Thoughts on the controversy concerning spontaneous order, FSU, and the Charles Koch Foundation
In what follows I will assume the Koch Foundation wishes to promote Austrian economic theory as a part of their agenda. Even if they have another agenda my arguments will still largely follow, usually with increased rigor.
On the one hand, for years scholars with an interest in Austrian economic theory have been penalized in their search for academic positions. This was as true at the university of Chicago with its own version of free market economics as it was anywhere else. The insights and view of men such as Ludwig von Mises and F. A. Hayek were long kept alive by think tanks funded by classical liberal businessmen while academic departments were handing out positions to those who believed government could “fine tune” the economy. Marxists and genuine socialists were discriminated against as well as Austrians at American universities, but not by nearly so much.
Yet in time Hayek won a Nobel Prize and his and Mises’ arguments against socialist planning have transited from being regarded as foolish fanaticism to what ‘we all knew’ would happen sooner or later. I think virtually no one today advocates centralized economic planning as a replacement to the market. In my view Hayek’s work on spontaneous order theory can be appreciated as a pioneering application of insights regarding emergence into the realm of social science. Surely Mises’ and Hayek’s insights were of greater weight than those of many who received tenure at decent schools and taught thousands of students. Yet mainstream academia made it difficult for anyone to pursue their insights.
Do we have a failure of science here? And if so, is it a failure that a few enlightened businessmen are correcting by riding to the rescue?
There are many dimensions to this question, and all are complex.
Did science fail?
Yes and no. Science is first and foremost a project where people investigate the unknown using what is already known, and subject to rigorous standards of evaluation, to expand the circle of reliable knowledge. Because we are dealing with the unknown we can never be sure we are on target, and sometimes what we regard as reliable knowledge needs to be reconfigured based on newer discoveries, as Einstein and quantum theory did most spectacularly with Newton’s work. But this process takes place continually on a smaller scale. Thomas Kuhn captured it with his distinction between “normal” and “revolutionary” science, which translates in economic theory terms to the distinction between Israel Kirzner’s argument that entrepreneurship is a equilibrating force in the market (normal science) and Joseph Schumpeter’s argument it is a disruptive force (revolutionary science).
Some sciences have proven better at creating a large and increasing body of knowledge universally regarded as reliable than have others. No matter what a physicist’s views about hotly contested theories at its edges, they agree about a huge percentage of what is included within contemporary physics. I suspect the degree of near universal agreement in biology is smaller – but still enormous. It is smaller yet in the social sciences.
I think the reason for this fact is that a proposition in physics is more easily evaluated than one in biology, and one in biology is more easily evaluated than one in economics. Science grows by theories being tested and failing, to be replaced by new theories that do a better job at resisting being disconfirmed while lending themselves to tests that might do just that. Measurement, experiment, and prediction are the three most impressive ways to accomplish this task. Rational explanation is also impressive but not as definitive. The different fields of human knowledge lend themselves unevenly to being evaluated by these tests with the social sciences being particularly intractable due to the complexity of what they study. Economics has been the most successful, I think because the market is so impersonal, but I think it is fair to say it is still a far cry from the physical and biological sciences in the percentage of knowledge all schools of thought agree about.
Schools of Thought
When competing theories are persuasive to some and not amenable to being unambiguously disconfirmed they result in schools of thought that seek to teach their views to others. Each competing school shares a realm of “normal science” with other schools: normal science (A). But each competing school also has a realm of “normal science” specific to that school. Normal science (B). I think it safe to say that the percentages of normal science (A) is larger in physics than the normal science (B) and that in the social sciences the amount that qualifies as (A), that is shared by all, shrinks and the part that is (B) grows.
In emergent order terms, scientific schools are essentially like organizations. They have a research program, criteria for success in that program, and their members seek to expand the influence and wealth of their school by helping their next generation of scholars to find employment and pursue the research agenda. There is nothing wrong with this from a scientific perspective, any more than there being nothing wrong with a business seeking to grow within the market. Under competitive circumstances this is how discoveries are made and bad research agendas ultimately abandoned. But how effectively this process works depends on how easily poor theories can be weeded out, and the social sciences face greater difficulties here than do the natural sciences.
Because of difficulties in weeding out bad theories, we can expect the social sciences to have more persistent schools of thought and for the organizational politics of power and strategy to play a bigger role in perpetuating these schools than is the case in physics or biology. (David Hull demonstrates that these organizational strategies also exist in biology in his excellent Science as a Process, but I am describing degrees of influence, not whether it exists or not.)
In the social sciences more than the physical sciences the difficulty in rejecting bad theories leads to self-perpetuating schools that freeze out other approaches that may in fact be as viable scientifically or more so, but are less able to succeed at the inevitable politics present in any human endeavor.
Science is a discovery process. It does not discover truth. We do not know what Truth is. It discovers progressively more reliable knowledge, knowledge that gets set aside when it is discovered not to be reliable, or that new knowledge is more reliable. And organizations that get established in a science have interests that are not necessarily in keeping with the system’s well being as a whole, just as it’s the case with businesses in the market, parties in democracies, and indeed in any spontaneous order, as it is true for organisms in ecosystems. The tension between teleological orders within nonteleological emergent systems, and the operations of those systems, is inevitable and unavoidable.
To bring the point home, the failure of “Austrian” economics to achieve widespread academic respectability in the US is not necessarily a sign of anything fundamentally amiss with science, or even with social science. Nor is it evidence that Austrian theory is more faulty than other more accepted theories. It is a misfortune compounded by politics that is inseparable from how science is done. If Austrians were in the institutional position of the Chicago School, they would almost certainly act in the same way towards Milton Friedman and his students.
Academia and Think Tanks
I see these observations as reasons for never suppressing heterodox theories and encouraging them always to have a venue. But how can heterodox schools of thought be preserved? In the case of Austrian economics, it was through think tanks created by classical liberal businessmen. Had this not happened, I suspect the school would have died out. In my judgment we are far the better off for it being supported "from the outside." But here we have a risk as well as an opportunity.
In academia a scholar’s status ideally rises or falls on the judgment of his scientific community of reference. This is probably never 100% true, but there is a lot of truth to it. In a think tank this is much less the case.
Think tanks are organizations established to promote a specific point of view or, at best, a broad perspective. Usually they are also politically oriented. This means the think tank scholar answers to a different set of priorities and standards than does the academic one, priorities where ultimate success is removed from the scientific community. In the best of worlds a think tank scholar will be expected to make decent academic/scientific contributions, but the best of worlds is rare. And even in the best of worlds the scholar is imperiled if his or her research leads to views at variance with his or her earlier views that initially got them hired.
The academic runs the risk of losing a chance for an academic position if his or her work departs too far from that of existing schools of thought. The think tank scholar runs the risk of losing his or her employment in the think tank if they do the same. But academia is diverse enough that many different schools of thought dominate different departments. In addition, academia is safer for a scholar than is a think tank once a scholar has tenure. But tenure is disappearing these days in more and more fields, and with it a corresponding rise in the risks of doing innovative work. In both academia and think tanks it is getting difficult to simply pursue research in the direction a scholar believes will most advance knowledge rather than the priorities of whatever organization he or she serves. But academia is still safer than a think tank because its culture has to some degree absorbed the value that a diversity of (‘sound’) approaches is good.
A think tank does not answer to the standards of a scientific discipline. It answer to the standards of its funders, who are committed to different values. These usually are to promote a particular political or philosophical point of view. What this means is that science is subordinated to an assumption about what it should find to be true. A scholar’s success or failure rises or falls on how well he or she serves that agenda.
This is the logic of an organization. It is analogous to that of a research program in science, or of a school of scientific thought, but it cannot substitute for science as a whole. But unlike a scientific research program or most schools of thought, if the expected conclusions are not arrived at, the scholar faces a very real likelihood of being dismissed. This likelihood impacts the scholar’s choice of topics in a way a university tries to minimize with its culture and even more with the institution of tenure.
Is tenure a good idea?
Yes and no. Probably mostly yes. Most scholars play it safe in order to attain tenure. We have had people say they will not contribute to this open sources journal because it will not help them get tenure. Others tailor their publication plans around what a tenure review will accept. In this respect they are in a position somewhat like those employed at a think tank. They avoid the risky questions and shrink from unorthodox conclusions, especially in the social sciences where a knock out blow to an entrenched orthodoxy is particularly difficult to land for reasons discussed above. (The physical sciences are safer in this regard.)
By the time they get tenure most have been socialized into being ‘safe’ or, alternatively, they want to relax a bit from the pressure of survival. Some become academic “dead wood,” holders of seats who do nothing ever again to advance their field. But I suspect this is the inevitable price paid for enabling a small number of others to explore risky questions or advocate unorthodox conclusions. Enabling many to rest on their laurels so that a few can safely expand the frontiers of knowledge may be part of the price we pay so those frontiers can be expanded.
Certainly the insecurity of employment at think tanks is far worse than within an academic environment. A person can be released from employment at a think tank very quickly, and in intellectual fields the opportunity to find new employment is highly structured to the job market for positions beginning in the fall semester of the coming year. It has no resemblance to many employment markets in the business world. Being dismissed from a think tank is far more devastating to a person's economic future than not being rehired at a university or college.
I have sometimes thought that tenure should be replaced with long term contracts – ten years for example, renewable upon demonstration of continued performance. That solves the “dead wood problem” but probably at the cost of increasing a person’s efforts to play it safe. So at this point I think that, with all its problems, tenure probably does more good than harm, and there seems no adequate alternative to it.
In a sense tenure is analogous to owning lots of capitol in the market. It is a reward for successful work and a cushion against uncertainty, allowing one, if they wish, to pursue longer term or riskier projects. It is analogous to Charles Koch’s inheritance, except that it cannot be passed on to the next generation.
To take tenure away and replace it with a demand for perpetual “productivity” is in many ways akin to a tax on the income of successful entrepreneurs such that they never make more than the mediocre.
Emergent order insights
What we have here is a classic tension between organizations within emergent orders and the orders themselves and also between different emergent orders. Organizational dynamics within emergent orders injured the standing of the Austrian school despite the major contributions made by leading figures within it. This is the first point, concerning organizational politics. The second tension, that between the values of the emergent order of science and the values of non-scientists seeking to influence it through resources they acquired in a different emergent order in the second.
The emergent order of the market values productivity as it can be measured in a consumer’s willingness to pay, whether it be my paying a dentist for services rendered or Charles Koch’s willingness to pay an academic salary for services rendered. The emergent order of science values productivity in terms of a scientist’s contributions to his or her field as judged by their peers in the field. These are not the same.
In an ideal world for scientists each scientist would have the resources necessary to pursue his or her insights without depending on others’ judgments as to their worth while. Whether the work a scientist creates is published and accepted or not is the business of science, but not their having the material resources needed to do the research. Obviously those conditions are very rarely met today in any field. Therefore tensions are built in between scientific criteria and being able to do work based solely on scientific judgment.
Tenure and academic culture are the ways that a space for scientific freedom is maximized under present circumstances.
From an emergent order perspective if Charles Koch wants to promote the ideas of the Austrian School as a science, or any other perspective, he is going about it unwisely. He is injecting unscientific criteria (his political and economic beliefs) into the ongoing scientific community, rather like injecting a demand that creationism be taught in a biology department into biology as a criteria for funding for a biology department. I think Koch's economic understanding is vastly superior to a Creationist's biological understanding, but that is irrelevant to the point I am making.
His is an understandable strategy if he assumes, like any planner who does not understand an emergent system, that he knows what discoveries can be made, where research should go, and that his judgment is better than that of the scientific community. It is also understandable if he wants to subordinate an uncontrolled system to a political agenda. But it is not a contribution to science as a process of discovery because it assumes the truth in advance.
Alternatives
A better approach, but much more expensive, would be to create an economics department, or even a college or university, staff the department with people with the views he wants promoted, and set it free to sink or swim based on the judgment of those provided a place of operations and respect its scholars can get in the scientific community and the students it can attract. Obviously this is an extremely expensive undertaking, and the foundation seems uninterested in spending so much. But the expense involved illustrates the substantial gap between the different emergent orders that have emerged from out of civil society, and the difficulty of influencing one from the outside without corrupting it.
Financing a school of thought, be it Austrian economics or anyone else, based on their having already arrived at the correct conclusion is analogous to turning science into theology. We know where we want to arrive at, now let's find the best arguments for justifying the destination. Insofar as Austrian theory is scientific rather than theological, what is most important is not sanctifying the conclusions of an earlier generation of scholars but promoting the development of insights arising from its particular approach. Among Austrians there is no methodological uniformity - some, and I am not one, are attracted to Mises' praxeology as the primary method. Others, and I am one, are attracted to Hayek's idea of a spontaneous order as a key insight to be explored. (On this issue see Bruce Caldwell's Hayek's Challenge.)
The way to make sure a methodology remains active within the scientific community as a whole should not be by erecting the equivalent of an intellectual tariff wall protecting domestic manufactures. Such barriers can create a flourishing subsidized industry, but one that is incapable of competing in the larger world.
The subsidies needed should take a different form: promoting use of that approach in direct engagement with the broader relevant scientific community.
This means assisting graduate students using these methods to explore new areas, and in today's job market doing so without graduating with a huge burden of debt - which I assume is being done. It means encouraging these students to participate in professional conferences. It means having conferences where new work is presented rather than endless discussions of the classics, or only work by already existing Big Names presenting what we can be pretty sure we have heard before. It means promoting conferences where scholars in different schools of thought, always including Austrians, present work focused on a common problem. This enables cross-fertilization. In other words, it means making sure the insights potentially within the Austrian (or any other) paradigm have a chance to be fully developed and appreciated - and this is always risky.
This is intellectual entrepreneurship, and like any entrepreneurial act, the insights explored might not pan out. Intellectual entrepreneurship requires both the entrepreneur - those with insights - and the resources for them to explore their insights. Nearly every scholar lacks the resources under current conditions for exploring further Austrian insights. This is a bigger barrier to developing its approach than the lack of secure teaching environments for teaching what they have already accomplished. But the FSU idea only addresses this latter issue. If I understand the news reports correctly, the scholars hired will be in a very insecure position with their performance evaluated yearly by the Charles Koch Foundation. This virtually guarantees their working to make non-scholars happy with their output. Even assuming the best will in the world by the Foundation, the result is very much like subjecting scientific work in any field to political criteria which discredits their work in the eyes of other scientists as well as promoting self-censorship in safe directions.
Only by enabling people to develop their insights in new areas can we determine what can and can not pan out in the realm of any science. It is what those of us involved in putting on the conferences on emergent order are seeking to do. This approach does not distort science, it does not inject extra-scientific means of control over what is taught or studied. It provides people interested in a particular approach with the resources in terms of time, contacts, expenses, and the opportunity to publish, without subjecting their final outcome to non-scientific standards.