|Peter Boettke|

John Maynard Keynes famously argued in The General Theory that practical men who believe themselves to be devoid of the influence of academic scribblers are in fact "usually the slaves of some defunct economist." This was good rhetoric on Keynes's part primarily to emphasize to his readers how they had to abandon the habits of thought and intellectual straightjackets that they had taken on-board often unwittingly.

But did you know that Milton Friedman argued similarly in Capitalism and Freedom? Friedman states: "There is seldom anything truly new under the sun in economic policy, where the allegedly new generally turns out to be the discard of a prior century in flimsy disguise." (1962, 57)

Do you agree? If so, what does that say about both Keynes and Friedman's respective positions (as they are juxtasposed with each other often in discussions of public policy)? If both are claiming that the positions they are opposing are merely retreads of previously held positions, then what would public policy innovation really look like?

Also, if we consider the argument that Friedman (and Adam Smith before him) makes about the failure of government intervention but the continued progress that US citizens enjoyed during the period inspire of that failure, how can we in fact cleanly test which economic policies are good and which ones are bad. We have in front of us novel/good; novel/bad; old/good; old/bad. Keynes and Friedman both thought they were offering novel/good to be juxtaposed to old/bad mainly and fearing the possibility of novel/bad (Soviet style central planning or Nazi style corporatism as prime examples). But if the empirical test is ambiguous at best, how can we sort out the correct story?

Here is Friedman: " ... there can be little doubt that the record is dismal. The greater part of the new ventures undertaken by government in the past few decades have failed to achieve their objectives. The United States has continued to progress; its citizens have become better fed, better clothed, better housed and better transported; class and social distinctions have narrowed; minority groups have become less disadvantaged; popular culture has advanced by leaps and bounds. All this has been the product of the initiative and drive of individuals co-operating through the free market. Government measures have hampered not helped this development. We have been able to afford and surmount these measures only because of the extraordinary fecundity of the market. The invisible hand has been more potent for progress than the visible hand for retrogression." (1962, 199-200)

I make this argument myself all the time --- stressing the horse race between Smithian, Schumpeterian, Stupidity --- but I do recognize a problem. As I see it, the critics of the market (Keynes, Samuelson, Stiglitz, etc.) deny the very "fecundity of the market" that Smith and Friedman are upholding. The market in their intellectual framework is not self-regulating, and thus the progress experienced must be due to government policy measures.

So the question remains -- how would you design an intellectual test (a broader concept than the more narrow idea of an empirical test) that would be able to sort out from the complex reality of economic policy history which stream of thought is correct? Which academic scribblers have the logic and evidence on their side -- the Smith, Say, Mises, Hayek, Friedman crowd, or the Marx, Keynes, Samuelson, Stiglitz crowd? And if we cannot sort that out, are we in fact all merely "slaves of some defunct economist" when it comes to our public policy pronouncements?

I don't think so, I believe we can sort rationally. But I am sure that those whose positions I consider counter-productive also believe that their positions emerge from rational analysis. And there is the tension in public policy discussions. The Robert Aumann discussion of agreement and disagreement among rational agents simply doesn't deal with humanly rational actors, who have priors, and who look at the world through multiple perspectives. The puzzle isn't why rational actors would ever disagree, it is in fact the opposite how do humanly rational actors ever come to agree with one another about how the world works? This can only be accomplished by institutions that incentive the different actors and provide them with quality information and critical feedback. It is about the epistemic community they find themselves in. So thinking along those lines, why would it be that the epistemic community of economic public policy would produce an endless intellectual cycle rather than a dovetailing toward a consensus?