Obituary: Robert Heilbroner
A brief obituary appears in the New York Times, courtesy of The Associated Press: "Robert Heilbroner, 85, Economist and Writer, Dies."
Absent from this brief death notice is, perhaps, one of Heilbroner's most famous formulations. Upon the collapse of 20th century socialism, he said: "Mises was right."
Comments (13)
Yes, Mises was correct regarding the impossibility of socialist economic calculation. But the collapse of the so-called socialist economies is really beside the point. As I believe is now widely admitted, the so-called socialist economies did not fundamentally establish their own prices. They copied the prices of the comparatively free market economies and then adjusted these prices in an attempt to fit them to local conditions. The central planners copied and then adjusted market economy prices because a socialist economy can not establish prices for the factors of production.
Interestingly, while the mainstream economics profession generally purports to understand Mises’s demonstration of the impossibility of socialist economy, leaving aside the question of whether they fully comprehend the calculation argument and its implications, many in the mainstream profession do not appreciate Mises’s argument involving interventionism. Many in the mainstream still do not understand that government intervention into the market economy has self-defeating negative consequences. These negative consequences, if consistent action on the part of the interventionist is assumed, require additional government intervention, which, if pursued vigorously enough, eventually leads to full state direction of production and the abolition of markets for the factors of production. As a simple illustration, the price of a good can not be lowered by imposing a price ceiling below the market clearing price of that good. A shortage will inevitably result, which, from the viewpoint of the interventionist, will require additional interventions, such as price ceilings on the factors used to produce this good and/or government directives that factors used in the production of other goods be transferred to the production of the good on which the price ceiling was initially imposed.
An additional point regarding interventionism and one directly related to Mises’s calculation argument is that when the prices determined by the market are altered by government intervention these prices no longer reflect the economic data, and economic calculation utilizing these prices is compromised. Thus, the rationality in the allocation of the factors of production made possible by economic calculation is negatively impacted. If enough prices are substantially altered by government intervention, economic calculation will effectively break down.
Published: January 11, 2005 1:09 PM
Unfortunately, Heilbroner later qualified his praise of Mises in a way that shows he missed the point. In his book 21st Century Capitalism Heilbroner said that Mises was right that socialism was unworkable, but right for the wrong reason: socialism has incentive problems, but no informational problems. Everybody knew that there was a shortage of shoes, he said, but no one had any incentive to do anything about it (as though Mises' calculation argument were about absolute quantities of consumer goods rather than choices among relative quantities of producer's goods).
Published: January 11, 2005 1:49 PM
I just heard a new argument against Austrianism, put to me by a professor of economics (of the Chicago School, now retired):
"The trouble with Austrians is that they've never actually had to run an economy, so they're nothing but theoreticians who can't contribute anything to the real world."
If so then Einstein can also be ignored because of his lack of experience building and flying rocket ships.
Keynes was offered to me as the definitive work on the Great Depression. Now there's a man with plenty of experience advising governments on economic policy. I promised that I would read it as soon as I finish Rothbard's America's Great Depression.
Published: January 11, 2005 9:39 PM
"The trouble with Austrians is that they've never actually had to run an economy, so they're nothing but theoreticians who can't contribute anything to the real world."
That was either a joke on your professor's part, or he didn't get what Austrians believe.
Obviously, an economy cannot be "run" or managed by non-interventionist economists, since such an economy would not be managed at all. The Federal Reserve could not be run by Austrian principles, since it would cease to exist.
On the other hand, every truly free market that has existed throughout history has run according Austrian principles - i.e. the praxeology principles of human economic behaviour as described and explained by Mises and other Austrians.
As you say, O. Henry, one need not run a system to accurate describe it.
Published: January 12, 2005 3:16 AM
> The trouble with Austrians is
> that they've never actually had
> to run an economy
What about Alan Greenspan? ;-)
Published: January 12, 2005 8:42 AM
"The trouble with Austrians is that they've never actually had to run an economy"
how about Eugen von Böhm Bawerk? (three times Minister of Finance in Austria)
and which other great non-Austrian economist actually "ran an economy" (successfully, I mean)?
Published: January 13, 2005 6:30 AM
"The trouble with Austrians is that they've never actually had to run an economy." Let us not forget Ludwig von Mises, who apparently was responsible for preventing the Marxist socialists from seizing control of Vienna and possibly all of Austria after World War 1. I believe he convinced socialist leader Otto Bauer that a socialist takeover would likely lead to widespread starvation in that country. In addition, Mises was responsible for preventing a hyperinflation in Austria after the first World War. Moreover, as a result of the influence he exerted from his advisory position in the Chamber of Commerce in Austria, he has been called "The Economist of the Country." Interestingly, Germany suffered a hyperinflation after World War 1, arguably due to that country's lack of any real economists as a result of the stranglehold that had been placed on the economics profession for many decades by the German Historical School. Finally, as noted in some of the above postings, I believe it is accurate to state that Austrian School economists emphatically do not desire to "run" any economy. Instead, if they choose to enter the public policy arena, they desire to advise government officials and representatives as to the appropriate and scientifically correct courses of action.
Published: January 13, 2005 10:46 AM
Thank you all for your interesting comments.
The Federal Reserve could not be run by Austrian principles, since it would cease to exist.
Funny that you should mention this, because my friend specifically held out the creation of the Federal Reserve as an example of the beneficial effects of intervention in the economy. The evidence of this is that (a) the fed is still in existence after 90 years; and (b) every major country has a central bank. My only rejoinder was to wonder how such a beneficial institution could have somehow overseen a Great Depression of ten years' length, whereas in the bad old days before its foundation, no depression lasted for more than a year or two (Rothbard does acknowledge the depression of 1873-1879, which has been described as mild, and related to the re-adoption of the gold standard).
Published: January 13, 2005 9:11 PM
As noted in some of the above postings, the existence and operations of the Fed fundamentally contradicts the monetary and business cycle theories of Mises/Rothbard, Hayek, and other Austrian School economists. However, the large majority of the economics profession, including the Chicago School and the various forms of Keynesianism, does not agree with the Austrians regarding these issues. One possible measure of the correctness of the economic theories that guide the Fed’s actions is that the purchasing power of the dollar has declined to approximately $0.05 since the Fed’s inception in 1913. And we still have the boom/bust business cycle. Although there are both conceptual and practical problems with price indexes, for roughly 200 years prior to the Fed’s inception, U.S. prices, while at times exhibiting considerable short-term fluctuation (partially do to wartime inflation), had generally remained stable.
Published: January 14, 2005 8:39 AM
See also, from a 1997 biblio of one of my publications: See Gertrude E. Schroeder, The Dismal Fate of Soviet-Type Economies: Mises Was Right, CATO J. v11 n1 (Spring/Summer 1991) p. 13. Robert Heilbroner, an avowed democratic socialist, has also admitted the triumph of capitalism and Mises’ prescience. “Less than seventy-five years after it officially began, the contest between capitalism and socialism is over: capitalism has won.� Robert Heilbroner, The Triumph of Capitalism, THE NEW YORKER, Jan. 23, 1989, p. 98, 98. “It turns out, of course, that Mises was right.� Robert Heilbroner, After Communism, New Yorker, Sept. 10, 1990, p. 91, 92. See also Mark Skousen, “Just because socialism has lost does not mean that capitalism has won�: Interview with Robert L. Heilbroner, FORBES, May 27, 1991, p. 130. Heilbroner had previously dismissed Mises’s arguments, helping to spread the myth that Mises’s anti-socialist claims had been “demolished� by socialist theorists responding to Mises’s arguments. See ROBERT HEILBRONER, BETWEEN CAPITALISM AND SOCIALISM 88-93 (1970). In this work, Heilbroner claimed that Mises was wrong, that socialist economic calculation was possible, and that the “superior performance� of socialism would “soon reveal the outmoded inadequacy of a free enterprise economy.�
Published: March 23, 2005 2:15 PM
Also--here is the Heilbroner interview cited above; and a recent piece by Dave Boaz in Reason about Heilbroner.
Published: March 24, 2005 3:10 PM
Here also are selected pages from Heilbroner's Between Capitalism and Socialism (1970). See his nauseating remarks about the feasibility of socialism, and his terrible caricature of libertarianism.
Published: July 13, 2005 11:10 PM
Going back on the point over "Austrians" who actually ran an economy, I would cite some modern classical economists who -although not purely 'Austrian'- had immense influence in the economic policy of their governments: Jacques Rueff in France and Wilhelm Roepke in Western Germany after World War II.
Going further back to the 1860s, some outstanding classical economists with government responsibilities were both the great Richard Cobden in Great Britain and Michel Chevalier in France.
John Cowperthwaite in Hong Kong also after WW2 was the closest thing to a purely classical economist setting economic policy (and there is still no central bank in Hong Kong!)
Published: September 4, 2007 6:48 AM