In reflecting on Paul Krugman’s seemingly 100% record of supporting state intervention as exemplified in my last post, I recall having formerly wondered why economists overwhelmingly support State-based economic views and rarely support free market views. I believe the answer lies in a passage I read recently in Murray Rothbard‘s A History of Money and Banking in the United States.
Rothbard was discussing the American Imperialist Movement of the late 19th Century (I bet the majority of Americans never even heard of that! Well, it was real and it’s effects are still felt around the world today.) As the politicians struggled to get support for this mercantilist policy, the American Economic Association (AEA) put together a committee to help garner support for establishing colonies by “providing ideological justifications for acquiring them.” Furthermore,
the committee’s fiscal recommendations strongly intimated that trained economists were necessary for a successful empire. It was they who must make a thorough study of local conditions to determine the correct fiscal system, gather data, create the appropriate administrative design and perhaps even implement it. In this way, the committee seconded [Yale President] Hadley’s views in seeing an opportunity for economists by identifying a large number of professional positions best filled by themselves. (p. 217)
Rothbard also explains that President Hadley had envisioned economists in a role he likened to “philosopher-kings.” This is in keeping with Rothbard’s observations elsewhere that the intelligentsia throughout history often feel like their brilliance is wasted on mere productivity and they should be rewarded for their shining intellects alone. Who would reward someone for such a thing? The State, provided of course the brilliance is used to reflect its light on the glory of the State in return.
I believe this mutual benefit is the primary reason Keynesian economics won out over the Austrian School in the 20th century: State-issued grants and state-supported institutions of research and learning will naturally favor those who justify the State’s interference and its expansion, as western governments did in fact foster Keynes and his theories over Hayek and his. As the State increasingly monopolizes such institutions one can expect dissenting viewpoints to be rare and short-lived.
I was also reminded of Rothbard’s observations of old by an item that appeared in the news last week demonstrating an exception to Rothbard’s rule. The article reported that Ron Paul turned down a speaking role at the Republican National Convention because he would not fully endorse Romney and he would not allow them to censor his speech. Dr. Paul chose truth over glory and I’m sorry to say I think he is in a small minority among those in politics, academics and the media.