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The Distemper Revisited
The Robinson Crusoe Ethic Versus the Distemper of Our Times noted that there is a stark and largely unrecognised incompatibility between the only-partly-genuine material prosperity of recent years and the gilded values and policies that have accompanied it. It showed that the maintenance of contemporary standards of living in Western countries (to say nothing of their improvement) requires much lower time preferences and much higher rates of saving than have existed in recent years. It also showed that the tension between complaisant expectations of a secure future and an unwillingness to save for it (to say nothing of saving for a rainy day) must resolve itself in either lowered expectations, greater savings or some combination of the two (see in particular Hans-Herman Hoppe, Democracy, The God That Failed: The Economics and Politics of Monarchy, Democracy and Natural Order, Transaction Publishers, 2002, ISBN: 0765800888). Hence the unresolved – because it is undiagnosed – Distemper of Our Times.
This set of circulars elaborates this conclusion. It concludes (hardly for the first time) that the maintenance and improvement of contemporary living standards depends not just upon capital but also new ideas, innovations and technology. Much more controversially, however, it shows that these things owe little or nothing to either institutionalised research and development or “education” – particularly the variety imparted in contemporary universities and their business schools. For individuals, education (in the proper sense of the term) is indeed priceless stuff. The private returns to education, in other words, can be high. But what about the endlessly-trumpeted “positive externalities” and “returns to society” that stem from state-directed educational institutions? These are much lower than academics and politicians blithely, relentlessly and unthinkingly assert. Indeed, like the results of most activities organised and financed by governments, the results of state-directed education are much more likely to be negative than positive.
Governments, then, should not need not finance science, education R&D and the like. Further, government intervention is not just harmful, it is superfluous. Entrepreneurs, capitalists and the private sector can do so and indeed successfully did so before the rise of the Leviathan state. Governments should not finance these things because free and profit-seeking individuals have done so and will do so better than governments. The best science, of course, takes place in informal and non-institutional settings – most notably and successfully in the talented amateur’s workshop. And the technology devised by enterprising individuals and harnessed by capitalists creates the wealth that enables benefactors to found educational institutions. The red brick universities of the north of England, for example, were founded after brass was made out of muck – and not, as today’s politicians and academics relentlessly and stupidly assert, in order to make more brass. Exacerbating the Distemper of Our Times, then, are some false, destructive and downright crazy notions that are held with fanatical zeal by powerful politicians and influential academics. These destructive ideas have, among a host of other bad things, spawned business schools in which perverse incentives thrive and pernicious attitudes proliferate. It is high time that one of Her Majesty’s loyal Australian patriots compiled the charge sheet and blew the whistle.
A Tale of Two Rapacious Tribes
Recall that a well-armed but enlightened and peaceful tribe inhabits the island next to Crusoe’s. Its members agree to keep their distance and to impose themselves upon him in only one way: in return for the unrestricted use of the island and protection from any invaders, each month Crusoe will render to them a portion of fruit and berries equal to the amount he can collect during a single day. Let us now say (with acknowledgement and apologies to Warren Buffett, “The Age-Old Lesson of Static Island The Washington Post 28 September 1982 and Axel Leijonhufvud, “Life Among the Econ in A. Leijonhufvud, ed., Information and Coordination: Essays in Macroeconomic Theory, New York: Oxford University Press, 1981, ISBN: 0195028147) that one day, whilst delivering the requisite amount of berries to his benign protectors, Crusoe learns about two not-so-benign tribes on distant islands.
The first tribe, the Politicians, survive and prosper solely by piracy and plunder: constructing nothing and backed by armed force, they sail to islands peopled by productive men such as Crusoe and summarily demand at least one-third and sometimes one-half or more of all that is produced each year. Not satisfied with this theft, the Politicians also help themselves to a significant percentage of the fixed property accumulated and owned by the islanders. Some Politicians settle on these islands, announce that they “represent” the islanders and state that they will provide “services” financed by the islanders’ taxes (less the very hefty slice that the Politicians keep for themselves). Whether it is direct or indirect, their meddling and taxes reduce the islanders’ standard of living (see Albert Jay Nock, Our Enemy the State; Frédéric Bastiat, The Law; and A Tale of Two Islands). Amazingly, however, a bizarre variant of the Stockholm Syndrome and Cargo Cult develops: to the disgust of a sturdily independent minority of islanders, large numbers of their compatriots support the Politicians and demand ever more “services” from them. The Politicians’ aggression also prompts some of their more geographically distant victims (who assume correctly that many and probably most islanders support their “representatives”) to retaliate against the islanders. Clearly, the taxes, domestic meddling and foreign predations render the islanders poorer and less safe than they would be if they had never encountered the Politicians.
A second tribe, the Academics, occupy their own, much smaller, island and jealously guard access to it. But their constant exhortation of their “autonomy” hardly means that they are independent. The Academics, like the Politicians, seem to produce nothing of value. Without coercion, very few islanders are willing to pay for the Academics’ services. Knowing or at least suspecting this, Academics demand that Politicians subsidise their standard of living. They demand, in other words, that the Politicians plunder the general population and share some of the proceeds with the Academics. Over time the Academics, historically a poor but cunning tribe, have devised procedures which have eroded most of their liberties but greatly improved their material standard of living. They spare no effort to praise and glorify the Politicians, and they write books and articles that rationalise the Politicians’ theft and plunder of the islanders’ income and property. Flattered by this praise and using it to legitimise their piracy, Politicians favour Academics. A portion of what they expropriate from islanders they remit to Academics; and because Academics are few in number relative to the islanders, they enjoy a high standard of living at the islanders’ expense. Academics thus celebrate and jealously guard their standing as “Court Intellectuals.”
Robinson Crusoe Visits Academic Island
Crusoe, intrigued and alarmed by this disturbing information from his benign protectors, possesses the skill and wealth required to travel to Academic Island. He undertakes the long voyage and disembarks at that portion of the island inhabited by the Business School (“BS”) clan. Its individual members are known as “BSers” and Crusoe immediately discovers something strange about them: as an adjunct to their primary activity, which is to praise the Politicians upon whose continued pillage their standard of living depends, BSers purport to study and understand things such as “business” and “entrepreneurship.” Indeed, some BSers claim that they can train young people to become businessmen, and when it suits their purpose – but, mind you, never in such a way that it seriously criticises the Politicians or draws attention to their plunder – they pay lip service to capitalism and entrepreneurship. Most, however, know on exactly which side their bread is buttered and therefore fear and actively denigrate the neutered and bastardised version of capitalism that exists on other islands that a few BSers occasionally visit.
Crusoe also quickly learns something that is astonishing: unlike Academic Island’s Dental clan (whose members not only talk about cavities but also repair them) and its Engineering clan (who not just study bridges but also build them) few if any members of the BS clan have any direct knowledge of business. Very few BSers live among or associate with entrepreneurs; and virtually no BSer has ever started a business and built it over the years through adversity and towards prosperity. As a result, practically no BSer has the remotest idea what it is like to plant, harvest and market a crop. Analogously, virtually no BSer can conceive what it is like to meet a payroll. Unlike Crusoe, in other words, no BSer has ever had to rely entirely upon his mind and body to wrest an independent, prosperous and civilised existence.
Accordingly, and perhaps unsurprisingly, BSers seem uninterested in, unimpressed by or even aware of the arrival in their midst of an entrepreneur-capitalist-scholar of Crusoe’s calibre. Crusoe’s first impression, then, is that BSers are an odd – and, indeed, hypocritical – breed. They depend upon the Politicians for their bread but speak constantly of their “autonomy;” their bread is plundered from others yet they babble interminably about “fairness” and “equity;” they often chatter about business but have a superficial (at best) understanding of it (see, for example, Letter 52); and they rarely deign to practice it. Crusoe, as a self-made man who is acutely aware of his shortcomings of talent and character, has arrived at the BSers’ doorstep ready to learn. But he quickly realises, given his breadth and depth of direct experience, that he knows more about capitalism, entrepreneurship, business and economics than any BSer ever will.
There is another strange thing about the Academics more generally: despite their common genetic heritage and widespread dependence upon the Politicians, relations among the various Academic clans are strained. The distrust and contempt that BSers feel for the Arts and Humanities clans, for example, is heartily reciprocated – and social intercourse with them is inhibited by numerous taboos. Crusoe begins to realise that the sense of entitlement borne of their dependence upon the Politicians, together with their disdain for capitalism and entrepreneurship and their clannishness (bordering upon contempt for the islanders whose bread feeds them) makes interaction with BSers unproductive and disagreeable.
...continued in Part II
 
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