Those who read my blog will know that I am a fan of the Austrian school, with a variety of caveats including a preference for Hayek over Rothbard and a distaste for their distaste of empirical, microeconomic, experimental, and applied work. In two sections, this article covers some things I have recently learned about the Rothbardians, Hoppe in particular, which makes me like them even less. In a third section, I propose that the field of anarcho-capitalism should be dehomogenized in a manner similar to the dehomogenization of Hayek from Mises.
I. Some Background
I previously knew little of Hans Hermann-Hoppe. I received a certificate in Austrian Macroeconomics from the Mises Institute years ago, learning under Joe Salerno. Salerno is a leading proponent of the Austrian Dehomoginization Theory, which is the theory that the Austrian School is a label for several importantly different economic approaches. Specifically, Salerno distinguishes between a Hayekian and a Misesian tradition. Notice the empirical nature of Hayek’s argument:
successful economic action…depends largely on the approximately correct prediction of future prices. These predictions will be based on present prices and their trends…Indeed the function of prices is precisely to communicate, as rapidly as possible, signals of changes of which the individual cannot know but to which his plans must be adjusted. This system works because on the whole current prices are fairly reliable indications of what future prices will probably be.Hayek, Denationalization of Money
Hayek’s empirical disposition bodes well for a synthesis with the Chicago School, and specifically with the Friedmanian position that economic models need not be realistic by construction so long as they yield correct results. Interestingly, this dissolves Hayek’s alignment with Mises that economic calculation is impossible without prices.
Hayek might agree that it would be practically impossible to coordinate without prices, but he means this in the technical sense that it is overwhelmingly likely that a price prediction model with input prices would beat whatever other prediction models are available. All Austrians must recognize that a first-stage economy has no prices, so price estimates can be constructed without pre-existing prices. I think all of these pre-internet scholars would be surprised at the amount of data the internet provides and the precision of modern modeling including machine learning models. I think Hayekians and Friedmanians, although not Misesians or Rothbardians, would acknowledge the possibility and value of non-pecuniary models of price that empirically outperform price models of price.
Then there’s always the scholarly defense of Mises that he was simply embellishing and he knew full well that when he said economic calculation without prices is ‘impossible,’ he simply meant that it was practically impossible. Fine, so then let the Misesians and Rothbardians embrace empirical work too, although what I actually see is a loathing for empirical work among them today.
II. The Repugnant Fruit of Rothbard
Rothbard made some good critiques and some bad critiques, and in his misguided criticisms he set out to reimagine economics on the basis of revealed preference. Here are some of his mistakes in my view:
- While I like an axiomatic analytical approach, he posits unjustified axioms, so the method is unjustified as well.
- He betrays his own axiomatic preference by attempting to build a quantitative method using revealed preferences.
- From revealed preferences, he rejects the possibility of genuine indifference, but this rejection is illogical.
- A quick proof by example: Given a horse dying of thirst equidistant between two oases, the horse will die if it fails to move and yet it has no preference among either oasis. A neoclassical could predict his choice with a probabilistic coin toss model and would be correct. A Rothbardian would be unable to predict the horse’s choice, but after the horse made a choice the Rothbardian would claim the horse truly preferred A to B all along. At once we see the predictive failure of Rothbard and also the invalidity of drawn conclusions.
- His failed argument for axiomatic state malevolence. As an alternative, Hayek and Friedman argue for the expected inefficiency of the state in a non-axiomatic way that is compatible with Christianity.
Hans Hermann-Hoppe is a Senior Fellow of the Ludwig von Mises Institute and has an enviable publishing record. He is also an anarcho-capitalist. These are all positives in my book. Only today did I learn that:
- Not only is he a Rothbardian, but perhaps the leading Rothbardian today and a very close friend of Rothbard for years.
- I, therefore, consider him as a representative intellectual fruit of Rothbard. I think Hoppe and Rothbard would happily ascent to this labeling.
- Hoppe advocates for reduced immigration on axiomatic grounds
- Phil Magness has convinced me (weakly, but enough for concern) that Hoppe has some eugenic influence
- Hoppe writes that ‘Negroids’ have a lower time preference than Caucasians on average. Phil and others argue that this is evidence of pro-eugenics disposition.
- While maintaining that I’m not Hoppean or Rothbardian, I demand a bit more evidence, postulating:
- The strange choice of words could result from a combination of Hoppe’s age, non-native English speaker status, and political correctness in academia; a semantic grasping at straws to avoid saying something like ‘blacks.’
- Hoppe’s correlation statement may well be true, depending on how he means the word and what data he marshals to that end.
- Correlational statements and even causal statements of racial effects in academic work do not amount to racism.
- Racism does not amount to eugenicism or nazism. It’s particularly hard to imagine an anarcho-capitalist nazi.
- Further comments from Magness to address my concerns, which I take with worrying credibility:
- Hoppe uses the term because he endorses Rushton’s eugenic text, which also uses the term as one of its primary categories of racial classification. He endorses Rushton’s position in this essay and numerous other works, including Democracy: the God that Failed.
- The word choice is intentional. It is explicitly drawn from eugenics, and is cited as such to an acknowledged eugenic text.
- As with his David Irving quotations, this is an instance where Hoppe tipped his hand a bit too far and let his racism show.
So now let’s review the rotten fruit:
- A real anarcho-capitalist should find immigration laws repugnant. Indeed, even the average economist knows of the extreme value of immigration. Here, Hoppe veers away from what is normal among economists and, further, what is normal among anarcho-capitalists. Yet, it’s not clear that he misrepresents Rothbardian analysis or culture.
- The Rothbardian mode, in general, seeks axioms without empirical test; this whole approach is dangerous. When one makes a logical error, there is no means by which to identify the logical error, so the logical errors just go on compounding into truly absurd statements that defy and contradict even their axiomatic origins. A glimpse of some of the other crazy things Hoppe has said outside of his empirically poor opposition to immigration:
- “There can be no tolerance toward democrats and communists in a libertarian social order. They will have to be physically separated and expelled from society.”
- The above quote defies the logic of even Hoppe’s own covenant communities and the defiance is in a predictable manner: Such a situation is logically possible but by no means exclusively indicated, yet Hoppe feels no need to move from the logically possible into the empirically expected.
- David Friedman provides a better analysis that incorporates incentives using price theory to show why such exclusivist covenant communities are both possible and unlikely in an actual anarcho-capitalist society. Specifically, such exclusive communities would be an expensive luxury good, and luxury goods are a small segment of the economy.
- The Rothbardian preference for axiomatic analysis fails to deal with the transition to anarchy, which is the largest problem for anarcho-capitalism in my view. Instead of a gradual transition to anarchy, Hoppe treats the situation as so logically different that the optimal policy regime changes, but the optimal policy regime he suggests will never bring about anarchy, so again we have:
- Internally inconsistent analysis
- Analysis at odds with normal economic analysis
- Analysis that fails to deal with important related theoretical and practical concerns
- Analysis that, when applied, yields results that ordinary people find concerning on moral grounds. This is by no means a standalone criterion, but it adds importantly to the concern.
III. Don’t Let Rothbardians Pollute Generalized Austrian Economics or Anarcho-Capitalism
It’s been suggested by some that Austrians tend to be racist, and I want to dispense with that now. The core of Austrian economics is teleology, which is fundamental to all people. There is nothing racial in the core of Austrian economics.
At the same time, anyone who does any analysis where race is an independent factor runs the risk of being labeled a racist in the popular press. This problem extends beyond the Austrian school to all of economics, and to sociology, biology, and many other fields where ethnicity might take a right-hand position in a regression analysis. This is not an academic problem but a problem of popular scientific illiteracy and media clickbaiting. Here is a list of things that are not racist (not comprehensive):
- Defining a race or quasi-racial factors such as culture or ethnicity on the basis of self-identification, external identification, a basket of genes, cultural behaviors, language, nationality, parental factors, or any other definition.
- Identifying correlations between racial or quasi-racial factors and other factors.
- Identifying causal relations between racial or quasi-racial factors and other factors.
- Identifying differences between or within racial or quasi-racial groups with respect to other factors.
- Suggesting public or private policy moves on the basis of items 1-4.
- Notice the asymmetry between people who want to use the term ‘racism’ in this regard: Affirmative Action is racist in this regard and yet we see the tendency on the left to claim that only some such policy moves are racist, while libertarians tend to desire all such policies eliminated.
Here is a list of things that are racist (not comprehensive):
- Making statements of moral worth based on racial or quasi-racial factors. This is both a racist and immoral activity.
- Making incorrect judgments about racial or quasi-racial groups, or about people within those groups, on the basis of such racial or quasi-racial factors.
- For example, mistaking correlation for causation, or mistaking a group norm for a necessary trait of each group member.
- These are common statistical mistakes for variables other than race as well.
- This sort of racism is both common and overblown. It’s not necessarily immoral. It can happen by accident. It’s often a case of bias or ignorance rather than the result of deeply held beliefs or prejudices.
Unconcious bias is a problem and mankind will be better off to the extent that we can eliminate it, but social censorship is not a route to the elimination of unconcious bias or other statistical mistakes with racial variables or variables of any kind. We must improve scientific literacy to address this issue, and that involves talking about these variables more and in a level-headed or loving tone, not less and in a presumptive or hostile tone.
As a final note, I really think Wikipedia’s series on Anarcho-Capitalism groups people of very different thinking:
I’d favor dehomogenization of anarcho-capitalism into Friedmanian and Rothbardian anarcho-capitalism. I think the Friedmanian camp is closer to Hayek than the Rothbardian camp is in terms of economic approach, although perhaps not in terms of intellectual heritage. On the other hand, Hayek was very much engaged in conversation with Keynes and Milton Friedman, so perhaps they influenced his thinking as much or more than Mises. In the 1980s, Hayek stated:
Milton and I agree on almost everything except monetary policyGarrison, “Hayek and Friedman: Head to Head”
I think David Friedman may well have said the same thing. I certainly subscribe to the ideas of Hayek and the Friedmans over the ideas of Rothbard. While I’m a great fan of Menger I often take issue with statements from Mises. A core Misesian problem, though, is that he speaks in narrative and it’s often not clear to me when he’s embellishing and when he’s speaking technically. So I give Mises a pass by the benefit of the doubt and I see a clearer dehomogenization between Hayek and Rothbard compared to Salerno’s lucid analysis to which I’m still open. Yet, it seems to me that neither Hayek nor Mises were anarcho-capitalists, so I think Friedmanian and Rothbardian anarcho-capitalists offer the cleanest subcategory labels, and with important differences in analytical approach.