Conclusion of paper on Popper and Hayek

At the conclusion of comparing Popper and Hayek on some specific issues, a quick look at another topic that Boettke mentioned. This is the dangerous liaison between scientism and statism and it is probably worth mentioning Popper’s critique of the statist and totalitarian tendencies in the later work of Plato that are documented in the first volume of The Open Society and Its Enemies. It is actually important to mention it because nowadays the book is practically invisible in the academies and it is apparently kept in print by a lay readership. Other people including Michael Polanyi picked up the same themes in Plato and it is important to realise what it means when Western philosophy is described as footnotes to Plate.

It means that no other published thinker (leaving out the founders of religions) has exerted more influence for good or bad on the way we think. Popper saluted Plato’s as the non pareil but the more we admire a thinker the more we need to be aware of their mistakes, like Popper’s acceptance of received view of the industrial revolution. Popper did not belittle Plato, he identified elements in Plato’s work that have catastrophic consequences.

Every kind of totalitarian movement in the west has been assisted if not inspired by bad ideas in Plato because they lie dormant in his work until the time is ripe for some new movement to pick them up and put them into practice. For example Plato’s ideas about separating children from their parents for re-education were brutally and systematically pursued in the Chinese Cultural Revolution. The current legislation for affirmative action in the United States exemplifies Plato’s concept of collective justice that Popper criticised in defence of the traditional concept of individual justice, that is equality before non-discriminatory laws.

Considering the broad scope of The Open Society and specifically Popper’s work on scientism, rationality and the stimulus for institutional studies one can make a case for Popper and Hayek as twin pillars to support good science and the classical liberal project. What happened to Popper’s stature, his readership, his influence and the synergy of Popper and the Austrians? More work is required, especially if Popper is really a significant figure. If he is only second rate or his contribution was historically interesting but not durable then the work can be left to students struggling to find a dissertation thesis.

If Popper is a major figure then a very interesting research project will compare and contrast the trajectories of the Popper school and the Austrians since the 1970s when the Austrians staged a revival (from a low base) and the Popper school did not find younger standard bearers in sufficient numbers to constitute a critical mass in the profession. Consider the fortunes of the Austrian school after Menger if Mises and Hayek had died young (they both served in The Great War) instead of living long and highly productive lives. Even with their efforts (with others) Mises died on the brink of the revival (accepting 1974 as a marker) and Hayek had to live to his late seventies to see it. Where are the academic followers of Popper who stand in place of Mises and Hayek? What is the state of the Popperian infrastructure compared with the Austrian school with chairs, doctoral programs, journals and conferences?

That project is for the future. In the moment we have Popper’s critique of scientism, his critical rationalism, and some signs of a program of institutional studies inspired by his work. Tullock’s contribution has the potential to be especially influential on account of his stature in political economy and the relevance of his analysis to the state of science at present.

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Peter Boettke’s new book on F A Hayek

Peter Boettke, F. A. Hayek: Economics, Political Economy and Social Philosophy, Great Thinkers in Economics Series, Palgrave Macmillan, 323 pages.

This is an ambitious book on the career of one of the very significant thinkers of our time. Friedrich A Hayek lived through most of the twentieth century from 1898 to 1992 and his working life spanned three score years and ten. His work runs so wide and deep that no single author or book could do justice to it.

The theme that unifies Boettke’s densely packed account is the need to place economic events in their institutional, social and cultural context.   Adam Smith and the great classical thinks embraced the broad expanse of political economy and moral philosophy but the focus of economic analysis contracted to a narrow point in the 20th century. Boettke refers to the “hourglass of economics” and he wants to see that shape restored by wider and deeper institutional studies including attention to the moral framework of society.

Peter Boettke is Professor of Economics and Philosophy at the George Mason University in Fairfax Virginia. He is the immediate past president of the Mont Pelerin Society and a prolific contributor to the literature of Austrian economics.

Boettke sketched four stages in Hayek’s progress. His concern with economics persisted like a long thread in the tapestry of his thought and he added more threads as he discovered that economics alone was not enough. In the first phase from 1920 to 1945 he concentrated on the function of prices for coordinating economic activities and his work on monetary theory and the trade cycle earned him a prestigious chair at the London School of Economics in 1930 at the ripe age of 32.

In the second phase between 1940 to 1960 he explored the “abuse of reason” with books and essays on methodology including The Counter-Revolution of Science and The Road to Serfdom. In the third phase, roughly from 1960 to 1980, he moved on to the “restatement of liberal principles” with The Constitution of Liberty and the three volumes of Law, Legislation and Liberty.

The fourth phase on “philosophical anthropology and the study of man” produced The Fatal Conceit where he tried to wrap up all his arguments against socialism into a package. This work was edited by his official biographer at the time, William Warren Bartley (1934-1990) who raised funds to launch the project to produce a new set of collected works at the University of Chicago Press. Bartley only lived long enough to see the first volume and the project is proceeding under the general editorship of Bruce Caldwell, Director of the Center for the History of Political Economy at Duke University in North Carolina.

The critical turning point in Hayek’s career came in the 1930s when he was debating with Keynes on economic policy and with the socialist central planners led by Oscar Lange on the possibility of dispensing with markets to set the prices of goods. Both debates went badly for Hayek, at least in the generally accepted view. The problem of communication that Hayek encountered made him realise that deep currents of thought were driving Keynesianism beyond the temptation to tell politicians what they wanted to hear about the way to handle the Great Depression.

He embarked on prodigious studies in the history of ideas in philosophy, political economy and methodology to grapple with the presuppositions that drove Keynesian demand management, mathematical formalism, the newly emerging general equilibrium theory and the hubris of the would-be central planners. He saw problems at the micro level in the form of misplaced confidence in the methods of the natural sciences and he saw major defects at the macro level in lack of attention to institutions and incentives.

One of the drivers was logical positivism, the new philosophy of science that emerged in Vienna. Hayek’s older colleague Ludwig von Mises saw the threat coming in the 1920s and directed a salvo of articles against it but the diaspora fleeing from Hitler planted the ideas in the great universities of the English-speaking world. Hayek resumed the attack with The Counter-Revolution of Science (1952).

At the macro level he took up the study of institutions, prompted by Lange’s refusal to consider incentives as factor in economic affairs. He pursued the great task of institutional analysis in the United States where he moved in 1950, partly for financial reasons with an ex wife and a current wife to support. He was so out of fashion in economics that he was not wanted in the Department of Economics and instead he joined the Committee on Social Thought. This was established by members of the older Chicago school led by Frank Knight who thought that economics was becoming too specialised. Around that time a remarkable array of talents joined the Committee including T. S. Eliot, Mircea Eliade, Hannah Arendt, Leo Strauss and the novelist Saul Bellow.

He wrote The Constitution of Liberty to address some of the pressing issues of the size of government and the amount regulation required without exceeding some appropriate scope and limits. The scope and limits of course remain hot topics. The book ends with a ringing challenge that Boettke took up and repeated We must make the building of a free society once more an intellectual adventure, a deed of courage…if we can regain that belief in the power of ideas which was the mark of liberalism at its greatest, the battle is not lost” [276]. That is the motif of the last chapters of the book treating Hayek’s efforts to keep the liberal program alive as a vital and progressive intellectual tradition. He launched the Mont Pelerin Society in 1947 to maintain communication between liberal scholars.

Under the heading “Liberalism is Liberal” Boettke signalled some of the intellectual battles that the scholars have to fight including the idea famously articulated by Kevin Rudd that liberalism will usher in a “brutopia”. Boettke cites a prominent academic left liberal on the same theme “Compassion, justice, civic responsibility, honesty, decency, humility, respect, and even survival of the poor, weak and vulnerable – are all to take a back seat.” [263]. Left liberals have exploited that widespread perception to exert a powerful emotional appeal by virtue signalling on the themes of justice and helping the poor. These were appropriate from Christianity and classical liberalism while the actual existing institutions of Christianity and classical liberalism are excoriated and subjected to relentless attack. The idea of the welfare state gained traction after the industrial revolution because neither the conservatives at the time nor the leaders of the labour movement understood how laissez faire capitalism was advancing the welfare of the able bodied poor and generating the wealth that could be channelled through private and charitable efforts to deliver all the health, education and welfare services that socialists might desire.

The reform agenda of economic liberals is often depicted as narrow in its focus, lacking moral, cultural and spiritual depth, summed up in the comment that economists know the price of everything and the value of nothing. This indicates the need to include a robust moral framework among the pillars of classical liberalism, alongside the rule of law, the range of freedoms, non-discriminatory laws, justice and limited government. This framework would include honesty, compassion, self-reliance, social responsibility, charity, prudence, civility and tolerance.

One of the exciting developments in modern liberal scholarship is the growing awareness or at least the rediscovery of the synergy of markets and morals. The idea was not new to Adam Smith when political economy was closely related to moral philosophy and of course his first book was The Theory of Moral Sentiments. It was in the air at the Mont Pelerin Conference in 1989 with The Fatal Conceit hot off the press and cognate publications like The Ethics of Economic Freedom (CIS 1989). The late Michael Novak was a major modern pioneer on that front with The Spirit of Democratic Capitalism (1982) and Free Persons and the Common Good (1989). Lately Deirdre McCloskey weighed in with multiple volumes in defence of the bourgeois virtues.

Surveying Boettke’s achievement in this book, he has beaten a path through several decades of intensive work by a great thinker to identify the most important and fruitful line of march for scholars and friends of liberal democracy. F. A. Hayek: Economics, Political Economy and Social Philosophy is a challenging work of scholarship designed to provoke more efforts to explore the implications and applications of critical rationalism, Austrian economics and non-socialist (classical) liberalism. He could have mentioned that Hayek’s close friend Karl Popper was a fellow traveller in the project but that is another story and this vessel is loaded to the gunwales already. To conclude, we are fortunate that the ideas of Hayek and classical liberalism have found such an enthusiastic and energetic champion in Peter Boettke.

A longer version of this review is in the December edition of the Australian monthly Quadrant.

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Popper’s institutional turn

The purpose of this series of posts is to explain three areas where Popper and Hayek stood together. This is often overlooked among followers of Hayek who are not interested in Popper and also followers of Popper who are not interested or well informed about Hayek. Followers of Popper are thin on the ground and so are followers of Hayek and the people who are interested and well informed about both are practically invisible. Some names in that rather exclusive club are Bill Bartley and Gerard Radnitzky (both deceased), Hans Albert (no longer active), Larry Boland, Bruce Caldwell, Jack Birner, Mark Notturno, Pedro Schwartz, Jeremy Shearmur, Ian Jarvie. There must be many more but you get the picture.

Peter Boettke provided the impetus to write these stories because his recent book on Hayek made no mention of Popper at all. This is not a fatal flaw in the book, after all it was about Hayek and it was possible to tell the story of his achievements without reference to Popper. The book did not need to be any bigger and sometimes an author can try to cover too much in a single book. Popper wrote that it is not possible to say everything at once about a complex topic! Still the message from Boettke’s book is that some of the themes are very important, especially the theme of institutional analysis and it will help to explain institutional analysis to a wider audience if make use of Popper’s contribution.

The social and institutional aspect of Popper’s thought did not get much recognition until 2001 when Ian Jarvie published The Republic of Science. Actually it didn’t get much recognition then because the book fell practically stillborn from the press. Jarvie showed that Popper pursued a social or institutional “turn” in Logik der Forschung and it appeared in English in the articles that were published in The Poverty of Historicism in 1944/45 and in The Open Society and Its Enemies (1945).

The “turn” was easy to miss because Popper did not pursue it himself and that task fell to others. This post describes work by Jarvie, Gombrich, Roger James, Tryell Burgess, Paul Knepper and Gordon Tullock.

The Poverty of Historicism is a short and somewhat cryptic book on the methods of the social sciences, cast as a criticism of historical determinism or the locomotive theory of history that things will happen according to a historical plan regardless of our efforts to chance the direction of events. The positive suggestion for institutional studies came in a few sentences at the very end of the book. In Section 32 Popper urged the use of institutional analysis instead of the psychological approach of Comte and Mill to explain the phenomenon of human progress. They believed that progress in science and industry is an absolute trend, based on the progressive tendency of the human mind. Popper noted that there are other tendencies of the human mind like forgetfulness, indolence and dogmatism.

This immediately leads to the realization that a psychological propensity alone cannot be sufficient to explain progress, since conditions may be found on which it may depend. Thus we must, next, replace the theory of psychological propensities by something better; I suggest, by an institutional (and technological) analysis of the conditions of progress. (Popper 1961,154).

The social approach emerged again in Chapter 23 on “The Sociology of Knowledge” in The Open Society where Popper warned that the emerging sociology of knowledge and the push for central planning were twin dangers to be confronted after the war. He confronted Karl Mannheim’s exposition of the Marxist doctrine that our beliefs are determined by class interest and by the social and historical situation of our time. In defence of scientific objectivity Popper turned the sociology of knowledge on its head to argue that its focus on the origin of subjective beliefs did not engage with the proper object of inquiry, namely knowledge as a public or intersubjective product.

Further, what we call objectivity is not based on personal characteristics or psychological propensities. It will help if people adopt Popper’s proposal for the rational attitude but even if that attitude is in short supply the process of error-elimination to approach the truth can still occur through the process of open discussion supported by appropriate institutions such as free speech. (The philosopher Philip Kitcher later referred to this as well functioning cognitive community).

Thus the objectivity of science comes from the process of more or less free criticism in the scientific community.

It may be said that what we call ‘scientific objectivity’ is not a product of the individual scientist’s impartiality, but a product of the social or public character of scientific method; and the individual scientist’s impartiality is, so far as it exists, not the source but rather the result of this socially or institutionally organized objectivity of science. (Popper 1996 220)

Hence scientific objectivity is a situational or institutional problem that calls for such things as theoretical pluralism, clear formulation of the problems that the theories are supposed to solve, the design of critical experiments, the existence of journals, seminars, and conferences to facilitate critical discussion. Some of these requirements have to be provided by individual scientists, especially new ideas and imaginative criticism while others call for institutions, including political institutions to maintain the autonomy of the journals and the research institutes.

Jarvie on The Republic of Science and beyond

Long before his work on The Republic of Science Jarvie used Popper’s situational logic to explore some contemporary issues in sociology including the nuances of explanation and understanding, the current literature on the “teenager problem” (the mutual misunderstandings between generations), and the idea of social class in Concepts and Society (1972). For his unpublished work that is on line see Jarvie’s website that was recently posted on the Facebook site]. In “Rationality and Situational Analysis in Popper’s Scientific Work” he showed how Popper exemplified the practice of situational analysis in relation to intellectual problems. He challenged the generally accepted view that Popper did not contribute to substantive problems in the social sciences by showing how Popper’s signature ideas allied with situational analysis (of texts) produced at least nineteen important contributions in The Poverty of Historicism and The Open Society and Its Enemies. The signature ideas are methodological individualism, logic of the situation, unintended consequences and the rationality principle.

He classified nineteen contributions in three categories; history, sociology and political science. The history group includes the critique of historicism, an analysis of the rise of nationalism and conjectures about the Socratic Problem and the dating of Plato’s works. In sociology he cited two examples. One was the hypothesis of the “strain of civilization” in the transition between closed and open societies and the other is his sociological account of objectivity in science. In political science he referred to the protectionist theory of the state, the paradoxes of sovereignty, freedom and tolerance, and a proposal to maintain peace without punishing the individual citizens of a belligerent nation (such as Germany) in the aftermath of the Great War (Jarvie 1984).

The art historian Ernst Gombrich (1909-2001) saw The Open Society and Its Enemies through the press in 1945. Later, for the Library of Living Philosophers Popper Volume he wrote “The Logic of Vanity Fair: Alternatives to Historicism in the Study of Fashions, Style and Taste” (Gombrich 1974). He applied situational analysis and the idea of games such as “watch me” to explain phenomena including the competition between French Gothic cathedrals (each taller than the last) and the spread of innovations, fads and fashions in architecture, dress  and music. The “rules of the game” analysis might have inspired a lot of interesting work by Wittgenstein and his followers if they had addressed more substantive social and political issues in a critical and imaginative manner.

He found a more sinister example of the process in Jonathan Swift’s satire of the war between Lilliput and Blefusco that was prompted by a dispute between the “Big-Endians” and the “Little-Endians” over which end to cut off to eat a boiled egg. Gombrich used this fictional example to demonstrate the logic of escalating conflict over what should be trivial matters when they become politicized in the way that the New Left pursued in the ‘60s and ‘70s with the mantra “The personal is political”. The full fruits of this campaign are now upon us with the push for political correctness in the use of language and personal pronouns.

Roger James identified what he called the solutioneering approach to public policy-making in Return to Reason: Popper’s Thought in Public Life (1980). Solutioneering can be described as the game of “watch me” applied to social policy. It means jumping to a solution before clearly defining the problem and examining alternative strategies if indeed there is a problem that calls for intervention. Then implementing that solution drives policy regardless of the cost and the unintended consequences that might have been avoiding or minimised with appropriate planning and risk management. The game is to find a crisis, spring to a solution, [(Footnote Sowell 1988 on this] over-estimate the benefits, underestimate both the costs and the time required for implementation, insist that it is so urgent that there is no time to lose (it will cost more when the problem gets worse). If all else fails, describe the cost as a social benefit. The worldwide scramble to control the climate is a paradigm case. James described the process at work in Britain after the war in town planning, the National Health Service and some major government projects which were launched during the heyday of nationalization.

Tyrell Burgess adopted Popper’s approach in his work on education policy in Britain. He pursued strategies to improve literacy and learning without trying to simultaneously fix all the things that “holistic” commentators regarded as the cause of problems in education: race, unemployment, inequality, poor housing, ill health, old school buildings, unsupportive parents. He called this approach “multiple digression analysis” and he suggested instead to find more effective teaching methods by testing and selecting the best among the various methods that are available (Burgess 1985).

Paul Knepper drew a comparison between the approach of the Austrians and Popper in his account of “situational crime prevention”. This calls for analysis of the opportunities that criminals exploit followed by steps to reduce the opportunities and increase the costs. He cited Popper and Gary Becker as the inspiration for this approach and he referred to a substantial body of literature on the topic (Knepper 2017).

Tullock met Popper at Princeton circa 1963 and he  put aside his work on the politics of bureaucracy and turned to write The Organization of Inquiry (1966).   He approached the topic of scientific research and publication as a student of legal, social and economic systems to sketch a scenario for the decline of a scientific discipline, given a particular combination of motivational factors and institutional incentives.

He suggested that a self-perpetuating process could occur in a journal or a field of research dominated by “normal” or “uncritical scientists” so the work could “gradually slip away from reality in the direction of superficially impressive but actually easy research projects”. The peer review process is designed to avert such a decline; however, if the reviewers are too closely associated with the authors, either personally or by membership of a school of thought, then the rigor of the process may suffer.

When Tullock wrote the book in the 1960s he considered that the natural sciences were sound, but he thought that parts of economics and the social sciences were well down the slope that he sketched. In view of the concerns that are being expressed about the state of science at present it may be time to revisit Tullock’s analysis to see how much we can learn from it.

That should be enough to indicate some of the fertility of the program that Popper wittingly or unwittingly initiated by his fragmentary comments on the institutional organization of science.

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Critical rationalism and the critique of constructivist rationalism

Popper, Hayek and Oakeshott were all concerned with defective forms of rationality. Popper rejected comprehensive or unlimited rationality, Hayek criticised constructivist rationality and Oakeshott famously criticised Rationalism in politics. My conclusion is that all three had substantially the same views on the use and abuse of reason.

In “The Revolt Against Reason” (OSE Chapter 24) Popper described the conflict between rationalism and irrationalism as arguably the most important intellectual and moral issues of our time. He regarded “comprehensive rationalism” as logically untenable. This as the refusal to accept any position that has not been rationally demonstrated by evidence or argument but the principle itself cannot meet the criterion and is self-contradictory. In practical terms it demands that we have to abandon all prejudices and assumptions that have not been rationally demonstrated but this is logically and psychologically impossible. All arguments proceed from premises and these cannot be conclusively justified by reason or evidence.

Popper advocated a position that he called “critical rationalism”. It is a modest position and it does not ascribe authority to any source of conclusive justification.

We could then say that rationalism is an attitude of readiness to listen to critical arguments and to learn from experience. It is fundamentally an attitude of admitting that ‘I may be wrong and you may be right, and by an effort, we may get nearer to the truth.’

Turning to Hayek’s critique of constructivist rationalism. He traced the roots of the doctrine to Descartes whose “radical doubt” led him to deny the status of truth to any statement that could not be logically derived from irrefutable premises. That is clearly the same thing as Popper’s unlimited rationality. Hayek developed his arguments in particular against the political consequences of the doctrine based on belief in a socially autonomous human Reason. This faculty is to be used to redesigning civilization and culture after disposing of all traditions and conventions that have not been sanctioned by Reason.

Michael Oakeshott (1901-1990) spent most of his career at  the London School of Economics working on philosophy, politics and history. He also wrote about aesthetics, morality, education and horse racing; he coauthored a book called A Guide to the Classics for picking winners at the track. He enjoyed a certain amount of influence and assumed something of a minor cult status due to his personal charm and his wide range of interests.  He is celebrated by The Oakeshott Association.

His take on rationalism is subtle and nuanced as indicated by an exchange of letters with Popper. His position on rationalism in politics is the same as that of Hayek, being opposed to the kind of  radical rationalism that would reform society root and branch regardless of the damage inflicted in the process, whether by outright violence or the destruction of valuable traditions that sustain harmonious relations. Identity politics is one of the outcomes of the approach that he criticised.

Towards a Rational Theory of Tradition

Addressing the Rationalist Press Association in 1948 Popper advocated a critical attitude towards tradition and he described this (in part) as a rejoinder to Oakeshott’s “Rationalism in Politics. The critical approach means accepting that we all make use of traditions and there is no way to do without them although we may avoid excessive rigidity if we are willing to re-think our prejudices. This approach aims to steer between the taboos of the closed society and the “everything must go” attitude of constructivist rationalist revolutionaries. Popper objected to the kind of obscurantist conservatism that Hayek also rejected in his essay “Why I am not a conservative”.  Popper’s rejoinder to some aspects of  conservatism was the rejoinder to Oakeshottt or at least some interpretations of Oakeshott’s position. Popper also criticised the position of rationalists who dismiss traditions out of hand without attempting to understand the purposes they serve. This placed him alongside Hayek and Oakeshott in some respects. Indeed an exchange of letters between Popper and Oakeshott revealed that there was next to no difference between them when the nuances in both their positions were articulated.

That is probably all that needs to be said to indicate the alliance of Popper and Hayek on rationalism, but there is a tale to be told about William W. Bartley, III’s development of Popper’s non-authoritarian approach and especially the idea of non-justificationsm. This concept has next to no currency beyond Popper’s admirers due to the overwhelming influence of the quest for “justified true beliefs”. These beliefs are justified by some criterion that functions as the Philosopher’s Stone of epistemology. The two major “Stones” that have been advanced are sensory experiences in Empiricism and reason or intellectual insight in the Rationalist tradition.

Popper rejected both of those sources of authority in the lecture “On the Sources of Knowledge and of Ignorance”. He favoured non-justificationism and in practice this means forming tentative critical preferences for one theory rather than another on the basis of multiple criteria. He made a concession to suggest that we might use justification in the rather limited sense of justifying (explaining) our critical preference with an account of what would count as a better theory or policy.

Bartley took hold of non-justification with both hands and practically made a career out of writing about non-justificationist rationality as though it was the New Philosopher’s Stone.  He found fault with Popper’s demarcation criterion and that precipitated  a rupture in their association that took over a decade to heal. He then became Popper’s authorised biographer and in that capacity he interviewed Hayek, resulting in an invitation to write Hayek’s biography and edit his last book, The Fatal Conceit. In this book the notion of non-justificationism turned up as an additional stick to beat constructivist rationalism! (Champion ref).

No matter what rules we follow, we will not be able to justify them as demanded; so no argument about morals – or science, or law, or language – can legitimately turn on the issue of justification (see Bartley, 1962/1984, 1964, 1982). The issue of justification is indeed a red herring, owing in part to mistaken and inconsistent assumptions arising within our main epistemological and methodological traditions, which in some cases go back to antiquity”. (Hayek, 1988, 68)

Popper criticised those assumptions in “justificationist” epistemologies and authoritarian political philosophies (Chapter 7 of The Open Society). So Popper’s non-justificationism found its way into Hayek’s final work through the agency of the editor.

Bartley did not progress far with the twin autobiographies of Popper and Hayek although he raised funds to launch a project to print a new edition of Hayek’s collected works. He only lived long enough to see the first volume off the press and the general editorship passed first to his friend Stephen Kresge and then to Professor Bruce Caldwell.

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Popper and Hayek versus scientism

The synergy of Popper and the Austrian economists is apparently not an idea whose time has come just yet. This calls for a study of the reason why the synergy is apparent to some people like the late Gerard Radnitzky and Francesco di Iorio but not to most others. One of the reasons is that very few people have taken on board the strong version of Popper rather than various misperceptions. Quite likely a person could spend a career in philosophy without meeting someone who could give a straight feed on Popper’s ideas, let alone a follower of Popper or a course on his ideas. The same applies with the Austrians in economics although their situation is improving from a practically zero base in the early 1970s to a 2% share of the community these days. Still, some unspecified proportion of the 2% are promulgating the dogmatic apriorism that is not essential but cuts them off from critical rationalists and also the economics profession at large.

One way to explore the synergy or at least the congruence is to look at the long friendship of Popper and Hayek and their shared concerns. Three of these were : (1) scientism, that is misguided attempts to copy the method of the natural sciences; (2) the abuse of reason that Hayek called constructivism rationalism and Popper called unlimited rationalism: (3) the need for institutional analysis to widen the field of economics to embrace political economy and moral philosophy.

First a look at scientism. Hayek emphasised in the opening pages of The Counter-revolution in Science (1952) that his attack on scientism was not addressed at the proper and effective methods of science. That was written long after he read Logik der Forschung (probably in 1935 before the actually met Popper) when he recognized that he and Popper were essentially partners in epistemology and methodology. He claimed that he was thinking along those lines before he read LdF and Popper convinced him that the methods of “scientism” were not actually the effective methods of science but a form of inductivism with a lot of mathematics added whether it was helpful or not.

Scientism, defined as the inappropriate emulation of the perceived methods of the natural sciences, has been a problem in natural science since Newton’s triumph converted science into Science with a capital S. Hitherto the term ”science” referred to any body of organised information, and to be “scientific” was to be systematic in pursuit of any activity from angling to astronomy. Newton’s example created a new standard of excellence that called for sophisticated mathematical analysis using the Inductive Method applied to large bodies of careful and accurate observations.

Copying observed practices without insight and imagination produces what the physicist Richard Feynman called cargo cult science. The concept of cargo cults came from the Pacific islands where the cultists constructed mock airstrips in the expectation that cargo would arrive from the skies as it did when the Americans built temporary facilities during the war. Some will recall the vogue of Behaviorism in psychology that eliminated subjective processes and focussed entirely on observable behaviour!

Popper challenged the obsession with inductive methods that tends to produce the “cargo cult” approach and some leading scientists who took philosophy seriously agreed with him, among them Einstein, Eccles and Medawar. An interesting footnote is Einstein’s rejection of the invitation to contribute to the Carnap volume in the Library of Living Philosophy series.

I cannot accede to your request. For I have dealt with this slippery material only when my own problems made it absolutely necessary…I would not be able to do justice to this swarm of incessantly  twittering positivistic birdies…Entre nous I think that the positivist nag, which originally appeared so frisky, after the refinements which it had of necessity to undergo, has become a somewhat miserable skeleton and has become addicted to a fairly dried-up petty-foggery. In its youthful days it nourished itself on the weakness of its opponents. Now it has become respectable and finds itself in the position of having to make a go of its existence under its own power, the poor thing.

The upshot of all this is that natural science is conjectural and Barry Smith argued that the apriorism of Austrian economics is conjectural as well. That justificationism prompted Mark Blaug to write “Mises made important contributions to monetary economics, business cycle theory and of course socialist economics, but his later writings on the foundations of economic science are so cranky and idiosyncratic that we can only wonder that they have been taken seriously by anyone” (Blaug, 1992, 81). He quoted Samuelson’s famous rejoinder to the Austrians: “Well, in connection with the exaggerated claims that used to be made in economics for the power of deduction and a priori reasoning…I tremble for the reputation of my subject.”

Popper’s critical rationalism offers a corrective to the methodological rhetoric of the strong apriorists among Austrians and simultaneously a rejoinder to Blaug and Samuelson. For critical rationalists the test of evidence applies to the explanations and predictions generated by a scientific research program. The program itself is a system of ideas including philosophical and metaphysical framework assumptions and methodological procedures and principles that generate explanations and predictions. Not all of these parts are amenable to empirical testing and this applies to the natural sciences as much as the human sciences.

Hence it is not a departure from standard scientific practice to make use of untestable propositions. The critical rationalist does not insist that all the premises and presuppositions in scientific discourse should be verified, merely that they stand up to criticism as well or better than other options. Recall the four forms of criticism: empirical tests are a particular kind of criticism, but they are not appropriate for all assumptions, especially those of methodology and the philosophical framework assumptions of the program. They prove themselves at one step removed – by the power of the explanatory theories and the research programs that they generate.

Di Iorio (2008) found many points of contact between Mises and Popper:

“…the primacy of theory compared to experience; the anti-instrumentalist or realist conception of science; the fact that empirical theories rest on non-empirical presuppositions…methodological individualism; the criticism of scientism, inductivism and holism in social sciences “

Larry Boland is a productive follower of Popper in a career devoted to the methods of economics. He sketched a four-point Popper-Hayek program in Chapter 15 of The Foundations of Economic Method (Boland, 2003). The elements of the program are (1) Anti-justificationism, (2) Anti-psychologism, (3) Rational decision-making (according to the logic of the situation) and (4) Situational dynamics (behavior can change as a result of learning as well as from changes in the situation). Surprisingly I wrote about Boland’s program in a comprehensive summary of the first edition of that book many years ago but it dropped out of my consciousness until this revival of my efforts to explain the potential partnership of critical rationalism and Austrian economics.

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Review of Malachi Hacohen, Karl Popper, The Formative Years, 1902-1945. Cambridge University Press, 2000.

This originally appeared in the Australian monthly magazine Quadrant . It is reprinted in the revised paper edition of the collection Reason and Imagination.

Karl Popper almost came to the University of Sydney in 1945. John Anderson invited him to join the staff in Philosophy but Popper delayed his decision in the hope of an offer from the London School of Economics. When that offer came Professor Anderson was spared the confrontation with a colleague as assertive and argumentative as himself.

Popper died in 1994 at the age of 92 and this is the first comprehensive book to appear on his life and work, although he detailed account stopped halfway through Popper’s life. Hacohen is a historian based at Duke University and he has charted the evolution of Popper’s thinking with close attention to his intellectual influences and the explosive social and political tensions in Vienna which informed his thoughts on politics and ultimately prompted his flight to New Zealand. Over twenty years in the making, this is likely to be the standard reference for some time because the author had access to some recently opened archives and he also interviewed some longstanding colleagues of Popper such as Colin Simkin (from New Zealand) and John Watkins (of the London School of Economics) who are no longer with us.

The book has at least four different aspects, each of considerable interest. One is the reconstruction of Popper’s intellectual career as he groped towards his seminal work in the philosophy of science and politics. The second is to give some impression of Popper the person, the being of flesh and blood who is practically invisible in his intellectual autobiography Unended Quest. The third is the recreation of the social and political milieu of Vienna, the life of high culture and intellectual achievement that thrived but finally expired under the volcano of fascism and anti-Semiticism. The fourth is Hacohen’s mission to reclaim Popper for the social democrats, to snatch him back from the clutches of the Cold War liberals and the New Right.

So far as Popper the person is concerned, Hacohen had great difficulty in getting anywhere near the emotional roots of Popper’s life. He was so much a man of ideas that everything else appeared to be secondary (after early thoughts of a career in music), including his own comfort and the convenience of anyone who had dealings with him.

Hacohen reports that Popper worked for 360 days of the year, all day, without the distraction of newspapers, radio or TV. Several times a month, even in old age, he worked all night and some friend such as Bryan Magee would get an early morning call from Popper, bubbling with excitement to report on his latest ideas. Popper lived well out of London near High Wycombe and when Magee gained Popper’s confidence he was invited to visit, taking the train to “Havercombe” (in Popper’s heavily accented English). When I made the trip to Havercombe, Popper arranged to meet me at the station, carrying a copy of the BBC Listener, presumably to pick him out from all the other elderly gentlemen of middle-European extraction who might be thronging the platform at 2.00 on a Wednesday afternoon. In the event, he left the magazine at home and the kiosk had sold out so he had to buy The Times and fold it to the size of the Listener.

Of course he was the only person in sight apart from the Station Master. Popper, then aged 70, had what his research assistant tactfully described as a “very positive” attitude to driving. Fortunately it was not far to his home and there were few other cars on the road. Safely home, our conversation laboured, and he frequently pushed a tray of choc-chip cookies towards me. Later he lamented to his assistant that I had eaten a whole weeks supply of his favorite cookies in one afternoon. These aspects of Popper are the other face of the man who some described as “the totalitarian liberal”.

Magee endorsed the view that Popper’s personal behaviour often belied his liberal principles. In fairness, he added that Popper had to endure persistent and gross distortions of his ideas by philosophical and political opponents. Hacohen has resoundingly corrected the rather odd view propounded by David Stove regarding the motivation for Popper’s challenge to orthodoxy in the philosophy of science. Stove suggested that this was done in the frivolous spirit of the Jazz Age, so if other people wanted scientific theories to be verified, highly probable and justified, Popper would have them falsified, improbable and conjectural. In fact it is difficult to imagine anyone more divorced from the spirit of the Jazz Age than the priggish, puritanical, non-smoking, non-drinking young Popper. Apparently his idea of a good time outside working hours was a session as a voluntary helper in Alfred Adler’s social work clinic in the slums of Vienna.

Following Tolstoy’s ideas on the dignity of manual labour Popper tried various jobs and he completed an apprenticeship to become a qualified cabinet maker. Apart from a teenage flirtation with the communist movement Popper’s nearest approach to radicalism was Arnold Schoenberg’s Society for Private Musical Performances which he attended out of a sense of duty to explore contemporary music. However, when he started serious writing for publication there was no time for that kind of distraction and often on weekends Popper would sit with his wife in a coffee shop writing drafts which she typed up on a portable typewriter.

Popper’s lack of progress in the community of professional philosophers needs to be understood against the background of the ideas that dominated Anglo-Saxon philosophy under the influence of Wittgenstein in his two phases. It needs to be remembered that the philosophy of science was not institutionalised in the 1920s and there was only a handful of academics in that field in the world. The issues that are now addressed by some hundreds and maybe thousands of fulltime staff and students around the globe, were in those days the preserve of small groups of interested people, including working scientists, many of them outside the universities, like Charles Sanders Peirce and Bertrand Russell for much of their lives.

Such was the Vienna Circle of logical positivists who gathered around Professor Moritz Schlick (1882-1936), Rudolph Carnap (1891-1970) and Otto Neurath (1883-1945). Their spiritual predecessor was Ernst Mach (1838-1916) a philosopher-physicist in the strong empiricist tradition of David Hume whose mission was to purge science of metaphysics and place it on the firm “positive” foundations of sensation. Few philosophers have had such a deep and wide-ranging influence. In Hacohen’s words “He virtually became the official philosopher of Viennese progressivism” (and far beyond) through his influence in psychology, physics (the young Einstein), literature (Robert Musil), painting (the Impressionists), social philosophy (Joseph Popper-Lynkus).

They pursued Mach’s positivism, with Russell’s Principia their inspiration and Wittgenstein’s Tractatus providing the program. This was essentially a war on metaphysics by application of the strict “verificationist” definition of meaning. They proposed that statements should be regarded as literally meaningless if they could not be confirmed or verified by evidence. The propositions of logic and mathematics were exempt from the requirement for verification on the understanding that they are true by definition and they do not pretend to convey information about the world.

The most obvious casualties of the verification principle were religion and moral principles, though there were others that were less obvious, including the principle itself and, most regrettably, the laws of science. When these laws are stated in their strong (universal) form they cannot be verified by any number of observations. This dilemma, with the unsolved problem of induction, represented twin “skeletons in the cupboard” of positivism, but still the circle gained worldwide influence, and they did institutionalise the philosophy of science with a series of conferences in the 1930s with the sponsorship of luminaries such as Bertrand Russell. Then the predominantly Jewish and left wing members of the circle had to scatter for their lives, like Popper himself, and they were dispersed far and wide by 1939.

Manning Clarke recorded in his autobiography The Quest for Grace something of the flavour of encountering the crusading spirit of the positivists, round about 1940.

The first time I sat down in the ‘caf’ at Melbourne University I asked politely ‘Would you please pass the salt?’ My neighbour, a gifted woman, looked at me with the eye of the saved for the damned and said. ‘I don’t know what you mean.’ I decided to listen to what was going on. In the ensuing weeks I picked up a new vocabulary. I often heard the word ‘tautology’: that, I gathered, was a sin against the Holy Ghost. I heard the phrase ‘non sequitur’. I was often asked: ‘Is that a verifiable proposition?’

As the circle pursued their program in the 1930s two other forces loomed up on the horizon. One was an intellectual challenge from a young schoolteacher, the other was the lengthening shadow of the swastika.

Popper’s career did not pursue any steady course through the 1920s. His father was ruined by the postwar inflation and Karl left home to live in a commune in an old army barracks. Decked in army surplus attire he attended courses in science and mathematics as an unmatriculated student at the university, eking out a living by coaching overseas students. (Arthur Koestler was studying engineering at the university at the time, until he departed to support Zionism in Palestine). There was no prospect of a career and he engaged in socialist causes and social work.

His early experience as a voluntary teacher with a group called the “Young Proletarians” was not inspiring. The working-class children were resistant and greeted the young teacher with loutish behaviour. Things improved after Popper challenged the leader of the roughnecks to a boxing match. Eventually he found a place to train as a proper school teacher, in a newly formed Pedagogic Institute that was established to support Glockel’s school reform movement. There he learned philosophy and psychology from Karl Buhler (1879-1964), took on board Kant’s view on the projection of intellectual categories upon the world, moved his focus from the psychology of learning to the logic of theory formation and testing, and courted and married a fellow trainee-teacher. Josefine Henninger “Hennie” (1906-85) was a physical education teacher who became Popper’s greatest helper.

Popper addressed a different problem from that of meaning and metaphysics because he was concerned with the difference between science, where evidence matters, and pseudo-sciences such as astrology where theories appear to be based on observations but are actually “unsinkable”. His exemplar of science was Einstein’s theory which might have been refuted by a particular set of observations on the eclipse of the sun. Inspired by this example Popper advanced his criterion of falsifiability (testability) along with a set of conventions or “rules of the game” of science to ensure that the truth of theories can be tested by evidence. It is worth noting that testable statements are not confined to the “hard sciences” or even to the natural sciences, and Popper’s “rules of the game” can be applied to investigations in any field including history and literature. As for induction, Popper proposed that science could do without it, making its way by means of speculations controlled by criticism, especially the criticism of experimental or observational tests. On this account science is not an edifice based on observational foundations, it is more like a hot air balloon that is tethered to the “earth” of facts and observations by thin deductive threads.

These ideas on demarcation and induction formed slowly as Popper conducted endless discussions and debates with members of the inner Vienna Circle (Viktor Kraft and Herbert Feigl) and others on the periphery, such as Heinrich Gomperez. It was Herbert Feigl, after a nightlong session, who proposed that Popper should write a book. Hacohen provides a dramatic account of the writing, revision and publication of Logik der Forschung in 1934, one of a series of monographs produced by the Vienna Circle (it appeared in English in 1959 as The Logic of Scientific Discovery). All manner of problems intruded, political tensions were on the rise, the inner Circle members were divided on the acceptability of the book, Popper’s first effort had to be cut almost in half, the editor procrastinated for months before reading the manuscript, Popper was madly impatient to get into print and rubbed everyone up the wrong way, there were paper shortages, other books to be considered for publication in the series.

Hacohen gives a lot of credit to the logical positivists of the Vienna Circle for putting up with Popper’s Steppenwolf-like activity, prowling on the fringe of the circle where Schlick, Carnap, Neurath et al. huddled around their campfire, seeking warmth and consolation from the dying embers of the verification principle They accepted Popper’s book because most of them perceived that it had merit even if none of them really agreed with Popper’s turn from verification and induction to a theory of conjectural knowledge that may be tested but is never confirmed, or even assigned a numerical probability.

In the background to all this intellectual activity there were ebbing and flowing tides of political revolution. The communists plotted, the anti-communists reacted, the socialists took control of the Vienna city council in democratic elections, the Jewish problem created ongoing tensions. Hacohen has a special interest in the Jewish problem and he may have overdone this part of the narrative but his account of the shifting balance of power between the rival forces is engrossing. Popper had huge admiration for many aspects of the socialists’ program but he despaired of their tactics – they talked violent revolution (though their moderate leadership did not believe in it) and this prompted a violent reaction which they were not sufficiently organised and resolute to match, even when they had the numbers to prevail.

Against them were arrayed the conservative bourgeoisie and much worse elements of the kind that flocked to Hitler’s banner. Eventually Hitler annexed Austria and all bets for civilisation were off. Those who could see the writing on the wall, like Popper and Ludwig Mises (Hayek’s teacher), escaped if they could. Mises fled to Switzerland, just before his apartment was raided. Popper’s teacher Karl Buhler was less fortunate, he was arrested and interned for some weeks until he had the chance to escape by walking over the border to attempt a new life in the United States. Later on Popper counted sixteen relatives who perished in the holocaust.

With Logik der Forschung launched, Popper’s focus shifted to politics and the social sciences. His major concern was the failure of Marxism to provide a bastion against the rise of fascism and he attributed this more than anything to an intellectual error, namely the doctrine of historical inevitability. He labeled this “historicism” and he returned to his notes on “the poverty of historicism” in 1938 when he was settled at Canterbury College, Christchurch. By that time he was writing in English and his closest colleague was Colin Simkin, a young NZ economist (aged 26 when he met Popper). Popper had a low opinion of the social sciences although he thought that mathematical economics had turned the corner, an opinion formed when the was blown away by  Wald and Morgenstern who were launching really serious mathematical economics in Karl Menger’s seminar.   He relied heavily on the young Simkin for an introduction to the innovations of Keynes and for advice on the capacity for social engineering by democratic governments to control major problems such as monopolies and mass unemployment.

In return for this dubious assistance, he offered Simkin the advice to develop his mathematical skills in order to pursue the path of macroeconomic modeling. This advice turned out to be a something of a disaster for Simkin because it seems that this lifelong project failed to bear fruit. Simkin later came to the University of Sydney to assist in the battle against the Marxists in the Department of Economics.

Despite all the pressures of the times, the loneliness and isolation of New Zealand, the dreadful news from home, the threat of the Japanese advance, his teaching load and problems with his Professor (described in Roger Sandall’s book The Culture Cult), The Open Society and its Enemies was eventually written and dispatched. This book can be seen as a kind of “Battle of Britain” in the world of ideas, a desperate counterpart to the struggle where young men daily took to the air in the skies over the South of England with the future of civilisation virtually in their hands. On the other side of the world a relatively young Karl Popper patrolled the stratosphere of the world of ideas, confronting those from Heraclitus and Plato to the present day whose ideas he thought were undermining the cause of freedom and the open society. Like the young men in their Hurricanes and Spitfires, he did not fly in vain. The Open Society joined Hayek’s The Road to Serfdom to provide twin pillars of resistance to totalitarian thinking post WWII.

The Open Society and its Enemies is a monumental defence of democratic principles and a demolition of many pervasive ideas that render our traditions of rationality and tolerance dangerously fragile under the pressure of social and political crises. Chief among these is the utopian impulse to recreate society in the image of someone’s dreams. There is some debate as to whether Popper’s dramatic view of science as a succession of revolutions is consistent with the relative conservatism of his political philosophy. In fact there is no conflict because both garments are cut from the same cloth of critical rationalism, the spirit of criticism, respect for arguments, for the truth and for the rights of individual people.

In view of Hacohen’s plea to the socialists of the world to rally behind the ideas of Popper it is essential to work out whether Popper provides support or resistance to policies of state intervention along socialist or social democrat lines. Popper is generally regarded as a social democrat because he supported state intervention to counter monopolies and unemployment, to protect the economically weak from the economically strong. To assess the legitimacy of Hacohen’s claim on Popper it is helpful to examine the impact of Hayek on Popper, and also to consider some of the implications of Popper’s ideas that he never followed to their logical conclusion.

Briefly, it appears that when Popper’s views are adjusted to take account of his misunderstanding of the nature of monopoly and the real causes of unemployment, his basic principles place him with minimum state liberals or even libertarians. The important assumption here is that the mass unemployment of the 1930s was caused by injudicious state intervention (by minimum wage laws, by central banks and tariff barriers etc), and by excessive trade union power, not by the inherent instability of free markets.

Hacohen describes Popper’s correspondence from Hayek which commenced in 1943 while The Open Society was still in manuscript. Hayek’s reaction was gratifying but he took fright at Popper’s language of social technology and social engineering because he (Hayek) had identified the enemy, even more than the historicist, as the constructivist rationalist (the coercive utopian) who thought he could impose a pattern upon the organisation of a whole economy, like an engineer working from a blueprint.

Popper was concerned with freedom and he was equally concerned with human suffering and deprivation, after his formative years surrounded by the abject poverty in Austria after the Great War. Like the Prince of Wales visiting the out of work Welsh miners during the Great Depression, he knew “Something has to be done!” For this reason he reserved the right of the state to intervene so that the economically powerless could not be exploited by the economically powerful. He was a free trader in goods because he recognised that under monopoly, the consumers may have to pay to cart away the rubbish produced by the monopolist.

What was to be done about mass unemployment, the major cause of widespread suffering (apart from war)? This was never specified, though he would have learned the dangers of state interference with the labour market if he had read the works of W. H. Hutt on collective bargaining and the strike threat or (some time later) The Case Against the Arbitration Commission by P P McGuinness. Popper came near to a breakthrough in economics in the course of appraising Marx on capitalism and the “excessive” labour supply that supposedly leads to exploitation. He wrote in Chapter 20 of The Open Society:

What is not so clear, and not explained by Marx either, is why the supply of labour should continue to exceed the demand. For if it is so profitable to ‘exploit’ labour, how is it, then, that the capitalists are not forced, by competition, to try to raise their profits by employing more labour? In other words, why do they not compete against each other in the labour market, thereby raising the wages…It appears that the phenomena of ‘exploitation’ which Marx observed were due, not, as he believed, to the mechanism of a perfectly competitive market, but to other factors – especially to a mixture of low productivity and imperfectly competitive markets.

Low productivity and imperfectly competitive markets! These are recognised by free traders as a consequence of inappropriate and counterproductive government intervention. Interference with the labour market has been particularly damaging and it appears that the immediate cause of mass unemployment in Australia during the Great Depression was the fact that award wages were only reduced by 10% at a time when prices had fallen by much more than that figure. One of the best kept secrets of modern history is the comfortable situation of the people who remained employed for the duration at 90% of the previous wage rate while tens of thousands had no regular income at all. This secret was leaked, not by a historian or a sociologist or even by an economist but by the novelist Jessica Anderson in Tirra Lirra By The River.

As a result of Hayek’s influence Popper emphasised that state intervention should take the form of laying down clearly formulated rules, and state officials should not be empowered to issue discretionary orders to achieve particular short-term aims. He became more alert to the dangers of increasing state power, he insisted that social democratic policies should never be envisaged as a “cure-all” and he warned that socialists of good will should be alert to abuses of power that could result from increased state activity, however well meaning the original intention might be. In March 1944 he wrote to Hayek “I think I have learnt more from you than from any other living thinker, except perhaps Alfred Tarski”.

The result of all this is distressing to Hacohen.

In the postwar years, Popper no longer demonstrated commitment to reform…He never disavowed piecemeal engineering, but he argued that its purpose was to decrease, not increase, state power. He also showed growing sympathy towards libertarianism, and did little to stop the conservative onslaught of the 1980s.

Hacohen cited a reference to a 1982 interview where Popper expressed some sympathy with anarchism…”It was, he said, an unrealisable ideal but the closest we can get to it, the better off freedom is”.

Hacohen’s statement above seems to assume that decreasing the extent of Big Government and the “nanny state” does not count as reform. Such is the gulf that has opened up between socialism and common sense. Hacohen hopes that the left can be reinvigorated by Popper’s ideas, properly understood, to regain their sense of mission, to recover from the setbacks of the Thatcher and Reagan years, take the offensive and move forward again. I have a similar hope, that the left can move forward, but in a very different direction, the direction of classical liberalism, the direction pointed by Mises and Hayek, and by Popper in his stance as a minimal state liberal.

Despite this negative conclusion regarding one of Hacohen’s aims I do not want to leave the reader with an unfavourable impression of the book. It is a work of quite remarkable scholarship, well organised, clearly and vigorously written. It will provoke debate among friends of Popper’s ideas, and perhaps among others who are less friendly. It should lead to a reconsideration of Popper’s low standing in contemporary philosophy. It stands as a monument to Popper’s indomitable spirit and to the support of many people, not all of them adequately recognised by Popper himself, who helped him on his way. These include some members of the Vienna Circle, Karl Buhler, Robert Lammer (the diligent first reader of Logik Der Forschung), Ernst Gombrich and Colin Simkin. May they never be forgotten.

I would like to dedicate this article to the memory of Keith Barley, Reader in Agronomy at the Waite Agricultural Research Institute, Adelaide, who lent me The Open Society and Its Enemies in the spring of 1968.

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Karl Popper’s Contribution to Austrian Economics, the Quality of Science and Critical Thinking

 Rafe Champion and  Brian Gladish, Independent Scholars

The Austrian-born philosopher Karl Popper charted new direction in the philosophy of science in the 1930s with Logik der Forschung (The Logic of Scientific Discovery 1959). His ideas can be recruited to support the little-known Austrian school of economics, to improve the quality of scientific research and to indicate how a unit on critical thinking can be a core subject in liberal education. If Popper’s ideas are robust then the main features of his thinking should be the common property of all educated people. Some would say the same applies to Austrian economics.

The paper begins with a summary of the key features of Popper’s critical rationalism followed by an introduction to Austrian economics and the way that some of his ideas can elevate the profile of the Austrian school. The paper then turns to the rising tide of concern about the quality and reliability of the scientific research that is published in some fields. Finally there is a proposal for short course to introduce various forms of critical appraisal of ideas that could be a core component of liberal education to promote imaginative problem-solving and lateral thinking.

POPPER’S CRITICAL RATIONALISM

In his introduction to Popper’s philosophy Mark Notturno wrote “Popper was an outspoken champion of rationalism and a constant critic of subjectivist and authoritarian tendencies in science and society.” (Notturno, 2003, Preface). His philosophy can be described as critical rationalism with a historical and evolutionary approach. He liked to sum it up in two nutshells. One is the critical rationalist credo “I may be wrong and you may be right, and by an effort we may get nearer to the truth”. The other is the four-stage problem solving scheme that is described below.

Wade Hands demonstrated the difference that it makes to perceive Popper as a critical rationalist rather than the more usual “falsificationist”, a label that implies that his ideas are merely a variation on the theme of logical empiricism. Hands is a leading contributor to the literature on the philosophy and methodology of economics and for many years he was a critic of Popper’s views until he radically changed his perception. He wrote that Popper is best depicted as a critical rationalist and he concluded that critical rationalism fits both the practice of mainstream economics and Popper’s specific contribution to social studies – Situational Analysis and the Rationality Principle.

If Popper’s real message is critical rationalism, rather than falsificationist rules, then the method of SA seems to be quite fine. Popper explains in detail how to modify a particular SA explanation when it seems to be in conflict with the empirical data, internally inconsistent, or in conflict with more corroborated theories – if there are many paths to effective criticism, then preserving the RP and modifying the rest of the SA could be a perfectly reasonable response. The critical rationalist reading of Popper’s philosophy thus relaxes the tension between scientific rationality and SA social science and it does so within a framework that is both more contemporary than, and devoid of many of the problems of, strict falsificationism.” (Hands, 2001).

Popper (1902-1994) was born in Vienna, the son of a prominent liberal lawyer with scholarly interests. He dropped out of high school and attended lectures at the university as an unmatriculated student, trained as a cabinet-maker and eventually matriculated. In 1928 he qualified to teach high school science and mathematics after a course that included a doctoral thesis on habit formation in children. He worked on the philosophy of science in his spare time and in 1935 he published Logik der Forschung that appeared many years later in English (Popper 1959).

He criticized the traditional idea that scientific theories are developed by collecting observations followed by confirmation of the theories with more observations. He argued that the creation of theories is a matter of inspiration and guesswork because new ideas arise as conjectures or speculations and the really vital function of observations is to act as tests or attempted falsifications of theories.

In the 1960s biological themes became more prominent in his work and he contributed to the revival of evolutionary epistemology by exploring the principle of natural selection in relation to the development of scientific theories and other forms of knowledge. Evolutionary epistemology is concerned with problem-solving and error-elimination under various forms of selective pressure unlike theories of knowledge that focus on the justification of beliefs and the numerical probability of theories.

Popper started with the old idea that knowledge grows by trial and error or in more learned terms by conjecture and refutation. He postulated that every organism from the amoeba to Einstein can be described as constantly engaged in problem solving (not necessarily consciously of course). Innovations in the plant and animal world arise from mutations which generate new reactions, new organs, new forms of life. For humans the most important innovations are new ideas. Living organisms confront selective pressures exerted by the biological environment and competing forms of life. Ideas meet the competition of alternative theories, critical arguments and experimental tests.

The central motif of Popper’s evolutionary epistemology is a cyclic four-step problem-solving schema:

P1 —> TS —> EE —> P2, P3, P4 etc

The starting point is a problem situation. In response the organism generates tentative solutions. These are subjected to the process of error elimination by various selective pressures. Humans can make the process of error elimination conscious and systematic by critical discussion and experimental testing. In the course of these activities new problems emerge.

This approach to scientific knowledge has at least two important consequences; (1) it resolves conflicting ideas about the various processes and activities which are involved in creative thinking and problem-solving and (2) it highlights the importance of finding unresolved issues (problems) and the willingness to recognize them, even to create them!

On the first point the evolutionary schema can be used to challenge views about science that can tend to promote antagonism between the rational (scientific) and the imaginative (literary) frames of mind. For example Peter Medawar in his book Pluto’s Republic described the tension between the romantic and the rational views of science; the romantic points to the poetic inspiration involved in creating new theories while in contrast the rationalist makes much of data collection, experimentation and logical analysis. This conflict has broad cultural implications. The triumph of Newtonian mechanics was widely perceived as the full flowering of the so-called inductive method to find the truth by accumulating observations. This achievement provoked a revolt by romantics and poets who could not stomach a view of human activity that had no place for the imagination. Nor could they accept the mechanical universe. The result of this collision has been a kind of cultural clash with imagination set against reason, the organic set against the mechanical, the inspiration of the poet set against the empiricism of the scientist.

Popper’s theory offers a cure for this cultural conflict by harmonising the relationship between the various elements of the situation for both scientists and artists and indeed for anyone. These elements include traditional beliefs, criticism, logic, imagination and experimental trials. These elements each have a role to play and so there is no need for the tensions and antagonisms that flow from partial and narrow views of problem-solving and creativity, whether in science, art, technology or daily life. A helpful selection of Popper’s thoughts can be found in David Miller’s A Pocket Popper (Miller, 1983) and in a collection of “Cliff’s Notes” for Popper’s first five books Champion (2016).

On the second point the schema brings out the importance of recognizing problems and working on them in a critical and imaginative spirit. In this schema a problem functions as an ecological niche to be colonised by tentative solutions. Problems are welcomed as a challenge, not an impediment to science because they are the growing point or perhaps a habitat for new species of ideas. This provides a theory of discovery, based on the creative function of criticism. To grasp the full power of evolutionary epistemology it is necessary to understand this creative function of criticism in generating problems that can be seen as spaces for new ideas Problems are the habitat where new ideas grow and criticism has two functions, which are about equally valuable: (1) to eliminate error and (2) to reveal new problems, i.e. new habitats. Thus Popper’s theory brings out both the error elimination and the creative function of criticism and we need to maximise the play of criticism to get the best out of both its functions.

Watson and Crick systematically used the critical approach in their pursuit of the double helix structure of DNA. As Crick described it:

Our other advantage was that we had evolved unstated but fruitful methods of collaboration, something that was lacking in the London group. If either of us suggested a new idea the other, while taking it seriously, would attempt to demolish it in a candid but non hostile manner. This turned out to be quite crucial. In solving scientific problems of this type, it is almost impossible to avoid falling into error…Now, to obtain the correct solution of a [complex] problem usually requires a sequence of logical steps. If one of these is a mistake, the answer is often hidden, since the error usually puts one on completely the wrong track. It is therefore extremely important not to be trapped by one’s own mistakes.” (Crick, 1988, 70) [my emphasis].

In an interview he stated ”It’s getting rid of false ideas which is the most important thing in developing the good ones… You should not get bogged down with experimental details. You should make some sort of bold assumptions, and try them out” (Wolpert and Richards, 1989, 94-5).  Richard Feynman was an exemplary critical rationalist. He famously said “science is organized skepticism in the reliability of expert opinion” and he introduced his students to scientific discovery as guessing followed by the deduction and computation of results from the guess to check with experimental observations (Feynman, 2013).  This is what Popper called “conjecture and refutation”. It seems that Feynman never encountered Popper’s ideas and his impatience with philosophy and the soft social sciences was legendary (Feynman 1985).

Popper’s student Bartley described four forms of criticism: (1) experience; (2) theories; (3) problems; and (4) logic (Bartley, 1982, section xiii onward).  The criticism by test or experience is closely related to the main concern of theories of knowledge which are based on observations. The crucial difference is that for critical rationalists the observations are designed to test ideas, not to verify or confirm them. Of course good theories will pass a lot of tests but that is not the end of the matter because even the best theories have rivals and also internal problems which call for more work. The second form of criticism “by theories” consists of comparing the assumptions and implications of the theory under consideration with other well-tested theories. Criticism “by problems” or “check on the problem” means assessing how effectively the theory (or the policy proposal) addresses the problems that it was formulated to solve.

As for the process of forming critical preferences among rival theories, Popper suggested several criteria rather than one over-riding principle which leaves open the possibility that some theories will have different performances on the different criteria. This is consistent with Popper’s support for theoretical pluralism and the desirability of competing research programs. His first proposal applies to major “breakthrough” developments.

The new theory should proceed from some simple, new, and powerful unifying idea about some connection or relation (such as gravitational attraction) between hitherto unconnected things (such as apples and planets) or facts (such as inertial and gravitational mass) or new ‘theoretical entities’ (such as field and particles). (Popper, 1963, 241)

Other features of the preferable theory are: it makes more precise predictions and these stand up to more precise tests; it explains more facts; it describes or explains the facts in more detail; it has passed tests where the rival failed; it has suggested new experimental tests and passed them.

POPPER AND THE AUSTRIAN ECONOMISTS

The argument in this section is that some features of Popper’s ideas can improve the image of the Austrian school which currently makes up only about 2% of American economists. The Austrians have suffered from the perception that their methods do not meet the standards which have been taught in the philosophy of science since it became professionalised and specialised as an academic discipline under the influence of the logical empiricists led by Rudolf Carnap (1891-1970) and Karl Hempel (1905-1997).

Austrian economics is not widely taught and some background information will be helpful for most readers. It is pursued by a confederation of scholars who trace their intellectual ancestry to the founding father Carl Menger (1840-1921) and his colleagues Eugene Bohm Bawerk and Friedrich Weiser. Other significant early figures were John Bates Clark, Frank Fetter and Herbert J. Davenport in the US,  Philip Wicksteed in England and Knut Wicksell in Sweden (Salerno 2010). Prominent Austrians in the next generation were Ludwig von Mises (1881-1973), Friedrich Hayek (1898-1992) and Lionel Robbins (1898-1984) in the first part of his career.

Until the 1930s the members of the school were concentrated in Austria with scattered supporters around the world. Now most of the “Austrians” are in the United States with two prominent hives of activity, one at the George Mason University in Virginia and another at the Mises Institute in Alabama. There are doctoral programs at George Mason University, Texas Tech, Texas Baylor and Virginia. The Austrians are closely affiliated with the Virginia school of public choice theory (Coase, Buchanan, Tullock) and the Ostrom/Bloomington school of public administration.

In the early 20th century the Austrian ideas appeared to be firmly planted in the mainstream of the economics profession but the impact of Keynes in the 1930s and the rise of mathematics in the 1940s transformed the situation. The Austrians rejected the Keynesian revolution and they also object to much of the mathematical analysis that rapidly became standard in the profession after the war. They insisted that mathematical analysis can be misleading if it is not handled with care and insight into the economic issues as well as the mathematical formalism. Consequently the Austrians were widely perceived to be out of date and amidst the mushrooming postwar growth of the profession they became practically invisible until the movement staged a revival during the 1970s (Vaughn 1990, Boettke 2015). Another adverse influence from the 1930s was the rise of the philosophy of science known as logical positivism in Vienna and logical empiricism in the United States.

Mises did not live long enough to see the Austrian revival although he did more than anyone to keep the ideas alive. Prominent in the revival were Hayek, Ludwig Lachmann (1906-1990), Murray Rothbard (1926-1995) and Israel Kirzner (1930 – ) . The numbers have increased rapidly in recent years and it is hazardous to mention the names of contemporaries because any short list will give offence to many worthy scholars who are left out! For a concise and masterly account of the progress of the school from Menger to the present day see Boettke (2015).

In the aftermath of the Great Financial Crisis 2008 the Austrians emerged with a deal of credit for the insights they provided into the mechanism of the collapse (Thornton, 2009).

Several high profile investment advisers and financial commentators have employed the Austrian Business Cycle Theory in their interpretation of the crisis. They have been inspired to revisit this theory as a result of the manifest failure of mainstream macroeconomists to foresee or explain the subprime mortgage crisis and its subsequent metamorphosis into a pandemic financial meltdown…a number of economists and journalists associated with the modern Austrian school had warned of an emerging housing bubble during the Greenspan era when the conventional wisdom was that the Federal Reserve System had matters well in hand (Salerno, 2012).

The leading emphases of the school include the salience of dynamic competition and entrepreneurial innovation in the marketplace, the origin of social institutions as the unintended consequences of human action, the subjective theory of value, recognition of the time factor in social and economic processes, and the uncertainty of human knowledge. Those ideas are not unique to the Austrians although they been especially diligent in drawing out their implications. They have distinctive ideas regarding the “boom and bust” business cycle (as described by Salerno), capital theory and especially the methodology and philosophy of research.

The Austrian approach can be described as the “situational analysis of human action”, combining the language of von Mises, Talcott Parsons and Karl Popper. A central resource for Austrians is Human Action by von Mises, first published in 1949. A similar framework of analysis can be found in The Structure of Human Action published by Talcott Parsons in 1937 (summarized in Devereaux, 1964) and in The Open Society and Its Enemies and The Poverty of Historicism (Popper, 1945, 1957). The common features of the schemes of Parsons, von Mises and Popper are summarised in Champion (2010). The analysis starts with the human actor making plans and taking action to achieve his or her objectives. The actors take account of the various elements in the situation as they are subjectively perceived. These include the resources and capacities of the actors, the opportunities and constraints offered by the physical environment, the institutional framework of laws and regulations, and the social/cultural framework of written and unwritten mores, traditions, values and belief systems.

Some of the elements can change rapidly but many can only be changed slowly and the individual actor has very limited capacity to change the major elements of the situation. The outcome of actions are mediated (limited) by natural laws whether the actors are aware of them or not. The situation offers problems and opportunities for the actor/entrepreneur and Parsons in particular emphasised the element of individual choice and he thought of his approach as a voluntarist theory of human action (Devereaux, 1964).

Economists focus on the economic system, prices and production and the like but the framework is sufficiently expansive to take account of the impact of other factors and to coordinate the work in many areas of the social sciences and humanities. The framework drafted by the “gang of three” in the 1930s could have been used to maintain sociology and economics as an integrated discipline and to sponsor partnerships between economists and all students of social institutions – law, politics, literature, religion and cultural studies at large. There was a window of opportunity for these three leading figures in their respective fields to form a united front across the disciplines of sociology, economics and philosophy to promote the ideas that they shared and to debate the issues where they disagreed. This did not happen; there was no united front, no dialogue to resolve differences and the defective ideas that all three identified in the 1930s became embedded in the rapidly growing community of academics and researchers after the war. Consequently the kind of research programs which were implicit in the situational analysis of human action were blindsided by the dominance of logical empiricism, Keynesianism and mathematical formalism. This is not to decry the use of mathematics but the efficacy of numerical analysis has to be decided on a case by case basis by people who are understand both the mathematics and the economics.

The Achilles heel of the Austrian school in the eyes of the modern mainstream is the claim that the basic principles of economics can be established by logical analysis in advance of evidence (apriori) and they cannot and need not be empirically tested. Not surprisingly this position raised eyebrows after the rise of logical positivism/empiricism and Popper’s ideas in the philosophy of science created a demand for empirical verification or at least testing of scientific theories. Living in Vienna von Mises saw this coming because he was alert to the activities of the famous Vienna Circle of logical positivists and he wrote a long criticism of positivism in his master work (von Mises 1949).

The strong form of apriorism is apparent in his comparison of monetary theory with geometry where all of the theorems are implied in the axioms. “The quantity theory does not add to our knowledge anything that is which is not virtually contained in the concept of money” (von Mises, 1966, 38). “The starting point of praxeology is not a choice of axioms and a decision about methods of procedure, but reflection about the essence of action…” (ibid, 39). Rothbard took the same strong position. “The fundamental axiom that individual human beings act, that is, on the primordial fact that individuals engage in conscious action towards chosen goals [in contrast with reflex or knee-jerk behavior], furthermore, since praxeology begins with a true axiom, A, all the propositions that can be deduced from this axiom must also be true. For if A implies B, and A is true, then B must also be true.” (Rothbard, 1976). He asserted that these propositions are justified because they are deduced from the axiom of purposeful action. “Apart from the fact that these conclusions cannot be tested by historical or statistical means, there is no need to test them since their truth has already been established.” (ibid).

In view of those arguments Mark Blaug wrote “Mises made important contributions to monetary economics, business cycle theory and of course socialist economics, but his later writings on the foundations of economic science are so cranky and idiosyncratic that we can only wonder that they have been taken seriously by anyone” (Blaug, 1992, 81). He quoted Samuelson’s famous rejoinder to the Austrians. “Well, in connection with the exaggerated claims that used to be made in economics for the power of deduction and a priori reasoning…I tremble for the reputation of my subject.”

Popper’s approach offers a corrective to the methodological rhetoric of the Austrians and simultaneously a rejoinder to Blaug and Samuelson. For Popper the test of evidence applies to the explanations and predictions generated by a scientific research program. The program itself is a system of ideas including philosophical and metaphysical framework assumptions and methodological procedures and principles that generate explanations and predictions. Not all of these parts are amenable to empirical testing and this applies to the natural sciences as much as the human sciences.

Hence it is not a departure from standard scientific practice to make use of untestable propositions. The critical rationalist does not insist that all the premises and presuppositions in scientific discourse should be verified, merely that they stand up to criticism as well or better than other options (Hands, 2001, 301). Recall the four forms of criticism: empirical tests are a particular kind of criticism but they are not appropriate for all assumption, especially those of methodology and the philosophical framework assumptions of the program. They prove themselves at one step removed – by the power of the explanatory theories and the research programs that they generate.

The basic principles of Austrian economics such as the axiom of action can be regarded as working assumptions in the form of indispensable methodological procedures and assumptions which are required in all sciences. The axiom is often described as “self-evidently true” but it is better to describe as a methodological assumption that contributes to explanatory theories which are tested by their capacity to account for the phenomena under investigation, such as money, the Great Depression, unemployment, inflation and trade cycles including the Great Financial Crisis.

Popper made two other relevant contributions. One is the framework of Situational Analysis and the Rationality Principle which is functionally equivalent to the Austrian approach using the “axiom of human action” (Popper 1994). The second is to introduce students to the critical/creative problem-solving approach of the scientist who operates like an entrepreneur in a world of intellectual problems and opportunities, generating conjectures which are tested and criticised in the laboratory and the marketplace of ideas. Students who bring this approach to a course on Austrian economics will have less to unlearn than students who have encountered the philosophy of science in the more usual mode of collecting data and attempting to confirm theories. Harper explicitly drew on Popper’s evolutionary epistemology in his work on entrepreneurial activities (Harper, 1996 and 2003).

THE QUALITY OF SCIENCE

There is a rapidly-growing literature on problems in the quality of published research. The editor in chief of Lancet wrote “The case against science is straightforward: much of the scientific literature, perhaps half, may be simply untrue…Science has taken a turn towards darkness” with reference to small sample sizes, invalid analyses, conflicts of interest and obsession with fashionable trends (Horton, 2015). There is concern about the increasing incidence of retractions and the higher rate of retractions in high impact journals (Fang et al., 2011) and the dangerous liaison of science and politics (Butos and McQuade, 2006). Less than 12% of articles in 2004 in The Journal of Economic Theory passed three tests – stating a theory, explaining why it mattered and testing it (Klein and Romero, 2007). There are problems of replication of results and politicization in some fields. Another concern is the declining publication of negative results (Fanelli, 2012).

Popper provided two ways to approach this complex of issues. One is the social or institutional analysis of scientific and industrial progress which he proposed in The Poverty of Historicism. The other is the approach of critical rationalism and multi-faceted criticism to offset tendencies to confirmation bias that are built into the courses in the philosophy of science which focus on confirmation and the quest for inductive probabilities.

In The Poverty of Historicism Popper confronted Comte and Mill who adopted a psychological approach and regarded progress as inevitable due to the progressive tendencies in the human mind. Popper noted that there are other tendencies in the human mind such as forgetfulness, laziness and dogmatism. Instead of the psychological approach he urged a search for the conditions of progress using a situational approach to imagine ways that progress could be stopped. This is a very counterintuitive approach and it is presented in a few highly compressed paragraphs, summarized below.

Popper did not pursue these early thoughts in depth and others made important contributions. The art historian Ernst Gombrich applied Popper’s ideas to a wide range of issues including the drift of linguistic usage, architecture, the popularity of modern art and trends in music and fashion including hemlines (Gombrich 1974). Ian Jarvie published a major work to explain what he called Popper’s “social turn” to institutional analysis almost a decade after Popper died (Jarvie, 2001). He previously applied the situational approach in sociology (Jarvie, 1972). Roger James applied critical rationalism to some episodes of central planning in Britain (James, 1980) and Tyrell Burgess used Popper’s approach in education planning and administration in Britain (Burgess, 1985). Paul Knepper explained the work that has been done on “situational crime prevention” inspired by both Popper and the Austrian economists (Knepper 2007).

As for stopping progress in science, Popper proposed that this might be achieved in various ways.

By closing down or controlling laboratories for research, by suppressing or controlling scientific periodicals and other means of discussion, by suppressing scientific congresses and conferences, by suppressing Universities and other schools, by suppressing books, the printing press, writing, and, in the end, speaking. All these things which indeed might be suppressed (or controlled) are social institutions…Scientific method itself has social aspects. Science, and more especially scientific progress, are the results not of isolated efforts but of the free competition of thought. For science needs ever more competition between hypotheses and ever more rigorous tests. And the competing hypotheses need personal representation, as it were: they need advocates, they need a jury, and even a public. This personal representation must be institutionally organized if we wish to ensure that it works. (Popper, 1961, 154-5)

Popper also used the social approach to suggest how science can achieve a degree of objectivity through cooperative criticism of the kind practiced by Watson and Crick. When he wrote about this in the 1930s and 1940s the sociology of knowledge was becoming popular under the influence of Marxists and others such as Karl Mannheim.  This approach aimed to explain our personal beliefs as a reflection of the social and political climate of ideas around us.

Popper did not challenge the importance of intellectual influences. However he turned the sociology of knowledge on its head to argue that it is a mistake focus on the formation of subjective beliefs because this does not engage with the proper object of inquiry, namely knowledge as a public or inter-subjective social product. In other words we are students and critics of spoken and written propositions and arguments, not subjective beliefs or states of mind. Thus it follows that the objectivity of science, such as it is, does not arise from the a lack of prejudices among scientists or their unique impartiality. Instead it depends on a process of more or less free criticism in the scientific community.

It may be said that what we call ‘scientific objectivity’ is not a product of the individual scientist’s impartiality, but a product of the social or public character of scientific method; and the individual scientist’s impartiality is, so far as it exists, not the source but rather the result of this socially or institutionally organized objectivity of science. (Popper, 1966, 217).

It is important to note that criticism may be more or less free and this raises some issues about free speech and the factors which limit criticism. Following Popper’s line of thought to promote scientific objectivity it seems that we need such things as diversity of ideas (points of view and theoretical pluralism), clear formulation of the problems that the theories are supposed to solve, and access to journals, seminars and conferences to facilitate critical discussion. Some of these requirements have to be provided by individual scientists, especially new ideas and imaginative criticism while others are social and institutional.

Turning to the contribution of the philosophy of science to the quality of scientific work and especially the declining publication of negative results, it may be that the function of criticism is underplayed in teaching the philosophy of science compared with the effort devoted to confirmation theory and the technical aspects of assigning inductive probabilities to theories. In addition much of this work proceeds in isolation from “live” problems in science. Mulligan and associates deplored this tendency in philosophy at large (Mulligan, Simons and Smith, 2006)  and a recent example is a contribution to The Oxford Handbook of Philosophy of Science (Sprenger, 2016).

Sprenger posed two problems of induction; first whether inferences beyond the evidence are justified and second, assuming a positive answer to the first, to assess the various methods used to justify inferences about the future performance of general scientific theories. Regarding the first problem he briefly noted Popper’s critical approach and work by Deborah Mayo on testing in some specific scientific situations. That could have led to a survey of work by philosophers in relation to substantive scientific problems, such as Alan Chalmers on the contribution of philosophy to the development of atomic theory in chemistry (Chalmers, 2009). This could arouse the interest of working scientists. However almost all of the paper addressed the latest developments in probability theory without seriously engaging with any contemporary scientific issues. There is an impression of a mighty engine of philosophical thought which is not transmitting any power to the wheels of science.

AN INTRODUCTION TO PHILOSOPHY AND CRITICAL THINKING

Critical thinking is an important part of philosophy and this section suggests how a short course on critical thinking could be part of a Philosophy major or indeed a part of any liberal education curriculum. The idea is to introduce the four types of criticism suggested by Bartley (above); the test of experience; the test of comparison with other theories; the check on the problem; and the test of logical consistency. This could be pursued at school, it could be used for an introduction to university courses in philosophy, it could be a core subject for all tertiary students. The students would explore the implications and applications of the four methods of criticism applied to some theories or beliefs which interest the class. The topics should have some scientific or practical relevance but it would be unhelpful to select the most pressing issues of the day if these generate too much polarization of opinion to permit a civil discussion.

Explaining the test of evidence and experience could lead into the philosophy of science, the logic of experimental design and hypothesis-testing, to a study of rules of evidence in law, to the use of diagnostic tests by doctors, motor mechanics or plumbers, and to the use of clues by detectives and archaeologists. The test of comparison with other theories would raise questions about the weight and authority to be assigned to assumptions imported into arguments from other domains. For example the psychological theories assumed by literary critics, the physical theories assumed by geologists, the sociological theories assumed by engineers, the economic theories assumed by politicians. This part of the course should open student’s eyes to the interdependence of the disciplines and the artificial nature of boundaries between subjects. At the same time students may learn how to use readily available resources, including other students and staff to pursue problems from one discipline to another (for example by walking from the Philosophy Department to Physics or Life Sciences).

The check on the problem can lead in particularly interesting directions. This part of the course could indicate how a revised formulation of a problem may be decisive, how background theories can unconsciously direct how problems are identified and formulated, how fashions, fads and funding can influence the direction of research. It would lead to a study of the history of ideas, showing that problems have histories, that philosophical problems usually have their roots elsewhere, in science, or religion or in social and moral dilemmas, that powerful themes can leak from one discipline to another and preoccupations often run in parallel in more than one field.

The section on logic would call for study of both the formal and informal methods of argument. Formal logic concerns rules of inference and the way that logical steps can be used to draw out the consequences of an argument or of a scientific theory, perhaps for testing or for technological application. Informal logic encompasses the tricks of debate that may be used to cover up logical and factual defects in a position. Discourse by politicians, creation scientists and advertisers would furnish material for critical study.

If this approach is used for philosophy students it could be followed by exploratory reading of the Great Philosophers, though preferably not until the students have a firm sense of their own interests and problems. In this mood they might be less deferential to the greats, more critical and at the same time more willing to learn. This would contrast with the common situation where the young student is confronted with the soaring abstractions and profound arguments produced by the titans of the past. The novice is likely to be overwhelmed (who am I to criticise the great?) or else clings to a critique provided by the teacher. The result is likely to be either a student who is inducted into a system of thought or a graduate who is highly skilled in certain methods and techniques which are not necessarily connected to issues outside philosophy.

It is important to note that this approach is very different from most of the literature on critical thinking surveyed by Miller (2005). He discovered that there was a great deal of effort dedicated to critical thinking in recent times, citing an annotated bibliography of material on critical thinking with 903 books and papers published between 1980 and 1991 (Cassell and Congleton, 1993). Scanning the literature he found that practically all of it defined the purpose of arguments in terms of justification of beliefs and persuading other people to come to the same point of view. He quoted a typical example from the preface of a book on the philosophy of argument. “Argument is a social practice, arguable part of the core of any culture…the finding of reasons to justify beliefs and the response to disagreement by rational persuasion.” (Blair, 1999).

The purpose of the course proposed here is very different from justification and persuasion because it is focussed on the criticism of arguments and it can be explained in the language of used by Stuart Firestein in his book Ignorance: How it Drives Science (Firestein, 2012). More precisely, discovering ignorance (unsolved problems) drives science. Criticism a la Watson and Crick uncovers ignorance especially false assumptions and that drives the quest for better assumptions and new ideas. According to Firestein the great Italian physicist Enrico Fermi told his students that an experiment that successfully proves a hypothesis is a measurement and one that doesn’t is a discovery – an uncovering of new ignorance (Firestein, 2012, 57). Firestein’s book could be the text for the course.

CONCLUSION

Popper has a low profile these days judging from the negligible references to his work in The Oxford Handbook of Contemporary Philosophy (Jackson and Smith, 2005) and The Oxford Handbook of Philosophy of Science (Humphries, 2016). He enjoyed a high profile during the “philosophy of science” wars in the 1960s and 1970s but he became classified as a transitional figure between the logical empiricists and the new waves generated by Kuhn, Lakatos and Feyerabend. It seems that he went out of fashion before the full implications of his critical rationalism and evolutionary epistemology were explored (Champion, 2011). In the philosophy and methodology of economics that view is strongly supported by Hands (2001). This paper argues that there is still plenty of mileage in Popper’s work including a potentially fruitful partnership with Austrian economics, a contribution to improve the quality of science and ideas to promote critical and imaginative thinking.

REFERENCES

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Blaug, M. (1992). The Methodology of Economics: Or How Economists Explain. Second edition. Cambridge: Cambridge University Press.

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Cassell, J. F. & Congleton, R. J. (1993). Critical Thinking: An Annotated Bibliography. London: The Scarecrow Press.

Chalmers, A. (2009). The Scientist’s Atom and the Philosopher’s Stone: How Science Succeeded and Philosophy Failed to Gain Knowledge of Atoms. Springer.

Champion, R. (2010).   The Common Ground of Parsons, Mises and Popper in the 1930s: The Action Frame of Reference, Praxeology and Situational Analysis. Retrieved from http://www.the-rathouse.com/EvenMoreAustrianProgram/Convergence.html

Champion, R. (2011). In Defence of Fallible Apriorism and The Aristotelian Program for Economics. Nuova civiltà delle macchine, Vol. 1-2. 69-88.

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Crick, F. (1988). What Mad Pursuit: A Personal View of Scientific Discovery. New York: Basic Books.

Deveraux, E. C. (1961). Parsons’ Social Theory. In M. Black (Ed) The Social Theories of Talcott Parsons. Englewood Cliffs, NJ: Prentice-Hall. 1-63.

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Firestein, S. (2012). Ignorance: How it Drives Science. New York: Oxford University Press.

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Hands, D. W. 2001. Reflection Without Rules: Economic Methodology and Contemporary Science Theory. New York: Cambridge University Press.

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Goodman’s new problem of induction, grue emeralds

This is an essay drafted in response to a question in a Philosophy of  Science Course at the local university. The reading in the list is the  relevant section of Nelson Goodman’s book Fact, Fiction and Forecast in the 1950s.  W V O Quine wrote that it was one of the books published in the year that you really had to read!

The questionGrue and bleen. What are they, why are they a problem, and what do you think we should do about them?

Goodman discovered a “new problem of induction” as he explored a problem of projection of predicates that emerged after the dissolution of the original problem of induction.

The argument of this essay proceeds by placing Goodman’s new problem of induction in the larger context of confirmation theory. The suggestion is that the problem of confirmation may be insoluble and some other approach might be attempted – a program of epistemological pluralism rather like Cartwright’s causal pluralism (another essay topic is Cartwright on causal pluralism).

The green grue problem occurs in Nelson Goodman’s book Fact Fiction and Forecast (1955) under the heading The New Problem of Induction. He started by describing how the original problem of induction is dissolved as follows: In the same way that deductive inferences can be justified by their conformity to general rules, so inductive inferences can be justified by conformity to general rules and “predictions are justified if they conform to valid canons of induction ; and the canons are valid if they accurately codify accepted inductive practices” [64].

He then found that some problems arise in regard to certain types of prediction or projection as exemplified by his invention of grue emeralds that are green up to some future time t and grue afterwards. My simple-minded thought was to wait until time t and see what happens.

However he finds that his use of these unfamiliar predicates demonstrates a deeper problem. He is not content to put this anomalous situation aside merely for the simpleminded or commonsense reason that we are unlikely to encounter the problem in the normal course of events.

“If our definition works for such hypotheses as are normally employed, isn’t that all we need? In a sense, yes; but only in the sense that we need no definition, no theory of induction, and no philosophy of knowledge at all. We get along well enough without them in daily life and in scientific research. But if we seek a theory at all, we cannot excuse gross anomalies resulting from a proposed theory by pleading that we can avoid them in practice” [80] my italics

He concludes that this displays “the symptoms of a widespread and destructive malady” namely the unsatisfactory state of the theory of confirmation [80-81].

The original problem of induction was a manifestation of the more general problem of confirmation or justification, it arose in the empirical branch of the epistemology concerning the confirmation of general statements based on particulars. The problem persisted through various iterations of probability theory with Bayesian subjectivism being favoured approach at present.

The theory of inductive confirmation is one of the forms justification of beliefs that has been the major concern of epistemology for ever. The other major form of justification is rationalism or intellectualism (as described in a previous essay on empiricism and rationalism).

Karl Popper challenged the inductive mode of confirmation in Logik Der Forschung 1935 to show that scientists could get along with deductive testing and a theory of conjectural knowledge instead of a theory of justified belief. Popper’s theory is widely rejected and seldom mentioned in books classified as epistemology on the Fisher shelves. In those circles it is not regarded as a theory of knowledge at all.

William W Bartley took up Popper’s response and wrote a great deal about justification and justificationism to take the argument with the inductivists to a deeper level but it never caught on outside the Popper school. The gravitational attraction of the imperative to seek justification has been too strong.

Popper’s concession was to talk about the justification of a critical preference for one theory rather than another on the basis of pluralistic criteria – explanatory power, internal consistency, consistency with other well-tested theories, with the presupposition of a metaphysical research program. This makes a connection with Nancy Cartwright’s theoretical pluralism.

The last part of Goodman’s discussion turns to the problem of projecting from any set of cases to others, like projecting that green emeralds will be green in future. He makes the point against Hume that predictions based on some regularities are valid while some others are not [81]. On the specific matter of green and grue, he notes that “To say that valid predictions are those based on past regularities, without being able to say which regularities, is thus quite pointless.” [81]

Taking up this issue about which regularities are indeed regular, consider the colour of emeralds. They have the crystal structure of the mineral beryl (Be3Al2(SiO3)6) colored green by trace amounts of chromium and sometimes vanadium [Wiki]. This is an intrinsic property of emeralds, an essential property rather than an incidental like a coat of green paint. So if the emeralds changes from green to blue at some stage we have an interesting scientific question to ask about the process that occurred to produce the effect. In the absence of such a process the green colour of emeralds would appear to be a paradigm case of the regularity that permits valid predictions.

We may be excited to find the change in colour if it happens  because the violation of expectations is one of the great triggers for scientific advances. Hence the importance of Popper’s critical approach based on efforts to falsify hypotheses. It is not that we want falsified hypotheses, indeed he suggested we need some hypotheses to stand up to indicate that we are making progress. Nor does this mean that a falsified hypothesis or theory is instantly cast into outer darkness, there may be no better available. Besides there are two other considerations (1) the effect has to be repeatable if it really matters (see the claim to cold fusion) and (2) pace Cartwright some competing theories may perform better than others on some criteria or in some domains of application but not in all.

To conclude, there is a program of critical preference available as well as the program of confirmation/justification. This derives from Popper’s critical approach and conjectural knowledge, extended by Bartley’s work on the logic of justification in relation to various problems of rationality, including the rationality of science. Among the consequences of this program are the dissolution of inductive confirmation pace Hume and Goodman, also the problem of Hempel’s ravens and the Gettier problem.

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The Austrian Keys

By Leo Dunbar, Age Monthly Review, Melbourne 1985.

The economic affairs of many countries and the dismal science itself are in a very sorry state. Shortsighted protectionist policies in Western countries aided by ideologically crazed dictators at home have destroyed the economies of the Third World resulting in famine and civil war. The collectivist utopia has yet to emerge from the ruin of human rights in the Marxist states. The Keynesian revolution has delivered the twin spectres of inflation and unemployment. People search for solutions where they want to find them instead of looking where they are, like drunks hunting for their keys under the street-light, not in the lane where they fell to ground.

We rightly suspect simple solutions for complex problems but many of our economic and related social ills do indeed have a single basic cause, manifest in a thousand guises ranging from the Egg Marketing Boards to the Australian wage fixing Commission and the tariffs which raise the price of our clothing and shoes by half.   The root of economic evil is the disruption of open markets by constraints on trade, state-protected monopolies, cartels, and counter-productive regulations and charges. The keys which ‘fell in the lane’ are the ideas of the Austrian school of liberal economists, founded by Carl Menger (1840-1921), Friedrich von Wieser (1851-1926) and Eugen von Bohm-Bawerk (1851-1914). Other major figures are Ludwig von Mises (1880-1973), Friedrich A. Hayek (the 1974 Nobel Laureate), Ludwig Lachmann, Israel Kirzner and Murray Rothbard.

Their ideas support the policies of open markets and free trade, now labelled ‘economic rationality’ or ‘dryness’ and in the current political climate this may be their main interest.   But their impact ranges far beyond economic policy to embrace all aspects of methodology in the human sciences.   The Austrians addressed the dilemma of human knowledge and action under conditions of uncertainty, long before the official collapse of positivism precipitated the modern crisis of confidence in science and reason. Their framework for analysis of human action has turned up in the work of later theorists including Max Weber, Talcott Parsons and Karl Popper, without recognition of Menger’s prior achievement.

The ideas of the Austrian school challenge the interventionist role of the state whether by socialist central planning or by Keynesian fine-tuning. They challenge the dominant paradigms in mainstream   economics,   both   the equilibrium   analysis   of neoclassical micro-economics and the numerology of neo-Keynesian macro-modeling. A revival of Austrian modes of thought would precipitate a major paradigm shift in theory and in economic policy as well. So far this danger has been avoided by the simple expedient of ignoring them.   Particularly amusing examples of this intellectual astigmatism are afforded by Talcott Parsons and his younger   colleague Thomas R. Merton. Parsons established himself as the leading American social theorist of his generation with a gigantic tome called The Structure of Social Action (1937). This drew from the works of Durkehim, Pareto, Marshall and Weber to re-invent the Austrian wheel of methodological individualism, articulated by Menger more than half a century earlier. Parsons read German and studied in Germany so he could not use the usual Anglo-Saxon excuse that Menger’s works were not accessible to him. Merton specialised in the history of ideas and especially in simultaneous or parallel discoveries but he missed this one, in his own field. Some popular writers on economics such as Lester Thurow (Dangerous Currents), John K. Galbraith   and the late Joan Robinson apparently   have no knowledge or understanding of the Austrians.

Marxists and other supporters of pervasive state intervention such as Galbraith have done well to ignore the work of Menger, Mises and Hayek because they refuted the intellectual core of Marxism, leaving an empty ideological husk.   Marxist principles cannot survive the confrontation with historical evidence and Austrian analysis.

The decline of the Austrians

Four reasons account for the eclipse of the Austrian tradition. First, economics fell under the spell of mathematical analysis. Second, the subjectivism and methodological individualism of the school were misrepresented as ontological individualism, as a claim that only atomistic individuals existed, independent of social contexts and historical influences. Third, the Austrians taught that the undesirable conseqences of most forms of state intervention in markets far outweigh the intended effects and this put them at odds with all progressive social movements up to the present time. It has also enabled opponents to falsely depict market liberalism as a form of   conservativism. Fourth, after 1914 the school did not exist in any formal sense because Menger, Weiser and Bohm Bawerk had no instinct for academic empire building.

Philip Mirowski, writing in ‘Physics and the marginalist revolution’ Cambridge Journal of Economics (1984) described how Jevons, Walras, Edgeworth and Pareto placed mathematics at the heart of the new economics and systematically lifted themes and concepts from Newtonian mechanics.

‘The hard core of neoclassical economic theory is the adoption of mid-nineteenth century physics as a rigid paradigm, a hard core it has preserved and nourished throughout the twentieth century’.

This hard core produced a linkage of neoclassical economics with mathematical formalism; consequently much work in econometrics and model building has little practical application and belongs to pure mathematics.   This line of thought assumes perfect competition, complete knowledge and unfailing rationality. The Austrians harboured none of these assumptions but the Newtonian hard core made their work appear primitive and unscientific in comparison with the mathematical formalism in the mainstream of the subject.

Menger participated with Walras and Jevons in the marginalist revolution but his methodological interests ran deeper. He rejected   the Newtonian paradigm because he believed   that sociology and economics could not use the methods of the natural sciences. In his search for a true science of economics he wrestled with Kant’s problem of the demarcation of science and his polemic against the crude empiricism of the historical school led him to Hume’s problem of induction. His obsession with these problems (which are still unresolved) limited his output and in the last three decades of his life he wrote virtually nothing.

One of the most distinctive features of the Austrians is their subjectivism, especially the subjective theory of value   which distinguished Carl Menger from Walras and Jevons. His Grundsatz der Volkswirtschaftslehre (Foundations of Economics, 1871) placed the individual at the centre of the social scene; not the hedonistic social atom of classical theory, rather the individual with all his or her diverse wishes, wants, sentiments and attachments.   This takes account of   historical and social factors, and also of the knowledge and values internalised by individuals.   Knowledge is always imperfect and so a systematic study of human affairs must take account of the unexpected and unintended outcomes of actions and plans. The flux of events dictates that a realistic analysis must address the dynamic aspects of social and economic processes.   Ludwig von Mises   wrote in Notes and Reflections

“What distinguishes the Austrian School and will lend it immortal fame is precisely the fact that it created a theory of economic action and not of economic equilibrium or   non-action. The Austrian School endeavours to explain prices that are really paid in the market, and not just prices that would be paid under certain, never   realizable   conditions.   It   rejects   the mathematical method, not because of ignorance of mathematics or aversion to mathematical exactness, but because it does not emphasise a detailed description of a state of hypothetical static equilibrium’.”

Myths and markets

Austrian studies of real markets and the effects of technological innovation refute many myths. One of these is the view that capitalism is a system which generates misery and injustice, a notion which persists either as an article of religious faith or as an assumption picked up from some authority such as Bertrand Russell and never re-examined.

‘The industrial revolution caused unspeakable misery both in England and America. I do not think that any student of economic history can doubt that the average happiness in England in the early nineteenth century was lower than it had been a hundred years earlier; and this was due almost entirely to scientific technique’ (Bertrand Russell in   The Impact of Science on Society).

The best evidence against this picture is in the voluminous files collated for the Royal Commissions and Committees of Inquiry conducted from the eighteenth century into the 1850s. The workers did not live in pastoral bliss before the industrial revolution; instead they eked out miserable and precarious existences from one famine or plague to the next. The revolution improved their wages, their health and their life expectancy. Those who suffered the lowest wages and the cruelest working conditions   were those least affected by the new modes of production, especially domestic servants and farm labourers. Much of this evidence is summarised in Capitalism and the Historians edited by Hayek, especially in Hutt’s paper on the Factory System. To balance Charles Dickens’ bleak picture of factory work consider the situation of Charlotte Bronte, constrained by her social status form ‘menial work’ in the mills, forced to the servitude of governess duty, frantic with discontent at her lot, and craving for the shorter hours and better pay of the “repressed and exploited” millhands. Actually the Dickens view does not do justice to the reality.

Mises and Hayek demolished the idea that central planning for the whole economy would be more efficient than the ‘anarchy’ of the open marketplace. The major methodological problem of socialism or a central command economy is the calculation of all the inputs and outputs required in each and every sector of the economy and every single production unit. Mises and Hayek concluded that this problem is insoluble, so there is no way that such a system could function.   This argument is entirely technical (value free) and does not depend on objections to the regimentation that would be required in such a system.   It is widely believed that the calculation problem has either been solved (in principle) or may be solved with aid of modern computers but this ignores the real-world fact that both the Soviet Union and China are moving away from their attempts at central ‘command’ planning to allow more free play for market forces.   The Austrians are not Utopians and they never claimed that the real world contains perfect competition or perfectly efficient resource-allocation; the command economy is criticised not merely for being less efficient (as it clearly is when steps are taken in that direction), but for being impossible in principle.

Austrian analysis in Australia

An ‘Austrian’ in Australia demonstrates the strength of the Austrian analysis of our economic predicament. In The Destruction and Creation of Jobs (Australian Institute for Public Policy, 1985)   Wolfgang Kasper explored the destructive effect   on employment of the “stop-go” policymaking which has prevailed in Australia, whereby successive governments deliver various brands of snake oil to the creaking wheels of industry.   The selection of policy instruments has been too narrow and concentrated in the area of macro-manipulation, whether of the Keynesian ‘print more money’ kind or the monetarist ‘print less money’ variety.   This echoes the comment by Brittan (Encounter, April ’85) that both Keynes and the monetarists tried to get around the real problem which is malfunction of the labour market due to state-protected monopolies and other rigidities in the centralised wage-fixing system.

The ‘Austrian’ prescription for economic recovery has three major parts;   first, open markets without import restrictions or constraints on entry to local markets; second, a variant on the open market theme,   namely de-regulation of the rigid and centralised wage-fixing system; third, reduced public sector spending and privatisation. These strategies are linked because the problems they address are interlocked; Kasper shows how trade barriers in the form of tariffs and quotas generate leverage for organised labour to form monopolies in the labour market which in turn creates problems for job creation and increased efficiency.   Unfortunately for the Labor ‘dries’ the labour monopolies are apparently untouchable (by Labor). Equally unfortunately for the Liberal dries the tariffs and quotas are sacrosanct for the ‘wets’, the ‘pragmatists’ and their backers in heavily protected industries, especially textiles, clothing and footwear.

  1. Free trade in goods

The case for free trade requires a grasp on the principle of opportunity costs, a concept developed by Menger’s pupil von Weisser. This can be explained by a homely example. Some people will deliberate for weeks over the purchase of an item such as a lawn mower, poring over Choice, visiting discount houses and garage sales to obtain the best value in town. They may save $20 or $25 but the time might have been used to write an immortal sonnet or an article for the Age Monthly Review. In this instance, the opportunity to earn undying fame or hundreds of dollars was foregone in order to buy a slightly cheaper lawnmower; a large but invisible opportunity cost was incurred in saving a visible $25.   This principle can be applied to the tariff barriers against free trade.   The decline of an industry and the loss of jobs is clearly visible as a “social cost” or at least as a social problem for the workers and their families. Hence the appeal of protection from foreign competition which has been the basis of opposition to free trade for centuries.   But protection has a cost due to the lost opportunity   to generate employment and outputs in some more productive enterprise. For example we pay to protect jobs in BHP in three ways: First our steel is more expensive than it should be, adding to the cost of almost everything we buy from cars to tins of cat food. Second, we pay by the diversion of investment towards BHP and away from unprotected   firms which would create more jobs and more wealth. Third, the protected market for steel encourages unions in the metal trades to make extravagant wage claims because the industry can automatically pass on the wage costs in the form of higher prices. This contributes to inflation as do the wage flow-ons in other industries (courtesy of the Arbitration Commission).

The main feature to emerge from this analysis is that protection works against the creation of productive jobs in the medium to long term even if it saves some jobs in the immediate present. In addition it puts up the price of goods which of course impacts heavily on the poor, especially when the items affected are essentials such as clothing and shoes. Tariffs and other forms of interference in free markets have immense welfare implications (by raising prices) and the welfare lobby should take up cudgels in defence of Senator Button against the rag trade which is crying out about job losses if their protective tariffs are phased out. When the function of open markets in keeping prices down is better understood there will be fewer attempts to control prices by expensive and useless embryonic forms of the police state such as Price Justification Tribunals.

Free trade provides an unexpected and important spin-off that demands special notice in this International Year of Peace. Mises studied the restraints on trade imposed by Nazi Germany and he emphasised the importance of free trade as an instrument to promote peace and goodwill between countries. Collapsed economies breed social upheaval and the rise of dictators, who unite   and control   their country by fabricating or creating external threats.   The world is certainly not short of   collapsed economies, mostly due to the ‘beggar my neighbour’ policies of protection that most Western countries pursued after World War II.   An obvious example is the agricultural policies of the EEC and the US which have destroyed the world markets for many farm products and so beggared much of the Third World, not to mention Australian sugar farmers. Seen from this perspective the fund-raising efforts of Bob Geldorf and his helpers miss the point of the problem; they are a ‘band-aid’ effort in the worst sense of the term. Efforts should be redirected to bring pressure to bear upon the signatories of the General Agreement on Tariffs and Trade (GATT) to open up the markets of the world to free trade. Critics of this argument might point to the colonial wars over trade but these were fought to keep other trading countries out or to impose trade upon unwilling partners (as in the Chinese opium wars). These wars were fought for protection, not for free trade so they indicate the danger of the protectionist mentality.

Part of the socialist mythology is the idea that   unrestrained competition leads to monopolies and to exploitation. This ignores the fact that virtually all monopolies that exist at present are either state-owned (Australia Post, the railways) or protected by state regulations and controls (BHP and large sections of manufacturing). The entrepreneurial element is rarely absent from human behaviour and it is interesting to note the forms that this takes in protected industries. Management looks for ways to increase protection or state assistance (instead of production) and employees seek ways to avoid productive work or to create substitutes for it. Similar strategies are employed by workers in that most protected of all industries, the public service, where the entrepreneurial function at upper levels is largely devoted to empire building. Socialist rhetoric in favour of state intervention and control of the economy has been so successful that conservatives have taken up the cause. This highlights one of the features which socialists and conservatives share, namely the belief that any problem demands immediate state interference to   put things in order. Compare tariff protection   and censorship.

  1. The labour market

The mania for central control is epitomised by the centralised wage fixing system. This has come under fire from economic rationalists but critics are still a very small minority. The existing system is widely regarded as a triumph of reformism and a dyke holding back the mutual rancour of capital and labour such that an ‘unholy free for all’ will erupt if the system is relaxed. Against this view, the mischievous effects of the conciliation and arbitration system in slowing down economic growth and generating unemployment are documented by Paddy Mcguinness in The Case Against the Arbitration Commission (Centre for Independent Studies, 1984) and in Wages Wasteland, edited by Hyde and Nurick, (Hale and Ironmonger, 1985).

The Labor Party and the unions castigate John Howard and the de-regulators for lack of a wages policy, insisting that de-regulation will result in higher wages, forced by the threat of industrial mayhem in the absence of central control. This expectation is based on past experience when strikes succeeded because protected industries could capitulate to wage demands and simply put up their prices under threat of strikes or disruption by ‘go slows’ and ‘work to rules’ campaigns. The result is our current slide towards banana monarchy status. But things work differently in open markets because strikes will simply put the firm out of business and throw workers on the dole. The open market turns out to be a device to eliminate industrial conflict, just provided that the rank and file of union members are allowed a secret ballot on strike decisions. After all, they and not the union leaders are the ones who will lose their jobs if they put the company out of business.

De-regulators are likely to run foul of people who believe in ‘wage   justice’ which usually means payment regardless of productivity. The kind of wage justice which we really need means rewards for effort and skill to individual workers or work teams. This may be difficult to organise for some kinds of work but the principle is sound. It could produce large differences in pay among people ostensibly doing the same work but this will be partly a matter of choice (some people will choose to work less or less effectively) and everyone will benefit provided that increased productivity flows on in lower prices. Again the benefits depend on open markets because if competition is lacking then prices can be inflated and the industry can cream off super-profits.

  1. Reduced public expenditure and privatisation

The third   strand of economic rationality is reduced public spending which will be fairly painless as the other policies take effect, though people with vested interests in the status quo will generate a storm of protest. Significant job creation will reduce a major part of the welfare bill.   The elimination of tariffs and other types of interference in markets will dispense with armies of   clerks who tend the   luxurious jungle of regulations.   Privatisation will be on the agenda and here the major need is to dispel the threats put about by entrenched interests who play on the widespread ignorance of the positive function of markets. “Selling the family silver” is one of the derogatory images used to discredit privatisation. Even people such   as Katherine West have castigated the Liberals   for frightening the voters with abstract and jargonistic words such as privatisation and de-regulation. She of all people, as an academic commentator free of the daily grind of Party affairs and Parliamentary duties, is in a position to explain the benefits of the policies that we need for economic recovery so they will cease to be electoral liabilities.

Privatisation is more aptly called ‘participation’ and it is a radical revival of the socialist notion of public ownership of the means of production, instead of ownership by small groups of robber barons.   Socialists want the state to take over the means of production and these are to be held in trust for the   public but this has turned out to be a failure. The obvious alternative is to cut out the middleman (the state) and let everyone have a personal interest in the currently state-owned enterprises (plus wider ownership of shares in private enterprise). Samuel Brittan and   others have advocated   the allocation of   shares   in nationalised industries to everyone, on a pro rata basis and many other techniques can be used to give workers a genuine stake in their enterprise and its efficiency.   Privatisation and participation are ideas with a great future because among the failures of the Thatcher era many aspects of privatisation have emerged as clear winners on many criteria including efficiency and effectiveness, worker morale, innovation and flexibility in responding to the needs of clients.

Four sets of problem people

The ideas of market liberalism are not yet widely understood because four groups of people confuse the issues. These are the ‘do nothing free marketeers’, the conservatives, the ‘dries’ in the Labor Party and the socialist intellectuals. Malcom Fraser and Joh Bjelke Petersen are examples of ‘do nothings’ who mouth the slogans of free enterprise but in fact do not open up markets or dismantle controls and regulations.   The conservatives do not even pretend to support free markets though they claim to oppose socialism, often while they support de facto socialist policies (i.e. the old rural socialists of the Country Party). The Labor dries share many aims of their Liberal counterparts but they are obliged to be especially severe on the ‘New Right’ to deflect criticism from the Left of their own party. And the intellectuals of the Left are so blinkered by their ideological assumptions that they have not started to grasp what Hayek and the market liberals are talking about.

The linkage of market liberalism with ‘Conservativism’ and ‘The Right’ is almost universally assumed and this has provided tremendous leverage for the Left in their polemics against economic rationality. For this reason Hayek raised many eyebrows with his insistence that he is not a conservative at all. His postscript to The Constitution of Liberty titled ‘Why I am not a conservative’ suggested that we should break out of the one-dimensional mode of thought which places the Left, Centre, and Right in a line with the socialist radicals at one end, the conservatives at the other and   classical (non- socialist) liberals in the middle. It is more appropriate to arrange the three groups in a triangle,   each pulling in a different direction. But the conservatives do not really pull at all, they simply slow down the rate of change. They follow social trends without having any positive programme of their own and the trends in recent decades has been towards socialism and interventionism. So the conservatives have become a major impediment to the kind of changes that liberals wish to pursue   to protect civil liberties and to promote economic rationality for the good of all, especially   the poor and the unemployed.   The welfare benefits of dryness have not yet been properly explained.   Dryness promotes welfare by creating jobs and lowering prices. Clearly the best form of welfare is   gainful employment and   price reductions provide relief for people on low and fixed incomes who suffer most severely from the inflationary spiral.

Most of the policies that are sketched above address economic issues but of course poverty and unemployment are not just economic problems.   They are massive human problems and they outcrop in the form of violence, crime, vandalism, suicide, rape and drug addiction. Of course multiple causes are at work but the economic component is especially significant for its effect on youth unemployment. What price social cohesion for the future with almost a quarter of young people denied a stake in society? It is not just the statistics that count; it is the psychic scars of assaults and burglaries, the restricted lifestyles forced on people terrified of public transport at night,   the hopes and dreams of parents snuffed out when the victim of a drug overdose is identified on the mortuary slab.   The ideas of the Austrians need to be revived in the interest of the truth, also for the benefit of the poor in this country and the suffering millions in the Third World.

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Hayek as a critical rationalist

F A Hayek: Economics, Political Economy and Social Philosophy  by Peter Boettke of the George Mason  University is hot off the press. The subtitle signals three phases in Hayek’s career, first   fundamental economic theory from roughly 1920 to 1940, then the function of reason and knowledge in society from 1940 to 1960 and then restating classical liberal principles informed by economics and his views on rationality and justice.

He toured Australia in 1976 and some of the talks that he delivered explained what he was doing in his “abuse of reason” project after  he turned from  his major work on economics at the end of the 1930s. His target was “constructivist rationalism”, the mindset that recklessly claims to know more than is actually possible. In his view this was the abuse or pathology of reason that underpinned the utopian vision of socialism and central planning and many other adventures of tyrants and demagogues from time immemorial. It has been described as “the idiocy  of  ideology”. Another target was “scientism”, that is the application of (misguided) ideas about the methods of physics in the social sciences.

This article is an edited version of a paper about the tour and some of the material remains for general interest, especially for Australian readers.

Between 3 October and 6 November 1976, F.A. Hayek spent five busy weeks in Australia with more than 60 appointments, seminars, informal meetings and formal presentations. He and his wife travelled almost the full length of the east coast from Cairns and the Barrier Reef in Queensland to Melbourne, Canberra and Adelaide in the south with excursions to the country in Victoria and Queensland. Roger Randerson, a finance journalist and economics commentator, masterminded the tour.

The political situation, 1976

The central issue in Australian politics was the willingness and ability of the newly-elected Liberal and Country Party coalition led by Malcolm Fraser to regain control of the economy after the big spending and other initiatives of the Australian Labor Party (ALP) administration under Gough Whitlam (1972 – 1975). Inflation peaked at over 15 per cent in 1974 and unemployment was 6 per cent during Hayek’s visit.  Those figures were unprecedented in the years preceding the Whitlam administration. There were also major issues to be resolved regarding monetary policy and the then-fixed exchange rate.

There were high hopes for the Fraser administration in conservative circles and some progressives were alarmed by a rumour that he was a reader of Ayn Rand. That was before it became apparent that Fraser was the kind of conservative who Hayek had in mind when he wrote “Why I am not a conservative” – a man more concerned with holding political power than limiting it and prepared to protect existing industries rather than reforming for productivity. At the end of the paper there is an account of Hayek’s meeting with Prime Minister Fraser.

The climate of ideas, mid-1970s

In the mid-1970s, interventionism dominated the formation and discussion of public policy. The strength of interventionist tendencies on the both sides of politics can be seen in the hysterical tenor of criticism of the so-called New Right from political conservatives and also the Labor Party and the left. A decade later the Labor administration led by Bob Hawke and Treasurer Paul Keating  initiated  some significant reforms along the lines suggested by the ‘new right’ (strictly speaking the “dries’ in the Liberal Party) and they were so unpopular among Labor voters that many traditional Labor seats were lost to the Liberal (Conservative) party in the state of  New South Wales in the election of 1988.   (They were regained at the next election).

For many years the Institute of Public Affairs (IPA) in Melbourne was the major source of informed economic commentary on the conservative side of politics. Formed in 1943 it pre-dated the Mont Pelerin Society that Hayek formed in 1947.  The war provided the incentive for central planning and the federal public service doubled in size Australia between 1939 and 1945: “Curtin’s reform-oriented ALP government in 1941 caught the imagination of the intelligentsia who saw it as the vehicle for the new order”. The autobiography of H. “Nugget” Coombs (1981), the most influential advisor to Labor and Liberal governments over many years, showed how the new order would be based on central control of the economy, using the Keynesian insights to deliver sustained economic growth with full employment and other social benefits.

It was not only ALP supporters who were impressed by John Maynard Keynes. Much the same happened to the some leaders of the non-Labor forces, chief among them the remarkable mover-and-shaker, Herbert Gepp, who formed the IPA and charged C. D. ‘Ref’ Kemp with the task of producing a program for it. This work turned out to be a major source of ideas for the new Liberal Party under Prime Minister Robert Menzies (1943-46; 1949-1966). According to Walters (1988), “By the late 1930s Gepp, like Coombs, had discovered Keynes, and begun to propound a version of neo-Keynesian economic planning. Unlike Coombs, however, he drew the line at anything that looked like collectivism”.

Classical liberalism and libertarianism had practically no profile in Australia – until in 1975 a new party with a libertarian program and aroused a deal of disbelief but little electoral support. First called the Workers Party – heightening disbelief – later the Progress Party, and currently the Liberal Democratic Party, it had yet to gain enough support to make an impact in State or Federal elections. In 1976, the pros and cons of economic rationalism or deregulation were not yet significant topics for public discussion, and there was still a serious battle to be fought on the conservative side of politics before the agenda of deregulation achieved full support in the Liberal Party at the end of the 1980s.

Hayek’s Australian tour came some time before the network of academics, the new think tanks and the “backbench Dries” of the Liberal Party achieved some traction in the debate on public policy. For example the flagship of the new thinktanks, the Centre for Independent Studies, was not even a drawer in Greg Lindsay’s filing cabinet when Hayek visited, although it rapidly progressed and three years later published some of the papers that Hayek (1979a; 1979b) delivered on the tour.

Hayek on Tour

Hayek arrived two years after sharing the 1974 Nobel Prize in Economic Sciences with Gunnar Myrdal for their work on money, economic fluctuations and the institutional analysis of economic phenomena. In a remarkable piece of synchronicity, in June 1974, a small group of American economists convened at South Royalton, Vermont, for the first of a series of meetings which started the revival of the Austrian School of Economics. Hayek’s most recent major works were the three-volume Law, Legislation and Liberty: Rules and Order (1973), The Mirage of Social Justice (1976a) and The Political Order of a Free Society (1979c); plus Full Employment at Any Price? (1975), Choice in Currency (1976b) and Denationalisation of Money (1976c).

The Law, Legislation and Liberty trilogy were products of his abuse of reason” project that commenced with The Road to Serfdom (1944) and extended to his last book The Fatal Conceit: The Errors of Socialism (1988).  The three major speeches that he delivered on the tour drew upon that work which was primarily philosophical and political in nature. In ‘The Atavism of Social Justice’, delivered at the University of Sydney, Hayek (1979a, 15) pursued the controversial theme that dominated much of his mature work, that our instinctive moral sentiments were formed at a time when our ancestors lived in small bands and the ethos of sharing has been recruited in modern times to support the idea that justice is all about redistribution of wealth. The result is a push for systems and institutions which politicise and undermine the classical principle of equalitarian justice, and also impede the generation of wealth which is required to improve the lot of everyone in the long term. At the conclusion of the talk he very briefly made a crucial point about evolutionary theories and competition for “survival of the fittest”. His analysis had little to do with “social Darwinism” and competition between individuals; he was concerned with the sustainability of social and political orders and in this context the main benefit that we obtain from competitive selection is “the competitive selection of social institutions.”

‘Socialism and Science’ was delivered to the Canberra branch of the Economic Society of Australia and New Zealand (Hayek 1976e). Wolfgang Kasper’s account of the meeting (another addition at the end of the paper) conveys a sense of the excitement of the event and the responses aroused from all sides. Hayek established a good rapport with the audience and delivered a line that “brought the house down”: “I have been ill and I have tried old age. It was not to my liking! Who has the next question?”

Hayek (1976e) mentioned some of the issues addressed in the “abuse of reason” project, namely the unhelpful theories of science and rationality that he labelled “scientism” and “constructivism” respectively. He examined the way that socialists attempted to quarantine their ideas from scientific appraisal and he went on to another aspect of the project concerned with rationality and the formation and appraisal of social norms and moral rules. His position in The Fatal Conceit (1988, 21) aroused concerns that his interest in social institutions had led him away from political individualism in the direction of collectivism and some passages in this paper stand as a partial corrective to that perception. Against the genuine collectivists whose efforts to apply reason to generate new moral codes hark back to primitive instincts, he argued: “The [classical] liberal must claim the right critically to examine every single value or moral rule of his society…Our moral task must indeed be a constant struggle to resolve moral conflicts, or to fill gaps in our moral code … [towards] the order of peace and mutually-adjusted efforts, which is the ultimate value that our moral conduct enhances. Our moral rules must be constantly tested against and if necessary adjusted to each other, in order to eliminate conflicts between the different rules, and also so as to make them serve the same functioning order of human actions.” The purpose is to promote rules of the social game that tend to generate peace, freedom and prosperity.

Rules to promote freedom and democracy were the focus of Hayek’s (1979b) speech to the IPA (Sydney Branch) on ‘Whither Democracy?’ He articulated serious doubts about the sustainability of democracy as long as the notion of “majority rule” is not corrected by devices to minimise the risk of a tyranny of the majority (now called populism in a derogatory sense by people who disagree with majority opinion).

Hayek’s (1976d) extempore address at the IPA Annual General Meeting (taped and published in the IPA Review) dwelt on economic themes and revealed that Hayek’s longstanding connection with the Institute “played a considerable role in the development of my writings… I received an invitation to contribute an article to your Review. I wrote up for that purpose, which otherwise I would never have done, a diagnosis of the then existing situation…under the title ‘Full Employment, Planning and Inflation’ [1950].” He claimed that his analysis at that time essentially predicted the kind of outcomes that eventually emerged as “stagflation” in the 1970s, quoting the conclusion of the 1950 paper: “It must appear more than doubtful whether, in the nature of democratic institutions, it is possible that democratic governments will ever learn to exercise that restraint, which is the essence of economic wisdom, of not using palliatives for present ills which not only create worse problems later but also constantly restrict the freedom of further action”.

Hayek obtained significant public exposure on the weekly current affairs TV program ‘Monday Conference’ (11 October 1976) which was shown nationwide on the free-to-air public broadcaster, the Australian Broadcasting Commission (ABC).  This aroused strong reactions from supporters; and a persistent Marxist critic, University of Sydney Associate Professor of Economics Debesh Battarcharaya, received equally enthusiastic endorsement from the other side of the “house”.  Battarcharaya elicited from Hayek one of the memorable takeaway lines of the tour “I don’t want to trade discourtesies with you.” Robert Moore presided over the proceedings and maintained a balance of voices in the exchanges which enabled Hayek to range over many aspects of his social, political and economic ideas. One of these was the theme of his ‘Whither Democracy’ address, voicing concern that the erosion of authority by special interest groups would cause serious problems and this will discredit democracy.  But he insisted that “What has failed is not democracy as such, it’s a particular form of democracy which we have had.”

 Out of the public eye

There were many – mostly off the record – private engagements. The details of Hayek’s meeting with Prime Minister Fraser have not previously been reported (Appendix ).

Hayek and his wife went off-the-beaten track into the countryside. A trip to a Victorian forest enabled them to hear – and more rarely – see the famous lyre birds.  On his visit to Melbourne, Hayek and his wife stayed for some days at the home of C.D. (Ref) Kemp and Mrs. Betty Kemp at Mount Macedon. Mrs. Hayek, with her interest in astronomy, was keen to see an eclipse and Mt. Macedon was expected to be a good vantage point. In the event, clouds prevented a sighting. The Sydney Morning Herald (25 Oct 1976) reported: “Thousands of scientists and amateur astronomers, stationed at centres along the band of totality, were largely thwarted by the heavy cloud cover of much of south-eastern Australia on Saturday”.

Kemp had had a long acquaintance with Hayek’s thought and The Road to Serfdom had been one of the intellectual inputs into the work of the IPA, where Kemp had been economic adviser and then Director.  The IPA Review from the late 1940s published articles by Hayek which Ref Kemp had sought out.  The Kemps and the Hayeks got on well together and greatly enjoyed each others’ company. Hayek’s favourite room was the library. Ref Kemp recalled that Hayek took Tolstoy’s War and Peace off the shelves and commented that, in his view, this one was the best translations.  Hayek inadvertently allowed his cigarette to burn a mark on a small polished coffee table in the library: the Kemps ever after referred to it as ‘the Hayek table’ and refrained from repolishing it.

Ron Kitching hosted the Hayeks on his farm and provided an opportunity to come to grips with a giant bull named ‘Inflation’: “When he arrived we had a celebratory drink of his favourite tipple, Johnny Walker Black Label. ‘When ever I drink this brand of Scotch,’ Hayek announced, ‘I get ideas beyond my station’. He was a past master at putting people at ease. He then noticed hanging on the wall of the bar, a large picture of a magnificent Brahman Bull I owned. He asked about the Bull, so I told him he was a prize winning show bull which I had nicknamed ‘Inflation’ as he would not stop growing. He weighs 2,500 pounds in his working clothes. Hayek laughed and said that he knew a bit about inflation and that he would like to meet this one. Next day I took him down the paddock and took several pictures of him and the bull.  He was delighted to have a bit of fun. The caption of course was to be ‘Hayek’s Got Inflation By The Balls’”.

Impact and outcome of Hayek’s visit

The major public record of the tour is a Centre for Independent Studies Occasional Paper containing the three major speeches with some information about Hayek and a brief account of the tour including the partial itinerary. Hayek wrote the Preface with a graceful tribute to Randerson who organised the visit and “…was guide, philosopher and friend to Mrs. Hayek and myself; and finally crowned his efforts by editing these lectures and seeing them through the press.”

Hayek’s address to the IPA appeared in the IPA Review as did his paper on ‘Socialism and Science’. A version ‘Whither Democracy’ was published as ‘Can Democracy be Saved?’ in Quadrant, November 1976.

A survey of four daily newspapers, The Australian, The Sydney Morning Herald, The Melbourne Age and The Australian Financial Review revealed no mention of Hayek and the tour. The Sydney Morning Herald (15 October 1976) announced Friedman’s Nobel award on the front page and that was an opportunity to mention that a recent Prize winner was in the country at the time. Another place where the Hayek tour could have been noted was The Australian Financial Review (5 October 1976) which ran a story on Myrdal, Hayek’s co-recipient.

The impact of the visit is impossible to assess. Later in the decade, Hayek would have found many more interested listeners as the forces for reform became better organized and more articulate. There is no doubt that his ideas energised many of the people engaged in the push for reform – but it took more than a decade and a change of government to achieve real progress to a more open and competitive economy.

 Hayek’s meeting with Prime Minister Fraser

This account is based on personal communications with Roger Randerson (late in his life) and, more recently, with officers who served in the Commonwealth Public Service and the Prime Minister’s office at the time.

The meeting between Hayek and the Prime Minister occurred on 18 October 1976.  Hayek went to Parliament House accompanied by Roger Randerson; they were met on their arrival by a Prime Ministerial staffer.  Whilst waiting for Fraser to finish his previous meeting, the group chatted about Friedman’s recent Nobel Prize: Hayek declared himself to be very pleased.  It was mentioned that The Constitution of Liberty had been the subject of seminars in the Melbourne University Liberal Club during the 1960s; Hayek responded that “you never know the influence of your work. Sometimes you write and it seems to have no effect at all”.  Fraser emerged from his office and, after introductions, the party went into the Prime Minister’s Office accompanied by another of Fraser’s staff.

Fraser had discussed Hayek’s visit with his staff beforehand and received a written brief but it was apparent in the meeting that his mind was still on the issues of the previous meeting. After they sat down and exchanged pleasantries, Hayek opened the conversation by broaching the subject of the exchange rate, then under intense discussion, and asked the Prime Minister why it should not be allowed to float? Fraser responded by asking what further action would be necessary if this were done, but Hayek disclaimed enough detailed knowledge of the Australian scene to answer the question.  Fraser seemed unwilling to pursue the matter and Randerson commented that he had not suggested to Hayek that he raise the issue. Fraser courteously replied that he did not imagine that Professor Hayek needed people to tell him what to say.

Hayek, attempting to discuss a broader subject, turned to the issue of social justice: it was, he stated, a misleading and unsatisfactory term which encouraged the growth of government welfare spending.  Fraser responded sharply: “What do you do when aboriginal children are dying?”  Hayek suggested that the government should consider a minimum income system, to avoid the obvious problems of the current system which simply encouraged special interest pressures for more spending.  Fraser responded that this underestimated the common sense of the people, and that he had taken a strong stand himself in condemning politicians who kept promising new spending. Hayek responded that the system for deciding these matters was itself flawed and needed to be changed.

In the short time allowed for the meeting, Fraser did not attempt to engage his visitor on the major issues he was facing, despite the opening provided.  He had expressed interest beforehand but it appeared that the Prime Minister had not read the brief prepared by his staff, and the opportunity to engage one of the great minds of the modern era in a serious policy discussion was passed over by the Australian leader.

Wolfgang Kasper on Hayek at the Australian National University (prepared at the request of the present author).

In 1969, I had visited Hayek several times when he recuperated in a sanatorium in the Black Forest in Germany and I was a staffer of the German Council of Economic Advisors. By 1976, I had moved to the Australian National University (ANU), and found the atmosphere among the social scientists there not very congenial, to say the least. They were mostly neoclassical model builders or left-wing economic historians, most of whom might not even have heard of Austrian economics. But they were all very sure that they belonged to the noble religion of do-gooding reform and that the sacking of Whitlam was a gross injustice.

It was against this background that the news of Friedrich Hayek’s visit came as a great and very pleasant surprise! Hayek was to speak at ANU in the big Coombs Lecture Theatre (named after ‘Nugget’ Coombs). When I turned up in the company of a businessman friend, the auditorium was already quite packed. I saw only few of my fellow economists from ANU in the audience, but many vaguely familiar faces from the Treasury and – oddly – the Canberra Fabian Society.

Then, Hayek – a gangly old fellow – began to speak after an introduction that assumed few in the audience had even heard his name. I do not even recall the contents of his address only that it was lively and the audience were spell-bound. My businessman friend (and Chris Caton, then of Treasury, who sat next to us) loudly approved of what was said, but some around us began shaking their heads. Hayek clearly hailed from a different intellectual universe than the model builders, who were trained to assume ‘perfect knowledge’.

After the talk, the questions came mostly from several senior civil servants, some of whom were eager to use our eminent visitor to score policy points. Hayek obliged in his good-natured and clear way. I do not believe that he changed minds of the ‘Whitlam tribe’, but he did much to cheer and reinforce those who shared his basic worldview and his understanding that economics is about a dynamic game to search and test useful knowledge. Well after the habitual closing time for such public events, the questions and answers were keeping the big audience spell-bound. The chair (it may have been John Stone from Treasury, I am not sure) pointed out Hayek’s advanced age, his recovery from serious illness and politely suggested we come to a close. Hayek interrupted him cheerfully: “Yes”, he said in his Vienna-accented English, “I have been ill and I have tried old age. It was not to my liking! Who has the next question?” This brought the house down! With hindsight, I know that this remark was one of his standard party quips at the time – but he certainly won over the hearts of the audience, though possibly not their minds.

His Canberra show was fondly remembered by those present, including the majority who were unable to jettison their old beliefs in favour of thinking in terms of Austrian-evolutionary economics.

Ronald Kitching on the tour

The great Nobel Prize winning economist/social scientist F. A. Hayek made a month long lecture tour of Australia in October 1976. There is a bit of an inside story to this tour which so far few know about. Hayek was invited to Australia for a lecture tour by economist Mark Tier. However, Hayek, at that time, had to decline, but as circumstances changed and as he did not know anybody else in Australia, he wrote a note to Sydney Economist/Barrister Roger Randerson, whom he once tutored at The London School of Economics, saying that he could squeeze in a month before going on previously scheduled visits to New Zealand and Japan.

Roger and I were good mates so he rang me with the good news. I then suggested to Roger that he immediately write back to Hayek and ask what his fee would be. I can still quote the answer. Hayek replied saying: “Should first class return airfares be provided for my wife and myself both internationally and nationally, and first class accommodation be provided for us, and also providing that my lectures are confined to no more than two per week, there will be no fee.”

Roger estimated that the total cost would be approximately $25,000. As he was well connected in the commercial world and I was well connected with the Australian Mining Industry, we thought that it would be an easy matter to get the tour underwritten. So we set off to see what we could do. After a week’s travelling and lobbying, I could not find a single executive willing to undertake part in such a “revolutionary” activity. I returned to my home rather dispirited about it all. I rang Roger to see how he was doing.

He replied to my query, “My boy, nobody wants to know me. They are all running for cover.” I then went on to say that the average answer I got was, “We cannot be seen to be endorsing the right wing views of such a radical figure.” He replied that that was precisely the response he got too. So, I said, “Bugger it all Roger, I’ll underwrite the tour myself.” He replied, “I won’t see you do that m’boy, I’ll go you halves.”

So, with that settled, I suggested that we again go around the traps, and, seeing the tour was underwritten by somebody who wished to remain anonymous, try to see what could be raised for the venture. We were ably assisted in this effort by Mr. Ref Kemp, Director of The Institute For Public Affairs in Victoria, Mr. Viv Forbes in Brisbane, and Mr. R. H. (now Sir Robert) Norman OBE of Cairns.

Roger later published a booklet titled Social Justice, Socialism and Democracy featuring three of Hayek’s [1979b] most important lectures on the tour. In that small book he said: ‘Many publicly spirited citizens, institutions and organisations donated, (numbering no fewer than 62, in sums ranging from $50 to $2,000) towards the visit, but no list is given because some wish to be nameless. Their generosity is, however, gratefully acknowledged.’

The Hayek visit was a co-operative private enterprise. Indeed it had to be, because approaches at high levels for concessions from government owned or controlled internal and external airlines were refused.

There were complaints from high level “intellectuals”, that the visit was everything from a white washing of dangerous capitalist ideology, a political plot of ever devious Jews, to a “bankers plot”. Hayek incidentally was a non-practising Catholic. Hayek was in great form and he appeared as Guest of Honour on the hour-long Monday Conference with Robert Moore, and televised by the ABC network in all states on 11 October 1976.

In addition, in total he kept no less than 60 appointments, including visits to heads of state, seminar and lecturing engagements. A very heavy schedule for anybody, but at that time Hayek was 76 years of age. He was in scintillating form.

Roger decided that in the middle of the tour he would give him four days off on the Atherton Tableland. I had a spacious home there and as half of my six children were away at boarding school, we had ample room to accommodate Roger, and Professor and Mrs. Hayek.

When he arrived we had a celebratory drink of his favourite tipple, Johnny Walker Black Label. “Whenever I drink this brand of Scotch,” Hayek announced, “I get ideas beyond my station”. He was a past master at putting people at ease.

He then noticed hanging on the wall of the bar, a large picture of a magnificent Brahman Bull I owned. He asked about the Bull, so I told him he was a prize winning show bull which I had nicknamed Inflation as he would not stop growing. “He weighs 2,500 pounds in his working clothes,” I told the small gathering present.

Hayek laughed and said that he knew a bit about inflation and that he would like to meet this one. I told him that compared with the inflations he had witnessed, that this one was rather tame and that my boys jumped on to his back in the paddock. “I even jump on his back when he is in the yard and I can climb up the rails to do so,” I told him. “Well, while I am here, I would like to meet him, ” Hayek exclaimed. So I put that on the agenda.

I got this bright idea that I’d put the bull in the yard, get a step ladder, put Hayek on the bull, (if he agreed), and take a picture, which would carry the caption, “Hayek’s on Top of Inflation”. I told my wife and that was the end of it. She would not under any circumstances countenance such a move. “What if the Professor fell off and was injured,” and all of that sort of chatter. So that project was abandoned.

Nevertheless Hayek still wanted to meet the bull. Next day I took him down the paddock and took several pictures of him and the bull when another idea popped into my head and I quietly mentioned it to him. He was delighted to have a bit of fun. The caption of course was to be “Hayek’s Got Inflation By The Balls.”

Well, the old boy was delighted. He was quite at home with animals and had palled up with the bull, which was an easy matter with this particular animal. So he posed and I took the picture. He predicted that if the Americans got hold of a copy, the picture would become famous.

I am happy to announce that I recently heard from Dr. Eamonn Butler of the Adam Smith Institute in London. He told me that at a recent luncheon in her honour in London, Mrs. Thatcher, much to her delight, had a picture presented to her of her favourite Economist/Philosopher and with Inflation by the balls.

Hayek’s grand-daughter, who was present, read out the story.

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