The Era of Deadly Error

0:00That philosophic ideas count is no news to Austrians whose economic theories rest on conceptual analyses of action and value. But philosophy can confuse as well as guide. This morning I will discuss two philosophical mistakes that in recent times have supported dangerous idiocy and while undermining the market. I begin with the more familiar mistake, that of Reifying Society. This is the belief that society names an entity with its own causal powers, and that people are the way they are because society makes them so. Like a mother ship sending out smaller versions of itself on specific missions, the treatment of society as a thing over and above its component individuals leads to more specific abstract Nouns such as crime, wealth, poverty, savings and peer pressure, being treated as names of real factors. Unlike most fallacies, which are committed when people do not heed what they are saying, reification is taken by its devotees not as a blunder, but a major sociological discovery. Analytically speaking, the worst effect of reification is to give rise to pseudo-explanations.

1:18People to entities like society or crime appeases the appetite for understanding without supplying genuine intellectual nourishment. An hour later, you're still curious. Slum youths commit so much crime, we are told, because they are affected by peer pressure. Yet what is peer pressure but other slum youths committing crimes and inviting their friends along? Peer pressure is just another name for the phenomenon we are asked about in the first place. Criminal Examples of this sort of thing can be multiplied without end. In my book, I cite some Connecticut residents complaining, quote, We were bypassed by the wealth that surged through Fairfield County in the 1980s.

2:09Then there is this priceless sentence from the New York Times, quote, The Carter family is being stalked here by what the Klan's 54-year-old matriarch Regina calls a monster, crack cocaine. She has watched it swallow her daughter, and now she is fighting for her grandson's soul. Another one I came across recently when Alex Haley was caught for plagiarism, the Washington Post reported that he had been bitten by the virus of plagiarism. As these examples show, reification relieves the guilt of responsibility. Don't blame unproductive reckless behavior on the tiny cog, but on the big social machine of which it is a helpless part. But the flip side of absolution for vice is disrespect for virtue.

2:57Tiny little cogs can hardly be autonomous or have rights to be free. What individuals think of as their own decisions are forced on them. Thus, the only way to improve society is by tinkering with the big machine on gross, sweeping individuals along in the process. Such systematic intervention, of a sort only government can undertake, seems to conflict with individual liberty, but hey, individuals are not free anyway. They are slaves to their social role, so in forcing them to act in new ways, giving them From New Roles, the state does nothing worse than society has done to them already. This mode of thought is at work in a tax, for example, on the use of cheap overseas labor by American firms.

3:43Juanita in the Philippines makes running shoes for 50 cents an hour, a good deal all around. The finished product is less expensive than if manufactured domestically, and Juanita is better off than she would be without a job. Of course, 50 cents is less than an American would get, mainly because so many other members of Juanita's labor pool are willing to accept that wage, but many people find this scandalous. Juanita, you see, is exploited, forced to work for 50 cents by the, quote, poverty of the, quote, third world she is mired in. The solution, of course, is to attack the entity poverty itself by making Nike pay higher Interventionists scorn Hobbes' words that, quote, the value of all things contracted for, like Juanita's labor, is measured by the appetite of the contractors, and therefore the just value is that which they be contented to give.

4:47The interventionist's response is that Juanita does not contract voluntarily, for she is is caught in a system, and blah, blah, blah, blah. Here is where the reification comes in. Having treated the Philippine labor pool as a thing external to Juanita, Carlos, and Corazon, which makes them accept relatively low wages, interventionists don't bother to ask why the Philippine labor pool is that way. It is that way because, in fact, for reasons having to do with education, ability, and training, Most Filipino labor is not worth more. Perhaps Filipinos do not know how to bargain collectively. That, too, is a reflection of the ability of individual Filipinos to cooperate with each other. Quote, the economy doesn't make anyone do anything.

5:35It is just a name for individuals exchanging goods and services. The character of an economy is explained by the interaction of its constituents. Once this is clear, intervention in, quote, the economy is seen for what it is namely pushing people around. Belief in collectives rests on a confusion between two kinds of traits of individuals. First there are the traits people have when they are taken in isolation such as height, weight, age and health. Obviously these individual properties cannot explain how people behave in social groups. Watch Robinson Crusoe on on his desert island as long as you please and you will never learn what sort of conversationalist he is. If social holism, this is a very popular view, is the claim that the properties of groups cannot be reduced to the individualistic properties of their members, it is true. However, people also have relational traits. Crusoe's tendency to tell jokes to anyone who will listen, for instance, is one such. Now, even though that trait involves reference to other

6:44of the People. It still pertains to Crusoe the individual. Thousands of miles from another soul, Crusoe is still a good conversationalist in the sense that he would tell jokes if he had an audience. The big point is that the properties of a group can be reduced to the relational properties of its individual members. Once you know how these members react to each other, how garrulous they are, how cooperative, how keenly they negotiate, you can predict and Holism is false. Just keep these two kinds of traits distinct and you will never reify. As I say, most Austrians already know of the aid and comfort reification lends to collectivism and socialism. I now turn to what I regard as a much more consequential error. It is also very little discussed, so its destructive effects largely escape notice. It gets a bit I refer to the notion that things are never what they seem, or to put it more abstractly, that science always explains away appearances in terms of their opposite.

7:56Let me get specific, this all gets back to our common worry, but I want to tell about four familiar but genuinely epical discoveries in the history of science, which have been In 1573, Copernicus demonstrated that the earth revolves around the sun. The sun and the stars are in fact fixed relative to the earth. A century later, Robert Boyle revived the corpuscular theory of matter, which takes It takes the physical world to consist of numerous minute particles whose interactions explain the properties of macroscopic objects. Two corollaries learned by most of us by high school were drawn from this view. First, ordinary objects like this lectern are mainly empty space. Remember when they told you that? Not solid. And second, color is not a feature Color is an effect of these little particles on the nervous system and resides in the mind.

9:12The corpuscular theory did not gain firm empirical support until the 19th century, but it quickly persuaded Newton, John Locke, and other luminaries. It has been part of our intellectual heritage for Hundreds of Years 3. Jumping to modern times, puzzles about radiant energy and electron orbits led physicists early in the century to propose that the energy possessed by bodies does not vary continuously but comes in discrete amounts. Fully worked out, this so-called quantum theory implied that the more definite a body's momentum, the fuzzier its position. Thus, at any time, this hand is spread by waves of probability over the entire universe. It only seems to occupy a sharply bounded region because that is where the probability waves peak. Incredible as this sounds, it had better be true since it is the theory on which transistors are based and all our VCRs and computers, so it 4. Einstein's 1905 Special Theory of Relativity denies that there are such things as space and time, as ordinarily understood. You may think the Mars Pathfinder, the taxpayer's

10:32latest gift to scientists, is doing something right now, at the very moment I am speaking. Not so. Two events that are simultaneous for you are not simultaneous for observers moving Everything Relative to You. What is more, the distance from here to Mars also varies with the speed of the observer. Absolute simultaneity and distance do not exist. As if that weren't weird enough, Einstein later announced that objects falling in a massive body's gravitational field do not actually pick up speed. Mass warps space, and what we perceive as gravitational Acceleration is Uniform Motion in Curved Space-Time. Well, these cases are so fascinating because in each one, what we believe based on ordinary observation is completely overturned.

11:25The sun seems to move across the sky, but it really doesn't. Lecturns seem to be solid and brown, but they really aren't. Hands seem to occupy definite positions, but they Something seems to be going on right now, but it really isn't. Some of these inferences, of course, are open to challenge. To call something solid, may be argued, means that I can't put my hand through it, and I can't put my hand through this lectern, whether or not it is mostly empty space. It can also be argued that color refers to whatever it is about an object, including the arrangement of atoms at its surface, which causes certain sensations in me. Since the arrangement of atoms at this lectern surface does cause the requisite sensations, the lectern is brown, period. Still, the message is clear.

12:12In four striking cases, scientific investigation showed the world to be the reverse of how it appears. And what has happened, I believe, is that historians of science who should know better have radically overgeneralized these cases into, in the jargon of the prime offender, a paradigm. Science always shows that things are the reverse of how they seem. Deep scrutiny of virtually any phenomenon will reveal that everyday convictions about it are wrong. In fact, taking things at face value betrays naivete, or readiness to debunk is the mark of the sophisticate, what David Riesman called an inside dopester. At one point in Gilbert and Sullivan, Gilbert and Sullivan's pinafore, Little Buttercup Things, Things are seldom what they seem, skim milk masquerades as cream.

13:06So I'll call this jaundiced view the skim milk fallacy. If anybody can think of a better name, I'm open. Skim milking, I believe, looms large among the factors that have opened the floodgates to oceans of nonsense. The skim milk presumption that things are seldom what they seem was not given currency by any one writer or group, although Thomas Kuhn's work on the irrationality of science has no doubt helped. So did Freud's doctrine that the reasons from which people think they act usually rationalize less savory motives they are unaware of. No, it took hold mostly because of the inordinate attention given these four celebrated discoveries of things not being what they seem. I have no quarrel with the discoveries themselves, but they cannot be taken as typical of science because they all concern phenomena on non-human scales.

13:59It is no wonder that common sense does not register quantum or relativistic effects. They happen too fast, on too great or small a stage, where velocity is not reached in normal experience. Evolution had no reason to prepare us for what happens in nanoseconds at astronomical distances or near the speed of light. However, evolution did shape our faculties to work reliably at the dimensions at which economic and social phenomena take place. A creature poor at recognizing food or anticipating what his fellow beings will do is apt to leave fewer descendants than more insightful competitors, and we descended from those competitors. About matters at the scale of human behavior, how things seem to us is an excellent guide to how they really are.

14:48That is why skim milking is a fallacy. Well, okay, this is all very interesting. Now to connect it to modern left-wing liberalism and socialism. One of the most vexing aspects of liberal conventional wisdom is its extreme perverseness. Why do so many intellectuals believe such insane nonsense as the following? Punishment does not deter. Marriage is like prostitution. Males are innately like females. Homosexuals are just like heterosexuals. People's freely contracting to exchange goods are being coerced, but buying the only make of shoe from the Soviet State department store is freedom. Intelligence is irrelevant to life outcomes.

15:33Any student can perform at gifted levels if his teacher believes he can. Giving money to women who have illegitimate children discourages illegitimacy. Taxing something leads to more of it. Look-say is better than phonics. Idiocy is strength. It's the latest one. Joseph Stalin was a nice guy. Why, we constantly ask at conferences and in private conversations. I mean, after all, Peter Klein was asking this. Why would anyone believe such demented idiocy? Liberals are anti-experts. They can be depended on to be wrong. What they think is a trusty guide to what isn't so. Why?

16:20Of course there are many specific causes, and we've heard some already, envy, guilt, identification with the underdog, the prospect of running the state's coercive machinery, but something must prepare the mind to accept what contradicts experience and common sense. This is where skim milking enters. I suggest that things are believed, these things, these crazy nutty things that most Most of my 140 IQ colleagues believe, are believed because they contradict observation and common sense. For the theme uniting the tenets of conventional liberal wisdom, that is, left-wing liberalism, is that they all run exactly counter to experience. I think they are arrived at from experience via the assumption that experience always misleads.

17:10For imagine yourself, for imagine that you fancy yourself a deep thinker. You want to distinguish yourself from the herd by knowing things they don't. Being scientific is also good, and you've picked up the impression that the aim of science is to overthrow popular prejudices. Remember, left-wingers tend to be more educated so they have heard about those discoveries that I've been talking about. You may well then reason about human behavior like this. The sexes seem to differ, so they must be the same. Men and women seem to bond from profound emotions, so their association is commercial. A desire for sex with another man is utterly alien and repulsive to heterosexual males, so the homosexual personality must be just like the heterosexual.

17:59English is a phonetic language, so it should be taught as if it were ideographic, as if it was little Chinese pictures. Capitalism leads to prosperity wherever it has been tried, so it must be bad. Socialism never works, so it must be good. Nobody forces market interactants to do anything, so they aren't free. Under socialism, you are not allowed to do anything, so you are free. Everyone fears death, pain and loss of property, so threats of death, pain or confiscation do not affect behavior. Some individuals do well in school from the earliest grades, master difficult material that leaves the rest of us behind, and are counted on as the problem solvers in the workplace. Therefore intelligence has nothing to do with success. Some people can't grasp simple ideas no matter how patiently we explain them.

18:47Therefore their failure is our fault. People become demoralized when what is theirs is taken from them, so raising taxes makes them work harder. I've actually had people tell me that. Sort of a reverse Laffer curve. People feel most comfortable with others like themselves, so they will love ethnic diversity. Stalin accepted a messianic creed whose Armageddon is a confrontation with capitalism. He possessed atomic bombs. He was willing to kill millions of his own countrymen in pursuit of his aims. So his truculence was our fault. Only a fully committed skim-milking liberal could dream up reasoning like this. But it all too easily gulls the average person, rightly impressed by science while wrongly convinced that science and common sense are at odds. Once again, there are many reasons why Joe Sixpack acquiesces in liberal absurdities. But one, I suggest, and I throw this out because I haven't seen it discussed, is the skim-milk fallacy. The The paradoxes of liberalism are widely accepted by the public because it too is under the vague impression that science shows us what is really going on as opposed to what seems to be going on.

20:04That's why so many people don't believe the evidence of their senses. Let's scrutinize the invidious relation of skim milking to economic liberty. All forms of socialism come down to the belief, in Orwell's phrase, that freedom is slavery. Beneath the skin of bourgeois rights to non-interference, this is the kind of Marxist line that's still popular, lurks the skull of bondage. Recall that Marx impressed generations of intellectuals by calling his socialism scientific. Earlier brands had been touted as morally superior to the market, But moral superiority is hard to prove empirically. Here was socialism deduced from laws of history. That also has a very nice ring. What conception of science encouraged the revolutionary Marx?

20:54Then as now, the paradigm of a scientific breakthrough was the Copernican, where appearances were denied. Well, the one thing obvious about trade, employment and other commercial transactions is that they are voluntary. And a scientific theory should assert that they are not. That, for instance, employment is wage slavery. The worker is forced to accept a pittance for wages because there are other workers bidding for his job in the, quote, economic system. Notice, by the way, how skim milking works hand-in-hand with reifying here. On the other hand, progressive taxation, on its face coercive, enhances freedom by reigning in plutocrats. So does the minimum wage law, despite seeming to curtail a range of bargains. A novel invention or service so desirable, everyone wants to exchange goods for it as a monopoly, which forces itself on helpless consumers. Gotta fight that. Prices set by the government, which seem to be uninitiated, coercive, liberate consumers from monopolistic schemes. The pattern of the old Marxist left to construe what looks free as enslavement and what looks coercive as liberating, continues

22:08with Marx's New Left Children. You might think you could see by looking, as Yogi Berra would say, that men and women pair up because they want to, that in all societies women care for the children because they want to do so more than the men, and that men achieve more high status positions because they choose to pour more of their energy into doing so than women. Ah, but you would be wrong. Men and women act this way because they are brainwashed by patriarchy. Only affirmative action role models created by judicial fiat, jaw-boning of colleges to get rid of men's wrestling in favor of women's field hockey, and total war on stereotypes will free men and women to be themselves. And we would never have known any of this had we relied on appearances. Isn't sociology wonderful?

22:55Ironically, Marx and his followers have overlooked another scientific revolution, which also also overthrew a few appearances, but which, properly understood, deepens appreciation of the market. The theory of evolution showed the appearance of design in nature to be misleading. That most features of living organisms display goal-directedness and the efficiency of artifacts led mankind for many ages to think the natural world was planned. As Darwin explained, however, design can be mimicked by randomly generated variations competing to reproduce under environmental constraints. The world may be an artifact in some ultimate theological sense, but so far as natural processes go, it merely simulates one. Unplanned goal-directedness of the sort we see in nature calls to mind the spontaneous, uncoordinated order that that emerges as goods compete to survive in the market.

23:55Animals must absorb energy and attract mates. Goods must absorb factors of production and attract buyers. Complex ecosystems evolve as only those organisms survive, which can find sufficient food, and only those goods and services survive, which can be transported to a sales point. Both the wild and the market witness progressive refinement as variations of surviving designs are generated and themselves culled. Leaving the Hardiest Variance of Variance Early models, dinosaurs, the Rio, give way to later ones, horses, the corvette, and crude methods of reproduction, mitosis, piecework, to more elegant, sex, the production line. Liberals fret about the unplannedness of the market.

24:43They call a healthcare non-system of private doctors, private insurers, and private hospitals a hodgepodge. Other appearances really do deceive. Undesigned order is perfectly possible. Research illuminating not only the processes I've mentioned, but also the more mysterious properties of socioeconomic systems like the emergence of morality. The market depends on good faith. But why do people keep their word when they can get away with profitable deception? Why do we tend to punish greed when colluding with it would be advantageous? For reasons, it turns out, not far from those for which animals will not pursue combat to the death, and the ratio of males to females in a population remains 50-50. At the same time, as you can see, this research also helps reduce large-scale system features to the behavior of competing individuals, driving another nail into the coffin of reification. In this, it is pursuing the true and permanent aim of science, the explanation, not the poo-pooing, of what we observe. Science, properly understood, is pretty nifty after all. Thank you.