Tuesday, February 12, 2008


In my on-going research into the activities of Fr. Robert Sirico and questions arising about Sabbateanism in connection with think tank funding, I last posted research on Lord Acton and his rejection of the infallibility doctrine under the influence of his excommunicated mentor Dollinger. Now I'd like to address Austrian Economics directly, since it does seem to be the body of knowledge that binds together a number of think tanks with which Fr. Sirico is involved.

Wikipedia provides a brief description of the founding of the Austrian School of Economics in Vienna, credited to Carl Menger following the 1871 release of his book PRINCIPLES OF ECONOMICS. The entry also lists the major players in this school including Eugen von Bohm-Bawerk, Murray Rothbard, Friedrich von Wieser, Ludwig von Mises, Friedrich von Hayek, and more. The subsequent move from Austria to Chicago is not discussed, though the Chicago School is linked as a source for further information.

The article does not mention the impact that Adam Smith had on this school, however the Online Library of Liberty does discuss Smith's impact in an article on "Spontaneous Order".

The idea of a “spontaneous order”, i.e. an order which emerges as result of the voluntary activities of individuals and not one which is created by a government, is a key idea in the classical [l]iberal and free market tradition. Although, as Norman Barry argues, the idea emerged in the medieval period, it is closely associated with a number of figures who wrote during the 18th century, in particular a group of writers associated with the Scottish Enlightenment - Bernard Mandeville, David Hume, Adam Ferguson, and Adam Smith. Adam Smith, in the Wealth of Nations, is famous for encapsulating the idea of spontan[e]ous order in the phrase "the invisible hand" which suggests an ordering principle which lies behind the activities of many individuals buying an[d] selling in a market place....

In the 19th century the idea was pursued by Frederic Bastiat and Gustave de Molinari in France, and Herbert Spencer in England. Later in the 19th century the Austrian school of economics made the idea central to their reformulation of economic theory after 1871. Karl Menger, Ludwig von Mises, and Friedrich Hayek are the key figures in this development.

"Spontaneous Order" requires an "invisible hand to promote an end which was no part of [the original] intention" according to this article. That would appear to be a reference to God in the eyes of any Christian. But what if those promoting the system are not Christian?

Next I turned to The American Almanac and a segment titled "Leibniz versus Mandeville" by Edward Spannaus which is part of a larger article titled "What Is The 'General Welfare'?" Bernard Mandeville, according to Spannaus, was "the evil godfather of today's free-market fanatics". Spannaus tells us:

The two overriding themes of Mandeville's writings are: (1) that selfishness and licentiousness are not evil but are a social good (``private vice equals public virtue''), and (2) that it is not only wasteful, but it is counterproductive and harmful, to attempt to educate or improve the lower classes. ...

Mandeville's fundamental contention, which endeared him to the likes of Adam Smith, and ``Austrian School'' (now ``Chicago School'') founders Friedrich von Hayek, and Ludwig von Mises, was that any attempt at a ``grand design'' or an effort to plan men's actions for the common good, is folly.

As he argued in The Fable of the Bees, man, like the industrious bee, performs selfish actions ``in the small''--which lead to the greatest good in the ``large''. ...

Von Mises, in his book Theory and History, adopts Mandeville's bestial view, stating that during the Enlightenment, eminent philosophers stopped ``brooding about the hidden purpose of Providence in directing the course of events,'' and began to look at things from the standpoint of acting men, rather than from the standpoint of plans ascribed to God or nature. This is best illustrated by Adam Smith, says von Mises, but to understand Smith, ``we must first refer to Mandeville.''

``The older ethical systems were almost unanimous in the condemnation of self-interest,'' von Mises wrote. ``Referring to the Sermon on the Mount, they exalted self-denial and indifference with regard to treasures which moth and rust corrupt, and branded self-interest as a reprehensible vice. Bernard de Mandeville in his Fable of the Bees, tried to discredit this doctrine. He pointed out that self-interest and the desire for material well-being, commonly stigmatized as vices, are in fact the incentives whose operation makes for welfare, prosperity, and civilization.''

``Adam Smith adopted this idea,'' von Mises declares.

That sounds so much like the philosophy of another Viennese philosopher, Jacob Frank, the disciple of Jewish heretic Sabbatai Zevi, who believed that man must commit "holy sin" in order to force God's hand to bring good out of it.

Robert O. Self, Assistant Professor of History at Brown University, has much to say about this in his book AMERICAN BABYLON. I'll pick up with this book and Self's look at Austrian Economics next time.

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