Stephanie Kelton made a jab (it was, admittedly, funny) at Austrians in response to the Anti-MMT panel at the Austrian Economics Research Conference. She said, “MMT is a JG for Austrians.” “JG” is short for “job guarantee,” a reference to the hallmark policy prescription from MMT proponents that the federal government can and should provide a job guarantee to all citizens.
After a chuckle, it got me thinking about what economists do and why they do it.
I’m too young to answer the why question, especially if I were to presume I could speak for all economists. It seems more appropriate to let the experienced scholars, after a career of duking it out with other experienced scholars, reflect on the deep but simple-sounding questions like “What’s the point?” or “What should economists do, and are we doing it?”
We have an answer from James Buchanan, who has a book of collected essays titled What Should Economists Do? in which the first chapter lent its title to the whole collection. Buchanan notes that to answer the question, he had to “proceed squarely against the advice of a modern economist whose opinions I regard with respect, George Stigler.” Stigler said “that it is folly to become concerned with methodology before the age of sixty-five.” Buchanan also quotes Jacob Viner’s tautology, “economics is what economists do,” and Frank Knight’s reversal, “economists are those who do economics.”
After the humor, Buchanan gives us his answer: economists should focus on markets, not resource allocation. Even though many principles texts include resource allocation in their definitions of economics, Buchanan argues that economists ought to study “the various institutional arrangements that arise as a result of this form of activity.” By focusing on resource allocation, we are turning onto a path with a dead end—resource allocation problems have a mathematical solution, especially when given the agents’ utility functions and a set of resources. This is a dead end because not much more can be said after solving such a contrived problem. Instead, Buchanan wants economists to focus on “a unique sort of relationship, that which involves the cooperative association of individuals, one with another, even when individual interests are different.”
In the book’s postscript, Buchanan says that such an approach “has social value in offering an understanding of the principle of order emergent from decentralized processes, of spontaneous coordination. … Such an understanding is necessarily prior to an informed decision on alternative forms of social order.”
Ludwig von Mises came to a similar conclusion in the final chapters of Human Action. He blasted the “professional economists” (much like Buchanan’s resource allocation problem solvers) for being “instrumental in designing various measures of government interference with business.” They are lackeys for special interest groups who want to steer government policy in a way that is advantageous for their clients.
Economics does not belong to these interventionists according to Mises, but to all citizens. Here we find one of Mises’s most famous quotes:
Economics must not be relegated to classrooms and statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man’s human existence.
Economics is simply too important to leave to the technocrats, who will only bend, break, and trample on it while justifying interventionism. Mises goes as far as to say that learning economics is “the primary civic duty” of “all reasonable men.” Mises held that governments need popular approval to survive in the long-run, which means that economic understanding is a roadblock to interventionism.
According to Mises, without economic understanding, bad ideas proliferate and triumph:
The public discussion of economic problems ignores almost entirely all that has been said by economists in the last two hundred years. Prices, wage rates, interest rates, and profits are dealt with as if their determination were not subject to any law. Governments try to decree and to enforce maximum commodity prices and minimum wage rates. Statesmen exhort businessmen to cut down profits, to lower prices, and to raise wage rates as if these matters were dependent on the laudable intentions of individuals. In the treatment of international economic relations people blithely resort to the most naive fallacies of Mercantilism. Few are aware of the shortcomings of all these popular doctrines, or realize why the policies based upon them invariably spread disaster.
Finally, Mises ends his magnum opus with this dire warning:
The body of economic knowledge is an essential element in the structure of human civilization; it is the foundation upon which modern industrialism and all the moral, intellectual, technological, and therapeutical achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race.
So, Kelton is right, in a way, though it’s not just MMT that provides a “job guarantee” for Austrian economists. It’s all of the bad ideas from resource allocation problem solvers; from the professional class of “economists” who argue on behalf of the state and the special interest groups who seek to steer it in their favor; from the socialists, Marxists, Keynesians, monetarists, mercantilists, totalitarians, and warmongers. And it’s not really a job guarantee but a duty to expand economic understanding because it inoculates the public from embracing or tolerating the very ideas that threaten human flourishing and survival.
