Featured image is A Hopeless Dawn, by Frank Bramley.

With rare exceptions, 20th century social scientists from B. F. Skinner through Paul Samuelson adopted methodologies which eliminated meaning and the mind from the study of human beings. The former believed that nothing existed beyond our external behavior, whereas the latter treated the mind like something that could be boiled down to an optimization formula.

A number of heterodox schools of social science have reacted to this. The Austrian school of economics, for example, has always been critical of the heavily mathematical models of mainstream economics, as well as the information lost in macroeconomic aggregation.

However, the Austrian school is not innocent here, either. In its crudest incarnations, it simply collapses into a formalism. This is not much better than mathematical optimization.

Its best incarnation, which I think is embodied in the subset of GMU economics under the stewardship of Pete Boettke, is much more sophisticated and open to other schools of thought. His students draw heavily on public choice, institutional economics, and philosophy.

Nevertheless, it is missing something essential. Thirty years ago, Don Lavoie attempted to fill in that gap by marrying GMU-style Austrian economics with hermeneutics. This would have brought human meaning into the social sciences in an unprecedented way. Sadly, he was rebuffed, and then he died tragically young.

As a result, even the most sophisticated treatments of meaning and mental content by members of this school are empty in important and systematic ways. Vlad Tarko’s paper “The Role of Ideas in Political Economy” is an example of this approach at its highest caliber. To understand its strengths and weaknesses, and how it could be humanized, I will evaluate this paper below.

Before we begin, I want to emphasize that I have picked this paper because it is very good. It offers a sophisticated framework that is of great value. In criticizing its treatment of meaning and mind, I do not want that fact to be lost.

Functional Ideas Interacting With Social Structures

Vlad explains the figure above as follows:

Ideas influence the change of institutions by shaping the goals and expectations of the “political entrepreneurs” (Wagner 1966; Di Lorenzo 1988; Buchanan & Congleton 1998: pp. 72-8; François 2003; Christopoulos 2006; Boettke & Coyne 2009b) or “public entrepreneurs” (Oakerson & Parks 1988) involved in institutional design. Institutions, via the details of their enforcement, generate a certain structure of incentives. The structure of incentives shapes human action and generates a particular emergent outcome out of the interactions of all the agents involved. The surprise regarding this outcome leads to a certain change in ideas and in the overall “climate of opinion” (Evans 2011). The cycle then repeats.

“Praxeology” is the Austrian jargon for microeconomics, or as Vlad refers to it in this paper, “culture-invariant economics.” Culture-invariant because economic laws are universal; the reality of choosing one thing over another under conditions of scarcity cannot be persuaded away. The claim of economics is that choice under scarcity has an intrinsic logic to it, which applies regardless of the religion, ideology, or politics of a given nature. This could have also been called history-invariant for the same reason.

For brevity’s sake, we can divide Vlad’s framework into idealist and materialist elements. On the idealist side, culture is made up of a “pattern of meanings” through which events are interpreted. Specific ideas then influence how agents, including institutional entrepreneurs, respond to the events as they have construed them.

On the materialist side, some institutional procedures are implemented which are enforced through reward and punishment (though Vlad acknowledges that “social order relies to some extent on morally internalized norms” beyond institutional enforcement). These procedures create incentives with outcomes that are determined by culture-invariant economic laws.

We then interpret those outcomes, and “The cycle then repeats.”

Let’s take a closer look at the idealist elements, which set it apart from the typical economic account.

An example early in the paper of how this works looks at the self-conception of the economist. Whether an economist thinks of himself as a social philosopher (as James Buchanan did) or a positive scientist (as Milton Friedman did) will influence the character of the theory they do and the policy implications that will flow from it. Whether or not those implications will be pursued, however, has as much to do with whether the character of the theory is congenial to other aspects of the situation (such as the structural interests created by existing institutions). This, of course, is the old story about how an economics with interventionist recommendations will go better on a government economists’ resume.

Later, Vlad argues against the pure rent-seeking model of politics.

Rent-seeking and regulatory capture models work only for simple cases when (1) the consequences of changing the rules are relatively easy to predict, and (2) the collective action problems of organizing for the purpose of changing the rules are small.

He concludes:

Moral values and general beliefs enter the picture precisely as heuristics for a complex and largely unpredictable world.

It seems to me that he is not here attending the content of any ideas, but rather responding to the behavioral economics literature on irrationality. He wants to say that the ideas, biases, and tendencies which appear to get us to deviate from rational calculation in fact are coping mechanisms for a world too thick in uncertainty and complexity for rational calculation to be of use.

That’s all well and good, and there may be something to it, but it does not appear to me to have much to do with the morality or beliefs. But we’ll get to that in a moment.

Vlad’s big move in the paper is to reconcile Hayek’s cultural evolutionary account of norms and institutions with Buchanan’s Rawls-inspired contractarianism. Again, morals are judged on the basis of which are the “most efficient,” as he quotes Hayek explicitly saying:

“It is not the intelligence of our ancestors that has left us with more efficient morals … [r]ather, they happened to be right, so their successes multiplied, and they displaced the others who believed in the different morals” (Hayek 1983). In the Hayekian picture, societies that fail to implement good ideas about socialeconomic-political organization are either conquered by those that do or remain so far behind in terms of development that they eventually abandon their misguided ways and imitate the more successful ones (Andreozzi, 2005).

He then makes it clear that this “morality” we were speaking about was really just rules:

“[I]n social evolution, the decisive factor is not the selection of the physical and inheritable properties of the individuals but the selection by imitation of successful institutions and habits”. As Gaus (2007: p. 238-9) explains, when we apply the cultural evolution perspective to the problem of institutions, rules are the “unit of selection”: “in Hayek’s account rules play a role analogous to genes in biological evolution; whereas individual organisms are constituted by following the instructions of genes, a Great Society is constituted by following the instructions of rules. And just as genetic variation can give an advantage to an individual organism in its competition with others, rule variation can perform the same role in competition between social orders of actions.” E. Ostrom (2008) adopts the exact same view, including the analogy between genes and rules.

From this we see that morality is implicitly treated to be about rules, which in fairness is how most moral philosophers treat it today and certainly how they treated it in Hayek’s day. Rules are “selected” by cultural evolutionary pressures much the same way that genes are by natural selection (never mind that making genes the unit of selection is an increasingly contested move these days).

Vlad then moves to reconcile this account with the notion of constitutional rules chosen behind a veil of uncertainty:

The alternative to group selection proposed by Buchanan and collaborators is contractarianism (Buchanan & Tullock 1962; Buchanan & Brennan 1985; Buchanan & Congleton 1998). If the agents devising the rules can be placed behind a veil of uncertainty, their specific interests will be rendered irrelevant, and, thus, they will be forced to devise general rules under which everyone can be expected to benefit in a wide array of circumstances (Buchanan & Tullock 1962: pp. 77-81; Buchanan 1972; Buchanan & Brennan 1985; V. Ostrom 1997: p. 136; Buchanan & Congleton 1998: pp. 3-16). However, is this really an alternative to Hayek’s group selection? Sugden (1993) describes Hayek’s normative position as “evolutionary contractarianism” – a view according to which the “justification of any social institution is that it benefits each individual separately, ‘benefit’ in each case being understood in terms of that individual’s own ends. … We cannot know in advance that a particular spontaneous order will benefit a particular individual. This leaves us with the criterion that a social institution has value to the extent that it tends to assist each individual in the pursuit of his or her ends, whatever those ends may be.” (p. 413, my emphasis). In other words, one of Hayek’s main points about the spontaneous order involved in cultural evolution is precisely that it places people behind a veil of uncertainty. Hayek provides the contractarians with the real-world process that puts people behind that veil. Buchanan and collaborators have thus not actually provided an alternative to Hayek’s theory – they have spelled out in great detail the very missing element about why group selection would ever be welfare enhancing.

All of this, of course, itself rests on a specific conception of what “welfare enhancement” looks like.

To this account, Vlad finally adds an interesting take on Elinor and Vincent Ostrom’s notion of polycentric political orders.

There is a non-violent mechanism for creating agreement, namely social entrepreneurship, which catalyzes a process of “norms cascades” (Finnemore & Sikkink 1998). We can see social entrepreneurs as creators of focal points for cooperation (Boettke & Coyne 2009a; 2009b). However, it is unlikely that they can eliminate disagreement entirely. This creates a quasinatural span for various agreeing-to-disagree domains, i.e. for a polycentric order.

So social entrepreneurs are able to persuade groups to agree with certain norms, which then cascade more broadly. But there are many social entrepreneurs, and the cascades are not uniform in who they reach or how far they go. So cross group disagreement remains. Politics becomes a mixture of agreement within some groups with tense agree-to-disagree areas. This sometimes breaks out into violent conflict, primarily as an information-gathering exercise to overcome the uncertainty about who would win in such a conflict. When each side is confident enough in who would win, non-violent mechanisms are relied upon.

But again, it must be noted that what is being agreed or disagreed upon here are merely the rules. This cannot be emphasized enough: Vlad’s presentation of morality in this paper boils it down to a matter of rules, including rules of thumb to apply more loosely when negotiating the formal rules.

And moreover, the efficiency of the rules is evaluated in terms of maximizing preferences, regardless of the content of those preferences.

Ideas Without Content

Vlad’s conception of beliefs and ideas is so thin that it is simply swallowed up by the materialist aspects of his account.

It is not surprising, then, that he misread Deirdre McCloskey’s The Bourgeois Virtues as offering an explanation of the Industrial Revolution. What that book sets out to do is to discuss the content of ethically thick life in bourgeois society. It is a defense of the moral worth of a way of life.

Vlad’s framework leaves no space for such a defense. Consider the account he believes is superior to the type McCloskey offers: an explanation of the rise of Christianity that is utterly indifferent to the content of the religion.

Wright (2009) provides a better example of sophisticated cultural explanations. For instance, he explains the spread of Christianity as a cultural phenomenon that solved an economic problem: the social networking necessities of merchants in the Roman Empire in the absence of state capacity to secure property rights. According to Wright’s account, early Christianity worked as a trust-building device among strangers engaged in long-distance trade – long-distance merchants (like St. Paul) needed a signal of trustworthiness that they would not be robbed by their hosts in various places around the Empire. The cultural features of Christianity, especially its universality, evolved under the pressure of the Roman institutional deficiency and this demand for long-distance trade made possible by Roman roads.

But does the content not matter at all, then? Fallenness, redemption, the works; merely a veil over some economic function?

No, Vlad assures us:

But the resulting Christian beliefs were not merely the epiphenomenal froth on the wave of an economic phenomenon. As in any signaling model, it was critical for the signal to be hard to fake, hence the often very high costs (even death) associated with being a Christian in the early period, and it was the actual content of the beliefs themselves that secured this high cost.

The content matters because it made belief hard to fake. That is, it played a similar role that a standardized test might do today. This is how Vlad attempts to reconcile meaning with material structure. I don’t think it’s too harsh to conclude that this reconciliation is an utter failure, and that his account is entirely empty. As I said of Fukuyama, the most popular exponent of this kind of argument:

If the only defenders of religion left were people like Fukuyama, who simply see something instrumentally useful, religion would be doomed to fade into oblivion. Once religion becomes nothing more than a club, a vehicle for community building, it is destined to lose to organizations that compete specifically on that margin. Or simply to the desire to not be bothered by other people at all; perhaps to sit at home writing blog posts instead!

McCloskey’s second book in the series, Bourgeois Dignity, which was out at the time Vlad wrote this paper, argues very thoroughly that these kinds of analyses are insufficient to explain our modern enrichment. Among her strongest arguments is directed at exactly the conception of morality we find in Vlad’s paper–the notion that it’s all about rules.

The rules in operation in Great Britain during the Industrial Revolution were already largely in place for centuries. What changed, in McCloskey’s argument, was not the rules, but the content of enough people’s beliefs. Liberalism was not by and large about specific rules, but about leveling the worth of a human being across class divides, and an embrace of commerce as a worthy activity.

Vlad could not have known this at the time, but Bourgeois Equality went on to argue that the rise of liberalism took place within a specific series of historically contingent events, including the outcome of several wars but also the struggle among Christian denominations more generally, among many others. Her account fits what he’s looking for, in the sense that it is a sophisticated model of the complex interaction between materialist and idealist elements. But it relies on a far richer account of the idealist elements; it succeeds in evading the economist’s cardinal sin of dehumanization.

The darwinist model of idea-selection over time simply does not work. In what way are rules “selected”? What is the mechanism? Given that societies are constituted of complex bundles of rules, the content of people’s preferences, ways of life, military culture, and Hayekian lower level economic knowledge, how exactly is it that flourish or decline, or conquest, “selects” at the unit of a specific rule? Doesn’t this require the ability of people to understand which rules were specifically responsible for the success or failure in the first place? Conquest alone certainly does not get you there, as conquerors have as often as not been economically illiberal societies who simply specialized in honing their military prowess.

Moreover, morality is not just or even mostly about formal rules. People make strong evaluations and qualitative distinctions, not just between preferring this over that, but between higher and lower ways of life. This is precisely what McCloskey was getting at in The Bourgeois Virtues. She set out to join economics, sociology, philosophy, and theology, in order to describe the ideals, the virtues and vices, of a particular way of life as it is actually lived.

Almost none of this involves “heuristics for a complex and largely unpredictable world”; instead you find ideas about how we ought to live, or what kind of person we ought to be. And this fleshes out the content of our conceptions of liberty; whether a given rule or regulation encroaches on our liberty in any meaningful sense is decided through these evaluative frameworks, which rest on full blown conceptions of a good life (if often tacit or containing contradictions).

So if your goal is to evaluate different beliefs and rules and the process by which some are accepted or rejected, you cannot ignore their content. Moreover, the notion of welfare as maximizing preference satisfaction regardless of content is itself a substantive framework, and an abhorrent one.

Restoring Meaning and Mind

There can be no better guide for the humanization of economics, and especially Austrian economics, than Don Lavoie. It was Economics and Hermeneutics, which he edited and is available online for free, which introduced me to the latter subject in the first place. Tom Palmer, who wrote the last chapter of that collection, has also done work in this area. The authors of that collection point to the big names in 20th century hermeneutics, of which Hans-Georg Gadamer is the biggest but Paul Ricoeur is also frequently mentioned. More accessible to the English reader are the many works of Charles Taylor.

Several times in the paper, Vlad reaches for a concept to help describe why some ideas have more resonance in specific circumstances than others. I think that the concept of the hermeneutic situation is a good fit, and that embracing it would go a long way towards humanizing his framework.

One way of thinking about our hermeneutic situation is as the background that both enables us to see intelligibility in the world, but also constrains what we can find intelligible. The most obvious example is language—to be fluent in English is to create specific conditions of intelligibility. If you are not also fluent in Spanish, then you will likely attempt to project English meanings when you encounter someone speaking Spanish or a Spanish text. Sometimes this even makes some headway—after all there are common word origins that have retained some similar usages across languages. But few people would think that this suffices to read a book or carry out a conversation.

There is more to language that words alone. Taylor argues that the language dimension goes all the way down to the level of practice; that our non-verbal behavior contains a sort of vocabulary of its own, which is intelligible to fellow practitioners or members of a given community. This is an important corrective against the Hayekian (and Oakeshottian and ultimately Burkean) dualism between reason and the tacit. In that vein, Vlad quotes Elinor Ostrom saying the following:

Although “human agents frequently try to use reason and persuasion in their efforts to devise better rules (for themselves and their supporters or for a broader community)”, due to the complexity involved, it is unavoidable that “[t]he process of choice … always involves experimentation” (p 58). The key to development is to actually allow this process of experimentation to take place.

In another part of the paper, Vlad insists that Hayekian processes are not irrational. But Hayek himself refers to tradition and institutions as “non-rational”, at least in The Constitution of Liberty. And in Ostrom’s quote we can clearly see that assumption in place.

But how can experimentation be contrasted with reason in this way? Certainly there’s a difference between attempting to regulate everything from top to bottom the way the USSR did and allowing trial and error to occur in the marketplace. But treating something as trial or error requires that they have this meaning to us. A drug trial that produces no beneficial effects and many negative ones must be recognized as a failure. This recognition is perfectly rational, in any meaningful sense of the word. It is certainly reasoned.

Moreover, the implications of Hayek and Ostrom’s analysis is itself a variety of rationalism. The Constitution of Liberty is, after all, a defense of a certain kind of political order. Justifying a political order on the basis of its previous evolutionary success is not any less rationalist than justifying a political order on the basis of welfare economics, or Marxist doctrine.

Our hermeneutic situation provides the context for understanding meaning from the highest levels of theory to the lowest levels of practice. It is made up of what Gadamer calls our horizons of meaning; they are the whole of our context against which we make sense of all of our more partial experience.

To this is added our prejudices—what an Austrian might think of as our initial expectations, tacit or explicit. Prejudices provide a sort of orientation within our horizons—so when we pick up a romance novel, we already have certain expectations based on the genre, even if we have not read one before. Our horizons encompass more than this specific expectation—so if we encounter something in the novel which surprises us, say tropes that we wouldn’t have expected outside of science fiction, we can reorient ourselves within the scope of our horizons.

The crucial thing is that, as human beings with a finite history, our horizons are limited in scope. However, that scope can be expanded; we can broaden our horizons. As I put it elsewhere:

Imagine a book that has Spanish on each right page, with the English translation on each corresponding left page.

Now imagine three people: someone who is only fluent in English, someone who is only fluent in Spanish, and someone who is bilingual.

Gadamer would say the bilingual person has a broader horizon than the monolingual people. Not only does his horizon encompass theirs—in that he can read the Spanish and the English—but he can go yet further, judging the quality of the translation in terms of communicating the meaning of the Spanish.

The ability to broaden our horizons is cause for optimism, but we only have so much time in this world. Even the wisest of us can only encompass so much with her horizons. So it is not just that disagreement persists, but that for many people much of the time, the source of the disagreement is quite opaque. In an ideal scenario we are able to approach what Gadamer calls a fusion of horizons, in which we reach a mutual understanding that leaves both of our horizons transformed. Too often we do not.

Now, how could this account supplement Vlad’s?

A proper account of something like the rise of Christianity or Keynesianism would attempt to flesh out the hermeneutic situation of the people at the time, at the moment before the spread began. This would include the religious, civic, and folk beliefs prevalent at the time. As Vlad says, it would also include the institutional background, as well as the other relevant details at the level of practice. The most masterful example of this kind of treatment that I have seen is Charles Taylor’s Sources of the Self.

The ways in which ideas can interweave with their practices are various. There can be a perfectly stable relation of mutual reinforcement, where the idea seems to articulate the underlying rationale of the dos and don’ts in an adequate and undistortive fashion; and then the idea can strengthen the pattern and keep it alive, while the experience of the pattern can constantly regenerate the idea.

But then it can come to appear to some people that the dominant ideas distort the practice and that perhaps as a consequence the practice itself is corrupt. They may demand rectification. From the standpoint of the conservatives, it will appear that the protesters are (at best) inventing a new practice. But however one describes it, the result of the struggle will be change, perhaps a split into two communities with separate practices—the case of Western Christendom in the sixteenth century.

Or it can be that the whole practice and its rationale come to seem repugnant, and there can be a demand for what is self-consciously seen as a transfer of allegiance to a new practice—as when ·whole Untouchable communities in India convert to Buddhism or Islam.

What I have here been referring to as idealist and materialist elements “interweave” in complex ways to create our hermeneutic situation. It may seem obvious from a materialist perspective why an Untouchable community would convert to a rival religion that doesn’t have a caste system. But why do they choose the specific alternative that they do? Why are certain alternatives more viable than others?

The Reformation is an even better case in point. Everyone likes to point out that the printing press played a huge role. But what do printing presses do, except copy texts? How can one treat the printing press as a structural factor without conceding the importance of the content of the texts?

If you want to take meaning and the mind seriously as a social scientist, you are doomed the muck through the arguments, mythologies, and art prevalent at the time under study, as well as the history of the practices. In short, you cannot be serious about studying political economy and remain indifferent to the content of preferences, beliefs, and the whole background that forms people’s hermeneutic situation.

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• Coping with Contradiction
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