Interview with John D. Mueller, author of
Redeeming Economics
Redeeming Economics has been described as an “anti-Freakonomics.” Is that a fair characterization?
I have great respect for Steven Levitt. But Freakonomics displays all the problems with neoclassical economics identified in Redeeming Economics: particularly circular logic and empirically false assumptions, both of which were apparent in Levitt’s famous but erroneous claim about abortion supposedly reducing crime 20 years later. Levitt is severely handicapped by relying on what George Stigler and Gary Becker called the “economic approach to human behavior,” which tries to reduce everything to some kind of consumption, production, or exchange. That misses the central role of gifts, which are featured in the (neo) scholastic “human approach to economic behavior.”
But hasn’t Freakonomics broken new ground?
Sure! But not always as an improvement. The most interesting parts of Stephen Dubner’s original New York Times Magazine article, on which Freakonomics was based, were the instances of Levitt’s behavior that, Dubner correctly saw, contradict the “economic approach” that he uses. Perhaps understandably, that insight disappeared once the two became business partners.
You don’t have a Ph.D. in economics. Isn’t that a handicap?
It certainly isn’t in forecasting, where you are paid based on results. But it’s my dumb luck to be a member of the first generation in eight centuries when not having a doctorate would be a positive advantage. Starting in 1972 at the University of Chicago, American universities abolished the requirement that you had to master the history of economics to get a degree. Historian of economics Henry William Spiegel noted of the "marginal revolution" that ended classical and launched neoclassical economics in the 1870s, "Outsiders ranked prominently among the pioneers of marginal analysis because its discovery required a perspective that the experts did not necessarily possess." The same will be true of the neoscholastic revolution.
What has formed your perspective?
Basically three things: First, having been economist and speechwriter for then-Congressman Jack Kemp for the decade from 1979-1988, when he and Ronald Reagan made economic policy and history from opposite ends of Pennsylvania Avenue. That permitted me to see how moral philosophy is translated into policy in U.S. government. Second, having made my living as an econometrician since then. That permitted me to see that the logical and mathematical structures of scholastic, classical, neoclassical economics differ fundamentally, and that the latter two have more unknown variables than explanations. This requires circular logic and/or empirically false assumptions, which are evident throughout today’s neoclassical economics.
And the third?
The book wouldn’t have been possible without support from The Lehrman and Lincoln Institutes and a fellowship from Princeton University’s James Madison Program in American Ideals and Institutions. It’s an excellent illustration of the theory of gifts, which neoclassical economics omits.
But surely modern economists discuss gifts.
. In classical and neoclassical economics gifts are always assumed to be disguised exchanges. (Neo) Scholastic theory rests instead on Augustine’s insight that there are two kinds of economic transactions, not just one: “sale or gift.”
What does your thesis suggest for the way economics is taught today?
The best thing any American college could do to jump-start its economics program now would be simply to restore the requirement that candidates master the history of economics. No matter how badly it was taught, any decent textbook in the past half-century now begins with Aristotle, not Adam Smith. Liberal arts colleges should also excel, because the economists leading the neoscholastic revolution need once again a solid grounding in the natural law, where economic theory originated. But Redeeming Economics was made both possible and necessary by abolition of that degree requirement.
If this is a movement, where are the other neoscholastic economists?
There aren’t many yet, but the same was true of neoclassical economics in the 1870s. Important examples of the neoscholastic approach today can be found in Jennifer Roback Morse’s Love and Economics, and in articles by Dr. Sophia Aguirre of Catholic University. Historians of economics who recognized the scholastic contribution to economics include Joseph Schumpeter in his History of Economic Analysis, (1954), Henry William Spiegel’s The Growth of Economic Thought (1971), and Jacob Viner’s Religious Thought and Economic Society (1978). Economists who developed important features of the neoscholastic approach include Heinrich Pesch, Jacques Rueff, and Wilhelm Röpke.
Isn’t (neo) scholastic economics essentially a Catholic phenomenon?
No, that ignores the key role of what Joseph Schumpeter called the “laic or Protestant scholastics.” (Neo) Scholastic economics is essentially a product of the natural law, which is what we can know by reasoning from common human experience. Its economic principles were hammered out three centuries before the Reformation and five centuries before Smith. Until then, Catholics and Protestants basically agreed on economics. Samuel Pufendorf’s Protestant version of the natural law was written about a century before the Declaration of Independence, taught to (though rejected by) Adam Smith, widely circulated in the American colonies, and recommended by Alexander Hamilton, who penned two-thirds of The Federalist. Besides, neither Viner nor Röpke was Catholic.
You surprisingly classify most American Founders in the (neo) scholastic tradition. Can you name a few and explain what they did to justify that claim?
James Madison developed Aristotle’s theories of property and faction. Hamilton developed Augustine’s distinction between private goods like bread, which two of us can’t simultaneously consume, and “public goods” like administration of justice or national defense, which we can. Hamilton made the further distinction between true public goods and quasi-public goods, which benefit many but not all citizens (like manufacturing subsidies or social benefits). Abraham Lincoln’s natural law view, by which he opposed Stephen Douglas on slavery, was based on theirs.
You contrast the modern “theory of public choice” with what you call the “theory of American public choice.” What’s the basic difference?
The two are based not just on different economic theories but different world views. The Founders maintained, as James Madison put it, that “justice is the end of government”; that “as a man is said to have a right to his property, he may be equally said to have a property in his rights”; and that “the most common and durable source of factions is the various and unequal distribution of property.” The theory of public choice says instead that rather than justice, the goal of government is to obtain the benefits of office; that voters’ interests are not systematically related to their economic interests; and it ignores the presidency. In chapter 14 I show that data since 1948 from the American National Election Studies support the theory of American public choice.
You mentioned that you worked for ten years for Congressman Jack Kemp, who had a big impact on both Reagan administrations. How did you get from there to here? Isn’t it a switch to go from “supply-side” to “neoscholastic” economics?
Some of the most important lessons in Redeeming Economics are the fruit of my work for Jack Kemp. I had free run of the Library of Congress for years, and my job forced me to use it extensively. Supply-siders were notoriously argumentative, and it was my job to help Jack articulate a consistent policy. I also learned what makes for successful or unsuccessful economic policies. The section on political economy describes the four basic principles of all successful American economic policy from George Washington through Abraham Lincoln through Franklin Roosevelt through Ronald Reagan. It also describes how the recent financial crisis was caused by both parties disregarding all four principles.