Friday, December 12, 2008

More From The House Of Rand

The Ayn Rand Institute appears to have a lot better luck in getting attention in the "mainstream" media than the Ludwig von Mises Institute or other more radical free market think tanks. Presumably this is due to Ayn Rand's past association with Greenspan, which has proven to be both good and bad for the official objectivist movement. On the one hand, it appears to be giving them more attention, on the other hand, many think that the disastrous results of the Greenspan era discredits objectivism and laissez faire economics.

Example number of this is this interview with ARI executive director Yaron Brook in newsweek, about Greenspan and the financial crisis. His answers are mostly good, except for the reply to this question, which followed after Brook had stated his opposition to bank bailouts:

"But scholars like Ben Bernanke, current head of the Federal Reserve, says one reason the Great Depression was so severe was that government waited three years before intervening, and let scores of banks fail before then."

To which Brook simply responded by pointing to how unemployment remained very high under Roosevelt. Which is true, but really isn't a response either to the assertion that for the first three years (when Hoover was president), the government pursued laissez-faire policies or that bank failures was a key reason for the depression.

The idea that Hoover pursued laissez faire policies and didn't intervene in the economy is completely false, as Hoover was the most interventionist president America had ever seen (later America has seen even more interventionist ones, including Roosevelt), as Rothbard documented in his book America's Great Depression. I understand that for sectarian reasons Brook will find it hard to officially quote Rothbard, but that shouldn't stop from being able to dispute the "Hoover pursued laissez faire policies"-myth in an interview.

As for the bank failures made the crisis worse-part, it is certainly the case that they do make the crisis deeper in the short-term, especially if wages are inflexible due to other government interventions. But they were hardly the primary cause of the Depression, and that argument do in fact apply to almost all larger companies, including car companies. And if the government bails out all failed companies (or at least all failed large companies) then we will get a Japanese-style zombie economy.

Meanwhile, Alex Epstein, has a blog post in the Telegraph, linking the current crisis to predictions made by Ludwig von Mises and Ayn Rand.


Blogger Aragon said...

It interestingly seems that ABCT was almost the official objectivist business cycle theory during the heydays of Ayn Rand. Here is what Nathaniel Branden wrote in his 1962 essay titled "Common Fallacies about capitalism".

"Throughout most of 1920's the government compelled banks to keep interest rates artificially and uneconomically low... money was poured into every sort of speculative venture... But it was not the Federal Reserve but capitalism that took the blame for the 1929 depression...
Contrary to popular misconception, controls and regulations began long before the New Deal... [T]rend toward statism began to move faster under Hoover Administration... The economic adjustments needed to bring the depression to an end were prevented from taking place... increased taxes and labor legislation... forcing wage rates to unjustifiably high levels...
For a general discussion of the business cycle... see Ludwig von Mises, Human Action" (Ayn Rand, etc. Capitalism: The Unknown Ideal, pp. 82-86)

That sounds like Murray Rothbard to mee. Unfortunately in our days, the official Ayn Rand Institute seems to be allied with certain neocon extremists. That is one reason why George Reisman left those circles. Yaron Brook seems to be sympathetic towards Peter Schiff when they both appear in the Fox Business News, and he seems to know lot about asset bubbles. But modern randians pay too much lip service towards official mainstream economists and don't want to associate by any way with Austrian school of economics.

6:12 PM  
Anonymous Per-Olof Samuelsson said...

Aragon: One shouldn't over-generalize here. There are "Randians" who do know and understand ABCT. And then, there are "Randians" who don't.

Some stray observations:

1. Quite a few works by Mises (and also Henry Hazlitt) were included in the "Recommended Bibliography" in "Capitalism: The Unknown Ideal". Also, some of Mises' works were favorably reviewed in "The Objectivist Newsletter".

Unfortunately, Ayn Rand herself never wrote extensively on her agreements/disagreements with Mises. So one has to figure out for oneself what those agreements/disagreements are. (I'm constantly tearing my hair about this issue...)

2. Some years ago Richard Salsman delivered a lecture series on the "Austrian" school, the gist of which seems to be that the early "Austrians" (Menger and Böhm-Bawerk) were OK, but that Mises and Hayek are not. I have not heard those lectures myself (I have just read the course description), and some later statements by Salsman have made me lose all interest in ever listening to them.

3. On the positive side, lectures on economics at "official" Objectivist conferences are nowadays given, not by Salsman but by Brian Simpson, who is a disciple of George Reisman. That's at least a hopeful sign.

4. Finally, the reason George Reisman broke with the "official" movement was that he was very unjustly treated by those people. (For details on this, you can read my web site.) It had nothing to do with "neocon extremism". (Besides, every Objectivist I know of is opposed to neo-conservatism, a fact which should be known to everyone who bothers to read what they write on the subject.)

6:51 PM  

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