The Skeptical Liberal

The Skeptical Liberal

How can we live together in peace, prosperity, and harmony, while retaining our liberties as autonomous individuals who can, and must, create our own values? -- J.M. Buchanan


God and Professor Adler and Logic (Tagxedo)

In 1940, Frank Knight wrote a response to Mortimer Adler's "God and the Professors" (in which Adler charged that secular professors were more of a threat to America than the Nazis) that appeared in a special issue (Nov. 14) of the Daily Maroon - the University of Chicago's student newspaper. The image below is the text of the article run through the "tag" cloud generated Tagxedo ( Thought it would be fun to see what it looks like!

The closing line of the article will give you the flavor of Knight's response: "As to how to recognize, or find, truth, or good sense there are two positive answers. The first is that every one, every human being capable of considering the question, is, and must be, his own judge, just so far as he is a free mind. He must decide on his own responsibility, at his own peril, using such tests and following such council as his own judgment dictates. The other answer is that truth is determined by law and the arbitrary authority of men in power. All social life, indeed any possible human life, embodies some combination and compromise between these two methods of determining what is truth. The great issue in the world, and especially our own country, today, centers in a tendency, a movement and a struggle to shift the point of compromise away from individual freedom and responsibility far in the direction of authority and force."

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Inventors Day success

See story about the Inventors Day that students in my "Michigan Futures in the Global Economy" applied public policy seminar ran on April 11, 2008 at Michigan State University.


Complexity and Economics video lesson

A great two-part lecture on basic concepts in social economic organization, reminiscent of Knight's The Economic Organization, but incorporating concepts of complexity, institutions, and spontaneous order. "Complex orders arise from simple rules."

Part I

Part II

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Response to "High taxes can spur growth??"

Igor Vojnovic has provided an extended response to my criticism of his article:

"Battling the rhetoric that broke Michigan’s competitive advantage: A response to Ross Emmett"


High taxes can spur growth??

The headline caught my attention: “MSU researcher says high taxes can spur growth.”

The source—MSU’s bulletin of events and news—went on to say that the researcher found that “cities with high taxes and spending on public infrastructure and welfare … tend to experience more commercial growth.” On its own, such a statement might be simply a statement of the fact that vibrant cities will see both tax revenues and spending rise as growth occurs, although it seems to get the causation backwards. But the article suggested that the author’s point was different: the argument about taxes and growth was offered as a defense of high tax policy. The latter claim sounded wrong to me, so I went to see what I could make of it.

Igor Vojnovic's article, “Government and urban management in the 20th century: policies, contradictions, and weaknesses of the New Right,” was published in GeoJournal last December. Vojnovic is a professor of geography at MSU. Turns out that the article has little to do with the relationship between tax levels and economic growth: most of its thirty pages is a critique of neo-liberalism as a philosophical framework for urban development. While I could spend time on Vojnovic’s rather confused understanding of both neo-liberalism and its alternatives, my point in pursuing his argument was to see how he could be lead to believe that high taxes could led to economic growth. So I’ll stick to that argument here. We finally get to the point on page 19. Vojnovic summarizes the claim he is making this way: “Simply, U.S. cities that follow the minimal government strategy are not ranked as top private corporate investment destinations. The urban regions that attract private capital, in terms of concentrations of multinational headquarters and first-level subsidiaries, maintain some of the highest taxes and social service expenditures in the country.”

The leap of logic here confuses me. High taxes and social investment spur growth because urban areas that attract the head-quarters of large corporations and their major subsidiaries have high taxes and significant social investment? What does the presence of the head-quarters of large corporations have to do with economic growth in a region? And perhaps even more importantly, how is economic growth related to the decision of such corporations to set up new office locations? Few companies make significant location or relocation decisions each year (about 6%, if our research can be believed). No location or region could depend upon such relocations as the foundation for economic growth!

Most “commercial” growth, in fact, occurs among small- and medium-sized companies (note that commercial growth does not necessarily translate into growth in per-capita GDP, which is our usual measure of economic growth). Those companies often experience double-digit rates of growth as they go through the early stages of their life cycle. Their growth is quite sensitive to rates of taxation, and often do not depend upon the levels of what Vojnovic calls “social investment.” They tend to be driven by pragmatic issues: proximity to the relevant portion of their supply/value chain; access to human/intellectual capital; etc. Large centers get their share of these companies because of these issues, despite their disadvantageous tax environments! In short, Vojnovic has put the proverbial cart before the horse.

So should we adopt high taxes with correspondingly high levels of social investment to rebuild prosperity in Michigan? We already have relatively high taxes, so that is a moot point! What we need, however, is an environment conducive to the growth of innovative and entrepreneurial companies, regardless of their location within the state. Vojnovic’s development strategy is not helpful for that purpose.

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The Chicago School 2: Mainly Milton Friedman

Second session of "Revisiting the Chicago School," Notre Dame, September 14-15, 2007.

The first presentation in this session was by Beatrice Cherrier. Her doctoral research involves a comparison of the ways in which Milton Friedman, Gunnar Myrdal and Jacob Marschak understood the relationship between their scientific work as economists and their involvement in political advocacy. Claims by Friedman and others that his scientific work was not influenced by, or a defense of, his political views are often doubted, and Cherrier takes as her task both the attempt to understand how Friedman might make such a claim, and how, in a manner consistent with that claim, a relationship between the two might be sustained.

Those familiar with hermeneutic theory will recognize Cherrier’s task as one which simultaneously takes the interpretative framework of the author on its own terms and attempts to construct a meta-interpretative framework which allows the historian to render consistent that which the author himself does not see as consistent. Friedman claims that his science and politics were separate spheres. How could that be? What overarching framework (Cherrier’s word is “worldview") could render that claim consistent?

Cherrier’s argument is that Friedman’s positive science and his political advocacy emerged simultaneously from a common set of experiences and events; in other words, his politics did not come first and his science second, nor his science first and his politics second. The fact that science and politics were separate but inextricably woven together explains both Friedman’s claim that they are separate and their necessary connection. Explaining the relation between his science and his politics requires a complex understanding of the interconnections between his scientific, methodological and ethical commitments, which may transcend his science and his politics.

I was initially hesitate about Cherrier’s use of “worldview” talk because of my previous history with the use of the term, but was impressed with her ability to weave a complex story about the relation between a person’s science and politics by it. I particularly liked her use of an argument by Roger Backhouse that methodology often provides the channels by which ethical and political values enter science. I would add that the reverse is also true. My one suggestion would be that Cherrier ask to what extent her analysis assumes that Friedman’s work is a consistent whole, and that one can move with relative ease across the span of his work as if the author understands all of these relationships ahead of time. My frustration with “worldview” talk in the past emerged from precisely this point: the “historian” tied together all the connections and implications of an author’s work after the fact, not accounting for the reality of the person’s life, in which the connections and implications are figured out and discovered as the person went along. Perhaps the person’s expressions of the underlying “vision” were occasional moments of insights? I am not accusing her of falling prey to Quentin Skinner’s “mythology of coherence,” only suggesting that it might be an issue she should pay attention to.

The second presentation at the session was by Robert Leeson. Robert is in the process of producing a multivolume collection of Friedman’s writings. His presentation was largely an outline of the collection and a set of questions about both the collection and a potential biography of Friedman.

The question he raised about the biography of Friedman was an interesting one. Could a multi-author biography of a person be produced that would have some intellectual cohesion? The response of the conference participants was one I shared: the “art” of biography is an individual art, and the biographer in many ways “creates” her subject by the act of writing about him.

That said, the Pulitzer Prize for Biography has been given several times to co-authored biographies (of de Kooning, Jackson Pollock, Julia Ward Howe) and even once to a multi-volume biography of George Washington which was started by one biographer and finished by a team of two others. However, no other biographical prize in the English-speaking world has been awarded for a book authored by more than one person.

So I’ll turn Robert’s question to those who read this: is it possible for a multi-authored biography of a person like Milton Friedman to be written that would have integrity as a biography, and not simply a set of essays about the person’s work and life?

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The Chicago School of Economics 1: Roundtable on John Van Overtveldt’s book

I promised yesterday to begin posting blogs on the sessions of the "Revisiting the Chicago School [of Economics]" Conference held this past weekend at Notre Dame. I also encouraged other participants to post responses and/or additional comments. I hope they will!

The first session of the “Revisiting the Chicago School" was devoted to a discussion of Johan Van Overtveldt’s new book The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Business and Economics (Agate, 2006). Perhaps an appropriate beginning, although we turned the session (and I say we because I contributed) into a critical bashing of the book.

Given that the participants were largely historians of economics, our discussion naturally focused on two types of issues: a) Van Overtveldt’s historical blunders; and b) why a book that would be judged harshly by historical standards would receive such popular acclaim amongst economists (at the time, we did not know of any negative reviews; but see the review by Phillips-Fein, which makes many of the points raised at the conference). Throughout our discussion of those two issues ran another: how historians and others treat overt apologia compared to works that take on a school of thought from a critical perspective. The discussion was kicked off by comments from Warren Samuels, me, Robert Leeson and Phil Mirowski (the conference organizer). My comments are available on SSRN, and will be published, along with Warren’s and Robert's, in volume 26-A of Research in the History of Economic Thought & Methodology (Elsevier, 2008).

Upon reflection on this session, I came away with four things:
a) Van Overtveldt’s book is poor history because it is “Whig history”;
b) The book is an even poorer history because it ignores external issues which would enrich the history, even if it was still a Whig history;
c) “Think tank” histories are a particularly poor version of “Whig history”; and
d) There are still things to learn, even from a poor history.

Whig history is history written by the “winners” for the purpose of accounting for their victory. Almost invariably, Whig history also has the purpose of de-legitimating alternative histories, which might portray the winners’ victory as less than a just cause. Van Overtveldt’s defense of the Chicago “revolution” largely invokes the age-old claim that great men did great deeds (in this case, they had great thoughts). Like Keynes, Van Overtveldt believes that ideas rule the world. Because he accepts the intellectual power of Chicago’s ideas, he has little need to explain why they may have succeeded. Thus, the “reasons” he gives for Chicago’s success are fairly anemic: Chicago’s isolation, the fact that department members had a strong work ethic, the intense “debating culture” of the workshops, and the University’s commitment to academic excellence. Ironically, given the Chicago emphasis on constrained maximization, Van Overtveldt explains Chicago economists as the product of an unusual utility function (they work harder and like to debate) more than the result of a different set of constraints. Of course, the argument that the brilliant men hired in the Chicago department were different than other economists underwrites the Whiggish-ness of the story Van Overtveldt tells: no need exists to examine other reasons for the success of the Chicago School, because the quality of the people accounts for the quality of their ideas.

But the other reasons for Chicago’s success kept intervening in our discussions all weekend! T. W. Schultz’ ability to bring foundation monies to support departmental research was integrated with domestic agricultural policy, trade policy, and US foreign policy; Friedman’s monetary work was connected to NBER methods and of course an integral part of the response to American Keynesianism; Chicago’s industrial organization and law & econ research gained impetus from the Volker Fund’s efforts to create an American version of Hayek’s Road to Serfdom; Stigler’s creation of a research institute deliberately sought non-traditional funding models that addressed themselves to industrial leaders; etc. In other words, our histories of the Chicago School almost invariably at least pointed to external issues, even if they did not explicitly treat them as part of the evaluation of the School’s success.

My own difficulty with Van Overtveldt’s unwillingness to address the external issues that affected the department’s success was not only the fact that it made the history anemic, but that it also ceded key aspects of the intellectual terrain to those who would wish to argue that the Chicago School may have won the political battle, but lost the war. The lack of discussion in his book about the changing political environment in the US, the history of post-war economic development, the Cold War and American foreign policy, domestic agricultural or monetary policy debate, labor policy debates both internationally and domestically, etc. could lead one to suggest that, for Van Overtveldt, Chicago’s positions were not entirely defendable in these terms. The only terms he could find to defend them in were those of intellectual brilliance. [For a massive attack from the other side, see Naomi Klein's new book, to be released tomorrow!, Shock Doctrine: The Rise of Disaster Capitalism.]

[Note: you will no doubt realize that this comment about Van Overtveldt's book is a potential criticism of my own work on Chicago!]

In his discussion of the book, Phil Mirowksi called Van Overtveldt’s book “think tank” history. I take “think tank” history to be a special category of Whig history: it is overtly polemical, powerpointish in its simplification of history, and considers anecdotes the stuff of history. In other words, the extreme of Whig History. The purpose of think tank history is to rally the troops for another round of fund-raising and political lobbying in order to get the think tank’s agenda back at the center of policy discussion. We see this all the time in education, environmental policy, trade, industrial policy, R&D, antitrust, and other areas. Van Overtveldt’s book comes along, Phil might argue, at a time when the Chicago laissez-faire program is under attack along with much of the rest of the neoliberal and neoconservative agenda. In that sense, Van Overveldt provides a narrative that rejuvenates neoliberalism. [If this is true, then Klein's book could be seen as the response; and it is no doubt equally "think tank" history--she even has a film already!]

Mirowski’s criticism raises an issue that came up at several times during our discussions, and to which I am certain to return over the next several days. The issue is who sets the standards for historical inquiry and how the work of standard-breakers should be addressed. Our reaction to Van Overtveldt was a common reaction of historians to attempts by journalists and non-historians to write history: his account fails to meet the standards that historians set for themselves and police within their own discipline by the requirements of academic peer-review. But think tanks operate on a different standard: their products are successful to the extent that their policy agenda is advanced and dollars raised to continue the cause. The historians’ response to think tank history may be to ignore it, or it could be to do a better job. I hope we take up the latter course of action.

Finally, even with its faults, I cannot entirely dismiss Van Overtveldt’s work. In my paper on his book, I outline five things that I think he gets right, and I am serious in that endeavor. As the first to plow this field, especially the post-Friedman era of Chicago economics, he has turned up a lot of good material. I am reminded that I was drawn to the study of the history of economics because of books like Van Overtveldt’s! Today, I think the economics and history of the books I read then as shallow, and think that they provide a poor representation of the work real historians of economics do. Yet books like Van Overveldt’s draw people to examine Chicago economics more closely, and that is a good thing. But we should still work to provide a better history.

Here are the reviews of, and web commentary on, The Chicago School that I could find (additions welcome):

Marginal Revolution


BookTV (CSpan 2)

The Economist

John Kay, Financial Times

Alan D. Viard, The American

Kim Phillips-Fein, Chicago Tribune

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