Cactus Club October 1999

2 October 1999.........................EuroEnglish

The formation of language, money, the common law and the economic system in general are frequently cited as examples of the evolution of complex adaptive systems or as Hayek put it, spontaneous order. These are systems that are the result of human action but not of human design as Adam Ferguson wrote (long before Hayek) in his classic analysis of social relationships entitled AN ESSAY ON THE HISTORY OF CIVIL SOCIETY. Here is an example of the re-creation of language by social engineering using reason instead of tradition as the guiding principle. Question: How do you expect this project to fare? (PD)

The European Commission has just announced an agreement that English will be the official language of the European Community (EU) rather than German (the other possibility).

As part of the negotiations, Her Majesty's Government conceded that English spelling had some room for improvement, and has accepted a 5-year phase-in of new rules that would apply to the language and reclassify it as EuroEnglish.

The agreed plan is as follows: In year 1, the soft 'c' would be replaced by 's'. Sertainly, this will make the sivil servants jump with joy. The hard 'c' will be replased by 'k'. This should klear up konfusion and keyboards kan now have one less letter. There will be growing publik enthusiasm in the sekond year when the troublesome 'ph' is replased by 'f'. This will reduse "fotograf' by 20%. In the 3rd year, publik akseptanse of the new spelling kan be expekted to reach the stage where more komplikated changes are possible. Governments will enkourage the removal of double letters, which have always ben a deterent to akurate speling. Also, al wil agre that the horible mes of the silent 'e's in the language is disgrasful, and they should eliminat them. By year 4, peopl wil be reseptiv to lingwistik korektions such as replasing 'th' with 'z' and 'w' with 'v' (saving mor keyboard spas). During ze fifz year, ze unesesary 'o' kan be dropd from vords kontaining 'ou' and similar changes vud of kors be aplid to ozer kombinations of leters. After zis fifz year, ve vil hav a reli sensibil riten styl. Zer vil be no mor trubls or difikultis and evrirun vil find it ezi to understand ech ozer. ZE DREM VIL FINALI KUM TRU!!!

5 October 1999.............a self-organizing principle in the world

Quoting from CHAOS by James Gleick-------------------------------------"But the insight, the commentary, the marginalia, and the physics woven into the paper made it a lasting gift. Most seductive of all was an image that the authors called a STRANGE ATTRACTOR. This phrase was psychoanalytically ' suggestive, ' Ruelle felt later. Its status in the study of chaos was such that he and Takens jousted below a polite surface for the honor of having chosen the words.____________

In Japan the study of electrical circuits that imitated the behavior of mechanical springs - but much faster - led Yoshisuke Ueda to discover an extraordinarily beautiful set of strange attractors. (He met an Eastern version of the coolness that greeted Ruelle: ' Your result is no more than an almost periodic oscillation. Don't form a selfish concept of steady states.' ) In Germany Otto Rossler, a nonpracticing medical doctor who came to chaos by way of chemistry and theoretical biology, began with an odd ability to see strange attractors as philosophical objects, letting the mathematics follow along behind. Rossler's name became attached to a particularly simple attractor in the shape of a band of ribbon with a fold in it, much studied because it was easy to draw, but he also visualized attractors in higher dimensions - ' a sausage in a sausage in a sausage in a sausage. ' he would say, ' take it out, fold it, squeeze it, put it back. ' Indeed, the folding and squeezing of space was a key to constructing strange attractors, and perhaps a key to the dynamics of the real systems that gave rise to them.

Rossler felt that these shapes embodied a self-organizing principle in the world. He would imagine something like a wind sock on an airfield, ' an open hose with a hole in the end, and the wind forces its way in, ' he said. ' Then the wind is trapped. Against its will, energy is doing something productive, like the devil in medieval history. The principle is that nature does something against its own will and, by self-entanglement, produces beauty.' " Questions: Is the principle of the strange attractor the same principle that was noted earlier by Mandeville in THE FABLE OF THE BEES, Ferguson in AN ESSAY ON THE HISTORY OF CIVIL SOCIETY, and Smith in THE WEALTH OF NATIONS? Hayek coined the phrase spontanous order but aren't all these insights basically the same............ systems can achieve order without any central control mechanism? Is spontaneous order the opposite of social engineering? Are there any examples of systems that are naturally organized by the strange attractor principle but have been improved by central control? Would the weather work better if we could control it? (PD)

10 October 1999..............caught up in a vast nonlinear web

Quoting from COMPLEXITY by M. Mitchell Waldrop------------------------"But the fascination with complexity went still deeper than that, says Cowan. In part because of their computer simulations, and in part because of new mathematical insights, physicists had begun to realize by the early 1980s that a lot of messy, complicated systems could be described by a powerful theory known as ' nonlinear dynamics. ' And in the process, they had been forced to face up to a disconcerting fact: the whole really can be greater than the sum of its parts.__________

However, it's also true that a lot of nature is NOT linear---including most of what's really interesting in the world. Our brains certainly aren't linear: even though the sound of an oboe and the sound of a string section my be independent when they enter your ear, the emotional impact of both sounds together may be very much greater than either one alone. (This is what keeps symphony orchestras in business.) Nor is the economy really linear. Millions of individual decisions to buy or not to buy can reinforce each other, creating a boom or a recession. And that economic climate can then feed back to shape the very buying decisions that produced it. Indeed, except for the very simplest physical systems, virtually everything and everybody in the world is caught up in a vast, nonlinear web of incentives and constraints and connections. The slightest change in one place causes tremors everywhere else. We can't help but disturb the universe, as T.S. Eliot almost said. The whole is almost always equal to a good deal more than the sum of its parts. And the mathematical expression of that property---to the extent that such systems can be described by mathematics at all--- is a NONLINEAR equation: one whose graph is curvy.

The self-organizing systems championed so vociferously by the physicist Ilya Progogine were also governed by nonlinear dynamics; indeed, the self-organized motion in a simmering pot of soup turned out to be governed by dynamics very similar to the nonlinear formation of other kinds of patterns, such as the stripes of a zebra or the spots on a butterfly's wings.

But most startling of all was the nonlinear phenomenon known as chaos. In the everday world of human affairs, no one is surprised to learn that a tiny event over HERE can have an enormous effect over THERE. For want of a nail, the shoe was lost, et cetera. But when the physicists started paying serious attention to nonlinear systems in their own domain, they began to realize just how profound a principle this really was. The equations that governed the flow of wind and moisture looked simple enough, for example---until researchers realized that the flap of a butterfly's wings in Texas could change the course of a hurricane in Haiti a week later. Or that the flap of that butterfly's wings a millimeter to the left might have deflected the hurricane in a totally different direction. In example after example, the message was the same: everything is connected, and often with incredible sensitivity. Tiny perturbations won't always remain tiny. Under the right circumstances, the slightest uncertainty can grow until the system's future becomes utterly unpredictable---or, in a word, chaotic.__________

And yet, as intriguing as molecular biology and computer simulation and nonlinear science were separately, Cowan had a suspicion that they were only the beginning. It was more a gut feeling than anything else. But he sensed that there was an underlying unity here, one that would ultimately encompass not just physics and chemistry, but biology, information processing, economics, political science, and every other aspect of human affairs. What he had in mind was a concept of scholarship that was almost medieval. If this unity were real, he thought, it would be a way of knowing the world that made little distinction between biological sciences and physical sciences---or between either of those sciences and history or philosophy. Once, says Cowan, ' The whole intellectual fabric was seamless, ' And maybe it coud be that way again. " Questions: Does the interaction of psychology, economics, and philosophy in the new multi-disciplinary subject of socionomics qualify as a way of knowing the world that portrays the sort of unity which Cowan had in mind? How does the utterly unpredictable nature of nonlinear systems like society affect the potential for socially engineered projects to improve on the natural outcomes of an unplanned (the result of human action but not of human design) social system? (PD)

15 October endless stream of new and creative forms

Quoting from CHAOS, MANAGEMENT AND ECONOMICS by David Parker and Ralph Stacey----------------------"In this border area it is impossible to make clear-cut distinctions between stability and instability because the starting conditions that lead to the one are so close to the starting conditions that lead to the other. So close are they that it is not possible to measure or act upon the differences between them. IT IS NOT POSSIBLE TO DETERMINE IN ADVANCE WHICH END-CONDITION IS GOING TO OCCUR. The specific future of the system is effectively unknowable. Nonetheless, such behaviour has an overall, ' hidden ', qualitative pattern. Mandelbrot coined the word ' fractal ' to refer to the shapes he found. A fractal is a geometric shape in which similar patterns are repeated at several different scales. The shapes are similar no matter how closely they are examined. We can get a feel for what is involved if we think of a system that ' stretches and folds like a baker's dough ' (Kamminga, 1990, p.56). Instead of exploding exponentially, the system turns back on itself in a process of ' folding ', which merges widely separated points and keeps them bounded. The result is behaviour which is fractal or chaotic. It is exactly this combination of stretching and folding that leads to chaos (Medio, 1992, p.121).

These conclusions about chaotic behaviour flow from the non-linear structure of the system itself. They are not the result of the nature of the environment in which the system operates. Far from equilibrium, behaviour is both stable and unstable, and not because some agent within it or outside it intervenes (say, applies random shocks to the system). It results because the non-linear structure of the feedback loop causes it to happen. Fairly constant cycles of behaviour can occur, interrupted from time to time and without warning by phases of chaotic turbulence. Such qualitative changes in behaviour need not result, as is often assumed (notably in economics), from exogenous (external) effects or ' stochastic noise '. The aperiodic motion is not due to a change in the underlying relationship or structure of the system. Nor is it due to stochastic or random disturbances. IT IS PRE-DETERMINED WITHIN THE SYSTEM.

In the border region between stability and instability, the behaviour of the system unfolds in a complex manner. The product is so dependent upon the detail of what happens that the links between cause and effect are lost. It is no longer possible to count on a certain input leading to a certain output. The laws of the system operate to escalate small chance distrubances along the way, breaking the link between an input and a subsequent output.

Such ideas lead to the property of sensitive dependence on initial conditions. Sensitive dependence is an important feature of the disorderly behaviour of deterministic dynamic systems in science. In particular, it is responsible for their unpreditability, for the system can be sensitive to even minute changes in the value of its conditions or parameters. Very small variations in parameter values lead to huge variations in behaviour of the system (Schuster, 1989, p.63). The system can go from periodic to chaotic and back again even though the parameter values are very close together (see the appendix to this chapter, below, pp.42-46).

In chaotic behaviour, a system operates to amplify tiny changes in conditions into major alterations of consequent behaviour. This is what lies behind the ' butterfly effect ', first observed by Edward Lorenz, who was attempting to predict weather patterns. The sensitivity may be so great that differences in the value of a condition or parameter to a number of decimal points could eventually alter the behaviour of the system completely. Tiny changes that could not possibly be detected could lead the system to totally different states of behaviour. Sensitive dependence has important implications for the study of management and economics. In practice, when assessing real systems, such as economic systems, initial conditions can rarely if ever be precisely specified. Measurement errors and ' noise ' will usually be present. Also, it can never be safely presumed that all of the factors that may have an effect on behaviour are included in the model.

When non-linear feedback systems are pushed far from equilibrium into chaos, they are capable of spontaneously producing unpredictable, more complex forms of behaviour through a process of self-organization. Fractals are evidence of self-organising systems. Fractal shapes are self-similar, that is to say, they have similar structures on all scales and they are now known to be common in nature. A snowflake is a good example, as is a tree leaf; watching the clouds reveals further evidence of natural self-organizing and complex patterns. In other words, in non-linear feedback systems in nature, continuously creative and innovative behaviour EMERGES. At the boundary between stability and instability, the system produces an endless stream of new and creative forms. Experimenters seeking to influence the outcome would have to operate on the boundary conditions - that is, they would have to operate upon the context or situation within which the behaviour is occurring. They cannot determine what the system will do in specific terms: all they can do is bring about some general pattern of behaviour if the right environmental conditions are created.

In the old Newtonian mind-set of the scientist, nature's systems were thought to behave in predictable or predetermined ways. To discover them simply meant more research. The bounty would be full knowledge of the system, resulting in an ability to control and plan successfully. The same mindset applied (and still does) in much social science research. If we can find out what causes poverty or leads to inflation or causes juvenile crime or determines unemployment, then society can be organized to end poverty, inflation, juvenile crime and unemployment. It is recognised that problems could arise if there are conflicts in the required policies. For example, lower inflation might lead to higher unemployment, at least for some time. But essentially this is posed as a question of choice, usually political choice. It is not allowed to disrupt the view that the system can be planned.

From a chaos perspective, however, the planning of specific long-term outcomes is bound to lead to disappointment. Chaotic systems are driven by complex feedback processes. Hence, links between precise cause and effect are usually impossible to identify; we cannot therefore act on such links. Instead, order may emerge unpredictably from chaos without formal design, although there is no guarantee that it will." Questions: The phrase "unintended consequences" refers to the unexpected and often unwanted results of trying to direct a non-linear system which is subject to a complex feedback process which is in turn subject to sensitive dependence on initial conditions. Compare and contrast the handling of unintended consequences by the free enterprise system with how these problems are dealt with in a political system. Must political solutions always make the problem worse as if doomed to fail by inherent flaws in the decision framework itself? Why can't we eliminate drug consumption, provide real economic security for senior citizens, or make the medical system work as well as the grocery store system? (PD)

17 October 1999............a profound insight

Quoting from "The Results of Human Action but not of Human Design" by Friedrich A. Hayek, reprinted from STUDIES IN PHILOSOPHY, POLITICS AND ECONOMICS in AUSTRIAN ECONOMICS: A Reader edited by Richard M. Ebeling---------------"There can be little question that the author to whom more than to any other this ' anti-rationalist ' reaction is due was Bernard Mandeville. But the full development comes only with Montesquieu and particularly with David Hume, Josiah Tucker, Adam Ferguson, and Adam Smith. The uncomprehending ridicule later poured on the the latter's expresson of the ' invisible hand ' by which ' man is led to promote an end which was no part of his intention, ' however, once more submerged this profound insight into the object of all social theory, and it was not until a centruy later that Carl Menger at last resuscitated it in a form which now, yet another eighty years later, seems to have become widely accepted, at least within the field of social theory proper. (12)

Footnote 12: Carl Menger, Untersuchungen uber die Methode der Socialwissenschaften und der Politischen Okonomie insbesondere, Leipzig, 1883, p. 182: "die unbeabsichtigte Resultante individueller, d.i. individuellen Interessen verfolgender Bestrebungen der Volksglieder.....die unbeabsichtigte sociale Resultante individuell teleologischer Faktoren: (in the English translation of this work by F.J. Nock, ed. by L. Schneider, PROBLEMS OF ECONOMICS AND SOCIOLOGY, Urbana, 1963, p. 158). The more recent revival of this conception seems to date from my own article on "Scientism and the Study of Society," Economica, N.S. IX/35, August 1942, p. 276 (in the reprint in THE COUNTER REVOLUTION OF SCIENCE, Glencoe, ILL., 1952,p. 25) where I argued that the aim of social studies is "to explain the unintended or undesigned results of many men." From this it appears to have been adopted by Karl Popper, "The Poverty of Historicism," Economica, N.S. XI/3, August 1944, p.122 (in the book edition, London, 1957, p.65). where he speaks of "the undesigned results of human action: and adds in a note that "undesigned social institutions may emerge as UNINTENDED CONSEQUENCES OF RATIONAL ACTIONS "; as well as in THE OPEN SOCIETY AND ITS ENEMIES, 4th ed.,Princeton, 1963, vol. 11, p.93 where he speaks of "the indirect, the unintended and often the unwanted by products of such actions" (i.e., "conscious and intentional human actions"). (I cannot agree, however, with the statement, Ibid.p.323 based on a suggestion of Karl Polanyi, that "it was Marx who first conceived social theory as the study of the UNWANTED SOCIAL REPERCUSSIONS OF NEARLY ALL OUR ACTIONS." The idea was clearly expressed by Adam Ferguson and Adam Smith, to mention only the authors to whom Marx was unquestionably indebted.) The conception is also used (though perhaps not adopted) by Ernest Nagel, "Problems of Concept and Theory Formation in the Social Sciences," in SCIENCE, LANGUAGE AND HUMAN RIGHTS (American Philosophical Association, Eastern Division, vol. 1), Philadelphia, 1952, p.54. where he says that "social phenomena are indeed not generally the intended results of individual actions; nevertheless the central task of social science is the explanation of phenomena as the unintended outcome of springs of action." Similar though not identical is K.R. Merton's conception of ' The unanticapted consequences of purposive social action ' (see his article under that title in AMERICAN SOCIOLOGICAL REVIEWS, 1936, and the further discussion in SOCIAL THEORY AND SOCIAL STRUCTURE, rev. ed. Glencoe, IL, 1957, pp. 61-62). "

Then quoting Carl Menger in "The Theoretical Understanding of Those Social Phenomena which are not a Product of Agreement or of Positive Legislation, but are Unintended Results of Historical Development" reprinted from INVESTIGATIONS INTO THE METHOD OF THE SOCIAL SCIENCES WITH SPECIAL REFERENCE TO ECONOMICS from the same reader as above------------------"All this is true of those social phenomena which refer back to a pragmatic origin. Another portion of them, however, is not the result of agreement of members of society or of legislation, as we have already explained. Language, religion, law, even the state itself, and, to mention a few economic social phenomena, the phenomena of markets, of competition, of money, and numerous other social structures are already met with in epochs of history where we cannot properly speak of a purposeful activity of the community as such directed at establishing them. Nor can we speak of such activity on the part of the rulers. We are confronted here with the appearance of social institutions which to a high degree serve the welfare of society. Indeed, they are not infrequently of vital significance for the latter and yet are not the result of communal social activity. It is here that we meet a noteworthy, perhaps the most noteworthy, problem of the social sciences: HOW CAN IT BE THAT INSTITUTIONS WHICH SERVE THE COMMON WELFARE AND ARE EXTREMELY SIGNIFICANT FOR ITS DEVELOPMENT COME INTO BEING WITHOUT A COMMON WILL DIRECTED TOWARD ESTABLISHING THEM? " Questions: How important is this concept? Do you agree with Menger and Hayek that understanding the above mentioned phenomena should be the aim of social studies and is the most noteworthy problem of the social sciences? Is there enough emphasis on teaching and learning about the concept of spontaneous social order and complex adaptive systems? Did you learn about these ideas during your formal education? (PD)

20 October 1999................the promise of human action

One of the great thinkers of the Austrian school of economics was Ludwig von Mises. On the occasion of the 50th anniversary of the publication of Mises' seminal book HUMAN ACTION, Lew Rockwell, president of the Ludwig von Mises Institute, delivered the following speech. Comment: My teaching assistant at the University of Arizona is working on his PhD in economics. I asked him if he had ever heard of the book Human Action or of Ludwig von Mises. His answer was no and unfortunately that is probably a typical response. Our internet course Principles of Socionomics will emphasize Austrian economics in conjunction with the relatively new theory of complex adaptive systems (along with evolutionary psychology and natural law social philosophy). These are all new subjects to most students. If an introductory course in mainstream economics is combined with our course, this should give the students a more balanced presentation of ideas than is currently available. Questions: Do ideas, emotions, personalities, and technology interact in a predictable way to determine how free a society becomes? Will the world be a more or less free place to live in by the end of the 21st century? Why is freedom good? Is there such a thing as too much freedom? (PD)



[This speech was delivered at the offices of the Mises Institute, September 14, 1999, the date on which Human Action was published 50 years go.]

In a 1949 memo circulated within Yale University Press, the publicity department expressed astonishment at the rapid sales of Ludwig von Mises's Human Action. How could such a dense tome, expensive by the standards of the day, written by an economist without a prestigious teaching position or any notable reputation at all in the US, published against the advice of many on Yale's academic advisory board, sell so quickly that a 2nd and 3rd printing would be necessary in only a matter of months?

Imagine how shocked these same people would be to find that the 1st edition, reissued 50 years later as the Scholar's Edition of Human Action, would sell so quickly again. How can we account for the continuing interest in this book? It is unquestionably the single most important scientific treatise on human affairs to appear in this century. But given the state of the social sciences, and the timelessness of Mises's approach to economics, I believe it will have an even greater impact on the next century. Indeed, it is increasingly clear that this is a book for the ages .

Human Action appeared in the midst of ideological and political turmoil. The world war had only recently ended, and the US was attempting to reshape the politics of Europe with a new experiment in global foreign aid. The Cold War was just beginning. Virtually overnight, Russia went from ally to enemy-a shocking transition considering that nothing much had changed in Russia. It had been a prison camp since 1918 and its largest imperial advances in Europe had taken place with the full complicity of FDR. But in order to sustain wartime economic planning in the US, and all the spending that entailed, it became necessary for the US to find another foreign foe. By 1949, the US began to fight socialism abroad by imposing it at home.

Indeed, on this day 50 years ago, the old idea of the liberal society was gone, seemingly forever. It was a relic of a distant age, and certainly not a model for a modern industrial society. The future was clear: the world would move toward government planning in all aspects of life, and away from the anarchy of markets. As for the economic profession, the Keynesian School had not yet reached its height, but that was soon to come.

Socialist theory enthralled the profession to the extent that Mises and Hayek were thought to have lost the debate over whether socialism was economically possible. Labor unions had been delivered a setback with the Taft-Hartley Act, but it would be many years before the dramatic declines in membership would take place. In academia, a new generation was being raised to believe that FDR and World War II saved us from the Depression, and that there were no limits to what the State could do. Ruling the land was a regime characterized by regimentation in intellectual, social, and political life.

Human Action appeared in this setting not as polite suggestion that the world take another look at the merits of free enterprise. No, it was a seamless and uncompromising statement of theoretical purity that was completely at odds with the prevailing view. Even more than that, he dared to do what was completely unfashionable then and now, which is to build a complete system of thought from the ground up. Even Mises's former students were taken aback by the enormity of argument and the purity of his stand. As Hans Hoppe has explained, some of the shock that greeted the book was due to its integration of the full range of philosophy, economic theory, and political analysis.

When you read Human Action, what you get is not a running commentary on the turmoil of the time, but rather a pristine theoretical argument that seems to rise above it all. To be sure, Mises addresses the enemies of freedom in these pages-and they happen to be the same enemies of freedom that surround us today. But much more remarkable is the way he was able to detach himself from the rough and tumble of daily events, and write a book restating and advancing a pure science of economic logic, from the first page to the last. It contains not a word or phrase designed to appeal to the biases of the world around him. Instead, he sought to make a case that would transcend his generation.

To appreciate how difficult this is to do as a writer, it is useful to look back at essays we may have written last year or ten years ago. Quite often, they have all the feel of their time. If any of us have written anything that can hold up five years later, much less fifty, we should feel extremely happy at our accomplishment. And yet Mises sustained a 1,000-page book on politics and economics that doesn't feel dated in the least-or at least that was the consensus of the students we recently had in our offices to re-read the entire work.

Consider Samuelson's Economics, which made its first appearance in 1948. It's no accident that it's in its 16th edition. It had to be continually updated to fix the theories and models that events rendered anachronistic in only a few years. Even as late as 1989, the book was predicting that the Soviets would surpass the US in production in a few years. Needless to say, that had to go. Last year, a publisher brought out the first edition-as a kind of museum piece, the way you might reproduce an old phonograph record. In any case, it didn't sell well.

Incidentally, when John Kenneth Galbraith reviewed Human Action in the New York Times, he called it a nice piece of intellectual nostalgia. Interesting. Does anyone read any of Galbraith's books today for any other reason? Our purpose in reissuing the 1st edition, on the other hand, was not nostalgia: it was to introduce a new generation to what it means to think clearly about the problems of social order. We still have so much to learn from Mises.

I think we need to reflect on what it required of Mises personally to write the book. He had been uprooted from his homeland, and much of his beloved Europe was in tatters. Well past mid-life, Mises had to start over, with a new language and a new setting. It would have been so easy for him to look around at the world and conclude that freedom was doomed and that his life had been a waste.

Try to imagine the intellectual courage it required for him to sit down and write, as he did, an all- encompassing apologia for the old liberal cause, giving it a scientific foundation, battling it out with every enemy of freedom, and ending this huge treatise with a call for the entire world to change direction from its present course onto an entirely new one.

I'm sometimes accused of having an excessively pious devotion to the man Mises, but it is impossible not to notice, in the thicket of his dense argument, that he was also a singular character in the history of ideas, a man of uncommon vision and courage.

When we honor Human Action on this great anniversary of the book's publication, we must also honor the fighting spirit that led him to write it in the first place, and to see it through to its miraculous publication.

What are the political and economic trends that have come to pass in the last 50 years? The rise of new technologies, whose existence are best explained through a Misesian theory. The collapse of the Soviet Union and its client states, for the reasons explained in this book. The failure of the welfare state, again foretold in these pages. The widespread disappointment at the results of positivist methods in the social sciences, also addressed here.

Indeed, if we look at the failure of the welfare state, the persistence of the business cycle, the hyperinflation in Asia, the collapse of currencies in South America, the benefits we've derived from deregulation in our own country, and the meltdown of social insurance schemes, we'll see that each is addressed and predicted in Human Action. Again, each is discussed in terms of timeless principles.

But none of these issues touch on what I find to be the most encouraging trend of our time: the decline in the moral and institutional status of the central state itself. Quite often in the press these days, pundits decry the rise of cynicism and anti-government feeling among the public. But what does this really mean? Surely not that Misesian theory has come to capture the imagination of the masses. We are a long way from that. What they are decrying is the end of the old intellectual and political regime that was just coming into its own when Mises's book appeared in 1949, and has been breaking apart since at least 1989.

The same level of respect is not shown to leaders in Washington as it was in those years. Involvement in politics or the civil service is not valued as highly. In those days, the State got the best and brightest. These days, it gets those who have no other job prospects. The public sector is not the place to look for band width. Moreover, hardly anyone believes that central planners are capable of miracles anymore, and the public tends to distrust those who claim otherwise. The political rhetoric of our time must account for the rise of markets and private initiative, and acknowledge the failure of the State.

Now, there are exceptions. There is the Bill Bradley campaign, which, as far as I can tell, is driven by the idea that Clinton has cut the government too much! And then there are the conservatives at the Weekly Standard. Last week's issue called for something new: what they have dubbed "One Nation Conservatism." The idea is to combine the conservative domestic statism of George W. with the conservative foreign-policy statism of John McCain. This is what might be called the politics of the worst of all worlds.

The entire approach fails to come to terms with a central insight of Mises's treatise: namely, that reality imposes limits on how expansive our vision of government can be. You can dream about the glories of a society without freedom all you want, but no matter how impressive the plans look on paper, they may not be achieved in the real world because economizing behavior requires, most fundamentally, private property, which is the institutional basis of civilization.

Government is the enemy of private property, and for that reason becomes the enemy of civilization when it attempts to perform anything but the most minimal functions. And even here, Mises says, if it were possible to permit individuals freedom from the State altogether, it should be done.

People were not ready for that message then, and they are more ready for it now, because we live in times when government routinely confiscates one half or more of the profits associated with entrepreneurship and labor. Politics consists of a 100,000 pressure groups trying to get their hands on the loot. Why would anyone believe that it would be a good idea to expand this system?

Let me read you the rationale for this One-Nation Conservatism. It will inspire people to throw themselves into what they call public service. Public service has four main merits in their view: it "forces people to develop broader judgment, sacrifice for the greater good, hear the call of duty, and stand up for their beliefs."

These are all desirable traits. But I fail to see how they have anything to do with politics. Rather, a politicized society tends to produce the opposite: narrow judgment, selfishness, petty graft, and compromise. And that's putting the best possible spin on it.

Who are the real visionaries today? They are software developers, communications entrepreneurs, freedom-minded intellectuals, home schoolers, publishers who take risks, and businessmen of every variety who have mastered the art of serving the public through excellence, and doing it despite every obstacle that the State places in their way.

The real visionaries today are the people who continue to struggle to live normal lives-raising children, getting a good education, building healthy neighborhoods, producing beautiful art and music, innovating in the world of business-despite the attempt by the State to distort and destroy most of what is great and good in our world today.

One of the great rhetorical errors of Mises's time and ours has been to reverse the meaning of public and private service. As Murray Rothbard pointed out, private service implies that your behavior and your motivation is about helping no one but yourself. If you want an example, tour the halls of a random bureaucratic palace in DC.

Public service, on the other hand, implies a voluntary sacrifice of our own interests for the sake of others, and I suggest to you that this is the most overlooked feature of a free society. Whether it is entrepreneurs serving their customers, parents serving their children, teachers serving their students, pastors serving the faithful, or intellectuals serving the cause of truth and wisdom, we find an authentic public ethic and a real broadness of judgement; it is in the voluntary nexus of Human Action where we find the call of duty being acted on. It is here we find people standing up for their beliefs. It is here we find true idealism.

It was Mises's firm conviction that ideas, and ideas alone, can bring about a change in the course of history. It is for this reason that he was able to complete his great book and live a heroic life despite every attempt to silence him.

The scholarly followers of Mises in our own time exhibit these traits, and inspire us everyday with their innovative, principled, and radical approach to remaking the world of ideas. In their work for The Quarterly Journal of Austrian Economics, in their books, and in their teaching we see the ideals of Mises being fulfilled.

At a low point in his life, Mises wondered if he had become nothing but a historian of decline. But he quickly recalled his motto from Virgil: Do not give in to evil, but proceed ever more boldly against it. With Human Action, Mises did just that. He was to die around the time that Nixon went off the gold standard and imposed wage and price controls, to Republican cheers. He didn't live to see what we see today-nothing short of the systematic unraveling of the statist enterprise of our century-but he did foresee that hope was not lost for the flourishing of human liberty. For that great virtue of hope, we must all be very grateful.

Let me also say how grateful I am to everyone involved in the production of the Scholar's Edition on this 50th anniversary, from our Members to our faculty to our staff. Mises smiles today.

LLEWELLYN H. ROCKWELL, JR. is president of the Ludwig von Mises Institute in Auburn, Alabama.
518 W. Magnolia Avenue
Auburn, Alabama 36832-4528
(334) 321-2100 -- Phone
(334) 321-2119 -- Fax

21 October 1999..................biology, economy, complexity, and society

Quoting from BIONOMICS by Michael Rothschild-------------------------"Somehow the idea that human cells can live on after their ' owner ' dies conflicts with our innate sense of what a human being is. Try as we might, we simply cannot think of the fellow sitting across the aisle as an assemblage of 10,000 billion cells that just happens to be arranged in a familiar shape. Nonetheless, from the biologist's perspective, the cell is of utmost importance, because the cell is where life's real action takes place, where genetic information turns chemicals and energy into living tissue.

The same is true in the economy. A huge multinational corporation is, on close inspection, a confederacy of thousands of specialized ' work cells, '. Just as every complex organism is comprised of cells organized in tissues and organs, large firms are composed of work cells arranged in hierarchies of departments and divisions. As in nature, all the critical life-giving functions take place inside individual cells, where people use knowledge to transform resources into goods and services.

Because of their size and influence, the great corporations--the behemoths of the economy--grab the headlines. But the overwhelming majority of organizations, and organisms, are minuscule. Ice-cream parlors, hair salons, plumbing contractors, and family farms are microbes of the economy. Like single-celled creatures, such firms are incredibly numerous and diverse, but, because of their minute size, they seem unimportant to casual observers. Nonetheless, whether work cells are clumped together as complex organizations or live independently as small firms, they are all essential to economic vitality.

The biologic and economic systems owe their similarity of form to their similarity of function. In nature, organisms convert genetic information into tissues. In the economy, organizations turn technological information into products. Since both information realms are constrained by limited resources, they evolved similar ways of efficiently turning resources into more information._________

Once the blueprint of a particular protein is copied into RNA, the molecule slips through a pore in the nuclear membrane and out into the body of the cell, headed for a protein assemble site (ribosome). At a ribosome, the linear code carried by RNA is translated into the three dimensional shape of a protein molecule. Pure information is given physical form. Just as a pile of loose bricks is assembled into walls of specific dimension according to a blueprint, free-floating amino acids are assembled into the proteins called for by DNA. Disorder yields to order.___________

The entire global economy is comprised of work cells and organizations engaged in the interdependent production and exchange of products. Regardless of size or level of technological sophistication--from the corner delicatessen to the world's leading microprocessor firm--all organizations cope with essentially the same tasks that face a single living cell. Encoded information is developed and preserved in DNA or blueprints. Copies are shipped to ribosomes or assembly sites. After raw materials are prepared, components are reassembled in new configurations. In a series of finishing steps, these objects are packaged into deliverable products. From protein to microprocessor, the essentials of organic and economic production are the same." Question: Complexity manifests itself by replication of simple forms into more complex forms. Cells become a body. Bodies become an organization. Organizations become an economy. Are there lessons to be learned from biology that might help us to a better understanding of not only our economy but also our society? (PD)

22 October 1999.................regarding the 20 October 1999 input

I share your concern about the lack of appreciation among "economists" of Ludwig von Mises (and F.A. Hayek). In Australia the majority of economics teachers and many University economics lecturers have never heard of either great man. It gets worse. Frequently I meet Australian graduates in economics who cannot name any economist. One such graduate was an adviser to a Federal Senator. He told me the only economist he had ever studied was Karl Marx. (MD)

23 October 1999....................individual responsibility, the State, and evolution of a complex adaptive system

Quoting from TOWARDS A FREE SOCIETY by Cactus Club member Gary Wolfram--------------------"A free society offers choices. It does not guarantee results. You have the choice of deciding whether or not you wish to attempt to become an opera singer. If you misjudge your talent, or people's willingness to pay for your performance, then you must accept that result. You may starve and end up driving a taxicab. Then you may feel you have wasted all the years of training or listening to opera music. That is what freedom entails: no guarantees other than the freedom to make you own choices.

A free society demands that its people be guided by this sense of individual responsibility. When people are allowed to act as they see fit, people must believe that the outcomes that result from that action are the responsibility of the individual. This must be more than a legal concept. It must be more akin to a moral concept. It must be one of those general principles by which the society organizes itself.

When people believe that individuals are responsible for their own actions, it will also have an effect on individual behavior. It will make people choose in a fashion which would be different than if they felt they could not be held responsible. It requires them to prepare more, to make more efficient choices about the use of resources. When deciding whether to build a certain product and thus use up resources in production, you will make sure that the value of those resources in other uses doesn't exceed the value in the use you make of them. If the value is greater in other uses, then you will have paid more to produce your product than you receive for it, and you will go bankrupt. Since this results in a reduction in your standard of living, you will be more careful than if the system is such that you are not held responsible for your choice, e.g., the government will reimburse you for any losses you incur.

This sense of responsibility also provides a moral justification for the manner in which society is organized. When we know that in a market system the distribution of income is actually determined by consumers, and that individuals can garner and maintain wealth only by pleasing consumers, it affects our attitude about the redistribution of income. In the same way, a sense that individuals are responsible for their actions results in a certain belief about the justice of the system.

Take that famous socialist utopia novel of the late 19th century by Edward Bellamy, LOOKING BACKWARD 2000--1881. In it Bellamy describes the economic system of late 19th century Europe as a carriage ride in which some people, at random, end up in the drivers seat, and others, at random, fall off into the mud. The idea is that it is primarily luck that determines the distribution of income in a capitalist society. If that is what you believe, then you probably believe that it is rather unfair that some people are rich and others are poor, since they do not become that way because of the results of their choices and actions. This means that a society should be able to form a government in which the government can take away from those who are rich and give to those who are poor.

In a society where people are not to be held responsible for their actions, criminal activity is blamed on circumstances of the individuals, or on genetic characteristics of individuals. The belief that people who commit crimes do so by making rational choices and will be held accountable for these actions results in a much different view of criminal activity and the way society would deal with it.

Notice that freedom is important for the altruistic individual as well as the person who seeks only personal gratification. One can hardly be considered altruistic when contibuting to a cause under the threat of imprisonment. Unless you are free to choose not to contribute to a charity, and people believe that you are responsible for the good that occurs from your contribution, there is no room for altruism. The belief that it is a moral responsibility to volunteer one's time, treasure, and talent to the benefit of those less fortunate goes away. In a perfectly eqalitarian society, there would be little altruism and a good deal of coercion.

In a free society, there is no guarantee that native ability or intelligence or education will lead to success. In a market economy, the use to which you put your talents and resources determines what your fortune will be. If you are lazy, or you make incorrect choices, then you will not be as successful as a person with less talent or resources that works harder or makes better choices. This sense of insecurity is what causes people to trade off liberty for guarantees. There are risks involved in my accepting responsiblity for my action. People can respond to this by giving up their freedom in order to sustain some minimum result." Questions: Is there a reciprocal relationship between the meme of individual responsibility and freedom to choose your own actions? Do activities of the state such as taxation, regulation and income transfers change the environment within which the complex adaptive system we call society adapts and evolves? If so, what are the likely consequences of this change? (PD)

24 October 1999...............path dependency and horse's rears

Here is an interesting example of the path dependency concept in the theory of complex adaptive systems:

The US standard railroad gauge (distance between the rails) is 4 feet 8.5 inches. That's an exceedingly odd number. Why was that gauge used? Because that's the way they built them in England, and English expatriates built the US railroads. Why did the English build them like that? Because the first rail lines were built by the same people who built the pre-railroad tramways, and that's the gauge they used. Why did they use that gauge then? Because the people who built the tramways used the same jigs and tools that they used for building wagons, which used that wheel spacing. Okay! Why did the wagons have that particular odd wheel spacing? Well, if they tried to use any other spacing, the wagon wheels would break on some of the old, long distance roads in England, because that's the spacing of the wheel ruts. So who built those old rutted roads? The first long distance roads in Europe (and England) were built by Imperial Rome for their legions. The roads have been used ever since. And the ruts? Roman war chariots first made the initial ruts, which everyone else had to match for fear of destroying their wagon wheels and wagons. Since the chariots were made for, or by Imperial Rome, they were all alike in the matter of wheel spacing. Thus, we have the answer to the original question. The United States standard railroad gauge of 4 feet, 8.5 inches derives from the original specification for an Imperial Roman war chariot. Specifications and bureaucracies live forever. So, the next time you are handed a specification and wonder which horse's rear came up with it, you may be exactly right. Because the Imperial Roman war chariots were made just wide enough to accommodate the back ends of two war-horses. And now, the twist to the story... There's an interesting extension to the story about railroad gauges and horses' behinds. When we see a Space Shuttle sitting on its launch pad, there are two big booster rockets attached to the sides of the main fuel tank. These are solid rocket boosters, or SRBs. Thiokol makes the SRBs at their factory at Utah. The engineers who designed the SRBs might have preferred to make them a bit fatter, but the SRBs had to be shipped by train from the factory to the launch site. The railroad line from the factory had to run through a tunnel in the mountains. The SRBs had to fit through that tunnel. The tunnel is slightly wider than the railroad track, and the railroad track is about as wide as two horses behinds. So, the major design feature of what is arguably the world's most advanced transportation system was determined by the width of a horse's rear!

25 October 1999............regarding the 17 October 1999 input

Menger's insights are profound, indeed. You quote him from Hayek via Ebeling as follows (worth repeating over and over): We are confronted here with the appearance of social institutions which to a high degree serve the welfare of society. Indeed, they are not infrequently of vital significance for the latter and yet are not the result of communal social activity. It is here that we meet a noteworthy, perhaps the most noteworthy, problem of the social sciences: HOW CAN IT BE THAT INSTITUTIONS WHICH SERVE THE COMMON WELFARE AND ARE EXTREMELY SIGNIFICANT FOR ITS DEVELOPMENT COME INTO BEING WITHOUT A COMMON WILL DIRECTED TOWARD ESTABLISHING THEM? "

Mises acknowledged Menger and Bohm-Bawerk as his antecedents. The publisher of Sennholz's English translation of Bohm-Bawerk's monumental and milestone treatise "CAPITAL AND INTEREST" (Libertarian Press, 1959) advises the reader that Menger's "PRINCIPLES OF ECONOMICS" (English translation published by The Free Press, Glencoe, IL, 1950) is perhaps the one essential antecedent work that should be read to understand Bohm-Bawerk because it integrates the thinking of the classical economics ancestors Mandeville, Ferguson, Smith, Ricardo, Mill, Bastiat, etc.

From this, it seems we should take a hint from Hayek and Mises and read Menger directly. If we did, perhaps we would begin to come to grips with residual attachments to a political state as the essential promulgator of law and order. It seems that even Rothbard, the most "advanced" of all the Austrians, held on to a small but significant attachment to political institutions (e.g. money) although he was somewhat less reliant on political government than his mentor Mises. He was active in Libertarian Party affairs at one time. What was that about? Of course in all fairness to Rothbard and Mises, I'm looking back a few years with 20-20 hindsight and without any academic baggage. There has been some progress, no doubt. Who are the teachers of the new findings and advancements in the economic understandings beyond Rothbard? Rothschild (Bionomics) is a biologist, not an economist. D. D. Friedman is a physicist, not an economist. Does it matter if formal economics experiences a break in its academic continuity if that leads to a rebirth in a fruitful new life?

Your Questions re. Menger: How important is this concept (unintended consequences)?


Do you agree with Menger and Hayek that understanding the above mentioned phenomena should be the aim of social studies and is the most noteworthy problem of the social sciences?


Is there enough emphasis on teaching and learning about the concept of spontaneous social order and complex adaptive systems? Did you learn about these ideas during your formal education? (PD)

Hell no, to both questions!

As a formal engineering student, I never got any closer to economics than what was called "engineering economics," which is nothing more than glorified project and manufacturing cost accounting. There might have been a little business finance included by way of dealing with product "pricing." However, such pricing had no reference to markets and exchange and, therefore, no recognition of the Austrian subjective theory of value.

If you are taking a survey, here's a short history of my discovery. I learned of such ideas gradually over many years of inquiry of informal study. I admit to extraordinary obstinacy, curiosity, contraryness and parsimony. It helped me a lot that I was interested in what I called "philosophy," and I had the good fortune to fall in with some good company who happened to be way ahead of me on economic theory. When I met them, they were already into The Freeman etc., and the works of Leonard Read, Henry Hazlitt, Ludwig Mises, Baldy Harper and Ayn Rand, whereas I was still somewhat of a patriot and a public library patron trying to set things right. I was into public policy, national security and national economic issues and I was driving myself crazy.

It seems to me the Cactus Cub and the Sonoran Society are functioning as the "good company" nowadays, thanks to you and the internet. I'm encouraged. Where else besides the emergent institution known as TCSR is there any teaching and systematic learning about the possibilities for spontaneous social order and complex adaptive systems? Who teaches anything about the radical notion that the social institutions essential for serving the welfare of society are the spontaneous outcomes of autonomous individual actions, that they are not the result of so-called communal social activity as such--not even, but perhaps especially not, politically orchestrated movements?

Indeed, is there any such thing as "communal social activity?" Who even asks such questions? We can easily see the antithesis--communal anti-social activity. There is lots of that around. Politics represents the most systematic manifestation of communal anti-social activity, but it just boils down to a kind of pre-social human group interaction known as collectivity. All collectivity is akin to juvenile schoolyard gang activity in which "might-makes-right" is the rule of the day. Contrary to Plato, collectivity is not a synomym for community.

Menger states the question best: "HOW CAN IT BE THAT INSTITUTIONS WHICH SERVE THE COMMON WELFARE AND ARE EXTREMELY SIGNIFICANT FOR ITS DEVELOPMENT COME INTO BEING WITHOUT A COMMON WILL DIRECTED TOWARD ESTABLISHING THEM? " He was keen to see there is no such thing as "common will." By contrast, almost everybody who has any literacy whatever, believes in a common will. Literacy or not, this idea is a most mischievous form of mysticism or mythology or superstition no less pernicious and refractory than the flat earth and geocentric universe myths were in Bruno's and Galileo's time. I trust science--the antidote--will work this out more quickly in our time. The "common will" is analogous to "the kings new outfit" in the Hans Christian Andersen story.

You know I could not be more dedicated to or supportive of the concept that social studies are concerned with spontaneous social phenomena and to reveal the order underlying those phenomena (natural laws of society) is the aim of the social sciences. Trouble is, there is no concensus definition of the "social" domain of reality that sets it apart operationally from the biological, psychological and political domains. (AL)