Why Do Professional Economists Overwhelmingly Support the State?

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.

2 thoughts on “Why Do Professional Economists Overwhelmingly Support the State?

  1. I do not agree that Kansian theory which has as it’s basic premises that money is as money does…is the cause or is necessarily the sponsor of the elitist economic philosophies since the theories of the velocity of money and guns or butter theory was espoused. Case in point the Laffer (i can’t make this stuff up) curve which Regan made the dogma of what would become republican religion on economics, foreign policy and the transfer of wealth from the working (middle class) to the political elite (the monied interests) that would need the strongest and most expensive military the world has ever known to protect their interests around the world and put our lives at risk, take our freedom
    and put us into protective custody for their own imperialistic endevors under the guise of national interests(the corporate interests that bought these politicians), democracy and freedom.
    Kaynes theory depends an spending the money in and on America!
    We can build that…
    Let the rest of the world change their own hearts and minds

    he middle and working class…

    • Keynesian economics is based on the premise that consumption drives prosperity. This is false but is used to justify debt at the government level. The government should never be in debt unless it is absolutely necessary to borrow money in order to fight a purely defensive war, otherwise the debt is a burden to future taxpayers who are in that way taxed without representation. Production rather than consumption drives prosperity – Say’s Law holds – and savings rather than debt is the economically sound basis of spending decisions. Like you, I don’t admire the Laffer curve, which is used to maximize tax revenue for the government. In my opinion, the government does mostly harm including through military aggression as you mention, therefore, I’d like to minimize its resources. The greatest transfer of wealth in this country occurs through Fed-driven inflation which raises prices of goods faster than wages rise – this has the effect of giving the holders of assets the advantage of selling goods to wage-earners at higher prices long before the wage-earners can secure higher wages in their work producing the goods. This is an explicit goal Keynes stated himself in advocating loose monetary policy. I appreciate your comment and would ask you to dig in a bit to Austrian economics as an alternative to Keynesianism, rather than focusing on Reagan-style supply-side economics, which I agree with you is flawed.

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