The following quote is from Professor Donald Boudreaux of George Mason University, at his blog Cafe Hayek :
As the state intrudes into more areas of our lives, demand naturally arises for [justification] of the intrusions – both from the politicians and bureaucrats who do this intruding, and from the special-interest groups who benefit from it. A politician and lobbyist who can point to a favorable study by Prof. Jones of Acme University has a better chance of imposing his or her pet intrusion than does a politician or lobbyist who can point to no such study. So, of course, as the number and frequency of such intrusions grow, so too do the opportunities for the Prof. Joneses of the academy to be rewarded with notice or acclaim – and sometimes even lucrative consulting opportunities – for his or her formal arguments and empirical findings.
I don’t accuse the Prof. Joneses of the academy of being mercenary. I’m sincerely quite sure that almost none of them are. What’s going on here instead is a kind of academic natural-selection process: as the state expands its reach, the chance for some economic hypothesis or empirical finding in support of greater state involvement to find a receptive audience grows. And because that audience includes many people who, because of their office, are widely respected and have access to generous budgets, economists who are naturally biased in favor such intrusions have greater personal and professional incentives (in addition to the greater opportunities) to produce more of their research – research which, while supporting such intrusions, is produced honestly and scrupulously.
The upshot of all of these forces is that, compared to the past, a smaller portion of the economics profession today has mastered the economic way of thinking. Being credentialed as “economists,” these economists (and the general public) understandably believe that these economists today understand the economic way of thinking. But too many of them do not.
Professor Boudreaux’s first reference to “the economic way of thinking” is to the $165 paperback textbook used in first semester economics classes in some universities. His second reference is to the process itself which the authors of the book describe as “…a set of concepts derived from one fundamental presupposition: All social phenomena emerge from the actions and interactions of individuals who are choosing in response to expected additional benefits and costs to themselves.” For our purposes it may be thought of as rigorously thinking about the costs and benefits of any action proposed by anyone, especially government, and always bearing in mind that not all the costs may be obvious. Some may be hidden or subtle and if ignored or unseen will cause one’s evaluation to be defective. The phenomena economists refer to as “opportunity costs” or “lost opportunity costs” are easily unseen and hence unappreciated. Something that is a true cost could be argued by its advocate to be a thing entirely different or even disguised as a benefit.
A prime example currently in vogue is license plate readers used by law enforcement and some private companies. These are almost always touted as 100% beneficial at a small and worthwhile cost. But the unwarranted privacy intrusions and opportunities for abuse that are not matched by any discernible benefit are completely ignored.
The economic way of thinking (or not thinking) explains, I believe, why most politicians and bureaucrats prefer the economic theories of John Maynard Keynes to those of Friedrich Hayek. Keynes’s theories offer much justification for intrusion to solve economic problems, while Hayek’s counsel us to allow the corrective mechanism of the free market to work. Politicians and their accomplices will always look to Keynes for assistance. The Hayekian approach might have them do nothing when they fervently want to be seen as doing something.
That Hayek (assuming they know who he was) is right and Keynes is wrong never intrudes into the thinking off the intruders. This is so even though a handy history lesson proves which of these economists had it right.
The panic of 1920-1921 was handled by the Warren G. Harding administration by adhering to the economic counseling of Ludwig von Mises, (Hayek’s teacher and mentor) even though Harding probably had never heard of Mises and Hayek was still a 21-year old student as the University of Vienna. As a result the recession of 1920-1921, even though it was initially very deep, never became a depression and in fact cured itself by 1923.
The reaction of Herbert Hoover and Franklin Roosevelt was pure Keynesian and the Great Depression that developed after (but not necessarily because of) the 1929 stock market collapse descended into a deep depression that lasted for 12 years and ended only when the intrusions of the New Deal were replaced by other concerns after December 11, 1941.
I find Professor Boudreaux’s statement that is quoted above to be excellent. But I have to disagree with it in one small part. It’s understandable that Professor Boudreaux would not want to accuse “the Prof.Joneses of the academy of being mercenary.” Too many of them are his colleagues and he has to work with them and perhaps even socialize with them. I have no such limitation, and I can see clearly that the global warming/climate change flapdoodle nonsense proves that a lot of them are not just mercenary, but fraudulent.