Month: August 2011
Organic and Industrial Economics
As much as I enjoy a good rap throw-down between the ghosts of long-dead economic theoreticians, and admire all who seek to bring economic education to wider audiences, I’ve been experimenting with a simpler approach lately – using alternate terminology. Especially when speaking with “liberals” (hereafter written without the quotes), I’ve found using the terms ‘industrial economics’ for Keynesian-derived approaches and ‘organic economics’ for Austrian School-rooted strategies, to be most effective.
The current era offers a unique opportunity for libertarian-types to forge relationships with liberals and make some progress on agenda items of common agreement. It’s been said that a liberal is a libertarian who doesn’t yet understand economics (of the sort that makes testable predictions and provides useful modeling). Something has changed when Bernie Sanders’s website looks like Ron Paul’s might have a few years ago, and we should be using this opportunity to engage and enlighten our misguided friends.
“You see, the problem you fail to grasp here is well understood by the economists of the Austrian School, but completely missed by the Keynesians.” “Wah, wah wah,” as Charlie Brown’s teacher would say. Let’s skip the history lessons and focus not on how the models came into being, but what they’re really describing. That there even are competing economic models is unknown to a large portion of the population, so what we need is a way to quickly distinguish and characterize them.
I’ve found the terms ‘organic’ and ‘industrial’ to be concise, useful, and apt. The Keynesian model, relying on government economic planners and central banks, really is the industrial model. It’s the Economy Factory, with its owners, foremen, and workers. By contrast, the Austrians tell us to distribute those decisions to the millions of capable minds in the marketplace, let the small principles of the pricing mechanism form spontaneous order and create allocation instructions, all without the participants being directly aware of their participation. That man in Lebanon, New Hampshire thinking about buying a sheet of plywood to build a dog house can be as aware of the increased need for plywood due to a hurricane in Homestead, Florida as a uracil nucleotide is of its current role in building a frog eyeball – yet the systems still work. Truly, the Austrians take the organic approach.
As a thought experiment, think of strolling around your local farmers’ market with a clipboard, asking people if they think the government should run based on organic or industrial economics. Ignoring the problem of people answering surveys rather than admitting ignorance, the terminology already has built-in positive bias for the target audience. Adding to that, it’s less likely to bring up questions about whether this has something to do with Arnold Schwarzenegger (or, yes, even Paul Hogan).
There are some liberals who really do care about increasing the size of government more than they care about the people they claim to fight for, but they’re not the voting majority. Most liberals (I’ll call them ‘values-liberals’ to distinguish from the power-mad variety) have been taught that big government is the only way to achieve what they care about, but they can be re-trained, and ultimately become allies. I have former-liberal friends who call themselves libertarians now, and their confidence is among the highest, as they’ve already tested the other hypothesis.
The organic (aka Austrian) economic model provides plenty for values-liberals to like. It focuses on production, not spending. When talking to your values-liberal friends, that means jobs (union jobs even) as widgets still need humans to make them. It demands sound money, which means helping poor people save to lift themselves out of poverty. It relies on free markets, which deliver goods to the needy at the best prices while also slashing crime (particularly interesting to our urban friends). This list can be (and surely has been) extended for volumes.
As much as we might have trouble understanding it, not everybody has spent hundreds of hours studying competing schools of economic theory, yet the fundamental concepts can be explained inside of five minutes. If they ask for the long backstory, then that’s their own fault, but to get started, just focus on the essential distinctions between organic and industrial economics.
Pardon Our Dust
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