May 30, 2024
When I started “Marginalia”—which I now call “A Fuller’s Soap”—I envisioned it as a place to store some of my favorite quotes in economics. I would post notable quote whenever I came across, or was reminded, of one. To help keep the blog manageable and useful, I’ve decided to consolidate and cull my favorite quotes. In a few cases, I “cheated.” They’re not by economists or about technical economics. Oh well.
Here they are with a bit of my minimal commentary sprinkled in.
“Capitalism stands its trial before judges who have the sentence of death in their pockets. They are going to pass it, whatever the defense they may hear; the only thing a successful defense can possibly produce is a change in the indictment.”
From his 1942 classic, Capitalism, Socialism, and Democracy.
People in my circles are justifiably fond of the following C.S. Lewis quote:
“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated: but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience. . . . This very kindness stings with intolerable insult. To be ‘cured’ against one’s will and cured of states which we may not regard as disease is to be put on a level of those who have not yet reached the age of reason or those who never will; to be classed with infants, imbeciles, and domestic animals.”
It’s from his God in the Dock: Essays in Theology and Ethics.
Recently, I came across a much lesser-known quote of CSL’s, from an op-ed in The Observer:
“Is there any possibility of getting the super Welfare State’s honey and avoiding the sting? Let us make no mistake about the sting. The Swedish sadness is only a foretaste. To live his life in his own way, to call his house his castle, to enjoy the fruits of his own labour, to educate his children as his conscience directs, to save for their prosperity after his death—these are wishes deeply ingrained in civilised man. Their realization is almost as necessary to our virtues as to our happiness. From their total frustration disastrous results both moral and psychological might follow.”
3.
Carl Menger
From Menger’s much-less-read-than-Principles, Investigations into the Method of the Social Sciences:
“Language, religion, law, even the state itself, and, to mention a few economic social phenomena, the phenomena of markets, of competition, of money, and numerous other social structures are already met with in epochs of history where we cannot properly speak of a purposeful activity of the community as such directed at establishing them. Nor can we speak of such activity on the part of the rulers. We are confronted here with the appearance of social institutions which to a high degree serve the welfare of society. Indeed, they are not infrequently of vital significance for the latter and yet are not the result of communal social activity. It is here that we meet a noteworthy, perhaps the most noteworthy, problem of the social sciences:
How can it be that institutions which serve the common welfare and are extremely significant for its development come into being without a common will directed toward establishing them?”
Hard to disagree with Menger!
And a bonus Menger fun fact: Carl Menger’s grandson is very much alive and well and an emeritus professor of chemistry at Emory University. Here’s his university page and here’s his Google Scholar page.
“The time has surely gone in which economists could analyze in great detail two individuals exchanging nuts for berries on the edge of the forest and then feel that their analysis of the process of exchange was complete, illuminating though this analysis may be in certain respects. The process of contracting needs to be studied in a real world setting. We would then learn of the problems that are encountered and of how they are overcome and we would certainly become aware of the richness of the institutional alternatives between which we have to choose.”
From his Nobel acceptance speech.
Here’s Bastiat’s magnificent, soaring take on the social order.
From his Economic Sophisms.
“Now what astonishes me, what amazes me, is that a political theorist or statesmen who sincerely professes an economic doctrine whose basic principle runs so violently counter to other principles that are indisputable, can enjoy a moment’s calm or peace of mind.”
“For my own part, I think that if my study of the science of economics had led me to such conclusions, if I did not perceive clearly that freedom, the general welfare, justice, and peace are not only compatible but also closely connected and, so to speak, identical, I should endeavor to forget all I had learned.”
“’And I should ask myself: ‘How could God have willed that men should attain prosperity only through injustice and war? How could He have willed that they should renounce war and injustice only at the price of their well-being?“
“Is this science not misleading me when it requires me to accept the frightful blasphemy that this dilemma implies? How can I dare take it upon myself to make such a doctrine the basis of the laws of a great nation? And when a long succession of illustrious scholars has drawn more reassuring conclusions from the same science after devoting their entire lives to its study; when they assert that freedom and the general welfare are perfectly compatible with justice and peace, and that all these great principles run parallel to one another and will do so through all eternity without ever coming into conflict, do they not have on their side the presumption that stems from all that we know of the goodness and wisdom of God, as manifested in the sublime harmony of the physical universe? In the fact of such presumption and so many impressive authorities, am I, after a merely cursory investigation, to believe that this same God saw fit to introduce antagonism and discord into the laws of the moral universe? No; before concluding that all the principles of social order run counter to and neutralize one another and are in anarchic, eternal, and irreconcilable conflict; before imposing on my fellow citizens the impious system to which my reasoning has led me; I intend to review every step in the argument and make sure there is not some point along the route where I have gone astray.’ “
“If, after an unprejudiced investigation, repeated twenty times over, I always arrived at the appalling conclusion that one must choose between material goods and moral good, I should be so disheartened that I should reject this science, I should bury myself in voluntary ignorance, and above all, I should decline to participate in any way in public affairs, leaving to men of another character the burden of, and the responsibility for, so painful a choice.”
Few passages in economics border on the theologically sublime, but this one does.
Footnote 6 from Jensen and Meckling’s classic 1976 paper:
“Property rights are of course human rights, i.e., rights which are possessed by human beings. The introduction of the wholly false distinction between property rights and human rights in many policy discussions is surely one of the all time great semantic flimflams.”
Armen Alchian and Murray Rothbard make the same point. Alchian:
“Private property rights do not conflict with human rights. They are human rights. Private property rights are the rights of humans to use specified goods and to exchange them. Any restraint on private property rights shifts the balance of power from impersonal attributes toward personal attributes and toward behavior that political authorities approve. That is a fundamental reason for preference of a system of strong private property rights: private property rights protect individual liberty.”
The birth of economic thought was a watershed moment because it revealed the operation of laws for the social order which were distinct from moral or physical laws (both acknowledged to operate before economics was discovered).
In Interventionism, Ludwig von Mises elaborates on this point at length:
“The pre-scientific mind distinguished between the good and the bad, the just and the unjust in human action. It believed that human behavior could be evaluated and judged by the established standards of a heteronomous moral law. It thought that human action was free in the sense of not being subject to the inherent laws of human behavior. Man should, it argued, act morally; if he acted differently God would punish him in the hereafter if not during his lifetime; man's actions do not have any other consequences. Therefore, there need be no limit to what the authority might do as long as it did not come in conflict with a stronger power. The sovereign authority is free in the exercise of its power provided it does not exceed the boundaries of the territory in which it is sovereign; it can accomplish everything it desires. There are physical laws which it cannot change; but in the social sphere there are no limitations on what it may do.”
“The science of political economy began with the realization that there is another limit for the sovereignty of those in power. The economist looks beyond the state and its power apparatus and discovers that human society is the outcome of human cooperation. He discovers that there prevail laws in the realm of social cooperation which the state is unable to modify. He recognizes that the process of the market, which is the result of these laws, determines prices and that the system of market prices provides the rationale of human cooperation. Prices no longer appear as the result of an arbitrary attitude of individuals dependent on their sense of justice but are recognized as the necessary and unequivocal product of the play of market forces. Each specific constellation of data produces a specific price structure as its necessary corollary. It is not possible to change these prices-the "natural" prices-without having previously changed the data. Every deviation from the "natural" price releases forces which tend to bring the price back to its "natural" position.”
“This opinion is directly contrary to the belief that the authority can alter prices at will through its orders, interdictions, and penalties. If prices are determined by the structure of data, if they are the element in the process which effects social cooperation and which subordinates the activities of all individuals to the satisfaction of the wants of all members of the community, then an arbitrary change of prices, that is one independent of changes in the data, must necessarily create a disturbance in social cooperation. It is true that a strong and determined government can issue price orders and can cruelly revenge itself on those who fail to obey. But it will not achieve the aim it seeks through the price orders. Its intervention is but one of the data in the market which produces certain effects according to the inevitable laws of the market. It is extremely doubtful whether the government will be pleased with these effects and it is extremely doubtful whether government will not consider them, when they appear, as even less desirable than the conditions it sought to change. At any rate these measures do not achieve what the authority wants to accomplish. Price interventions are, therefore, from the standpoint of the initiating authority not only ineffective and useless, but also contrary to purpose, harmful, and thus illogical.”
“Anyone attempting to refute the logic of these conclusions denies the possibility of analysis in the field of economics. There would otherwise be no such thing as economics and everything that has been written on economic matters would be meaningless. If prices can be fixed by the authority without producing a reaction in the market which is contrary to the intentions of the authority, then it is futile to attempt an explanation of prices on the basis of market forces. The very essence of such an explanation of market forces lies in the assumption that each constellation of the market has a corresponding price structure and that forces operate in the market which tend to restore this-"natural"-structure of prices if it is disturbed.”
If I encountered a more compelling idea on my thought while an undergraduate, I don’t remember it now.
“The serious fact is that the bulk of the really important things that economics has to teach are things that people would see for themselves if they were willing to see. And it is hard to believe in the utility of trying to teach what men refuse to learn or even seriously listen to.”
A good reminder for Econ 101.
9.
Paul Heyne
“Is there an individual reason for learning economics if it won’t make the student rich? There is. It clears up puzzles. It explains important and interesting mysteries. People with any sort of intellectual life, or just with a healthy human curiosity about the world in which they live, cannot be comfortable participating in a social system that they don’t understand.”
Plus, economics will make you a more grateful person.
The price system—free enterprise—capitalism—the market economy—liberalism—pick your favorite term—doesn’t rest on a “foundation” of greed. Neither does it promote or encourage greed among market participants.
In fact, greed cuts right through the middle of every human heart, making it a feature common to every form of social organization. The relevant question, one that economists since Smith have emphasized, is: Which system of social organization channels greed to socially productive, rather than destructive, ends?
Here’s Kirzner with a characteristically pithy way of putting it:
“The essential quality of a market system, contrary to popular thinking, is not that it promotes greed; but rather, that it renders greed harmless.”
It’s a good reminder during the Christmas season when “consumerism” and “capitalism” are too often conflated.
11.
Ludwig von Mises
From the introduction to Human Action:
“Economics opened to human science a domain previously inaccessible and never thought of. The discovery of a regularity in the sequence and interdependence of market phenomena went beyond the limits of the traditional system of learning.”
Prior to the light economics shed, philosophers thought primarily in moral categories. Maybe Charles Taylor would refer to this as the Medieval “imaginary.” If a king’s policies failed to achieve his stated ends (always good things—peace and prosperity), this was liable to be chalked up by observers to a moral deficiency. Perhaps he was a wicked ruler! Economics changed all that. It was the first discipline to show concretely, rigorously, and systematically that intentions don’t guarantee outcomes.
“Thus, by teaching Greek to men who can neither make shoes nor drive an engine, I can get myself shod and carried by men who have no wish to be taught Greek. It might be a valuable exercise for any one who is “earning his living” to attempt to go through a few hours or even a few minutes of his daily life and consider all the exchangeable things which he requires as they pass, and the net-work of cooperation, extending all over the globe, by which the clothes he puts on, the food he eats, the book containing the poems or expounding the science that he is studying, or the pen, ink, and paper with which he writes a letter, a poem, or an appeal, have been placed at his service, by persons for the direct furtherance of whose purposes in life he has not exercised any one of his faculties or powers. Such an attempt would help us to realise the vast system of organized co-operation between persons who have no knowledge of each other’s existence, no concern in each other’s affairs, and no direct power of furthering each other’s purposes, by which the most ordinary processes of life are carried on. By the organisation of industrial society we can secure the co-operation of countless individuals of whom we know nothing, in directing the resources of the world towards objects in which they have no interest. And the nexus that thus unites and organises us is the business nexus—that is to say, a system of exchanges, conducted for the most part in terms of a medium that enables us to transform what we have into what we want at two removes.”
By possibly the most underrated economic mind of all time. From his “Commonsense.”
Was Wicksteed the first economic imperialist? Consider:
“Whether our housewife is apportioning the stuffing of a goose at table, or her housekeeping money in the market, or her time and attention between schemes for getting or keeping a connection for boarders and the more direct cultivation and furthering of the general tastes and interests of her life; and whether her husband is conducting family prayers, or posting up his books at the office, or weighing the advantages and disadvantages of a partial retirement from business; whether, in a word, either or both of them are pursuing their ultimate purposes in life and obeying their fundamental impulses by direct or by indirect means, they and all the people they are concerned with are alike engaged in administering resources, in developing opportunities and choosing between alternatives, under the great controlling guidance of the two principles we have been continuously illustrating throughout our investigations.”
13.
“It is one of the causes of the unique position of economics that the existence of a definite object of its investigation can be realized only after a prolonged study, and it is, therefore, not surprising that people who have never really studied economic theory will necessarily be doubtful of the legitimacy of its existence.”
From his “The Trend of Economic Thinking.”
Outright “economics denialism” is increasingly the most common objection I hear when talking to anyone about the Dismal Science. And anyone who has taught economics has encountered the suspicion that it’s all little more than ideology.
14.
“Since the same resource cannot simultaneously be used to satisfy competing demands, conflicts of interest will be resolved one way or the other. The arrangements for doing this run the full gamut of human experience and include war, strikes, elections, religious authority, legal arbitration, exchange, and gambling. Each society employs a mix of such devices, and the difference between social organizations consists largely in the emphasis they give to particular methods for resolving the social problems associated with resource scarcity.”
“The diverse approaches of the intersecting ‘schools’ must be the bases for conciliation, not conflict. We must marry the property-rights, law-and-economics, public choice, Austrian subjectivist approaches.”
16.
A.G. Sertillanges in his classic, The Intellectual Life:
“The man who wants to acquire from this authors, not fighting qualities, but truth and penetration, must bring to them this spirit of conciliation and diligent harvesting, the spirit of the bee. Honey is made of many kinds of flower.”
“But, by an inference as false as it is unjust, do you know what the economists are now accused of? When we oppose subsidies, we are charged with opposing the very thing that it was proposed to subsidize and of being the enemies of all kinds of activity, because we want these activities to be voluntary and to seek their proper reward in themselves. Thus, if we ask that the state not intervene, by taxation, in religious matters, we are atheists. If we ask that the state not intervene, by taxation, in education, then we hate enlightenment. If we say that the state should not give, by taxation, an artificial value to land or to some branch of industry, then we are the enemies of property and of labor. If we think that the state should not subsidize artists, we are barbarians who judge the arts useless.”
I was reminded of this quote in reading Richard Hofstadter’s classic, Anti-Intellectualism in American Life.
In it, Hofstadter repeatedly interprets resistance to government-sponsored education, science, and the arts as equivalent to disdain for education, science, and the arts. Of course, in any given instance, the inference might be justified, but making the leap without argumentation is, well, anti-intellectual. See Demsetz. Or see David Henderson’s playful classroom exercise. Hofstadter likewise glosses over opposition to the New Deal as inherently anti-intellectual with a nary an argument proffered.
“The popular assertion that there are various schools of economics whose theories have nothing in common and that every economist begins by destroying the work of his predecessors in order to construct his own theory on its ruins is no more true than the other legends that the proponents of historicism, socialism, and interventionism have spread about economics. In fact, a straight line leads from the system of the classical economists to the subjectivist economics of the present. The latter is erected not on the ruins, but on the foundations, of the classical system. Modern economics has taken from its predecessor the best that it was able to offer. Without the work that the classical economists accomplished, it would not have been possible to advance to the discoveries of the modern school. Indeed, it was the uncertainties of the objectivistic school itself that necessarily led to the solutions offered by subjectivism. No work that had been devoted to the problem was done in vain. Everything that appears to those who have come afterward as a blind alley or at least as a wrong turning on the way toward a solution was necessary in order to exhaust all possibilities and to explore and think through to its logical conclusion every consideration to which the problems might lead.”
From Mises’ Epistemological Problems of Economics, first published in German in 1933 and in English in 1960. That was then, this is now. Then Mises was able to claim that “all” the schools of economics were united in their message, differing only in their mode of expression. Now, the situation has changed—not to mention diversions introduced by the Keynesian Revolution. But economic science hasn’t changed. It’s the same yesterday, today, and tomorrow, even if our grasp of it continues to grow (or retrogress).
Mises, again:
“Nevertheless, knowledge about the inexorability of the laws of nature has so long since forced its way into the mind of the public—at least of the educated public—that people see in the theories of natural science a means by which they can attain ends that would otherwise remain unattainable. But, in addition, the educated classes are possessed by the idea that in the social domain anything can be accomplished if only one applies enough force and is sufficiently resolute. Consequently, they see in the teachings of the sciences of human action only the depressing message that much of what they desire cannot be attained. The natural sciences, it is said, show what could be done and how it could be done, whereas praxeology shows only what cannot be done and why it cannot be done. Engineering, which is based on the natural sciences, is everywhere highly praised. The economic and political teachings of liberalism are rejected, and catallactics, on which they are based, is branded the dismal science.”
The idea that the “social domain” is a constraint-free zone is reminiscent of the James Buchanan’s underrated essay, “There is a Science of Economics,” which can be found in “The Logical Foundations of Constitutional Liberty.” That constraints exist and that they limit what we may “accomplish” is probably the most compelling proof that economics isn’t make-believe.
Why the rejection? Mises pinpoints a key factor that still inspires most initial forays into economics:
“Scarcely anyone interests himself in social problems without being led to do so by the desire to see reforms enacted. In almost all cases, before anyone begins to study the science, he has already decided on definite reforms that he wants to put through. Only a few have the strength to accept the knowledge that these reforms are impracticable and to draw all the inferences from it. Most men endure the sacrifice of the intellect more easily than the sacrifice of their daydreams. They cannot bear that their utopias should run aground on the unalterable necessities of human existence. What they yearn for is another reality different from the one given in this world.”