Great article M.A.! Biffie and Fritzie need to read this......I doubt if it turns on the light bulb for them, but ya never know!!!
On Thu, Mar 12, 2009 at 9:34 AM, M.A. Johnson <[email protected]> wrote: > > "In short, the conference was about this: *Why do people still think the > interaction of free individuals is a superior economic system to one > directed by Harvard Ph.D.s like us? I mean, apart from the failure of > central planning in every case in which it’s been tried, a failure so > staggering that only a blockhead could miss it, why would people cling to > the idea that being herded into a collective run by the experts isn’t the > best way to live?" > > **We Need Our Heads Examined, Says Harvard > *by Thomas E. Woods, Jr. > > Last weekend, Harvard University sponsored a conference called (I am not > making this up) "The Free Market Mindset: History, Psychology, and > Consequences." Its purpose was to try to figure out why, since *everyone > knows* the current crisis amounts to a failure of the market economy, the > stupid rubes continue to believe in it. The promotional literature for the > conference opened with That Quotation from Alan Greenspan – the one in which > he suggested that there was, after all, a "flaw" in the free market he > hadn’t noticed before. > > Well, that does it, then! If our Soviet commissar in charge of money and > interest rates says the free market doesn’t work, who are you to disagree? > > The promotional material continues: "If the current state of the U.S. > economy makes clear that former Federal Reserve Chairman Alan Greenspan's > faith in free markets was misplaced, the question remains: what was it about > free markets that proved – and still continues to prove – so alluring to > economists, scholars, and policy-makers alike?" Because, of course, if > there’s one guiding principle behind the largest government in world > history, it’s *free markets*. Ahem. > > This conference, we were told, "brings together leading scholars in law, > economics, social psychology, and social cognition to present and discuss > their research regarding the historical origins, psychological antecedents, > and policy consequences of the free market mindset. Their work illustrates > that the magic of the marketplace is partially an illusion based on faulty > assumptions and outmoded approaches." The speakers then spent the day, I am > sure, laying out their own faulty assumptions and outmoded approaches, and > studiously ignoring the Austrian School of economics. > > In short, the conference was about this: *Why do people still think the > interaction of free individuals is a superior economic system to one > directed by Harvard Ph.D.s like us? I mean, apart from the failure of > central planning in every case in which it’s been tried, a failure so > staggering that only a blockhead could miss it, why would people cling to > the idea that being herded into a collective run by the experts isn’t the > best way to live? > > *So by assuming from the outset the very thing that needs to be proven – > namely, that the current state of the economy just occurred spontaneously, > as the result of wicked market forces – our betters relieve themselves of > the need to consider that central banking, a government-established > institution, just might have had, you know, a little something to do with > what happened. > > George Reisman has already demonstrated <http://www.mises.org/story/3165>the > absurdity of referring to our present system as a "free market" one. > Naturally, of course, none of the participants bothered to notice that a > Soviet commissar in charge of money and interest rates amounts to something > like the opposite of the free market, or that the economic distortions he > causes cannot, therefore, be the fault of the free market. This is exactly > why, in my book > *Meltdown*<http://www.mises.org/store/Meltdown-P557.aspx?AFID=14>, > I call the Fed "the elephant in the living room." We’re not supposed to > notice it, and we’re supposed to pretend the damage it causes is the result > of wildcat capitalism, unfettered free markets, or whatever other juvenile > phrase is currently in vogue to describe the usual bogeyman. > > Now I don’t want to list all the paper topics at this conference, since > it’d be a shame to make all of you feel stupid for having frittered away > your weekend when you could have listened to, say, Stephen Marglin’s paper > on "How Thinking Like an Economist Undermines Community." Now *there’s* a > topic I haven’t heard quite enough platitudes about. (If you must, you can > view the whole schedule > here<http://isites.harvard.edu/icb/icb.do?keyword=k13943&pageid=icb.page224311&pageContentId=icb.pagecontent475052&state=maximize>.) > You could also have heard a bunch of totally conventional polemics about how > the market economy allows for "too much" pollution, when in fact a genuine > free market – which, I need hardly point out, is not actually considered in > any of these alleged papers – would punish polluters and bring about the > internalization of so-called externalities. Murray Rothbard dealt with this > matter in an extremely important article > <http://www.mises.org/story/2120>none of the participants had read. > > I wonder if anyone at the conference asked questions like this: > > When Greenspan flooded the economy with newly created money and brought > interest rates down to destructively low levels, thereby distorting > entrepreneurial calculation as well as consumers’ home purchasing decisions, > was that the fault of the free market? Do you think the Fed’s creation of > cheap credit out of thin air makes market participants more careful or less > careful in how they allocate borrowed funds? > When Alan Greenspan bailed out Long Term Capital Management in 1998, was > that a "free market" phenomenon? Do you think he thereby encouraged more or > less risk-taking among other major market actors? > The Financial Times spoke in 2000, in the wake of the dot-com boom, of an > increasing concern that the so-called "Greenspan put" was injecting into the > economy "a destructive tendency toward excessively risky investment > supported by hopes that the Fed will help if things go bad." "All the insane > dot-com investment we’ve seen, all this destruction of capital, all the > crazy excesses of the past few years wouldn’t have happened without the easy > credit accommodated by the Fed," added financial consultant Michael Belkin. > Did the free market cause that? > Do lending standards decline for no particular reason, or could this > phenomenon have a teensy weensy bit to do with (a) government regulation > aimed at increasing "homeownership" and (b) loose monetary policy by the > Fed? When the banks get the additional reserves the Fed creates, they > naturally want to lend it out – and in order to do so, they wind up lending > it to people they either have or would have rejected previously. As I show > in Meltdown, the phenomenon of lax lending standards in the wake of an > inflationary boom by a central bank is traceable all the way to the > nineteenth century. There is nothing even slightly unexpected – or > market-driven – about it. > > Questions like these could go on and on. Not one, you can be certain, was > raised at this conference. > > Now if you really wanted to sponsor an event whose purpose was to try to > understand why people believe inane things that have been falsified by > reality, you’d do much better to hold a conference on socialism, or on > Keynes and his school. It would be fascinating to learn the psychological > motivation behind the persistence of Keynesian economics, whose popular > version is a non-falsifiable, ersatz religion. Is Japan’s economy still > suffering? Why, that’s because Japan didn’t spend enough – even though it > spent so much that it became the most indebted country in the developed > world. Have people spent so much that they’re now burdened with debt they > can’t possibly repay? Then we need more spending. Is the economy a distorted > mess after an artificial boom? Then instead of letting the economy > restructure itself along sustainable lines, let’s instead "stimulate" the > system just as it is, with the goal of bringing about more "consumption," > more "labor" employed, and higher "income," without bothering to > disaggregate any of these things and deciding what kinds of labor need to go > where, what kinds of consumption are sustainable and what are figments of > the bubble economy, or how the capital structure needs to be reassembled in > order to cater to genuine consumer demand. In fact, let’s actually boast > about neglecting capital theory altogether (as indeed Keynes did in a 1937 > article in the Quarterly Journal of Economics). > > Here’s another thought: given how many Keynesian economists predicted a > return to depression conditions when World War II spending came to an end, > and that what we instead got was the single most robust year the private > economy has ever seen, isn’t it a little strange that not one of these > economists went back and re-examined his premises? > > On the other hand, consider the names Jim Grant, Peter Schiff, Ron Paul, > and Jim Rogers. Apart from having predicted the current crisis – unlike > anyone at the Harvard conference and indeed unlike the paper-tiger > economists they unsurprisingly preferred to spar with during their > deep-thinking session last weekend – one thing these men have in common is > that they are all Austrian economists, they all believe in the Austrian > theory of the business cycle, and they all pin the blame for the crisis on > the Fed, a non-market institution. These men believe in the real free > market, not the centrally planned market of Alan Greenspan, Ben Bernanke, > and the Federal Reserve. And they saw a crisis coming at a time when > everyone else was predicting new highs for the Dow and singing the praises > of a world economy that was more robust than it had ever been. > > Maybe that’s why people believe in market economics: unlike the Rube > Goldberg models of their counterparts in the profession, the things Austrian > economists write and say actually have some connection to the real world. > > People who believe in the market economy support a social order in which > free individuals make voluntary contracts with each other, and no one can > initiate physical force against anyone else. Is that vision so obviously > unattractive that we have to refer its supporters for psychological > evaluation? We might instead wonder at the psychological condition of those > who would denounce such a system: might they be motivated, for all their > noble talk, by nothing but base envy of those with more material wealth than > they, or by a pathological desire to dominate other people? > > I’m sure that will be covered at next year’s conference. > > > http://www.lewrockwell.com/woods/woods106.html > > > --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
