From Smith, Mises, Buchanan and Hayek to the Study of PPE || Part II

Peter Boettke via YouTube

The second part of the interviev by Josef Šíma (president of CEVRO Institute, Prague) with professor Peter Boettke on the importance of mainstream vs. mainline distinction in understanding economics, the power of ideas and education focusing on the link between philosophy, politics and economics, and the new master’s PPE program in Prague.

First part available here:

Economics, Politics and the classics in political philosophy – those are ingrediences producing together a mix of ideas that – when applied to education – can produce a unique way how to understand society. Many scholars and students prefer this broad approach over a focus on hyperspecialized disciplines studied in isolation. You are the director of PPE at GMU. In what way do you believe PPE gives us something which standard approach misses.

My interest in philosophy, politics and economics traces back to my undergraduate days at Grove City College, where I studied with the great Austrian economists Hans Sennholz. Sennolz was a gifted lecturer and while he stressed the positive science of economics, he also stressed the social ethics and personal moral issues involved in public policy discourse. I majored in economics, but minored in philosophy. But as I pursued my education in economics at the graduate level, I had several other professors – Don Lavoie, James Buchanan and Kenneth Boulding in particular – who also stressed the positive science of economics, but the moral theory embedded in social philosophy.

So intellectually I was drawn to the questions that reside on the border of the disciplines of philosophy, politics and economics. I learned from my teachers that political economists must appropriately stress the technical economic principles that are necessary for the analysis of how alternative institutional arrangement impact the ability of individuals to realize productive specialization and peaceful cooperation. But the political economist must not stop there, but must bring into the open a discussion of the fundamental moral and ethical theories that are involved in any assessment of the proper role of government.

The technical rendering of economics in the 20th century, I often tell students led to a situation where economics as a discipline became more and more precise about less and less. The discipline in essence became precisely irrelevant to the most important questions that it has historically been tasked with asking. So if we imagine the shape of an hour-clock, what happened is that at the end of the 19th century, the discipline asked broad questions such as why are some nations rich and other nations poor, how do poor nations become rich, and how is that rich nations might become poor. But as the discipline strove to ape the natural sciences and transform into social physics, what the discipline could say about such broad questions became limited.

The failure to explain the divergence in economic growth between nations became a glaring example of the irrelevance of the modern technical theory. Adam Smith’s great book was title An Inquiry into the Nature and Causes of the Wealth of Nations, but mid-20th century economics argued that the model of market socialism could mimic the results of laissez faire capitalism in theory and outperform capitalism in practice by eliminating business cycles and the problems with monopoly power. The argument in economic growth theory was also that countries would converge over time as poor countries would catch-up and rich countries would experience slower but steady growth.

The breakdown of the Keynesian consensus, the collapse of communism and the failure of development assistance all brought to the forefront the intellectual bankruptcy of an institutions free economics. So to answer the most pressing questions at the end of the 20th century going into the 21st century, the discipline had to open up once again to the broad questions and this is seen in such works as Acemoglu and Robinson’s Why Nations Fail, but also Sachs’s The End of Poverty, Piketty’s Capital for the 21st Century, Zingales’s A People’s Capitalism and Easterly’s The Tyranny of Experts.

GMU PPE program has the name of F. A. Hayek in its title. What is the link between a broad approach to social sciences and Hayek? What do you want to signal to potential students by picking the name of one scholar out of so many other?

We take as our motto Hayek’s basic claim that nobody can be a great economist who is only an economist. Hayek is the 20th century version of Adam Smith in our estimation and his work spans not only from technical economics to public policy, but from theoretical psychology to philosophical anthropology. Yet, as discussed earlier Hayek is deeply rooted in the mainline of economics, so there is an intellectual unity to his varied sojourns into the other disciplines. This is what we are striving to replicate – his breadth, depth and yet analytical unity. I will resist the urge to advertise for our program at GMU, but I invite all your readers to visit us at and look at the various programs we currently pursuing.

In the past, you actively helped (such as a visiting Fulbright scholar) developing undergraduate and graduate programs offered by the CEVRO Institute in Prague.Today, you occupy a position of the director of Austrian School specialization which is about to start accepting students under the umbrella of a newly accredited PPE MA program launched by CEVRO Institute in a few months and you will teach a course each year in Prague for students of the PPE program. In what way do you believe this new project is important?

First, I absolutely love Prague as a location and intellectual culture so I am thrilled to be part of this new initiative at CEVRO. And I am thrilled to be working with you, and with the international board of scholars in philosophy, politics and law that you have assembled.

Second, I believe this program is not only unique throughout Europe, but that it is an essential for the advancement of mainline economics and political economy that educational ventures like this exist and in fact expand throughout the globe. With the advancement in technology, I believe this sort of tapping into various academic talent across the globe to be a significant entrepreneurial venture for CEVRO and will put the institution at the forefront in Europe.

And, third, I am of course thrilled that in developing the program it was decided to specialize in the economics division in the teachings of the Austrian school of economics. The research program developed by Menger, Bohm-Bawerk, Mises, Hayek, Rothbard and Kirzner is continually evolving and there are several individuals in this generation who are making major scientific contributions, and I think our program at CEVRO will be able to combine the classics in the Austrian tradition as well as the modern developments by Rothbard and Kirzner, and the varied contemporary branches that have emerged since the 2000s.

In the educational market-place, there are numerous programs focused on training students in mainstream economics and the corresponding tools of mathematical modeling and sophisticated statistical analysis. Without necessarily engaging in a wholesale rejection of this dominance in the educational market place for advanced economic study, the CEVRO program is going to offer an alternative and one that is fully integrated with philosophy, politics, and law. This returns Austrian economics not only methodologically and analytically to its mainline roots, but also cultural to the Central European educational culture that produced Menger, Bohm-Bawerk, Wieser, Schumpeter, Mayer, Mises, Machlup, Haberler, Morgenstern and of course Hayek.

In an interview we did together in 2012 you warned against the deficit-debt-debasement circle which government like to engage in. Any additional thoughts on this process given the new experience we have with our governments in the last 3 or 4 years?

Actually, my views about deficit-debt-debasement have been reinforced by events over the past several years. I listen to slightly out of sync mainstream voices such as Lawrence Kotlikof and William White on fiscal policy and monetary policy respectively, and I think we need to really think hard about the institutional solutions to the serious institutional problems that face the social democratic states of Western Europe and the US. The problem the fiscal gap (the gap between the promised outlays government’s have made to their citizens and the ability to pay for those promises) and the exit strategy for the Federal Reserve and the European Central Bank from the policy regime post 2008 will be the challenge that the next generation must face head on.

It is my sincere belief that this isn’t a technical issue exclusively, but a political and ultimately philosophical issue as well. We have to reassess not only the scale of government, but more importantly the legitimate scope of government, and we have to address what institutional environment is most conducive for individuals to realize the gains from exchange and the gains from innovation. The CEVRO program in philosophy, politics and economics will provide graduate students with the tools necessary to tackle these very difficult problems and to think imaginatively about the appropriate institutional solutions.

Peter Boettke