|Peter Boettke|

Last Sunday (November 9th 2014) marked the 25th anniversary of the Fall of the Berlin Wall. The Soviet Union would collapse 2 years later on December 26th 1991 in the wake of the failed coup attempt in August by hard-liners.

I started paying attention to the Soviet Union back in 1972, and not due to politics but as a result of on what I considered a great injustice done by the referees to the US Olympic basketball team in the gold medal game against the Soviet team. So if truth be told, I had a Cold Warrior mentality toward the Soviet Union but due to rivalry in sports, not politics starting as a pre-teen and continuing through my teenage years. At Grove City College, as I was introduced to economics, I became more focused on the Soviet economic system and its failings. As I "matured" (I put that in quotes because it is a relative issue) I also became obsessed with the theory and history of socialism more generally, and especially the debate between both economists (Mises-Hayek and Marx-Marxists) and philosophers (Ayn Rand and (at that time) Christian socialists). It was my good fortune to stumble upon an issue of the Journal of Libertarian Studies, 5 (1) 1981 edited by Don Lavoie, and to read Lavoie's work -- though essays in that volume by Rob Bradley, Sheldon Richman and David Ramsey Steele stand out as pivotal to my growth of knowledge in the area. I decided after my exposure to Lavoie that I wanted to pursue advanced study of both Austrian economics and the theoretical problems with socialism. Almost simultaneous to my discovery of Lavoie's work, I received a mailing from the Institute for Humane Studies annoucing the establishment of a PhD program at George Mason University and the ability to study Austrian economics through the faculty at the Center for the Study of Market Proecesses --- where Don Lavoie was a featured teacher.

After some consideration of alternatives and the sort of calculations that a 23 year old might make, Rosemary and I decided that I would give up a rather lucrative position as a tennis teaching professional in NJ (I never made the same nominal salary I was making teaching tennis in teaching economics until my last few years at NYU --- and that is in nominal terms not real!) and head to graduate school at George Mason University. I actually did not receive a fellowship (didn't apply for one because I didn't understand that process at the time) and was originally admitted only to the MA program. Once I got to the campus in Fairfax, through tennis connections I was offered a job as the Assistant tennis coach at GMU and a teaching tennis job at the International Club where the head coach also was a teaching pro. But Rich Fink, then head of CSMP, offered me a fellowship and the chance to work for Don Lavoie on the Center's newsletter, Market Process. After talking it through with Rosemary, it was decided that since I was at GMU to study Austrian economics and, in particular, with Don Lavoie so I could focus on the problems with socialism in theory and practice, I would turn down the tennis jobs and take the fellowship --- though it again meant that we would be living on a lot less money. I also in that first semester, transferred into the PhD program -- though that was indeed my plan all along, I just thought you needed to get an MA first and then apply for a PhD. I had a lot to learn that first year in graduate school, and it wasn't limited to economics. But thankfully several more experienced graduate students took me under their wing and showed me the ropes -- namely, Roy Cordato, Karen Palasek, Deb Walker and Wayne Gable.

So began my intellectual journey under Don Lavoie's mentorship. I consider myself to have had a very charmed history when it comes to economics -- Sennholz came into my life at preciously the right time that I was able to learn from him, and I had the good fortunate to study with James Buchanan, Gordon Tullock and Kenneth Boulding as a graduate student, and then I had the amazing opportunity to work with Israel Kirzner for 8 years at NYU, and in-between I spent a year with Milton Friedman and Gary Becker at Hoover, and then of course at GMU upon my return I had the experience to interact and learn from one of the most fertile minds in the discipline of economics Vernon Smith. But working with Don Lavoie from 1984-88 has been my most cherished experience. Don was an assistant professor, about to become a tenured associate professor, he was young, totally committed to the ideas of Mises-Hayek, and unashamedly radical. His books, Rivalry and Central Planning and National Economic Planning: What is Left? were both published in 1985, so my first task as his research assistant was helping to track down last minute references in preparation for the books to be published. When the books were published and Don was subsequently celebrated for his achievement across the ideological spectrum of academia, I celebrated with him. His work garnered further attention as the socialist system in East and Central Europe and the Soviet Union started to fracture. Poland's Solidarity movement, Hungarian reforms, and of course the Gorbachev efforts at perestroika and glasnost all seemed to both confirm Lavoie's arguments and to reflect the practical promise of Lavoie's radicalism in political and economic affairs.

I studied socialst political and economic theory and socialist philosophy, but also history, culture and even language (I studied Russian language for close to 8 years, but never really learned it; some might say I have studied the English language for my entire life and have yet to learn that as well!). My work focused on bringing the powerful insights of Mises-Hayek to the study of the history of socialism in the Soviet Union --- its origins, its practice, its consequences. I would later add the complementary analytical component of Buchanan-Tullock on politics to examinations of socialist practice. Over the course of the next decade and a half, I published The Political Economy of Soviet Socialism: The Formative Years, 1918-1928; Why Perestroika Failed; The Collapse of Development Planning (edited); Socialism and the Market (9 volumes, edited); and Calculation and Coordination. During that time, I was a research fellow for extended periods in Moscow, Prague, Jena, and have given lectures at various universities in Poland, Romania, Slavakia, and Serbia. I have numerous wonderful memories of people and places throughout East and Central Europe and the former Soviet Union. I have learned from them not only about events and contemporary affairs, but also about intellectual movements and the spread of ideas more generally.

In a recent co-authored paper wtih Olga Nicoara that will be published in The Oxford Handbook of Austrian Economics, we try to survey what the leading students and practitioners of economic reform claim to have learned from the 25 year experience. The consensus seems to be that:

1. Transition problems are not particulary difficult economic problems per se;

2. Transition problems are instead difficult political/legal and social/cultural problems;

3. Critical to success is leadership by a political entrepreneur;

4. And, the existing stock of social/cultural capital among the population matters for the success of the economic, political and cultural transformation that post-communism represented.

If you look at Andrei Shleifer's "The Age of Milton Friedman" (2009), he ends by claiming that the critical issues plaguing less developed economies and regions are "shortage of human capital" and "predatory regulatory and tax policies". His paper is excellent and should be read by all students of comparative institutional analysis and development economics more generally. But I would argue that if you can translate those critical issues into the language of lessons from post-communism one can see a fundamental connection. Though not trying to link these specific claims in the literature at the time, this is fundamentally the argument I am making in my 2010 paper on "Spiritual Capital and Economic Development" published in The Hidden Form of Capital: Spiritual Influences in Societal Progress, edited by Peter Berger and Gordon Redding. Spiritual capital is one form of human capital, and its stock will either raise or lower the costs of the administrative appartus to protect people and property from predatory action by either private or public actors. Ultimately, what drives economic progress is the fundamental institutions of property, contract and consent (what could be called public capital), all else falls into place as proximate causes after that -- including the investments in human capital acquisition (type and amount), physical capital, and public policy choices. The critical issue to my mind is the linkage between spiritual capital (ideas) and public capital (institutions and their enforcement). This is why ideology matters in the comparative study of political economy. It is why we must study not only socialist practice, but socialist philosophy and theory. This remains as true today as it did when Ludwig von Mises penned his fundamental critique of the socialist system in 1920, and developed further in his book Socialism. As I say in my recent introduction to the new ebook version:

Mises was indeed among the greatest economic thinkers of the 20th century. His contributions are justly recognized in value theory, capital theory, monetary theory, comparative economic systems, and the methodology of economic science. Each new generation must read his works anew and focus on how his work remains such a vital contribution to the “extended present” that constitutes the conversation over the centuries in the “worldly philosophy.” Mises rises above others precisely because he was both an astute technical economist and a bold social philosopher. Socialism puts those skills on display on every page. I have been reading this book since I was a college student in the early 1980s, and I have been teaching the book every year since I started my college teaching career in the late 1980s. I learn something new every time I read it. I encourage the reader to do the same. As Henry Hazlitt said in his review, Socialism is an “economic classic in our time.” My only modification would be that the test of time has demonstrated the it is in fact an economic classic for all time.

So as you reflect on the great moments in history --- and the Fall of the Berlin Wall is certainly one of them --- it will pay to frame those events with an examination of the ideas, and not just the interests, that animated those events. Mises's Socialism and Hayek's The Road to Serfdom provide an ideal guidepost for understanding the difficulties in theory and in practice that the socialist idea confronts then, and must continue to confront to this day. It is just another example of the lessons learned from economics for yesterday, today and tomorrow.