Of Creatures and Corporations

In a brief digression from the central topic of my blog (not that, after only one other post, this blog can really be said to have a central topic,) I wish to address a trend among those who subscribe to the Austrian School of economics, a dangerous trend which can only serve to hurt said school in the long run. I am speaking of the tendency to consider Darwinian evolution an example of spontaneous order, an illustration of the viability of free market economies. Many, I think, would consider a denial of emergent order in nature to be a tacit denial of the possibility of spontaneous order in society. Nothing could be further from the truth.

There is a certain irony in this trend. While attending a conference on Austrian Economics in New York, I was constantly reminded, along with other attendees, of the folly of trying to impose the methods of the natural sciences upon the social sciences. Yet, after describing the emergent order in markets, many of the lecturers rather unthinkingly and casually inducted biological evolution as an example of other spontaneous orders.

I don’t blame them. Most of them, being economists rather than biologists, had probably never studied evolution in any serious detail. But they need to understand that biological evolution does not–and indeed, cannot–serve as an example of spontaneous order. It cannot, first of all, because the theory is false. It was hatched in an age when scientists knew virtually nothing about the true nature of living organisms, before the discovery of information-rich molecules at the very foundation of life. I will not belabor this point because it is not critical to my argument and is bound to draw fierce objection. The more fundamental problem is that biological evolution could not serve as an example of spontaneous order even if it was true.

To illustrate this, we must begin by defining spontaneous order. F. A. Hayek and others before him defined it as order resulting from human action, but not from the execution of human design. I have some questions as to whether or not this definition is accurate, given Hayek’s own exposition of the concept. As this article points out, whether or not an order is spontaneous depends on your level of analysis. The larger order of a market economy might not be the result of a singletop-down plan. But it is just as assuredly not the result of random chance or serendipity. Were it not for the intelligent, deliberate planning of individuals and firms acting in their own self interest, market forces would have nothing to act upon in the first place. It could not punish and weed out bad economic calculation with losses and could not reward good economic calculation with profits. Thus, as many Austrian economists have already recognized, the “spontaneous” order in market economies is actually the unintentional outgrowth of many intentional, top-down economic plans of a lower order.

Biological evolution simply does not resemble this kind of spontaneous order. It postulates that through purely random mutation, species acquire traits which natural selection (read: the free market) can select for or against, leading to gradual (or rapid, evolutionists can’t seem to get this point straight) changes in populations over time. In other words, not only is there no top down plan evident at the ecosystem level, as is also the case in a free market, there is no top down plan at an organism level, which is clearly not true in a free market.

Some evolutionists have already picked up on muddled explanations of spontaneous order and have begun to peddle them. Michael Shermer, of Skeptic Magazine fame, for example, has tried to argue that conservatives should believe in evolution because they believe in the “invisible hand” of free markets. But there is a crucial difference between emergent order in the economy and biological evolution that makes one plausible, even inevitable, and the other miraculous.  The difference is specificity.

Economics teaches us that the values of goods and services are subjective. One consequence of this is that there is no particular configuration of capital, no economic order, that can be said to be “ideal,” or even “better” than another. A “better” economy, from the economist’s perspective, is simply one in which what people actually have more closely resembles what they want, whatever that might be. By that definition of “order” almost anything could be thought of as orderly.

By contrast, the configuration of a biological organism requires a staggering degree of specificity to support even the most minimal life functions. While there are millions of configurations that work, there are orders of magnitude more configurations that do not. For any one of these configurations, there is practically zero tolerance for deviation in its genetic blueprint, so much so that many eukaryotes have elaborate error correction systems to repair mutations in their DNA.

It is critical that free market economists clarify these points when talking to general audiences about spontaneous order. We already have trouble enough combating the misconceptions peddled by liberals without inviting a whole separate branch of human inquiry to help spread them. We have enough enemies without alienating our natural allies in the evangelical community. Distancing ourselves from evolutionary theory, on the other hand, is an excellent opportunity to explain why spontaneous order in free markets is so plausible.

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Can you find the Rational Voter (suffragator rationalis)?

“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” – Murray Rothbard

The rational voter does not exist.

The sooner we come to grips with the tragic fact that the source of our economic problems is our own stupidity and sloth, the sooner we can start fixing them. Politicians are corrupt. But who lets them linger, languor and writhe in their own fathomless hypocrisy and incompetence? We the corrupt, hypocritical, indolent and incompetent People. Our political problems are a direct extension and magnification of our personal problems; they are our own moral failings acted out by strangers and broadcast on national television.

Launching into a discussion of morality and the transcendent may seem a strange or at least premature departure for a self-styled economics blog. It’s a great deal less of a departure, however, than you might think. Adam Smith, the founding father of the science of economics, was actually a moral philosopher who taught at the University of Edinburgh, and it was his interest in the moral dimensions of daily human interaction that led to his titanic work, The Wealth of Nations. Economics, at its most fundamental level, is the study of how people make choices, whether individually or collectively, and choices are what give meaning to morality. Academics have the luxury of divorcing their discussion from moral considerations, but when the time comes for individuals or political organizations to act upon economic theory (*snort*) and formulate policy decisions, morality inevitably enters the discussion.

There isn’t much I can do or say to right your moral failings or sharpen your moral wit other than to suggest that you adopt a god that exists outside of your own head and reject philosophies that gestated in a plume of marijuana smoke. What I can do, however, is contribute to your understanding of economics, a domain of human knowledge which has enormous consequences for how we view the world and how we make decisions. It also happens to be a subject about which most people are totally clueless, as numerous studies have confirmed. (see links below)

As I learned long ago, this ignorance of economics is not relegated to those on the political left. As a college student I never met a single liberal among my school mates who demonstrated even a basic understanding of the subject. They nevertheless evinced raucous support of one idiotic liberal scheme after another, giving corporeal shape to Rothbard’s injunction. After college, I encountered many conservative activists who were little better off in terms of their understanding of economics. Fortunately, the conservatives had much better instincts that led them to more sensible policy preferences even if they did not have the intellectual ammunition to defend them. Do not think yourself above economic fallacies just because you support free markets.

Rather than simply talking about economic illiteracy, let me support my aspersions with more concrete evidence. I have posted this test several times on Facebook, but it certainly bears posting again. See if you can get a passing grade.

http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3579

http://econfaculty.gmu.edu/bcaplan/pdfs/whatmakespeoplethinklike.pdf
http://www.csmonitor.com/Business/Donald-Marron/2012/0904/Investors-lack-basic-financial-literacy-study-finds

http://business.time.com/2012/04/23/financial-literacy-u-s-trails-brazil-and-mexico/

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