Academic journal article The Quarterly Journal of Austrian Economics

The "Missing Element" in Modern Economics

Academic journal article The Quarterly Journal of Austrian Economics

The "Missing Element" in Modern Economics

Article excerpt

The Lou Church Memorial Lecture in Religion and Economics

Austrian Economics Research Conference

Ludwig von Mises Institute

Auburn, Alabama

March 12, 2015

I'm honored, though I must admit also pleasantly surprised, to be invited to deliver the Lou Church Lecture in Religion and Economics at the 2015 Austrian Economics Research Conference. My first introduction to Austrian Economics came when I borrowed the well-thumbed copy of Ludwig von Mises's Human Action from my boss, then-Congressman Jack Kemp, for whom I worked as speechwriter and congressional staff economist before and during both presidential administrations of Ronald Reagan. While I have a high regard for what Austrian economics gets right that other economic schools do not, I consider myself a "Neo-Scholastic" economist, a term which I will try to explain.

Today I would like to discuss the significance of what my book's subtitle calls "The Missing Element" in modern economics. To address this central issue, I will begin with a question. I won't ask for a show of hands, only that you think of the answer: Did you celebrate the most recent Christmas or holiday season by giving gifts?

According to a recent national survey conducted by the Pew Forum, "Nine-in-ten Americans say they celebrate Christmas, and three-quarters say they believe in the virgin birth of Jesus. But only about half see Christmas mostly as a religious holiday, while one-third view it as more of a cultural holiday. Virtually all Christians (96 percent) celebrate Christmas, and two-thirds see it as a religious holiday. In addition, fully eight-in-ten non-Christians in America also celebrate Christmas, but most view it as a cultural holiday rather than a religious occasion" (Pew Research Center, 2013).

The Pew Forum survey summary continues: "The way Americans celebrate Christmas present is rooted in Christmases past. Fully 86 percent of U.S. adults say they intend to gather with family and friends on Christmas this year, and an identical number say they plan to buy gifts for friends and family. Roughly nine-in-ten adults say these activities typically were part of their holiday celebrations when they were growing up" (Pew Research Center, 2013).

My working hypothesis is that economists in general, including those adhering to the Austrian School, are pretty much the same as other Americans, both in their attitudes and, more importantly, in their behavior. But rather than merely assuming that I am right, I have compiled an anonymous questionnaire drawn from the Pew Forum Christmas survey. It has no official relation to or sanction from the Mises Institute. But I'd be grateful if you would fill it out and return it to me.

Subject to contradiction by this mini-survey, I consider it likely that, though scholars adhering to the Austrian School may also be more inclined to view Christmas as a cultural rather than religious holiday, nevertheless--whatever their reasoning--they remain just as likely as other Americans to celebrate Christmas by giving gifts. (1)

But if so, this behavior creates an explanatory problem, because no school of modern economics, including the Austrian School, has an adequate theory of personal gifts.

How did this missing element go missing?

From the mid-nineteenth to the mid-twentieth centuries, even specialists in the history of economics viewed their subject much like Saul Steinberg's "View of the World from 9th Avenue": the famous poster which depicts Manhattan's Ninth and Tenth avenues in exquisite detail, right down to the fire hydrants, while across the Hudson River, the rest of the world consists of vast blank areas with labels like "Jersey" or "Japan." For years, any historical textbook would start with Adam Smith, while in the hazy middle distance were the eighteenth-century "Physiocrats" and "Mercantilists." Moreover, economics seemed a very cozy British affair, presented like a biblical genealogy: Adam Smith begat David Ricardo, who begat John Stuart Mill, who begat Alfred Marshall, who begat Arthur Pigou, who begat John Maynard Keynes, whom Keynesian economists consider the pinnacle of economics. …

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