Political Alchemy: How to Turn Lawyers into Idiots
You have probably heard of alchemy. In popular discussions, it is thought to be the attempt to turn lead into gold.
Actually, it is far more sophisticated than this, and far more diabolical. This is from Wikipedia. It is accurate.
Alchemy was an ancient branch of natural philosophy, a philosophical and protoscientific tradition practised throughout Europe, Africa, and Asia, originating in Greco-Roman Egypt in the first few centuries.Alchemists attempted to purify, mature, and perfect certain materials. Common aims were chrysopoeia, the transmutation of "base metals" (e.g., lead) into "noble metals" (particularly gold); the creation of an elixir of immortality; the creation of panaceas able to cure any disease; and the development of an alkahest, a universal solvent. The perfection of the human body and soul was thought to permit or result from the alchemical magnum opus and, in the Hellenistic and Western mystery tradition, the achievement of gnosis. In Europe, the creation of a philosopher's stone was variously connected with all of these projects.
Alchemy was an attempt of an elite and secret guild of chemical experimenters to transform the world around them by means of a combination of chemical techniques and mystical illumination. These adepts were attempting to be mini-gods. They were really searching for the ability to create a new mankind: transcendence. It would begin with the alchemist himself, who would experience mystical gnosis.
The most famous alchemist in the West is Isaac Newton. We think of him as the great philosopher of science, but at least half of his life was spent as a secret alchemist. This was covered up by his successors and popularizers because it would have made him look unscientific. They literally suppressed the information. It was not discovered until John Maynard Keynes bought his private papers. He began to read them. He was amazed at what he found. He then wrote what I regard as his greatest work, an essay: "Newton the Man." He made this assessment: "Newton was not the first of the age of reason. He was the last of the magicians, the last of the Babylonians and Sumerians, the last great mind which looked out on the visible and intellectual world with the same eyes as those who began to build our intellectual inheritance rather less than 10,000 years ago." He concluded with these words: "As one broods over these queer collections, it seems easier to understand -- with an understanding which is not, I hope, distorted in the other direction -- this strange spirit, who was tempted by the Devil to believe at the time when within these walls he was solving so much, that he could reach all the secrets of God and Nature by the pure power of mind Copernicus and Faustus in one."
Newton was not alone. He was the most distinguished member of the Royal Society, which was founded by Charles II just after his restoration to the British throne in 1660. The Royal Society was an extension of an earlier informal association, which is known today by historians as the invisible college. Some of these men were self-consciously in the mystical/magical tradition. Newton was one of them. The great historian of the invisible college is that remarkable researcher, Frances Yates. She wrote The Rosicrucian Enlightenment (1972). She spent a career examining these connections. Her books are remarkable. She was familiar with the ancient alchemical tradition and ancient philosophy. She was also a master of 16th-century and 17th-century British history. She found things that nobody had suspected, such as the fact that the Globe theater, in which Shakespeare's plays were presented, was self-consciously designed using magical dimensions. Magic and alchemy were basic to the intellectual tradition of those two centuries. The most detailed book on this was written half a century ago: Keith Thomas' Religion and the Decline of Magic (1971).
In that era, the dominant economic philosophy was mercantilism. In the second half of the 17th century, mercantilist writers adopted statistics and mathematics to give their ideas the aura of scientific precision. They justified state intervention into the economy on this basis: this would increase the wealth of the state, and therefore it would increase the wealth of the people. Mercantilism was an economic extension of the magical world view that had captured the minds of British intellectuals and government policy-makers in Great Britain for a century. It imitated the advances in science, and it paralleled the same transition: from magic to science. Mercantilism retained the magician's worldview: regeneration through manipulation. It would no longer be chemical manipulation by adepts. It would be economic manipulation by adepts.
CENTRAL PLANNING AS ALCHEMY
Modern central planning is a form of intellectual alchemy. It does not use chemicals to transform the world as a way to transform mankind. It uses human beings instead. Its goal is to create a new form of society which will in turn create a new humanity. This new humanity will overcome the limitations imposed by nature. It will make possible great economic productivity that could not be attained if it were not for an enormous central government with enormous political power, which is funded by taxation, debt, and central bank counterfeit money. This outlook is the essence of magic. It is also the essence of Keynesianism. Even more, it was the essence of Marxism.
The economic theories of modern textbooks reflect this commitment to Keynesianism. But the neoclassical alternative, with its graphs and equations, is also basic to the textbooks. It, too, is a form of magic. I have written about this for over 20 years. I included an appendix on this topic in my economic commentary on the Book of Deuteronomy: Appendix A, "Modern Economics as a Form of Magic."
In contrast to the economics of the textbooks is Austrian School economics. This approach to economics is non-magical. It argues that individuals struggle against the limits of scarcity. They make discoveries. They cooperate with each other in the division of labor. The profit system enables successful producers to expand their operations, which in turn benefits consumers. There is nothing magical about it. It does not call upon the government to intervene to reshape the world in order to reduce poverty. It lodges economic authority in individuals who own property, including their labor. It makes individuals legally responsible for their own actions. It allows success and failure without intervention by the government planners. It sees the world as inherently limited because of scarcity, but it acknowledges that, at the margin, scarcity can be overcome by creative entrepreneurship, thrift, and double-entry bookkeeping. This view of economic causation is unpopular within the economics profession. The only college textbook that I know that promotes it was written by Mark Skousen. It is not a widely used textbook.
Exactly a century ago this month, Ludwig von Mises delivered a lecture to a group of economists. This lecture later in the year was published with this title: "Economic Calculation in the Socialist Commonwealth." This was the most important essay he ever wrote, and from a theoretical standpoint, it was probably the most important economic essay in the 20th century. He showed why socialism is inherently irrational. The socialist planner cannot base his planning on prices that have been produced in a free market. There is no free market under socialism. So, all socialist economic planning has to be irrational. This essay, more than anything he ever wrote, defined the Austrian School of economics.
His biographer Jörg Guido Hülsmann comments: “It was immediately clear to the audience that Mises was treading completely new ground. Socialism had been criticized from many angles, but hardly anyone had doubted that the central planners could achieve gains in efficiency. Mises’s thesis, if true, would strike at the heart of the socialist agenda. . . . In short, Mises’s paper was an all-out attack on the very foundation of the economic case for socialism—a refutation of its central tenet, which by the end of the war had become universally accepted.” I would like to believe that his assessment is correct: “The meeting of the Nationalökonomische Gesellschaft had ended in triumph for Mises. He had turned the obligatory rear-guard action that everybody expected him to deliver into a surprise attack against the very heart of socialism. Vienna’s Austro-Marxist elite was left speechless. They had believed that the intellectual war had long been won and that all that was left was the resistance of special interests and the unenlightened.” But the following is not correct with respect to the reaction of the academic economics guild. “His triumph would become ever more complete over the following weeks, months, and years, when it became increasingly obvious that the objections of his opponents were spurious—and that he had already anticipated most of them.” This futility of objections to Mises’ theory may have been obvious to the shrinking number of Austrian School economists, but it was not obvious to the vast majority of economists. They dropped Mises’ essay down the academic memory hole, where it still resides.
Even after the abandonment of socialist economic planning by the Chinese government in 1979, even after the collapse of the Soviet Union in 1991, the textbooks are silent with respect to Mises. They do not mention his essay. They rarely mention his name. There is a reason for this. He was the economist, more than any other economist in the 20th century, who served as Toto. He pulled back the curtain and exposed the little men behind the curtain: central bankers (1912), socialists (1920), and Keynes (1948).
Unlike the wizard, who knew he was a humbug, mainstream economists really do believe that they possess the conceptual and practical tools to produce positive economic transformation. Here is their intellectual response to Mises: "Pay no attention to the man holding the curtain."
CONGRESS AND THE BUREAUCRACIES
In 2012, I wrote a brief article for Tea Party Economist: "A Nation Run by Idiots." I have reprinted it here.
The title looks like a joke. We know know that the people elected to Congress are above average in terms of their abilities in their own fields. A lot of them are lawyers. They have always been lawyers. People who really are idiots don't get through law school. Neither are people who are successful businessmen. There are a lot of businessmen in Congress.
Then there is the executive branch. This is where the real action is in every country today. The bureaucrats are really in charge, not the legislatures of the world. We live under a system known as administrative law. Harvard legal historian Harold Berman wrote about administrative law back in 1983: Law and Revolution. The Introduction to that book is the most important essay I have ever read. He shows that the rise of the administrative law is undermining the entire Western legal tradition, which he says goes back to 1077. His book is about the origins of that tradition. He argued that we are going to lose our liberty if this is not stopped. But it has not been stopped. It has extended since the time that he wrote the book.
Here is the good news: Berman was wrong. He was wrong because Mises was right. The more that the central planners centralize, the more irrational their results become, and therefore the less enforceable. The complexity of the task of central planning overwhelms them. To accomplish their goals, they would have to be God: omniscient, omnipotent, and omnipresent. The more they attempt to be all three, the more irrational is the economy they attempt to organize.
Most of the people in the decision-making positions are college graduates. A lot of them have advanced degrees. Tens of thousands of them are lawyers. But what they mandate as the law of the land is inherently irrational. They are acting as sorcerers' apprentices. Walt Disney described them well in Fantasia. We should think of them as we think of Mickey Mouse, vainly attempting to keep the brooms from flooding the room.
Mickey wanted to get something for nothing. That is exactly what central planners also want. Mickey did not know what he was doing. Neither do the central planners. Mickey's dream of exercising power over the brooms ignored that most powerful of laws, the law of unintended consequences. This is what Mises said a century ago.
Every year, the Federal Register publishes over 65,000 pages of regulations in fine print. Every page has three columns. These regulations are written by lawyers who are on the payrolls of executive agencies. There is no central plan coordinating these laws. These laws have unintended consequences. The results of these laws are chaotic. The whole system is well described in a little book by Mises: Planned Chaos. The book is an excerpt from his larger book, Socialism (1922). That book was an extension of his 1920 article. He returned to this theme in his final published article, "Observations on the Russian Reform Movement," published in The Freeman (May 1966). He was 84 years old. He could still write as well at age 84 as he did when he was 30. His observations on the irrationality of central planning were still as accurate as they had been in 1920. He said that the proposed economic reforms in the Soviet Union could not work. They didn't. A quarter of a century later, the Soviet Union disappeared. It never did solve its economic problems. The magic of Soviet central planning had produced a disaster.
As central planners exercise more and more control over the economy, the results are increasingly chaotic. The Soviet Union proved this for all to see. Yet Keynesian economists cannot see it. They are still convinced that they can use taxation policy and monetary policy to guide the economy through the rapids of economic change. They still believe in their equations, their statistical analyses, and their ability to see what is best for the masses.
CONCLUSION
The free market, with its system of private ownership, market exchange, market pricing, and double entry bookkeeping will triumph over the central planners. There is nothing miraculous about the free market. There is nothing magical about it. It is a system that is based on personal legal responsibility and the knowledge that each person has about his abilities, his responsibilities, and his opportunities.
The uncoordinated army of alchemists who think they can plan the economy better than individuals can plan their own lives will continue to produce chaotic results. They will become ever more blind as the free market expands economic opportunities. The greater the wealth produced by the free market, the greater the number of opportunities for even greater wealth. The myopic people who pretend that they have 20/20 vision will continue to pull the levers behind the curtain. They will eventually run out of other people's money to implement their plans. They will eventually either run out of counterfeit central bank money or else find that it no longer buys anything of value.
The reason why our rulers look like idiots is that they have adopted the philosophy of godlike wisdom associated with central planning. As they wave their magic wands, and as they spend their counterfeit money, they will look increasingly idiotic. That is the curse of being a sorcerer's apprentice. There is no sorcerer to deliver them from the brooms: unintended consequences. The busy brooms will eventually sweep them away.