The Economic Way of Thinking

The Work Of Elinor and Vincent Ostrom

Over at EconTalk, Russ Roberts has a splendid interview with Pete Boettke on the work of Elinor and Vincent Ostrom. 

Prychitko's Wager

Ian Vasquez over at the Cato@Liberty blog reports that Venezuela's Hugo Chavez said

Every day I’m more of a revolutionary, every day I’m more socialist… I’m going to take Venezuela toward socialism, with the people and the workers…The revolution is not negotiable, socialism is not negotiable, because every day I’m more convinced that socialism is the kingdom of God on earth. That is what Christ came to announce.

Apparently Chavez has a God-given right to expropriate the privately owned means of production.  I suppose he believes that the Lord on his side, so how can he possibly fail to deliver his people out of the world of scarcity and into the world of heaven on earth?

As for me, I'll bet on the economic way of thinking against Chavez's religion from now until doomsday.

When Moore Is Less

Sheldon Richman provides an excellent review of Michael Moore's new movie, Capitalism: A Love Story.

The Next Revolution?

Brooklyn, N.Y. – For the first time in generations, people are challenging the view that a free-market order – the system that dominates the globe today – is the destiny of all nations. The free market's uncanny ability to enrich the elite, coupled with its inability to soften the sharp experiences of staggering poverty, has pushed inequality to the breaking point.

As a result, we live at an important historical juncture – one where alternatives to the world's neoliberal capitalism could emerge. Thus, it is a particularly apt time to examine revolutionary movements that have periodically challenged dominant state and imperial power structures over the past 500 years.

Here's more of the story.

We Get By With a Little Help From Our Friends

A friend of mine sent me this note:

So it is the 20th anniversary of Tiananmen Square and the fall of the Berlin Wall.

This summer I'm leading a readings group on The Road to Serfdom to celebrate. Should be pretty fun. But I'm also interested in changing my public choice class this coming fall to focus on this as well. I want to do two solid weeks on totalitarianism.

I'd like to include more on the Nazis, Stalinism the Great Leap Forward, maybe Pol Pot, etc. It's easy to get basic stuff about how horrible it all is, but I'd like to get some stuff on the process. How did these countries become totalitarian?  Some stuff I could read for lectures and some stuff my students could read.

Any suggestions would be greatly appreciated. I wouldn't mind a video or two as well.

So, readers, do you have any suggestions for him? 

The Importance of Memory and Forgetting

20 years ago today I can remember Michael Chang surprising us all with his run in the French Open and the world stopping to watch the Tiannamen Square protests.  The picture below is the one I have always kept above my desk in my office. 

Most of my colleagues remember that event well and often stop to say things like, "Cool poster" or "I wonder what ever happenend to that guy."  I realize that I'm getting old and my students are getting younger, though, when I describe to them some of my first political memories being Tiannamen and the Berlin Wall falling, and they remind me they weren't born until 1990. 

Even though I can barely remember the events of 1989 (though I CAN remember the "Boys of Zimmer" breaking my heart quite vividly), and I didn't really grasp the bigger battle of ideas taking place at the time, I had some sense that the events of that summer were going to be pivotal in the future.  For younger people (e.g., college students today), though, there's no link to the tyranny of the past that has actually been lived or witnessed first-hand, and this is a real danger.  As one of my 30+ year old Czech friends put it a few years ago,

When people try to tell us communism was better, we can rely on experience to say, 'No, it wasn't.'  When people tell today's youth communism was better, the kids don't remember it and often take what's being said at face value.  There's a complacency and nostalgia for the old and a disappointment in capitalism. 

Economic Freedom Is A Necessary (But Not Sufficient) Condition For Political Freedom: A Note From My Capitalism, Socialism, & Democracy Course,

consid  Considering both economic theory and the historical record, it is reasonable to believe that if a society tries to abolish the market economy it will find that it abolishes the wealth-generation and long-run growth that only a market system can provide, and, on top of that, it will become more undesirably statist and lead to severe reductions in human freedom.  If people cherish rights of speech, assembly, association, dissent, freedom of choice, freedom of religion, and so on, if they cherish that kind of liberty in general, it can only come about by having private property rights in the means of production – in the printing presses, the bookstores, the communications networks, and in most other scarce resources. They won’t get it when the state, the planning board, the party – whatever you want to call it – is in control of those resources.

I, Pencil

The other day two of my children, my 10 year old son and my 14 year old daughter, showed some interest in what economics is really all about.  This was motivated by our watching of A Beautiful Mind, the loose story of John Nash's influence on economics and his troubled psychological problems.

My kids originally thought that economics was truly a dismal science.  But, to my surprise, they now want to learn more.  So I printed out a copy of Leonard Read's classic I, Pencil. They were impressed with this short, well-written article. My son recalled how we had discussions in our sauna (when he was 8) about the complexity of the everyday world around us. My daughter simply said "Wow."

Anybody interested in the economic way of thinking ought to read this piece -- especially undergraduate econ majors and the interested layman.  I urge our blog readers to follow the link above and (re)introduce yourselves to what Hayek once called the "marvel of the market."

Music To My Ears

The Milton Friedman Choir sings about the role of the corporation in a free market economy, over here on YouTube.

Boettke's Best

My friend, EWOT co-author and co-blogger Pete Boettke rarely posts here, and for good reason.  His opportunity cost is simply too high.  But from time to time I promise to link his best posts from our other blog, The Austrian Economists, onto this blog. 

Take a look at this -- Pete's take on the political economy of our current crisis. 

I Am Currently Re-Reading

Socialism, by Ludwig von Mises.  This is my favorite book in all of Austrian economics, and one of the most important books of the previous century, in my opinion.

Answer this question clearly and cogently

Joseph Schumpeter claimed that capitalism would give way to socialism largely for ideological reasons. This does not seem to have happened, at least directly. But might it be happening indirectly? Consider, for instance, a significant change that has occurred in the economic organization of debtor-creditor contracts. Not too long ago, lenders held their loans in their portfolios. They would lose if the borrower defaulted, which gave the lender a strong incentive to monitor the borrower, particularly for large loans. Now, lenders split their loans into numerous small pieces and disperse them throughout the economy. (For instance, many people who hold mutual funds and retirement accounts will find that they are holding small pieces of large loans made by commercial banks.) The burden of non-performing loans is thus dispersed throughout the economy rather than residing with the original lender. Does this development weaken the incentive offenders to monitor borrowers and thereby weaken overall economic performance? That is, can market transactions generate institutional arrangements that impair the market economy? However you address this topic, do so clearly and cogently.

Hat tip to Richard Wagner for being brilliant and having asked this question 3 years ago on a PhD field exam.

Medvedev: Lobbying Is Immoral

I listened to Dmitry Medvedev, the new President of the Russian Federation, give his first state of the nation address last week.  (Yes, even I've been known to watch CSPAN once in a while.)  I couldn't believe my ears.  Medvedev said that business lobbying will not be tolerated and -- get this -- it is immoral.  Was it just me, or did you hear this too? 

I've searched for a transcript of his address and haven't found it.

Two Murrays and a Man Named Noam: Anarchists

See Murray Rothbard here, delivering a presentation at the Texas State Libertarian Conference in 1989.

See Murray Bookchin also at a Libertarian Party conference (yes the LP)  here. 

Also see this interview with Bookchin back in 1981. 

They stand on opposite sides of the anarchist fence, although I was a little surprised how far Bookchin championed individualism at the LP conference. 

Noam Chomsky has been quite influenced by Bakunin (as I recall) and also Bookchin. Here's the first of a five part Chomsky interview.  You can easily navigate from that to the remaining parts.

Mao's China

A mixed bag of analysis and ideology on YouTube.

The Great Leap forward

Economic Planning in China part 1

Economic Planning in China part 2

The Cultural Revolution