WEBVTT NOTE XXXVII. The Nondescript Character of Economics 1 00:00:00.000 --> 00:00:05.000 PART VII. THE PLACE OF ECONOMICS IN SOCIETY 2 00:00:05.000 --> 00:00:11.000 Chapter 37. THE NON-DESCRIPT CHARACTER OF ECONOMICS 3 00:00:11.000 --> 00:00:16.000 1. THE SINGULARITY OF ECONOMICS 4 00:00:16.000 --> 00:00:26.000 What assigns economics its peculiar and unique position in the orbit both of pure knowledge and of the practical utilization of knowledge 5 00:00:26.000 --> 00:00:31.760 of Knowledge is the fact that its particular theorems are not open to any verification 6 00:00:31.760 --> 00:00:36.200 or falsification on the ground of experience. 7 00:00:36.200 --> 00:00:42.520 Of course, a measure suggested by sound economic reasoning results in producing the effects 8 00:00:42.520 --> 00:00:48.840 aimed at, and a measure suggested by faulty economic reasoning fails to produce the end 9 00:00:48.840 --> 00:00:50.160 sought. 10 00:00:50.160 --> 00:00:57.680 But such experience is always still historical experience, that is, the experience of complex 11 00:00:57.680 --> 00:00:59.160 phenomena. 12 00:00:59.160 --> 00:01:06.280 It can never, as has been pointed out, prove or disprove any particular theorem. 13 00:01:06.280 --> 00:01:12.640 The application of spurious economic theorems results in undesired consequences. 14 00:01:12.640 --> 00:01:19.080 But these effects never have that undisputable power of conviction which the experimental 15 00:01:19.080 --> 00:01:23.440 facts in the field of the natural sciences provide. 16 00:01:23.440 --> 00:01:30.240 The ultimate yardstick of an economic theorem's correctness or incorrectness is solely reason, 17 00:01:30.240 --> 00:01:33.280 unaided by experience. 18 00:01:33.280 --> 00:01:39.380 The ominous import of this state of affairs is that it prevents the naive mind from recognizing 19 00:01:39.380 --> 00:01:43.800 the reality of the things economics deals with. 20 00:01:43.800 --> 00:01:50.640 All is, in the eyes of man, all that he cannot alter, and to whose existence he must adjust 21 00:01:50.640 --> 00:01:54.540 his actions, if he wants to attain his ends. 22 00:01:54.540 --> 00:01:58.580 The cognizance of reality is a sad experience. 23 00:01:58.580 --> 00:02:02.960 It teaches the limits on the satisfaction of one's wishes. 24 00:02:02.960 --> 00:02:08.720 Only reluctantly does man resign himself to the insight that there are things, namely 25 00:02:08.720 --> 00:02:16.720 are only the whole complex of all causal relations between events which wishful thinking cannot alter. 26 00:02:16.720 --> 00:02:21.720 Yet sense experience speaks an easily perceptible language. 27 00:02:21.720 --> 00:02:24.720 There is no use arguing about experiments. 28 00:02:24.720 --> 00:02:30.720 The reality of experimentally established facts cannot be contested. 29 00:02:30.720 --> 00:02:35.720 But in the field of praxeological knowledge neither success nor failure 30 00:02:35.720 --> 00:02:43.040 speaks a distinct language audible to everybody. The experience derived exclusively from complex 31 00:02:43.040 --> 00:02:50.700 phenomena does not bar escape into interpretations based on wishful thinking. The naive man's 32 00:02:50.700 --> 00:02:57.780 propensity to ascribe omnipotence to his thoughts, however confused and contradictory, is never 33 00:02:57.780 --> 00:03:05.240 manifestly and unambiguously falsified by experience. The economist can never refute 34 00:03:05.240 --> 00:03:11.160 The economic cranks and quacks in the way in which the doctor refutes the medicine man 35 00:03:11.160 --> 00:03:13.560 and the charlatan. 36 00:03:13.560 --> 00:03:18.920 History speaks only to those people who know how to interpret it on the ground of correct 37 00:03:18.920 --> 00:03:20.880 theories. 38 00:03:20.880 --> 00:03:23.480 2. 39 00:03:23.480 --> 00:03:26.600 Economics and Public Opinion 40 00:03:26.600 --> 00:03:32.680 The significance of this fundamental epistemological difference becomes clear if we realize that 41 00:03:32.680 --> 00:03:38.520 The practical utilization of the teachings of economics presupposes their endorsement 42 00:03:38.520 --> 00:03:40.980 by public opinion. 43 00:03:40.980 --> 00:03:46.560 In the market economy, the realization of technological innovations does not require 44 00:03:46.560 --> 00:03:52.720 anything more than the cognizance of their reasonableness by one or a few enlightened 45 00:03:52.720 --> 00:03:54.280 spirits. 46 00:03:54.280 --> 00:04:01.080 No dullness and clumsiness on the part of the masses can stop the pioneers of improvement. 47 00:04:01.080 --> 00:04:06.280 There is no need for them to win the approval of inert people beforehand. 48 00:04:06.280 --> 00:04:11.960 They are free to embark upon their projects, even if everyone else laughs at them. 49 00:04:11.960 --> 00:04:18.080 Later, when the new, better and cheaper products appear on the market, these scoffers will 50 00:04:18.080 --> 00:04:20.080 scramble for them. 51 00:04:20.080 --> 00:04:25.340 However dull a man may be, he knows how to tell the difference between a cheaper shoe 52 00:04:25.340 --> 00:04:31.900 to and a more expensive one, and to appreciate the usefulness of new products. 53 00:04:31.900 --> 00:04:37.540 But it is different in the field of social organization and economic policies. 54 00:04:37.540 --> 00:04:42.940 Here the best theories are useless if not supported by public opinion. 55 00:04:42.940 --> 00:04:47.900 They cannot work if not accepted by a majority of the people. 56 00:04:47.900 --> 00:04:54.100 Whatever the system of government may be, there cannot be any question of ruling a nation 57 00:04:54.100 --> 00:04:59.980 Unlastingly on the ground of doctrines at variance with public opinion. 58 00:04:59.980 --> 00:05:04.260 In the end, the philosophy of the majority prevails. 59 00:05:04.260 --> 00:05:10.940 In the long run, there cannot be any such thing as an unpopular system of government. 60 00:05:10.940 --> 00:05:16.780 The difference between democracy and despotism does not affect the final outcome. 61 00:05:16.780 --> 00:05:22.020 It refers only to the method by which the adjustment of the system of government to 62 00:05:22.020 --> 00:05:27.740 to the ideology held by public opinion is brought about. 63 00:05:27.740 --> 00:05:34.120 Unpopular autocrats can only be dethroned by revolutionary upheavals, while unpopular 64 00:05:34.120 --> 00:05:39.700 democratic rulers are peacefully ousted in the next election. 65 00:05:39.700 --> 00:05:45.820 The supremacy of public opinion determines not only the singular role that economics 66 00:05:45.820 --> 00:05:54.380 occupies in the complex of thought and knowledge, it determines the whole process of human history. 67 00:05:54.380 --> 00:06:01.580 The customary discussions concerning the role the individual plays in history miss the point. 68 00:06:01.580 --> 00:06:07.680 Everything that is thought, done and accomplished is a performance of individuals. 69 00:06:07.680 --> 00:06:13.560 New ideas and innovations are always an achievement of uncommon men. 70 00:06:13.560 --> 00:06:19.920 But these great men cannot succeed in adjusting social conditions to their plans if they do 71 00:06:19.920 --> 00:06:23.160 not convince public opinion. 72 00:06:23.160 --> 00:06:29.840 The flowering of human society depends on two factors, the intellectual power of outstanding 73 00:06:29.840 --> 00:06:36.920 men to conceive sound social and economic theories, and the ability of these or other 74 00:06:36.920 --> 00:06:47.960 3. The Illusion of the Old Liberals 75 00:06:47.960 --> 00:06:55.560 The masses, the hosts of common men, do not conceive any ideas, sound or unsound. They 76 00:06:55.560 --> 00:07:02.560 only choose between the ideologies developed by the intellectual leaders of mankind. But 77 00:07:02.560 --> 00:07:07.060 But their choice is final and determines the course of events. 78 00:07:07.060 --> 00:07:12.320 If they prefer bad doctrines, nothing can prevent disaster. 79 00:07:12.320 --> 00:07:17.240 The social philosophy of the Enlightenment failed to see the dangers that the prevalence 80 00:07:17.240 --> 00:07:20.640 of unsound ideas could engender. 81 00:07:20.640 --> 00:07:25.920 The objections customarily raised against the rationalism of the classical economists 82 00:07:25.920 --> 00:07:29.500 and the utilitarian thinkers are vain. 83 00:07:29.500 --> 00:07:33.000 But there was one deficiency in their doctrines. 84 00:07:33.000 --> 00:07:40.680 They blithely assumed that what is reasonable will carry on merely on account of its reasonableness. 85 00:07:40.680 --> 00:07:47.380 They never gave a thought to the possibility that public opinion could favor spurious ideologies, 86 00:07:47.380 --> 00:07:53.720 whose realization would harm welfare and well-being and disintegrate social cooperation. 87 00:07:53.720 --> 00:08:00.640 It is fashionable today to disparage those thinkers who criticize the liberal philosopher's 88 00:08:00.640 --> 00:08:03.240 faith in the common man. 89 00:08:03.240 --> 00:08:09.400 Yet Burke and Haller, Bonald and Dimestra, paid attention to an essential problem which 90 00:08:09.400 --> 00:08:11.900 the liberals had neglected. 91 00:08:11.900 --> 00:08:17.760 They were more realistic in the appraisal of the masses than their adversaries. 92 00:08:17.760 --> 00:08:22.380 Of course, the conservative thinkers labored under the illusion that the traditional system 93 00:08:22.380 --> 00:08:29.020 system of paternal government and the rigidity of economic institutions could be preserved. 94 00:08:29.020 --> 00:08:34.740 They were full of praise for the Ancien Régime, which had made people prosperous and had even 95 00:08:34.740 --> 00:08:36.820 humanized war. 96 00:08:36.820 --> 00:08:42.620 But they did not see that it was precisely these achievements that had increased population 97 00:08:42.620 --> 00:08:49.380 figures and thus created an excess population for which there was no room left in the old 98 00:08:49.380 --> 00:08:52.860 System of Economic Restrictionism. 99 00:08:52.860 --> 00:08:58.700 They shut their eyes to the growth of a class of people which stood outside the pale of 100 00:08:58.700 --> 00:09:02.180 the social order they wanted to perpetuate. 101 00:09:02.180 --> 00:09:08.060 They failed to suggest any solution to the most burning problem with which mankind had 102 00:09:08.060 --> 00:09:13.740 to cope on the eve of the Industrial Revolution. 103 00:09:13.740 --> 00:09:18.700 Capitalism gave the world what it needed, a higher standard of living for a steadily 104 00:09:18.700 --> 00:09:21.620 increasing number of people. 105 00:09:21.620 --> 00:09:28.660 But the liberals, the pioneers and supporters of capitalism, overlooked one essential point. 106 00:09:28.660 --> 00:09:36.120 A social system, however beneficial, cannot work if it is not supported by public opinion. 107 00:09:36.120 --> 00:09:41.980 They did not anticipate the success of the anti-capitalistic propaganda. 108 00:09:41.980 --> 00:09:47.620 After having nullified the fable of the divine mission of anointed kings, the liberals fell 109 00:09:47.620 --> 00:09:55.140 prey to no less illusory doctrines, to the irresistible power of reason, to the infallibility 110 00:09:55.140 --> 00:10:01.820 of the volonté générale, and to the divine inspiration of majorities. 111 00:10:01.820 --> 00:10:08.580 In the long run they thought nothing can stop the progressive improvement of social conditions. 112 00:10:08.580 --> 00:10:14.660 In unmasking age-old superstitions, the philosophy of the Enlightenment has once and for all 113 00:10:14.660 --> 00:10:18.020 established the supremacy of reason. 114 00:10:18.020 --> 00:10:23.220 The accomplishments of the policies of freedom will provide such an overwhelming demonstration 115 00:10:23.220 --> 00:10:28.860 of the blessings of the new ideology that no intelligent man will venture to question 116 00:10:28.860 --> 00:10:29.860 it. 117 00:10:29.860 --> 00:10:36.180 And, implied the philosophers, the immense majority of people are intelligent and able 118 00:10:36.180 --> 00:10:38.940 People to Think Correctly 119 00:10:38.940 --> 00:10:44.980 It never occurred to the old liberals that the majority could interpret historical experience 120 00:10:44.980 --> 00:10:48.080 on the ground of other philosophies. 121 00:10:48.080 --> 00:10:54.220 They did not anticipate the popularity which ideas that they would have called reactionary, 122 00:10:54.220 --> 00:11:00.300 superstitious and unreasonable acquired in the 19th and 20th centuries. 123 00:11:00.300 --> 00:11:05.580 They were so fully imbued with the assumption that all men are endowed with the faculty 124 00:11:05.580 --> 00:11:11.980 and the Theory of Correct Reasoning that they entirely misconstrued the meaning of the portents. 125 00:11:11.980 --> 00:11:18.540 As they saw it, all these unpleasant events were temporary relapses, accidental episodes 126 00:11:18.540 --> 00:11:24.700 to which no importance could be attached by the philosopher looking upon mankind's history 127 00:11:24.700 --> 00:11:27.500 subspecie eternitatis. 128 00:11:27.500 --> 00:11:32.860 Whatever the reactionaries might say, there was one fact which they would not be able 129 00:11:32.860 --> 00:11:40.260 People to deny, namely that capitalism provided for a rapidly increasing population a steadily 130 00:11:40.260 --> 00:11:43.580 improving standard of living. 131 00:11:43.580 --> 00:11:49.300 It is precisely this fact that the immense majority did contest. 132 00:11:49.300 --> 00:11:54.800 The essential point in the teachings of all socialist authors, and especially in the teachings 133 00:11:54.800 --> 00:12:01.660 of Marx, is the doctrine that capitalism results in a progressive pauperization of the working 134 00:12:01.660 --> 00:12:07.700 with regard to the capitalistic countries the fallacy of this theorem can 135 00:12:07.700 --> 00:12:12.620 hardly be ignored with regard to the backward countries which were only 136 00:12:12.620 --> 00:12:18.300 superficially affected by capitalism the unprecedented increase in population 137 00:12:18.300 --> 00:12:23.100 figures does not suggest the interpretation that the masses sink 138 00:12:23.100 --> 00:12:28.540 deeper and deeper these countries are poor when compared with the more 139 00:12:28.540 --> 00:12:30.540 for advanced countries. 140 00:12:30.540 --> 00:12:35.120 Their poverty is the outcome of the rapid growth of population. 141 00:12:35.120 --> 00:12:40.060 These peoples have preferred to rear more progeny instead of raising the standard of 142 00:12:40.060 --> 00:12:42.500 living to a higher level. 143 00:12:42.500 --> 00:12:44.300 That is their own affair. 144 00:12:44.300 --> 00:12:50.460 But the fact remains that they had the wealth to prolong the average length of life. 145 00:12:50.460 --> 00:12:56.360 It would have been impossible for them to bring up more children if the means of sustenance 146 00:12:56.360 --> 00:12:58.600 had not been increased. 147 00:12:58.600 --> 00:13:06.100 Nonetheless, not only the Marxians but many allegedly bourgeois authors assert that Marx's 148 00:13:06.100 --> 00:13:13.000 anticipation of capitalist evolution has been, by and large, verified by the history of the 149 00:13:13.000 --> 00:13:14.440 last 80 years.