I have always loved reading about economics, and I have nurtured myself mostly of Economic History and History of Economic Thought, along with other particular policy issues which I also tend to analyse through articles and reports. In an attempt of being informed and not neutral, but at least, have a balanced and formed opinion, I have always chosen my reading books from large variety of schools of economic thought.
Three influential philosophers on nowadays ideology are Friedrich August Von Hayek, Karl Popper and Joseph Alois Schumpeter. It has been hard to leave Ludwig Von Mises out of this list, as his analysis of the free price system and his theory on the impossibility of socialism due to the lack of economic calculation in socialist regimes, is essential to nowadays economics and politics.
Vienna changed and moulded these three thinkers, serving as centre of encounter for hundreds if not thousands of intellectuals from different backgrounds and professions. Not everything was gold and silver, and other philosophers who supposedly supported liberty at the beginning betrayed this tradition by helping Hitler with the Anschluss preparations, and with several meetings in public squares welcoming him and promoting Nazism, as was the repugnant case of Ludwig Wittgenstein.
Popper took the decision of writing and publishing (1945) his great book The Open Society and Its Enemies, after the Nazi Anschluss, as part of the fight against Nazism from Austrians in the exile. The author demonstrates how throughout History, historicism has been used to promote a greater centralized political power, and how these totalitarian forces have continually coerced individual liberties. Popper makes a profound criticism of several relevant philosophers, starting with Plato; and his theories of hierarchy and autocracy, which Popper doesn’t share with him, accusing them of promoting collectivization. Later on, he also deconstructs the origins of Marxism, severely criticizing Hegel’s dialectic and his theories of confrontation. We might think Popper was very liberal in economic terms, but that wasn’t the case at al. Popper even agrees with some parts of Marx’s economic theory, as indirectly with the labour value theory, and his criticism of capitalism based on the worker’s exploitation argument, but attacks Marxist theories alleging that his assumptions on the end of capitalism and his methods are not real politics, they are an utopia with religious characteristics. Leaving aside Popper’s scientific theory, one of his most important theoretical contributions was his defense of decentralization, as he argued that this would lead to a great competition between members of society, leading to more balanced and factual arguments, being change in politics only possible through trial and error, setting himself apart from utopian theories, and in some way supporting the democratic system.
Joseph Schumpeter, first of all, published a Theory of Economic Development, in which he argues that the main cause of economic growth are entrepreneurs and innovations introduced by them in the system, leading to a process of constant product and firm development, and consequently greater efficiency in production, falling costs and much higher living standards. In the Schumpeterian structure of production, the process is defined by a combination of material and immaterial productive forces. The material ones are land, labour and capital, while the immaterial are technological development, enterprise and organization. It could be argued, and it is actually argued by some academics of the History of Economic Thought, that Schumpeter was one of the main theorists of endogenous growth models, introducing factors as technological development and innovative disruption which were later on developed along with the theory of knowledge by Paul Romer in the 90s. People who have read Schumpeter will for sure be waiting for one of the most repeated pair of words in economic literature: “creative destruction”, which describes how entrepreneurs incentivized by profit, and the desire of forming a monopoly, invest largest funds into inventing new products and innovating on already existing ones, displacing old products, methods of production and techniques from the market, and creating space for new ones. In my personal opinion, this is one of the best, theory of economic development through innovation of the XX century.
Schumpeter also published Capitalism, Socialism and Democracy, which argues that socialism would naturally replace capitalism, because capitalism created a state of well-being where only those left behind will be preoccupied to fight, bringing socialist policies forwards; understanding capitalism always as a process of innovation and entrepreneurship, not a system dominated by bureaucrats.
Hayek was an enthusiastic supporter of Popper’s views and ideas, apart from being very good friends. One of my favourite books, and one of the most important ones to read nowadays to be able to combat both, right-wing and left-wing populism is The Road To Serfdom , where Hayek makes a severe and realistic critique to collectivism, which has been one of the most genocide ideologies in History. Hayek argues that controlling society in a centralized way under the pretext of reaching a supposedly “common wellbeing” is totally impossible and pretty dangerous, as: 1) Central planners can’t have access to all available information, so processes of allocation can only be left to a decentralized system of information, as it is the market, and 2) Bureaucrats and their good aims for society can’t always be trusted, as if not tyrannies and oppressive regimes wouldn’t have arisen. Hayekian theory derives from Mises price mechanism, which depicts how socialism can’t allocate resources efficiently in the economy, as millions of economic agents can’t just function properly through individual transactions and decentralized management. Because all of this, socialist or in its defect, collectivist systems, will always be coercive and authoritarian. Democratic Socialism is a complete utopia. The centralization of economic power means the centralization of political and social control. Only competition serves as the safeguard of freedom and democracy.
The only way of escaping from populisms as Ulysses escaped from the Sirens, is by reading, informing ourselves about the world, contrasting data, and overall, keeping in mind how fortunate we are of having freedom. We should always defend it.