Market Economics with Wit, Elan

Article excerpt


Not many economists can make "the dismal science" throb with action and ideas. Nor do they see a long march of clearer economic thinking since Adam Smith - if with dubious detours around lingering ideas like those of Karl Marx and John Maynard Keynes - to the sunny market uplands of giants like James Buchanan, Milton Friedman, Friedrich Hayek, and Ludwig von Mises. This march is subsumed under "the house that Adam Smith built," as Smith' s beacons of the "invisible hand" and "natural liberty" still shine years since publication of his "The Wealth of Nations" in 1776.

In "The Making of Modern Economics," Mark Skousen pulls off this monumental task with finessse and wit. Quite an attainment: an enjoyable and enlightening tour de force replete with scores of figures, charts, tables, illustrations, photographs, hundreds of citations, a 27-page index and brief discussions of "pre-Adamites" like Aristotle, the Spanish Scholastics, Montesquieu and David Hume.

Mr. Skousen is editor of the monthly investment newsletter Forecasts and Strategies, and author of 20 books on finance and economics, including "Economics on Trial," "The Structure of Production," and "Dissent on Keynes " (ed.). He is a free marketeer who has cracked professional economic journals. He newly serves as head of the Irvington, N.Y.-based Foundation for Economic Education, America's oldest free-market think tank, founded in 1946, and publisher of the monthly Ideas on Liberty. And he just engineered the Foundation's acquisition of Laissez Faire Books of San Francisco.

Well, what of that Marxian detour? Marx's impact on economic history and thought was - and is - vast. Born a Jew, he was oddly anti-Semitic. Said Marx as quoted by Mr. Skousen: "What is the worldly cult of the Jew? . . . What is his worldly God? Money!" The idea pops up in Marx's "Communist Manifesto" as "naked self-interest . . .callous, 'cash-payment,'" as evil profit at the expense of the worker. So instead of sweet, selfless, state socialism, capitalism substitutes "naked, shameless, direct, brutal exploitation."

Marx's exploitation idea, alive and venomous, helps explain his theory of communism. The idea stems partly from classical economist David Ricardo's specious labor theory of value. So Marx held that only labor produces value, that labor is but "frozen capital," that profit and interest ("surplus value") are taken from its rightful owners, the working class. So on to the "Manifesto"'s socko wind-up: "Working men of the world, unite; you have nothing to lose but your chains."

Mr. Skousen sees twisted Marxian ideas leading to twisted Marxian logic that, for example, "the theory of communism may be summed up in a single sentence: abolition of private property," that communism is but "the temporary dictatorship of the proletariat," but that workers need not worry, for in time the state waxes into an anachronism and "will wither away." When? Who knows? Meanwhile - under Marxism as applied in the late unlamented Soviet Union - recalcitrant workers got to labor for years in hellish Siberian Labor camps.

Yet Marxian theory has been put into practice big-time. At one point in the post-World War II era, Marxism could claim that it swayed almost half of the world population. And even today socialist tentacles grab and entrap state schemes and enterprises across America and the West such as public schools, the Enivronmental Protection Agency (EPA), Medicare, affirmative action, Social Security. Is Marx dead? Half-dead, yes, as Eurocommunism fell in 1989-1991. But what of the other half? seeing those socialist tentacles, Nobel economist James Buchanan put it this way in a Wall Street Journal op-ed: "Socialism is dead, Leviathan lives."

Well, is Keynes dead? Not quite, as in the current Democrat-GOP scrap over a Keynesian oriented fiscal "stimulus" bill, which managed to attract quite a few Republicans. …