of modern social problems. An effective reform movement would have to strengthen the states to accomplish anything.

I'd also highlight some posts that Evan has written in the past on localism that are somewhat related. More recently, he's written on "what localism should not be" (his answer: "a romantically quixotic attack on the very technologies that are good for it"). This post rightly denounces the tendancy of people to equate localism with primitivism. He's also written on localism, food production, and culture, and I responded with some agreement and some critique.

What We're Reading

I've seen a few bloggers update their readers on what they've been reading. Seems like a good exercise, particularly if we're reading relatively obscure stuff.

Daniel

I just finished reading Bertrand Russell's Freedom vs. Organization, which is basically a history of Europe from 1815-1914. What I liked about it was that it combined intellectual history and more traditional history. The chapters were very thematic. Malthus, Ricardo, Owen, James Mill (not John Stuart, oddly), and Marx were covered in depth, with others making appearances. It was largely about the breakdown of the conservative order, the liberal and/or nationalist orders that emerged from that, and the impending breakdown of that world order with WWI.

I just started Mike Rapport's 1848: Year of Revolution, which should be self-explanatory. If it isn't clear, I'm trying to read up on my 19th century history. I read a lot from the late 18th and early 19th century, and I've recently read more about the 1920s and the depression, and I'm trying to fill in the gap. This is very good so far, although I'm not very far into it. Getting a great portrait of Metternich painted for me right now.

After this I'll read either J.R. Hicks's Value and Capital, which I've been meaning to read for a while, or the first volume of Joseph Dorfman's The Economic Mind in American Civilization (Dorfman, as I understand it, was Murray Rothbard's dissertation advisor). I wasn't aware of that when I got this three-volume set.

In terms of articles and other stuff, I've been reading some Orwell, Achebe, and Wittgenstein for a fleeting idea I had about language. May or may not return to it. I've also been reading up on aggregate labor supply issues (Hall, Prescott) for a new paper I'm working on about job creation tax credits.

Evan

During the past few weeks my reading has revolved around a course I'm taking in the history department at UChicago on structures of knowledge in modern Europe. Most of this has been selections rather than full books. I did work through all of Foucault's History of Sexuality v.1, however, and a sizable portion of Discipline and Punish, both written during his genealogical period (1976 and 1977, respectively). I'm sorry to say that this was my first real interaction with Foucault, but I was utterly impressed and do hope to get into some more of his work before too long. My interests have recently shifted much more to the sort of historicization of knowledge with which Foucault's projects are identified, and his work has been a real contribution to my current thinking on this process (I've discussed some of these issues at my other blog... this was written before I had any interaction with Foucault). I've also just finished part of Andrew Abbott's The System of Professions. Abbott is a Chicago sociologist and another writer worth your time; he's done a lot with questions of method and exploring academia from a sociological perspective. This book is his 1988 study that presents a theory of professional knowledge. His main concern is to counter previous professionalization theories that inadequately account for variation amongst the professions, and to present an account based on competition for jurisdictions of professional knowledge. Alongside Abbott, we read two essays by Pierre Bourdieu, again my first interaction. In both "Intellectual Field and Creative Project" and "The Field of Cultural Production", Bourdieu examines the structures of recognition and reception for cultural and artistic work. From all of these readings, I'm gaining an appreciation of the genuinely useful work of social theory, but also a frustration at the depth of the literature that needs to be engaged for any serious benefit of it. From the vantage point of my studies in theology, the task is daunting considering I have my own disciplinary literature to work with.

I also just recently finished Louis Menand's The Metaphysical Club, one of my few non-research related readings of late. My wife was shocked that I was actually reading a book with so many prizes and so much critical acclaim attached to it, and it's true that this isn't my normal material... usually I'm blissfully ignorant of what's on the wider cultural radar and sort of make my own way with the problems that I'm working on at the moment. Paths crossed in this case, however, as I'm trying to read more on pragmatism; this is the philosophical background of my doctoral adviser at Chicago and I've recently formed a strong interest in it through his influence. The book was a delight to read, covering important intellectual figures between the Civil War and World War I who were central to what's now called "pragmatism". One thing that struck me as I went along, however, was that Menand spoke much less explicitly about pragmatism than I would have expected. There were as many pages devoted to Darwinism or probability as there were to any straightforward account of pragmatism. I appreciated this approach, as it resisted any temptation to lump figures into a monochromatic school of thought. This was an account of biographies and intellectual trends forming a broad web of development during a pivotal time in American history, and the telling of it all was as seamless as it was diverse.

The "Internet Austrians": a Blog Review

One of both Evan and my interests is intellectual history, and I am specifically interested in the history of economic thought. As the spate of recent posts demonstrates, one of my particular fascinations is the Austrian school of economics. The Austrian school interests me because its very insularity has allowed for the growth of some very original thinking - a lot good in my opinion, and a lot bad. It is also very libertarian in character, and so it is well within the classical liberal tradition. Of course, this makes it a bit of an ally for me. But again, there's a contrast: I find that Austrian school thinking in a lot of ways threatens the prospect of self-government, which in my view is inextricably linked to the preservation of liberty (the most extreme example is Hans-Hermann Hoppe's political framework). So for me, the Austrian school is a study in contrasts. One feature of Austrian economists is that they are very active on the Internet. In an exchange I had with a Wikipedia editor, he called them "the Internet Austrians," and remarked on the somewhat frustrating task of ensuring that they don't completely dominate the economics entries in the online encyclopedia! Go to any Wikipedia entry on economics - you're bound to find an "Austrian position on X" appended to it, and they're usually quite thorough. Another outlet for Austrians has of course been blogs.

For a while, I've been wanting to write a post reviewing the Austrian blogs out there to help direct uninitiated readers to relevant bloggers, and perhaps to solicit reactions from readers who are familiar with these blogs that may be different from my reaction. Recently, I've had cause to write such a review post: I am taking Cafe Hayek, an Austrian blog I've followed for quite a while, off my blog roll. A string of posts has made me realize it's really not worth checking up on - and the best way to abstain is just to not get updates from them. When two professional economists, in one week, completely miscommunicate the concept of externalities, inflation, and stimulus/fiscal policy, I start to wonder why I even read it. The inflation post was especially disappointing - the author didn't even seem to be aware of elements of inflation that are explained in Concise Encyclopedia of Economics's entry on it - and this encyclopedia is maintained by his colleagues! Cafe Hayek does offer two things that might interest readers: politics-heavy posting with a strong libertarian emphasis, and a very active comment section. But a warning on both; the political posting is very light on actual economics (which is part of the reason I'm realizing I'm wasting my time). For example, in the recent stimulus post there's no attempt to explain the argument for stimulus or even provide an analytic counter-argument to stimulus. Instead, the author calls it "magic", dismisses it, and moves on. There's little substance. My caution on the comment section is that it's very hostile. Again, it's hard to carry on a substantive discussion because if you're out of their mainstream your thoughts are only occasionally engaged (and there are some very good commenters on there - don't get me wrong) - more often they're caricatured and dismissed with a lot of name-calling.

So that's a long review of what I've concluded is not a very constructive Austrian school blog. Now I want to run through some better ones.

Coordination Problem: It's really unfortunate that I discovered Coordination Problem so late. This is an excellent blog. Occasionally there are some ideological posts, but the vast majority of it is very substantive economics. And it's heavy-duty Austrian economics as well. We all know that governments can't plan economies and freedom is good. That's often as far as Cafe Hayek goes. Coordination Problem moves beyond these superficial insights and gets into Austrian epistemology, Austrian capital theory, and a lot of interesting material (namely, the stuff that makes Austrian economics unique - opposition to planning, the Austrian perspective on knowledge, the market as a discovery mechanism, etc. aren't really unique to the Austrian school, although they're certainly an integral part of it). When its authors dispute Keynes you get the impression that they really understand Keynes, which is refreshing. The comment section is also great. Much less hostile, and another thing I've noticed is that a lot of big-name economists comment on their blog, which is great. And when the authors comment it's to really engage the commenters. Hats off to Peter Boettke, Steve Horwitz, and everyone else at Coordination Problem.

Econlog: Econlog is run by several economists associated with George Mason. It's also very good. I'll step on a few toes and say that I very much enjoy reading Arnold Kling and Bryan Caplan, but I don't really prefer David Henderson. Henderson's posts can be more in the Cafe Hayek-style of over-simplifying his opponents and veering into political ideology heavy posts. Some readers may like that, it's just not what I prefer. Arnold Kling's "recalculation story" for recessions that he often shares is very interesting and important. I think he oversells it, but it's definitely a contributor to how I think about the business cycle. Bryan Caplan reminds me of the "Freakonomics" mentality in economics - he gets into a lot of interesting issues that aren't necessarily in economics proper. Some people call that disciplinary imperialism - I call it good reading. The comment section here is at a mid-point between Cafe Hayek and Coordination Problem. Medium-hostile and medium-substantive.

Mises.org: Although I think some people might resent me saying this, the Mises Institute is really the mothership of American Austrian economics. There are major Mises-Hayek and Mises-Rothbard rifts for some people, which is why I say some people might resent that. But all in all, the site is full of lots of good material. If you're interested in internicene disputes within the Austrian school (I'm generally not), this is a good blog for that. Comment section isn't that hostile. One concern I always have about the Mises posts is that they definitely fall into this trap of caricaturing positions they disagree with. It's hard to get anything out of that. I'm a Keynesian. How am I supposed to take a post seriously when it's refuting a dumbed down version of Keynes that I feel I have no relation to? I can't. So that can be an obstacle to really getting anything out of these posts. But the introspective posts can be interesting.

Economic Thought: I definitely recommend this blog, but it does have some bugs. It regularly fails at this problem of caricaturing alternative positions. It also comes across as being obsessed with countering every word that comes out of Paul Krugman's mouth (and again, usually by changing what he said). Nevertheless, I recommend it because like the Mises blog, it has some really good insights on the Austrian school itself. It's also written by some very well read, articulate, and energetic students out in California - and as a young, aspiring scholar myself I respect that. The comment section is a little sparse, but that's the curse of small blog that we understand well here at Facts and Other Stubborn Things. That's a reason to go read it and leave a comment - not to ignore it!

Monetary Freedom: Mostly monetary and macro Austrian blogging. Posting is occasional. I have to say I haven't been truly drawn into his posts, but I've enjoyed many of them. I'm not particularly familiar with this one.

ThinkMarkets: I think this needs to replace Cafe Hayek on my blogroll. Up until now I really haven't followed Mario Rizzo, but I have found my way to this blog on several occasions because people have linked to him, and I've been very impressed. Mario reminds me of the authors at Coordination Problem, insofar as he has an excellent command of Austrian theory and he writes substantive economics posts - not political ideology. He doesn't do the Road to Serfdom Lite kind of posts that you can get on Cafe Hayek or from David Henderson at Econlog. Rizzo is a meat-and-potatoes Austrian. He also doesn't caricature Keynes. In fact, I often feel like he has a better grasp of Keynes than many Keynesians do. He occasionally falls into this "if you're not an Austrian you don't like free markets" hooey, but nobody's perfect. I can't comment on his comment section - as I said, I don't really follow this one closely but I think that's going to have to change.

Not-really-Austrian/More Libertarian Blogs

Money Illusion: Not really an Austrian blog, but a lot of Austrians think well of Scott Sumner, as do I. He offers a very unique perspective on monetary policy. He has me half-convinced. His posts are always epic - I rarely get a chance to read the whole thing.

Megan McArdle: Another not-technically-Austrian. She's libertarian. She's always an excellent read. she's well thought of among many Austrians.

Others worth checking out

I don't know why, but I still don't follow Tyler Cowen. A lot of people rave about him - I really need to follow him. The Independent Institute might have a blog - they occasionally have interesting articles. I think The Freeman might have a blog. Will Wilkinson has a libertarian blog that's more politically focused (which is mostly why I haven't followed him). Cato has a blog that I don't follow. Reason has a blog I don't follow but that I've heard good things about. These all may be worth checking out if your interests lie on the libertarian side of things and not the substantive Austrian economics side of things (with the exception of Cowen, who definitely does substantive economics... although I'm not sure if he's technically an Austrian).

Appomattox

One hundred and forty five years ago today, General Lee and the Army of Northern Virginia surrendered to General Grant in Appomattox, Virginia. It's an interesting time for this anniversary, given the flurry of responses to Governor McDonnell's recent declaration of Confederate History Month in Virginia. Without going into too much detail (the discussion is getting wearying), I personally think that it's not unreasonable to commemorate the Confederacy, but that it needs to be done in a very open and honest way. Governor McDonnell was wrong to not even mention the role that slavery played in the war, initially. He has since retreated from that position, which is good.

It is very bad history to anthropomorphize institutions. Institutions are complex, and they are composed of individuals with all manner of interests and goals. Too many people in this discussion have tried to apply adjectives like "racist" or "pro-slavery" to the Confederacy as an institution. It's a very hard charge to deny, considering the fact that secession would have been practically inconceivable without slavery. But I think we have a very impoverished view of the Confederacy if we end the discussion there. We have an especially impoverished view of Virginia's role in the Confederacy if we leave it there. When secession was primarily about slavery, Virginia voted against secession, as did many border states. This isn't to say that Virginians at the time were abolitionists; for the most part they and most Americans obviously weren't abolitionists. It's simply to say that the simple reactionary racism that many people attribute to the Confederacy doesn't seem to apply to Virginia in quite the same way that it applies to South Carolina or Georgia, who were among the first to secede before any army was raised in the North. And of course this doesn't even begin to engage the point that the interests and goals of the elite who spearheaded secession were not necessarily in line with the interests and goals of rank and file Confederates.

In other words, I think we make a mistake if we demonize Virginia and the Confederacy by reducing the entire society to a single dimension, like slavery, just as it would be a mistake to reduce other eminent slave owners like Washington and Jefferson to that single dimension. That's not a call to ignore slavery, of course. While I think it would be a mistake to demonize Virginia and the Confederacy, it would be both a mistake and an insult to deify the Confederacy and whitewash the slavery issue the way McDonnell's original proclamation effectively did.

Maybe I'm hedging too much, but I don't think I am. I'm not trying to deny the role of slavery, and I'm not defending secession. I just feel like people are overcompensating in their response to a truly thoughtless declaration by McDonnell. I've heard a lot of Nazi Germany comparisons, which I think are utterly indefensible. What justifies these comparisons? That the Confederacy was unapologetically a slave society? If that's the case then the antebellum United States itself could equally be compared to Nazi Germany, as could any of the numerous slave societies throughout history. I'm not quite sure this comparison is meaningful or helpful. It's one thing to say that for too long the South clung to an immoral institution that pervaded human society for much of its history. That is certainly true. But we have to be able to differentiate people who happened to have been born into this appalling institutional arrangement near the time of its death throes (like the Confederate secessionists) from people who invented wholly new terrors, hatreds, and immoralities and forcefully imposed them on a previously liberal, free, and democratic society (like the Nazis did). How different, really, was Robert E. Lee from General Washington? If nothing but their birthdays had been switched we would be honoring Lee and denouncing Washington. And if both these men were born in twentieth century Virginia, would either of them be advocating for the fresh imposition of chattel slavery the way Hitler advocated a fresh imposition of genocide on German society? Of course they wouldn't. Nothing in the historical record indicates they would even conceive of that. They knew what they were doing was wrong, but the inertia of the institution itself was too much for them to resist. So they refused to resist the institution of slavery. That isn't admirable, but it is different from what the Nazis did.

These are devastating human failures to think about. It's part of the reason why I largely stay away from Civil War history, and why I primarily read the history of the early Republic. The stain of the sin of slavery is still there in the early Republic, but somehow it's less distressing precisely because it hasn't yet come to the fore. And maybe that's a failure on my part - a failure to engage the hard issues.

But I suppose in the end that's my point. I take issue with some of the criticisms, which I think are hyperbolic to the point of obscuring the real suffering under slavery. But even more than taking issue with those people, who at least see the problem as a problem, I take issue with the people who would whitewash history of any problems. Not every tragic period of history is comparable to the Nazis; but what kind of mindset actually closes its eyes to the very deepest tragedy that is still influencing our society today - the tragedy of slavery? I don't know what motivates that sort of practiced ignorance. Nothing good motivates it.

The End of Science

Recently I was engaging in a very important task: honing one of my Pandora stations. Anyway, "Dodo", by Dave Matthews, came up and I was really struck by the lyrics:

"Once upon a time
When the world was just a pancake
Fears would arise
That if you went too far, you'd fall

But with the
Passage of time
It all became more of a ball
We're as sure of that
As we all once were when the world was flat

So I wonder this
As life billows smoke inside my head
This little game
Where nothing is sure"

It reminded me of a tendency that laypeople have when they argue about contentious science. It comes up especially in discussions of evolution or climate change. Someone will inevitably say something like "well they used to think the world was flat - so you're being really foolish to embrace evolution [climate change] now because someday science could completely revolutionize what we think". A flat earth can just as easily be replaced by a geocentric solar system or any number of other things.

I think this is a very misleading way of thinking about science that completely ignores the historical context in which we live. In terms of the stretch of human history - and the time that it's taken to build up our institutions, traditions, and dogmas - empirical science is a very recent phenomenon. We could date it to the "scientific revolution", but that even overstates the case, because it's taken even longer for science to get the right tools, critical mass of funding and personnel, and theoretical infrastructure to really do empirical science well. You had your Newtons and your Copernicuses, but they were few and far between. The result is that we've seen a lot of revolutionary ideas in science in relatively recent history, and I think this gives the false impression that science will continue to revise our understanding of the world.

If there is some ontological consistency to this universe, we shouldn't continually revise our understanding of our world, at least not radically. And if there's not this ontological consistency, then we really have no business doing empirical science in the first place! I think this has important implications for science over the next several centuries, and I'll outline them below:

1. Major discoveries that alter the way we think about the world will eventually end. We evolved from lower life forms. Our planet revolves around a star. The universe started in a massive explosion and it's expanding at a reasonably predictable rate. The earth has tectonic plates. These things aren't going to be revised. They may be refined, but the insights are probably here to stay. It is in this sense that I speak of the "end of science" in the title - the big exciting discoveries are going to start to reach a stasis.

2. Science will of course continue - and we'll probably have more scientists in the future. But the scientists of the future will more likely be catalogers and engineers. Just because we're going to develop a stable framework of how we view the universe doesn't mean that there won't be new things to learn. For example, we may have the broad strokes of evolution worked out and understood, but we'll never run out of work tracing out the history of individual species. We also will start to place more emphasis on applied science. In the future, we may even be able to start directing evolution - you will hear about "evolutionary engineers". But of course this won't change the theory of evolution substantially. It will be an application of the theory.

3. Some fields will not reach a stasis and will continue to be marked by contention and new discovery for quite a while - string theory and highly theoretical physics that may escape easy empirical confirmation, neuroscience, etc., have subject matters that are so complex they may continue to be fruitful when it comes to new discoveries.

4. Social science will increasingly be recognized as a science, which unfortunately it hasn't in all quarters. People will realize that it's ridiculous to think of studies of the social behavior of birds and apes as "science", but somehow not consider the study of the social behavior of humans "science". In many cases, the study of human society has been far more methodologically rigorous than the study of sociality in other animals. This will dawn on people and social science will gain new respect. As with neuroscience, the complexity and the feedback loops in human society will mean that fruitful new discoveries will persist for quite a while.

5. And finally, my hedge: of course some area that is now considered pseudo-science could end up being real and a lot of new discoveries and fruitful work will happen. It probably won't happen, but it always could. In a similar vein, someone could establish that previously nebulous ideas like the soul or spirit are subject to some sort of empirical verification (think in terms of the metachlorion in Star Wars that gave The Force to the Jedi). If somebody stumbled on a material basis for what was previously considered a spiritual phenomenon, of course that would open whole new vistas in empirical science. Unlike my previous four forecasts, though, there's absolutely no way foreseeing this sort of thing. My first four forecasts are fairly standard - this one gets into Kuhnian paradigm shift territory that is less tractable.

Of course my title is a reference to Francis Fukuyama's famous piece on "The End of History", which promptly crashed and burned. I use the reference intentionally - projecting far into the future and situating ourselves in time is always a fun thought experiment, but you always have to recognize the risks as well. It could all be wrong.

Good Thoughts from Peter Boettke

Facts and Other Stubborn Things got mentioned by Peter Boettke at Coordination Problem recently, discussing my post on the potential for a Keynesian-Austrian synthesis. I'm grateful that Boettke was so gracious, given the tone I can take when I talk about the Austrian School sometimes. I suppose the moral of the story is, if you're less shrill than Krugman, you get somewhat of a pass. In seriousness, though, Boettke offers a very thoughtful point:

"To me the issue is that what Austrians and Keynesians share is neither methodology nor analytic, but instead the recognition of the complex problem situation within which individuals find themselves in making their economic decisions. The "dark forces of time and ignorance" ensnare us, but the guiding role of relative prices and the discipline of profit and loss (and other institutions that undergird the market economy) work to coordinate economic plans and realize the mutual gains of trade and social cooperation under the division of labor. Coordination problems result when the price signals of the market get distorted and the discipline of profit and loss get softened by government actions. As Roger Garrison has situated the Austrian theory, when money is viewed as a tight joint (as in the New Classical theory) there are no macroeconomic problems, and when money is viewed as a broken joint (as in the Keynesian theory) there is no market solution to the problems of business cycles. But in the Austrian theory, money is viewed as a loose joint, and thus disturbances in a nominal variable can have real effects."

I think this frames it very well. I would push back a little on his loose vs. broken joint point. Lawrence Klein once wrote:

"It is wrong to think that Keynes’ system fails if it cannot predict pessimistic results. The pessimism is not inherent in this system; instead the determinants behind the system make it operate either pessimistically or optimistically, depending on the current state of affairs in economic and non-economic life."

The point is, Keynes's liquidity preference theory provided him with a great deal of flexibility in his models. This is what really justified calling it a "general" theory, because he could specify cases in which monetary policy held no power at all, and cases in which money worked as you'd expect it to in a classical system. So in that sense, I think Boettke is wrong to pigeonhole Keynes. But his review of the outlook and the problems that the two schools are grappling with is prescient.

That said, commenter Rafe Champion raises another good point:

"Trying to make a big deal out of agreement between Austrians and Keynesians on the problem of uncertainty is a no brainer because everything depends on where you go from that point."

Of course, there's nothing particularly insightful about that. The question for me isn't "where does the somewhat common Keynesian and Austrian starting point leave us?" - the question for me is "does where they go from that point really conflict so much that it can't be integrated? Do they both have good ideas on 'where to go from there' that aren't contradictory, just different?". My standard line on Austrian Business Cycle Theory is that it is "necessary but not sufficient". I buy almost every word of what you would think of as traditional Austrian business cycle theory. I simply don't think it fully explains the dynamics that contribute to downturns, and I think there are many downturns it doesn't help explain at all. But it is exactly on target, when it's applicable. I don't see why ABCT can't be used by a Keynesian.

The Austrian Problem

Yes, another post on the Austrian School. The catalyst is an initial post on what's wrong with Austrian economics by Martin Wolf, with responses by Brad DeLong and Paul Krugman.

Martin Wolf essentially solicits reactions to the Austrian School - it looks like there's been a lively exchange in the comment section, but I haven't reviewed it yet. DeLong gives eight alleged tenets of the Austrian School, and ends up giving the thumbs up to one of them but a thumbs down to all the others. I think he could probably qualify a few of his thumbs downs, but he's largely on target. Krugman, as usual, has some very prescient insights.

The first is the fundamental asymmetry of the Austrian argument about the business cycle:

"In practice, Austrians seem to be Keynesians during booms without knowing it; they realize that high demand produces a boom, but don’t realize that this contradicts their own theory of slumps."

His point is that if Austrians had a more consistent position on human action, they'd recognize that the very processes that they abhor in an artificial, sub-optimal boom can also cause an artificial, sub-optimal depression. Simply recognizing that would bring the Austrians considerably closer to reality. So why don't they recognize it? Krugman suggests:

"And the key to all this, I believe, is that the Austrian abhorrence of explicit models, even for the purposes of clarifying thought, leaves them unaware of the holes in their account."

Austrians actually take pride in their methodological dogmatism and backwardness, but it prevents them from really scrutinizing their own ideas. The result is that you still have Austrians today quoting Hayek and von Mises. There is very little (some, but little) innovation, precisely because there is no introspection. And where innovation does occur, it's largely political/philosophical/ideological innovation. Austrians are happy to highlight the disagreements between "left Rothbardians", "minarchists", or denizens of the anti-democratic Hans-Hermann Hoppe. If you throw the more traditional libertarians and Randians into the mix, it is a quite interesting intellectual stew. But the point is, it's mostly political philosophy: their economics is stagnant pond water. One of the few exceptions to this is Roger Garrison's macroeconomics, but even he simply formalizes Hayek. I don't know him too well, so I want to be careful about passing judgement too harshly, but he doesn't really seem to add anything new to Hayek's Pure Theory of Capital. Moreover, there's nothing in Hayek or Garrison that really refutes Keynesian macroeconomics - it simply presents another view. And I think that view is valuable. Austrian ideas on capital structure are interesting. But it's not really a response to what other people are saying - it's just sort of floating out there on its own.

Anyway, I've been thinking about this "Austrian problem" for awhile now. There's a lot of energy there. There are a couple genuinely interesting insights that would be useful to incorporate into more mainstream econoimcs. But as a whole, it doesn't really measure up because it isn't really introspective in any meaningful way, and it habitually caricatures and distorts what the other side of the argument is saying. A good example is Jonathan Finegold Catalan, who writes for Economic Thought, and occassionally the Mises Institute. Catalan is a student at San Diego State University, and I've really enjoyed following his blogging because I identify a lot with him - a young guy, trying to strike out on his own on a blog, deeply interested in economics and the history of economic thought. But it's been getting hard to maintain interest. Post after post after post has been degenerating into an imputation of ideas to people he disagrees with - almost always Paul Krugman. I don't always agree with Krugman either, but I get frustrated with this scripted version of "what Krugman said" that the Austrian School works from. One of the things that they like to talk about is this "consumption myth" - that Krugman and Keynesians think all consumption is good and savings is always bad. They make off the cuff remarks about government always being a solution. Barney Frank said arguing with the LaRouche crowd is like arguing with a kitchen table. I would give somewhat more credit to the Austrian School: it's like arguing with a broken record for them.

Sorry if this bores everyone - it's sort of a niche interest of mine. As I said in a recent post I do think that the very insularity that has made the Austrian School so off-base and bizarre in many respects has also facilitated the development of a few very interesting ideas that we should capitalize on. Any other thoughts and suggestions are welcome.

Intellectual Arbitrage: A Keynesian-Austrian Synthesis?

"Arbitrage" describes a situation where someone takes advantage of a price differential to make a profit. For example, if the same TV were selling in New York City for $200 and in Chicago for $250, and the cost per TV of transporting them between the two cities was only $10, someone could buy TVs in New York for $200, sell them in Chicago for $250, and make a $40 profit. They'd be crazy not to keep selling them this way until the price differential was eliminated. The logic of arbitrage drives the so called "law of one price" in economics and the assumption that economic profits (as opposed to accounting profits, which are somewhat different) are always driven to zero by market forces.

The concept of arbitrage is useful more broadly, of course. It's applicable in any situation where a previously unexploited differential furnishes the opportunity for considerable gain. All this is simply an introduction to a very brief thought I had this morning on a potential intellectual synthesis. Some of the greatest advances in science - particularly social science, where competing theories are more likely to coexist than in natural science - occur as a result of the synthesis of two previously competing ideas. The history of philosophy is full of such syntheses as well.

This morning, checking my blog roll, I stumbled across a post that reconfirmed earlier thoughts I've had about the prospect for a Keynesian-Austrian synthesis while listening to a Roger Garrison lecture. At the Coordination Problem blog, Peter Boettke of George Mason University wrote this of a new Hayek resource online:

"It is well worth looking through the entire site and the reading list for both economics and politics. Friedman has been pushing for the epistemic turn in economics and politics since the founding of Critical Review in the 1980s, and during that time Jeff's work with the journal has gotten major intellectual recognition twice -- during the political science perestroika dispute over rational choice theory, and during the last year over the financial crisis. In both instances, the same Hayekian insight into human ignorance was a central element in his explanation for how we need to reorient economics and politics."

If you took out "Hayekian" in that last sentence, I could have sworn this post was by Prof. Skidelsky talking about the Keynesian revolution. Human ignorance and uncertainty drives both the Keynesian system and the Austrian system, albeit in somewhat different ways. There really is considerable common ground between Keynesians and the Austrian School of economics. There are gaping chasms separating the two, as well, believe me. For all that I enjoy reading the Austrians, there is no way I could ever attend a school like George Mason. They're epistemologically out of their gourds, there are some insights I consider completely wrong, and they're a very ideological bunch generally. But there are pearls of wisdom in the Austrian School and considerable common ground that gets ignored, I think, because of their other eccentricities.

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As I alluded to, I had this reaction before listening to Garrison's macroeconomics. I think of it whenever I hear an Austrian badmouth Joe Stiglitz, because I've always thought that the work that Stiglitz won the Nobel Prize for and the work that Hayek won his Nobel for are on a very similar wavelength. The hostility just seems so wasteful to me. I had this gut reaction about the potential for intellectual arbitrage a couple months ago when Boettke renamed his blog "Coordination Problem" in the first place (I can't find the initial name... I think it was simply "Austrian Economics Blog"). I did a double take when they announced that name because so called "coordination problems" are so central to Keynesian microfoundations. Why in the world would an Austrian blog take that name? Apparently, because they think in those terms too. I was first introduced to the idea of emergent order and a self-organizing economy by uber-Keynesian Paul Krugman's book on the subject. It was only years later that I even learned that the Austrian School cares deeply about those issues as well. Cafe Hayek's subtitle references the concept of "emergence" and they regularly post on the idea. Who knew? Similarly, the phenomenon I've always called "unintended consequences" or simply "counterfactuals" is the same as a concept that the Austrians feel like they own under the moniker "seen and unseen" (from a famous Fredric Bastiat piece).

Of course not everything will be reconciled, but I think there's a huge potential for arbitrage between the Austrian School of economics and Keynesian economics that is not being exploited. Keynesians barely pay attention to the Austrian School, because for the most part they're unaware of its existence. They feel that they have bigger fish to fry (and as a practical matter, they probably do). Austrians are very aware of the existence of Keynesians, but they're absolutely committed to the idea of some mortal-foe death match between the two camps. Since Keynesians generally don't bother engaging Austrians, the Austrians have a habit of imputing ideas to Kenyesians. Of course this isn't intellectually productive at all. The highly ideologically-tinged atmosphere of the Austrian School also tends to degenerate into accusing Keynesians of being socialists. And once you're branded a socialist, the opportunity for constructive dialogue is reduced considerably as well. Readers of this blog know I think there's a lot wrong with the Austrians, and I do enjoy mocking their eccentricities. But I keep coming back to them because it's a very interesting and very different perspective that I do think has a few things to offer.

I have a few very specific ideas for how one might go about synthesizing Keynesianism and the Austrian School that I'll probably try to write up at some point over the next year. I was curious if readers knew of any previous attempts at such a project. I know John Hicks had a healthy dose of respect for the Austrians, and both Keynesians and Austrians admire Wicksell - but I'm not really aware of any previous attempt besides that. I know some history of thought people and several Austrians regularly check in on this blog, so I'm counting on you - do you know of any examples?

UPDATE: Steve Horwitz makes an important point in the comment section of Coordination Problem. It is wrong to say (as I also did above) that Hayek got the Nobel prize for his work on knowledge and information. He got the price for his work on macroeconomics and social institutions. It was the prize lecture that was the opening salvo in Hayek's valuable work on knowledge.