Posts Tagged economics

More on education

Ludwig von Mises
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I wrote earlier about whether universities have a future, a subject I’m obviously interested in as a I work in one. After writing that entry, I came across these quotes from the Austrian economist Ludwig von Mises on the subject of education and schooling:

It is often asserted that the poor man’s failure in the competition of the market is caused by his lack of education. Equality of opportunity, it is said, could be provided only by making education at every level accessible to all. There prevails today the tendency to reduce all differences among various peoples to their education and to deny the existence of inborn inequalities in intellect, will power, and character. It is not generally realized that education can never be more than indoctrination with theories and ideas already developed. Education, whatever benefits it may confer, is transmission of traditional doctrines and valuations; it is by necessity conservative. It produces imitation and routine, not improvement and progress. Innovators and creative geniuses cannot be reared in schools. They are precisely the men who defy what the school has taught them.

In order to succeed in business a man does not need a degree from a school of business administration. These schools train the subalterns for routine jobs. They certainly do not train entrepreneurs. An entrepreneur cannot be trained. A man becomes an entrepreneur in seizing an opportunity and filling the gap. No special education is required for such a display of keen judgment, foresight, and energy. The most successful businessmen were often uneducated when measured by the scholastic standards of the teaching profession. But they were equal [p. 315] to their social function of adjusting production to the most urgent demand. Because of these merits the consumers chose them for business leadership.
– Human Action, Chapter XV The Market


The emphasis laid by sociologists upon mass phenomena and their idolization of the common man are an offshoot of the myth that all men are biologically equal. Whatever differences exist between individuals are caused, it is maintained, by postnatal circumstances. If all people equally enjoyed the benefits of a good education, such differences would never appear. The supporters of this doctrine are at a loss to explain the differences among graduates of the same school and the fact that many who are self-taught far excel the doctors, masters, and bachelors of the most renowned universities. They fail to see that education cannot convey to pupils more than the knowledge of their teachers. Education rears disciples, imitators, and routinists, not pioneers of new ideas and creative geniuses. The schools are not nurseries of progress and improvement but conservatories of tradition and unvarying modes of thought. The mark of the creative mind is that it defies a part of what it has learned or, at least, adds something new to it. One utterly misconstrues the feats of the pioneer in reducing them to the instruction he got from his teachers. No matter how efficient school training may be, it would only produce stagnation, orthodoxy, and rigid pedantry if there were no uncommon men pushing forward beyond the wisdom of their tutors.

It is hardly possible to mistake more thoroughly the meaning of history and the evolution of civilization than by concentrating one’s attention upon mass phenomena and neglecting individual men and their exploits. No mass phenomenon can be adequately treated without analyzing the ideas implied. And no new ideas spring from the mythical mind of the masses.

  • Theory and History, Chapter 11.
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A little knowledge…

Meltdown author Thomas Woods Jr writes a long but informed and informative take-down of a Huffington Post article by Thom Hartmann on the economic crisis. Woods is one smart cookie, and he starts off with an honest admission:

After eight years of watching conservatives blow trillions of dollars and comport themselves like anti-intellectual, jingoistic blockheads, I found myself ashamed to admit that the Left seemed to have all the genuine intellectuals—people who seemed to possess real curiosity, who refused to accept whatever official line the government was shelling out, and who sought genuine understanding instead of name-calling and pointless vitriol.

He then takes apart Hartmann’s argument, starting with the spelling mistakes. Picayune, say you? Perhaps, but Woods suspects the spelling mistakes point to a deeper ignorance on Hartmann’s part:

Let’s start with the economists whose ideas, according to Hartmann, led us to the current crisis.  Why, they’re “Ludwig Von Mises, Freidrich [sic] Von Hayeck [sic], Milton Friedman, Alan Greenspan, Tom Freidman [sic], Robert Rubin, Larry Summers, and Ayn Rand.”  Now I’m sporting enough to look past the fact that Hartmann makes two spelling errors in a single economist’s name.  Still, color me skeptical that Hartmann knows a blessed thing about the work of F.A. Hayek.  (I assume he thinks these people are more or less interchangeable, that Mises = Friedman = Summers = Rubin, that Mises wouldn’t have denounced at least several of these figures, and that the differences between them are probably just trivial and not worth mentioning.)

Woods offers Hartmann a challenge:

Quiz time, Thom!  Name one book on economic theory (so The Road to Serfdom, if you happen to have heard of it, doesn’t count) Hayek wrote that you’ve read, flipped through, held in your hand, or even heard of.  Stumped?  How about one article?  Stumped again?  Then why not do the decent and honorable thing and shut up until you can speak from authority rather than prejudice and ignorance?  Sound fair?

Actually, Thom, I’ll be even more sporting. You can start condemning them again once you can at least competently summarize what someone who has read them tells you they say. How’s that?

Woods then fillets like a skilled chef:

Um, Thom, Mises and Hayek opposed central banking altogether, arguing that it was not only a superfluous intervention into the market economy but also that it was destabilizing and the source of the boom-bust cycle. These men are supposed to be similar to Greenspan how, exactly?…
It goes without saying that a government central bank’s intervention into the market to push interest rates lower than the free market would have set them cannot, by definition, be the fault of the free market.  The problems Hartmann identifies in his article, as well as the ones he neglects or doesn’t know about, are mere symptoms of a more fundamental cause, namely the creation of cheap credit by the Fed. Whatever happened to leftists’ interest in “root causes”?…
Then comes the inevitable post hoc ergo propter hoc fallacy: the American economy was strong back when the top income tax rate was 90 percent, so therefore high marginal income tax rates are great for the economy! How does Hartmann know that American prosperity didn’t occur in spite of, rather than because of, those high rates?  Without the help of economic theory, which Hartmann seems allergic to, how can we decide which of these possibilities is correct?I genuinely wonder how someone like Hartmann thinks wealth is created. Nothing I can see indicates he’s given the matter much thought. The average person’s standard of living, he seems certain, occurs because we loot and shackle the wealthy, who are mere parasites on the backs of working people, the real engines of the economy.

Leaving aside the odd view that only manual laborers engage in “work,” all the brawn in the world could never have produced a steam engine or a Pentium processor.  Only when informed by the knowledge of inventors and supplied with the capital saved by capitalists can the average laborer produce the tiniest fraction of what he is today accustomed to producing. The central ingredient in a laborer’s physical productivity is the equipment and machinery at his disposal. There is nothing natural or inevitable about the availability of this productivity-enhancing capital equipment.  It comes from the wicked capitalists’ abstention from consumption, and the allocation of the unconsumed resources in capital investment.  This process is the only way the general standard of living can possibly rise.  Hartmann thinks it’s just swell to tax it.

The “accepted wisdom” today is over-simplified Keynesianism. This is what we read in the mainstream press, and hear on the television. If these are where you get your economic information from, reading Woods’ article might be the start of a de-toxification program. This is high-quality intellectual debate: the kind that informs without being devoid of humour.

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