Mises Credited for Phelps's Idea
Today the Wall Street Journal published (p. A18 or online ) an article by David R. Henderson on Phelps's Nobel Prize award. Henderson notes that Phelps himself credited Milton Friedman and Ludwig von Mises. But though Mises's 1911 Theory of Money and Credit is deserving of attention, "Mr. Phelps gets the credit because--this is not his fault--academic economists now insist on formal models."
Phelps, in the Tuesday Oct. 10 WSJ (p. A14), mentions Hayek, but not too favorably. The new laureate writes,
"We all feel good to see people freed to pursue their dreams. Yet Hayek and Ayn Rand went too far in taking such freedom to be an absolute, the consequences be damned. In judging whether a nation's economic system is acceptable, its consequences for the prospects of the realization of people's dreams matter, too. Since the economy is a system in which people interact, the endeavors of some may damage the prospects of others. So a persuasive justification of well-functioning capitalism must be grounded on its all its [sic] consequences, not just those called freedoms."
So there we have it--empirical assessment of consequences trumps freedom. Phelps then goes on to express admiration for John Rawls.
Comments (10)
the endeavors of some may damage the prospects of others
Really? Perhaps some non-Austrian could explain exactly how this supposedly happens.
Considering it is the lynchpin of the entire anti-free-market agenda, they should have no trouble explaining it. One or two of the most extreme examples might be helpful.
Published: October 12, 2006 11:15 AM
Isn't this the same Rawls, which invented the "veil of ignorance"? Obviously, many people are under the veil of ignorance, if they think this was an important contribution to anything.
It also shows, that economists have long lost any idea of history, or they would see that freedom is the only thing that keeps an economy free in the long run.
Published: October 12, 2006 11:57 AM
could strong empiricists like Phelp or Friedman be real libertarians???
is there an strictly empirical way to prove freedom?
olmedo
Published: October 12, 2006 1:13 PM
I read the Phelps article and didn't think he expressed admiration for Rawls but, instead, showed how a change in Rawl's basic assumption (money is the most important thing in life) would reconcile Rawl's logic (which is pretty tight) with a more sensible economic outlook.
Published: October 12, 2006 1:13 PM
could strong empiricists like Phelp or Friedman be real libertarians???
is there an strictly empirical way to prove freedom?
olmedo
Published: October 12, 2006 1:14 PM
could strong empiricists like Phelp or Friedman be real libertarians???
is there an strictly empirical way to prove freedom?
olmedo
Published: October 12, 2006 1:14 PM
Read this line from quote: Since the economy is a system in which people interact, the endeavors of some may damage the prospects of others
What does that sentence imply? First, he has not grasped the first principles of economics. Second, he accepts the idea that people have the right to satisfy their needs, as opposed to the right to act in an attempt to do as long as it does not intefere with another's established property rights, etc.
Saying mean things about Rand and Hayek is generally okay, but it's not okay when the criticism strikes at the heart of all that is good and great about them. (And it's positively aweful when it's an intellectual inferior -- by many degrees -- who is dishing out the criticism.) It reminds me of Randy Barnett saying Rothbard "went overboard" and failed to "respect dissenting viewpoints."
Hey Randy (and Phelps): Drop dead.
Published: October 12, 2006 1:26 PM
olmedo-
No it is impossible to have any purely emperical way to prove freedom or for that matter statism. First, there is no lab that can run controlled experiments on human behavior (all conditions being equal except for the condition being tested for). And second, data requires a theory to interpet it. There are numerous examples of Austrians, communists, neo-con, etc... agreeing on the facts but disagreeing on the meaning of those facts. Anyone who claims to be purely emperical has an unstated and probably unexamined philosphical bais that they are using to interpet the data. One advantage that Austrians have over most others is that they openly state and discuss that bais.
CC
Published: October 12, 2006 2:23 PM
In response to those who wanted a direct quotation from the Henderson article:
"...policy makers could temporarily reduce the unemployment rate by making inflation higher than people expected, but could not achieve a long-run reduction in unemployment with an increase in inflation. In the long-run, then, there is no tradeoff between inflation and unemployment. This striking finding is now mainstream economic wisdom.
"Mr. Phelps was not the first to point this out. Nobel Laureate Milton Friedman (1976) had done so in 1967, as Mr. Phelps himself noted. And Mr. Phelps also credited Austrian economist Ludwig von Mises's book, 'The Theory of Money and Credit,' first published in 1911. But Mr. Phelps gets the credit because--this is not his fault--academic economists now insist on formal models."
Henderson has a salient comment later in his article, which I won't take the time to transcribe at length to the blog, which says that Phelps is "difficult to categorize politically." He objects to minimum wages and wants deregulation, but wants a huge subsidy program for low-end jobs.
Published: October 12, 2006 2:32 PM
Looks like Phelps conflates 'wealth' with 'perceived value.'
While we're on this topic, his article made it that much more depressing for the beginning of my work day--and I *hate* unpleasant beginnings to my work day. I hope that Phelps plans of compensating me for my loss of personal wealth, seeing how his actions in The Economy have hurt my own prospects.
Published: October 13, 2006 6:30 AM