35. Why I Am an Economist, a Libertarian, and a Supporter of the Austrian School

35

RANDALL G. HOLCOMBE

WHY I AM AN ECONOMIST, A LIBERTARIAN, AND A SUPPORTER OF THE AUSTRIAN SCHOOL

WALTER BLOCK ASKED ME to relate the events that led them to libertarian and Austrian ideas. Several others began their stories in high school, but I was completely unaware of these ideas until I was a graduate student. I was always a good student, but when I entered college I saw it as a way to make myself more employable, and also as a place to have a good time with my friends. I wanted to do well in my classes, but I was not seeking out ideas. I worked my way through college playing guitar in a series of rock and roll bands, and I would have kept that as a career, but apparently I lacked the talent, or the luck, or whatever it took to earn a decent income. But hey, it was the ’60s, and it seemed like a good thing to do. My point is that I did not enter college planning a career in the world of ideas.

I took my first economics course as a college freshman and was immediately attracted to it. One thing that appealed to me was that a few simple models seemed to explain almost everything that happened in the world. Rather than learning a large collection of facts, economics presented a few simple theories that explained nearly every fact! The power of economic reasoning was intoxicating, and I continue to love economics for that very reason. The remarkable ability of the market mechanism to coordinate the activities of everyone in the economy, and to produce such prosperity and economic progress, was quite a revelation. I could see that materially, people in market economies were quite well off, and economics enabled me to understand why.

In the very first sentence of Human Action, Ludwig von Mises claims, “Economics is the youngest of all sciences.” He goes on to say that “. . . many new sciences have emerged from disciplines familiar to the ancient Greeks . . .” but that economics was based on something never before recognized: “. . . a regularity in the sequence and interdependence of market phenomena. . . .” I did not read Mises until I got to graduate school, but this describes what I found so intellectually enticing about economics. That regularity of market phenomena explained in a simple way a lot of things about the real world that, before I knew economics, seemed very complicated. I liked the ideas of economics, and sometime around my sophomore year, I started thinking that I’d like to be a college professor. I was very attracted to economics, and became an economist first. The ideas of economics then led me to a broader world of ideas.

Part of my interest in pursuing an academic career came from a group of “intellectual” students that I hung around with some (but I confess I didn’t spend nearly as much time with these intellectuals as with my rock and roll friends). These students lived mostly in the world of ideas, and they were all socialists, so I came to associate intellectuals with socialism. I believed that capitalist economies were more productive than socialist economies both because in the real world things were that way, and because my study of economics showed me the power of the invisible hand. My intellectual friends offered strong arguments for socialism, backed up by scholarship in the form of books and articles, and I began to think that my free-market views were anti-intellectual. All the intellectual arguments I’d heard were socialist, so I thought of myself as more of a pragmatist than an intellectual. I could see that the market system worked, and thanks to my economics training I understood how it worked, despite the weight of intellectual opinion against it.

I did see that even in a market-oriented economy like the United States, more than a third of the nation’s income was allocated through government, and I did hear the arguments in my classes about inefficiencies caused by externalities, public goods, monopolies, and macroeconomic instability. My interest gravitated toward the economics of the public sector, partly because it was more difficult for me to comprehend, and partly so I would be able to address some of the issues raised by my intellectual friends. The private sector just works by itself. People engage in economic activity for their own benefit, and are led by an invisible hand to do what’s best for everybody. But the public sector is designed to overcome the shortcomings of the market, and to work for the public good, or so I was taught. But as I said, the workings of the public sector were not as clear to me as the workings of the private sector. This appeared to be one area of economics where I needed more study.

When I was a junior, one of my professors offered a special topics course in the newly developing area of public choice. The public choice approach analyzes government decision-making in the same way that economics analyzes market decision-making. Whereas the standard methodology of the time was to use economic analysis to show where problems might emerge with the market, and then assume that an omniscient and benevolent government would do what was required to solve those problems, the public choice approach looks at the information available to those in government and analyzes the incentives they face to determine how they will act. I found this approach to the economics of government very revealing.

One of the books we used in my special topics class was The Calculus of Consent by James Buchanan and Gordon Tullock. Buchanan and Tullock had recently established a Center for the Study of Public Choice at Virginia Tech, and I went to graduate school at Virginia Tech specifically because I wanted to study under them. I was not alone. A number of my classmates went to Virginia Tech to study under Buchanan and Tullock, and as a graduate student I was introduced to the ideas of Austrian economics and libertarian politics by my fellow graduate students.

The two classmates who had the biggest influence on me were John Metcalf (who is now an attorney in Jacksonville, Florida) and Jack High, who subsequently earned a Ph.D. in economics from UCLA and has been a leading figure in the resurgence of the Austrian school. Jack had the largest influence on me because he took a lot of time to introduce me to ideas, suggest reading material to me, and he was willing to endlessly discuss those ideas with me. On the recommendation of Jack and other classmates, I read Mises, Hayek, Rothbard, Rand, and others, and my eyes were opened.

The ideas of each of those writers had substantial appeal, but the whole was more than the sum of its parts. Thanks to Jack and John and a few other classmates, I discovered that there was a substantial and long-standing intellectual foundation underlying free-market economics and libertarian politics. I had thought my anti-socialist views to be anti-intellectual because I was completely unaware of the substantial intellectual output of libertarian writers and the Austrian school. I was never introduced to it as an undergraduate, and it was certainly not a part of the graduate curriculum. But my classmates in graduate school were very interested in the Austrian school, and I did a lot of outside reading. More than once I recall annoying my professors by arguing the ideas of the Austrian business cycle in macroeconomics, or arguing the merits of privatizing government activities in public finance class. And I remember as if it was yesterday Gordon Tullock telling me that I would never be able to find a job because of my extreme libertarian views. (I can smile about this now, because I am a tenured professor.) I had entered graduate school as an economist, wanting to learn more, but thanks to the education I got from my classmates, I left as a libertarian with a good Austrian background.

Jack High, John Metcalf, and I attended the now-legendary Austrian economics conference in South Royalton, Vermont, in 1974. The faculty at that conference was composed of Murray Rothbard, Israel Kirzner, and Ludwig Lachmann. I had read Rothbard’s and Kirzner’s work before, and meeting them was wonderful. Meeting Murray was especially memorable. From reading his work, I pictured him as a serious and bitter man, but in person he was as jolly as Santa Claus! He loved to stay up late telling wonderful stories, and anybody who knew him will tell you he was very a funny man. Listening to Murray was always a delight. Israel was more the serious scholar, but very warm and generous. Over the years I sent him some of my work hoping for comments, and he was always kind and helpful.

In addition to the faculty at South Royalton, I met a large number of younger scholars who attended, as I did, to learn more about Austrian economics. Looking back at the list of attendees, it is impressive to see how many of them have gone on to be leaders of the contemporary Austrian school. I also attended the follow-up conference the next year in Hartford, Connecticut, so in one sense I can claim Austrian connections that go back to the beginning of the Austrian revitalization.

By the time I left graduate school I had a very good familiarity with Austrian economics, but I remained very interested in the economic analysis of government, and much of my academic research has been in the area of public choice. I wrote my dissertation under Jim Buchanan, one of the founders of public choice, who has been a major influence on my thinking, and who has been so helpful to me throughout my career. After graduate school I taught at Texas A&M University for two years, where my first graduate assistant was Bruce Benson, who had just entered the Ph.D. program there. As a result of that, I try to take credit for all the work Bruce has done since, although people who know both Bruce and me will not let me get away with that.

From Texas A&M, I moved to Auburn University where I was on the faculty for 11 years. The Auburn faculty at that time was young, and very free-market oriented, and I was fortunate to have a number of excellent colleagues. Roger Garrison stands out among them. He was one of the people I had met at South Royalton, and in a marketplace for ideas that does not readily accept non-mainstream thinking, Roger’s steady success in promoting Austrian macroeconomics has been inspirational. Leland Yeager was also a colleague and friendly critic, and I learned much from him. Don Bellante was another Auburn colleague with Austrian leanings, so at Auburn I was in a department that was very congenial to the Austrian approach to economics. And I was at Auburn when Lew Rockwell moved to town and started the Ludwig von Mises Institute. Lew’s first office at Auburn was right next door to mine.

We started a Ph.D. program in economics while I was at Auburn, and the presence of the Mises Institute helped us attract some of our best students. We had an evening Austrian economics seminar where we exchanged ideas and had a chance to present our own work for critical analysis from the group. The graduate students were full participants in the seminar, and among the many fine students in that group, I recall Don Boudreaux, Roger Koppl, Mark Thornton, and Sven Thommesen. My 1989 book, Economic Models and Methodology, was written (in bits and pieces) for that seminar, and I owe much to the participants for helping me develop the ideas in that book. All in all, Auburn was a wonderful intellectual environment, and my only regret in mentioning the names I did is that I know I have left out many.

In 1988 I took a faculty position at Florida State University, where I remain today. Two of my colleagues who were instrumental in attracting me were Bruce Benson—my former graduate assistant—and Jim Gwartney. Anyone familiar with Bruce’s work on law will know what a privilege it is to have him as a colleague, and Jim is an excellent economist with a strong free-market orientation. Jim and I have co-authored a number of articles since I’ve been here, and I have been especially influenced by his emphasis on the importance of institutions to the successful operation of a market economy. With Bruce’s emphasis on law and Jim’s emphasis on what he calls the institutions of economic freedom, my colleagues at Florida State have more of an institutional emphasis than an Austrian emphasis, but the libertarian slant is still there.

I continue to be associated with the Mises Institute, which has pulled my academic work in more of an Austrian direction. Faculty research is evaluated largely based on publications, and until recently there have been few outlets for explicitly Austrian economic research. The Mises Institute established the Review of Austrian Economics in 1986, the Quarterly Journal of Austrian Economics in 1998, and holds an annual Austrian scholars conference. These outlets for Austrian-oriented academic research mean that I can devote more of my research time to specifically Austrian topics and have more of a chance to get them published, and have those vehicles to disseminate the results of my research the academic community. I’m excited to see a growing community of libertarian and Austrian faculty in our universities, and I try to provide my students with an introduction to this set of ideas that I never knew about when I was in college.

Randall G. Holcombe is DeVoe Moore Professor of Economics at Florida State University, and an adjunct scholar of the Ludwig von Mises Institute.