Aug 14, 2020

Restoring Liberalism

Ben Klutsey and Richard Ebeling discuss the Austrian school of economics and how classical liberals have sometimes fallen short in addressing social ills
Benjamin Klutsey Director of Academic Outreach

In this fourth installment of a series on liberalism, Benjamin Klutsey, the director of academic outreach at the Mercatus Center at George Mason University, talks with Richard Ebeling about influential liberal economists, the natural rights tradition, and the morality of markets. Ebeling is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel. He is one of the leading members of the Austrian school of economics and has written several books, including Austrian Economics and Public Policy: Restoring Freedom and ProsperityMonetary Central Planning and the State, and Austrian Economics and the Political Economy of Freedom.

KLUTSEY: We’ve been talking about liberalism and its values and how we can advance a liberal tradition in our modern society. We’ve touched on various themes such as individual liberty, toleration, mutual forbearance, pluralism, viewpoint diversity, and freedom of exchange. Today we’ll focus a bit more on the economic aspects of liberalism, and our guest is someone who has great depth and breadth of knowledge on this topic. In fact, he recently wrote a book about it titled For a New Liberalism, which came out in 2019.

Our guest is Professor Richard Ebeling. He is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at Citadel. Prior to his appointment at The Citadel, Dr. Ebeling was professor of economics at Northwood University in Midland, Michigan, from 2009 to 2014. He served as president of the Foundation for Economic Education from 2003 to 2008. He was the Ludwig von Mises Professor of Economics at Hillsdale College from 1988 to 2003. He was assistant professor of economics at the University of Dallas in Texas from ‘84 to ‘88. He is the author of numerous articles and several books, including the one we’ll be discussing today. Thank you very much for joining us today, Professor Ebeling.

EBELING: Great to be here with you. Thanks for having me.

KLUTSEY: I wanted to just dive into your book, For a New Liberalism. The question I thought would be good to help kick things off is this: your book is titled “a new liberalism,” but it seems you’re arguing for a return to the original liberalism. Am I right in thinking that?

EBELING: Basically, yes. The reason I chose the title—it was actually recommended by a friend—but the reason I chose the title was that it raises two issues. One is that liberalism has somehow failed and needs to be restored. The other implication there for a new liberalism is that we are in an era that is somehow anti-liberal, and liberalism needs to be brought back to replace the illiberal policies and directions of the society. What I basically am implying in the book is that both are true.

Modern American liberalism has failed. We have been increasingly moving in illiberal policy directions, both social-political as well as economic. That means that we need to rethink and, in my opinion, restore a proper understanding of liberalism that has its roots in the 19th century, its inspiration in the ideas of the 18th as well as the 19th century, but to go beyond them to be more consistent, more relevant, and more inclusive.

KLUTSEY: Right. You were fortunate to study under Friedrich Hayek, Ludwig Lachmann, and Israel Kirzner. How did they shape your thinking about liberalism and the way the world works?

EBELING: That is an interesting question. I would say they and a very small handful of others greatly molded me. Among the Austrian economists clearly, in terms of literature, the two Austrian economists that had the greatest impact on me was Ludwig von Mises and Friedrich Hayek. What I had the opportunity to do was in the 1970s I had summer fellowships twice at the Institute for Humane Studies when they were still headquartered in Menlo Park, California.

In both of those summers, Friedrich Hayek—he had just a little earlier won the Nobel Prize in Economics. In both of those summers, he was a senior fellow there as well. So, for both of those summers, my office was nicely located only one or two doors down from his. I was in my mid-20s, and he’s in his mid-to-late 70s. When you’re in your 20s, 70 seems old. I figured, “This guy, he might not show up tomorrow. He could die in his sleep.” Actually, of course, Hayek lived until he was 92.

But anyway, so I figured I have to go in and squeeze his brain for every little bit of knowledge. So, in that sense, it’s not like he was my teacher, but I had an opportunity for two summers to frequently, almost on a daily or every other day basis, to go in and spend an hour or so with him and, based upon the books of his that I had already read, to ask questions, tease out ideas. I would say that he has been a great and outstanding influence on my way of looking at the world.

I might also mention since it’s always nice to know a person’s observations of others, if you can have an image, an ideal in your head, of what you think a Nobel laureate should be like—patient, knowledgeable, courteous, sharing—that was Hayek. You could walk into his office, and he had his own things to do. He had just won the Nobel Prize a year or two earlier and a lot of demands on his time, but he would sit down with you. Even if he had heard a question from you that was a question he had heard 100 times over the years, he treated your question as if he was hearing it for the first time.

He also was very self-deprecating because I would ask him, “What about your battles with Keynes in the 1930s or your disputes with the socialists of the same period in the ’40s?” and he would tell these little self-deprecating stories. “Well, let me tell you about my next defeat.” That’s the way he would express himself. But I should mention he was a lifelong pipe smoker. His doctor made him give up the pipe, but he needed his nicotine fix. So, he took up sniffing snuff.

So, you’d sit there in his office, and he would take out the snuffbox and inhale with the stuff up his nose, but then the little snuff particles would come dribbling down his mustache onto his shirt and his tie. You’d be concentrating on what he’s saying, but your concentration was broken. Where’s it going to dribble down next? You couldn’t help staring at him. But seriously, he was a great mind who had great courtesy and patience and willingness to share his knowledge.

Lachmann and Kirzner I had a chance to study a bit with at New York University, again in the late 1970s. Lachmann, too, is of that generation that he had been at the London School of Economics in the 1930s. He had already earned a master’s degree at the University of Berlin under a famous member of the German Historical School, Werner Sombart. But in 1933, because Lachmann was Jewish, he had to leave Germany. He came to the London School of Economics and did another master’s thesis under Hayek. So, he too had a lot of these fascinating stories and knowledge. You would go into his office, and he would say, “Mr. Ebeling, in these four walls we can speak our mind.” But he was a delightful personality.

And then Kirzner. Kirzner recently had his 90th birthday. He’s been like an icon in the revival of the Austrian School, having himself written his dissertation under Mises at NYU. But what stands out about Kirzner is that if there’s a meaning to the phrase “the economist’s economist,” that is Kirzner. There’s a deliberative, scholarly seriousness about him that always attempts to be fair and impartial while weighing all the arguments on both sides. You’re in his company for any period of time, and you wish that if you could be a scholar, you’d want to be his kind of scholar because of the quality of his character and his personality. Yeah, so all three of those in their own different ways had a great influence on me.

KLUTSEY: The way you describe them personally, it seems as though they lived out liberalism personally. Would you agree with that? The patience, the deliberative nature, trying to weigh both sides, being tolerant of different views.

EBELING: Yes. What does liberal mean? Of course, liberal can mean a political philosophy, an economic concept of human relationships in the market arena. But liberal also has a sense of a state of mind, an attitude of openness, tolerance, deliberative patience, a willingness to weigh and consider, not to without reason set aside or condemn or disagree with, that any conclusion that is reached is based upon intellectual discourse of fairness and impartiality in the logic in the evidence of an argument. If one thinks of liberalism or being liberal in that wider sense—psychologically, personally, culturally—all three of them represented that.

KLUTSEY: I think you might have noted that Ludwig von Mises was your largest influence, which kind of makes sense given that you published a collection of some of his lost papers after they resurfaced in a Soviet archive. What does Mises add to your thinking on liberalism and how we might conceptualize it more clearly?

EBELING: Sometimes it’s hard to put into words your own thought processes of what has influenced your how. What struck me early on when I was reading—as an econ major, obviously, an undergraduate—reading more and more of the Austrian literature, particularly Mises, what struck me was the interdisciplinary quality of the man. He wasn’t just an economist. He was unbelievably knowledgeable about history, sociology, political philosophy.

Remember the old curriculum before the First World War in a place like the University of Vienna is if you wanted to become an economist, you did so through the Faculty of Law. So, you became a doctor of law, as well as specializing in economics. You knew the ancient languages. You spoke several of the modern languages. You were expected to be basically a Renaissance man, and there’s no doubt about it.

There’s only one instance in my experience where I ever saw this in work, an environment of Renaissance people. That was in Moscow during the end of the Soviet Union, but that would be a different topic to talk about, to be in a Moscow salon of what was then the intelligentsia of the end of the Soviet Union. That was like being at a salon in Paris during the Enlightenment era. That’s with a little bit of exaggeration, but that was sort of the environment.

But Mises was of that character. What also always impressed me is the systemizing way he put ideas together. A lot of people say that he just has a formal logic, that you start with “man acts” and then it becomes a closed system. There’s a coherence to his thinking, a way of seeing the logical links all the way through.

What always has struck me, which is obviously different than many readers, is that if you read his memoirs and if you read carefully various passages in his works, he’s neither close-minded nor dogmatic. He goes out of his way to say that each generation is building upon the knowledge that they’re left with by earlier generations. They are themselves only a way station on an unending intellectual journey. As confident as one ever feels about one’s own ideas and beliefs, one should always realize that there have been others before you who were equally if not more confident and were later shown to be often very wrong. So, his is not a closed-mindedness. It’s quite the opposite of that.

Some people call it intransigence, not suffering fools gladly, as the phrase goes. But you see then his consistency of saying, “Okay, what do you say a socialist economy will be like, Mr. Socialist? How are you going to plan the economy?” He just says, “Look here, let’s start with first principles. Without private property and a pricing system in a competitive arena, how will you undertake economic calculation? You can’t.” Or his criticisms of interventionism. There’s a compelling, persuasive logic in him. It doesn’t mean that you have to agree with everything in him. I mean, who agrees with everything in any thinker that you’re learning from?

He’s a system builder, but as I say, a system that is still open-ended, even though his rhetoric doesn’t always sound it. You have to understand people’s times. I’m probably talking more about this than I should and I apologize. But you have to understand the old German intellectual community—again, I’m talking about before the First World War—was different. People would attack each other. Scholars would attack each other in journals personally. For example, the founder of the Austrian School was Carl Menger. He was very critical of the German Historical School. He believed that they discounted the importance of deductive reasoning in social analysis.

The head of the German Historical School at that time, one of the heads, was Gustav Schmoller. He’s a big name in Berlin. He wrote this terrible critical review of Menger’s methodology book that was published in 1883. So how does Menger respond? He writes a little book called The Errors of the German Historical School in the form of letters to a friend. Unfortunately, it’s not in English, but I can read German.

So you read the stuff, and he’s listing all the problems with Schmoller and the German Historical School. At some point he says, “But after all, how can you reason with someone like Schmoller? After all, he has a mind of primordial ooze.” Now who would say that today? Because I can assure you that the harshness of the language was equally against him from some of these German people.

Then there was this professor at the University of Vienna in the 1920s and ’30s named Othmar Spann. He had this philosophy of universalism, which is basically a proto-fascist thing—collectives as opposed to individuals, both political, sociological, methodological. He would write these things. Again, very little of his stuff is in English. But he would write these things, and he’s saying, “In the Teutonic world. . . .” Who even says the Teutonic world? “In the Teutonic world, marginal utility theory has been crushed.” And then in another book on methodology, he refers to methodological individualism as “the dragon seed of evil.” Dragon seed of evil? This is like a learned guy. I mean, people are listening to him.

But then Mises, he has this collection of methodological essays, which came out in 1933, called The Epistemological Problems of Economics. In the introduction he says, “Many people of the German Historical School are criticized in the following essays, including Othmar Spann, who has been completely refuted.” So you have Spann saying, “You’re rejected,” Mises saying, “You’re refuted.” This is just how they talked back then. It’s a different scholarly style that today we sort of wince at, like “What?” And they never use footnotes.

KLUTSEY: You had mentioned that Hayek and others studied economics under law departments and so on, which seemed to indicate that there was a lot of interdisciplinary studying going on.

EBELING: Yes.

KLUTSEY: Do you think that there has been a lot more siloing in the modern era and so leading to some of the illiberalism that we see and the challenges in how academics from different disciplines talk to each other?

EBELING: Yes. Hayek himself has an essay called “The Dilemma of Specialization.” I believe it appears in his Studies in Philosophy, Politics, and Economics from 1967. He points out that, obviously, as sciences and disciplines develop, you cannot avoid degrees of specialization because how can anybody know everything? But he says, “But the focus on narrow areas has made too many scholars have blinders on.” These are my words, not his. It’s a long time since I read the essay.Richard Ebeling

But it just seemed to me that he was saying that people who have blinders on, that you’re just narrowly an economist and don’t understand the institutional, political, and social milieu in which economic forces play out. Or you’re just a political scientist or an historian, and you know little or nothing of what a practicing economist takes for granted in terms of how markets work and how government policies may play out. So, the free market economists will feel, and I don’t mean this in a pejorative way, but he’s implying that naively the political scientist or the historian thinks, “Well, government could just do this and successfully have no negative unintended consequences.”

I believe that forms of specialization have resulted in us not understanding that the social world that we all study is of one tapestry. We may be looking at different parts of the tapestry, but they’re so interrelated that you have to be able to, at the same time as getting your own special knowledge, also step back and have a sense of the complementarity of how it all fits together. Otherwise, you’re going to miss things to even successfully do your own area of research.

KLUTSEY: I see. That’s really interesting. In the book, you argue that liberalism transformed into political paternalism in the early part of the 20th century. How did this happen?

EBELING: Okay, this is very controversial because it prevents you from not seeming to take sides, which—I do have a side. There would be no liberalism today, or the liberties that we take for granted, if there had not been—I’m taking it as an historical fact now, not whether philosophers find it cogently persuasive—the tradition of natural rights.

That it is a self-evident truth. That certain individuals inherently as a human being—either due to their nature, as their reason can understand, or God-given, as many of the older philosophers believed—that are inalienable. That may be not taken away from you, may not be violated. And that the purpose of society and its institutions is to design an arena in which each person can be secure in that liberty against the aggressions of others, while having as much latitude of his natural rights and its practice as possible.

For instance, why did slavery end anywhere in the modern world? I’m not saying the only place, but a major focal point was Great Britain in the second half of the 18th century, the 1700s. People like Thomas Clarkson, William Wilberforce, and others, George Thompson. These people were deeply moved by the cruelty and the callousness and the inhumanity of the slavery that they were seeing in their own time, African slavery.

They’re trying to persuade their fellow men that this institution is not just inefficient, costly—they make those arguments too—but at the heart of it, it’s a moral issue. It is inherently wrong for one human being to presume to conquer and enslave and own another. Why? Because each human being in themselves has an inherent right to his own life and his liberty. He owns himself. He is his own property, not to be made a tool under force to the whims and wishes of another. That has a powerful argument. And it moved people. It persuaded people.

Again, just as an historical fact, it may be that a lot of libertarians and classical liberals have moved away from having religious views. We’re making a historical fact. They were moved by their Christian faith. This is an abomination in the eyes of God. God gives you your freedom; no man may take it away. This is natural within you.

That was a great force for the emerging liberation of human beings from various forms of tyranny, whether it be out-and-out slavery, which did not happen overnight but ended to an Act of Parliament in England in 1833, inspired others; the abolitionist movement in America through the terrible Civil War that we had; finally the end of slavery in the Western world—the last slave country in the Americas was Brazil. That ended 1889. The then empress of Brazil signed it away through an act.

This is what moved people, the idea that you should have certain civil liberties, that you should have a certain right to vote, that people should have freedom of exchange and association and occupation—what Adam Smith talks about, a system of natural liberty. His teacher, Francis Hutcheson, from whom he got many of his ideas, basically talked about the natural liberty and the natural rights of people. That is what gave us the foundations of the human freedoms that we take for granted, because these are viewed as universal for all men everywhere in all times, regardless of who they are and what they look like.

What began to change? Again, I’m talking too long and I apologize. This again is controversial among political philosophers. Utilitarianism. Now I’m an economist; I use utilitarian arguments all the time: “It works. It doesn’t work. It makes for the betterment of people in society as a whole.” But there was a shift, where you’re concerned about what seems to be useful and what seems to help more people as opposed to less people?

Now legislation becomes not a matter of “Is it consistent with people’s rights?” or “Does it have to be changed because it violates people’s natural rights?” to “What is inefficiency? What is more optimal? What seems to have more benefits than costs?” So that undermined—I’m trying to use undermine not in a normative sense, just as a statement, because it did undermine it—this idea of this fervent belief of the natural liberty of a person to himself that may not be violated. So now, it’s basically more utilitarian efficiency arguments. Then combined with that is the emerging historical relativism of Germany and of which Marxism is a form.

Each epoch has its own institutions and its own notions of human relationships and ethics and morality. The morality of today is not the same morality of yesterday. As the German Historical School people said in the middle and late 19th century, the laws of economics that applied in the Great Britain of the 1830s and 1840s, when there was the push for the free trade establishment, are not the same laws of economics that apply in the Germany of the 1880s and 1890s that say that it is necessary to have protectionism or welfare redistributed policies, which Bismarck was introducing under their influence. So, all of this undermines it. Again, I apologize, because it’s a story. It’s a story.

KLUTSEY: Sure.

EBELING: Very few American universities offered PhDs in the second half of the 19th century, virtually none, one or two, I think. So, if you wanted to be a scholar in any of these fields and to have a capstone of your academic career before moving on to what you were going to do, you have to go to Europe. Some people went to Cambridge and Oxford. Others went to the University of Paris or the Sorbonne.

A lot of American scholars—economists, political scientists, sociologists, historians—they went to the German universities. Was not Germany the land of the philosophers and the poets, the scientists, the romanticists? Of course. Germany represented culture. So, they went to these universities, particularly the social scientists in these various fields. Where do they study? With whom do they study? At these universities with the professors of the German Historical School, who are basically socialists without Marx. They want state socialism.

You don’t throw the baby out with the bathwater. You don’t kill businessmen. You don’t take away private property. But you have to have an enlightened government that is guided by opportunism and pragmatism. That’s their words in their books and articles. A rational government operates on the basis of pragmatism and opportunism. If it seems appropriate to regulate an industry today, you regulate it. If it seems appropriate to own an industry by the government tomorrow, you do it. If the reverse happens, well, that changes for a period of time.

All of these American scholars, including the founders of the American Economic Association, come back to the United States, and they become young professors. Some of them serve in the Wilson administration. Many of them, when they’re older, or their students serve in the Franklin Roosevelt New Deal administration of the 1930s. They imbue an entire philosophy that there needs to be not that type of Bismarckian militarism that the Germans had, but a new liberalism—an enlightened liberalism—that isn’t stuck in an ingrained notion of negative liberty, merely the protection of rights.

There has to be a positive liberalism that realizes that, how can you be free if you’re poor? Because if you’re poor, you have no power to achieve your goals. So, a positive liberalism requires that there be an equal opportunity of all through redistribution of wealth because is it not fair? Are we not all part of the same community family? Do we not all collectively benefit from this?

In fact, Richard Ely, who is a longtime professor at the University of Wisconsin, was one of the major founders of the American Economic Association, wrote several books on this. He said, “We are looking to a future where enlightened experts will guide others in society, particularly in the business community that will happily operate with them to move on and bring about reforms because in bringing about social justice, we are doing God’s work.” This is their mental attitude. That is basically how liberalism and the undermining of the older notions of a rights-based notion of liberalism got transformed over the 19th and early 20th century.

Now obviously, this is a long story, which I’ve already talked too much about but explains in a way what happened. So, today in America, what is liberalism? Liberalism was for—beginning particularly with the Roosevelt administration—laissez-faire government, not laissez-faire markets and people, but laissez-faire government. Government should not be constrained by constitutional limits, which Wilson had been pushing earlier. But government should be able to redistribute wealth, regulate as it’s considered necessary, becomes the political paternalist serving the people. Well, I’ll just leave it there.

KLUTSEY: The aspect of liberalism that has to do with voluntary exchange and so on, the economics of it or some might call it market liberalism, what are some of the misconceptions that people have about that?

EBELING: Part of the misconception is a failure to appreciate a set of ideas that require admittedly a degree of abstraction. The type of thinking that Adam Smith offered us in The Wealth of Nations in what has become this phrase from a passage in his book, “the invisible hand.” The idea that in a certain institutional setting, where we recognize that individuals have certain rights to their life, their liberty, their honestly acquired property, in which human association is based upon voluntary agreement and mutual consent.

There has emerged degrees of interdependency through forms of division of labor. Human beings inescapably are self-interested. In other words, you are a person. You look at the world through your own eyes. You act in ways guided by your values, given that self-interested behavior is inescapable. I’ll add a footnote about that in a moment.

Then what happens here? No longer can people gain what they want at the expense of others through plunder, conquest, enslavement. Now if you have what I want, and I can’t kill you, I can’t steal from you, I can’t defraud you, what am I left with? How can I apply my knowledge, skills, ability, and imagination to devise the offering to you of a product or a service that you will find attractive enough to take it in exchange from me for what you have that I desire and I value more highly in turn than what I would have to give you in trade?

Suddenly, you have now harnessed self-interest to a properly understood sense of the common good. In other words, a positive-sum game of mutual improvement and enhancement of life. That core concept is profoundly important to the liberal vision of society. Society is no longer a conflict of class, of race, of predators. We can imagine a world in which people live peacefully together, respecting each other’s rights to their lives and their liberty with tolerance.

At the same time, to advance my interests requires me to inescapably improve yours in the process. So, we are in a society of mutual prosperity through harmony and interdependence. Or, as Mises says in a passage in his treatise Human Action, “In the market, people compete through cooperation and cooperate through competition.” It’s mutual. That is the great lesson to the market economy.

Just recently, heads of major corporations connected with social media were called before Congress, just the other day. And they were put over the grills. They’re big. They’re powerful. They have huge revenues and wealth. The fact is as long as a market is open and unrestricted, not one dime, not one penny that someone such as Jeff Bezos has made or [Mark] Zuckerberg has made is due to plunder, theft, exploitation, or oppression.

If I buy a book from Amazon or if I stream a movie from Amazon, it’s because I value what the book can offer to me and the speed of getting it more than not having it or buying it from another. I just streamed a couple of movies, right? Why did I do so? It’s because I valued the entertainment and the information of the movies more than the price asked.

Now $2.99 from me, $3.99 from someone else, the price of the book to be shipped to me from another person adds up to the hundreds of millions of dollars that a company like Amazon makes, or Zuckerberg from any advertising by offering his social media services. Not one dime, as long as they’ve not been protected by the government from competition or received a subsidy or supportive regulation from the government, has been earned dishonestly. Bigness is not wrong in the marketplace as long as it’s earned on a free market. The result is what has cumulatively occurred. Adam Smith’s lesson. Each has had to apply their knowledge, skills, and ability to serve their fellow men to improve their own circumstances.

I said I wanted to add a footnote. When Adam Smith and every reasonable economist since him, when they’ve said that men are guided by self-interest, they have never meant, they have never meant he only cares about material, greedy acquisition. No. From the time of Adam Smith, it’s been whatever is of personal interest to you—family, friends, neighbors, causes. But you cannot escape the fact that each individual looks out at the world and lives his life through his own eyes and his own mind, and therefore evaluates what he considers good, right, just, important, and valuable.

And that’s all that economists since Adam Smith have ever meant by self-interest, not this imagery of greed with the most negative . . . but the idea of each acting and what is of value to them, most broadly defined, and achieving it through the volunteerism of civil association without force in society. To me, the morality of that, the ethics of that—I can’t hit you over the head, nor can you bind me to be your bondsman. Mutual respect, dignity, honesty, this is the foundation of the market and what makes it more moral and profoundly important as a social system than anything else man has ever stumbled upon.

KLUTSEY: Now from your book—I’m reading from page 369—you said, “Free market liberals have debated amongst themselves about what other roles and duties even a government meant to primarily secure rather than violate liberty should or should not undertake. This has usually concerned government spending and involvement in education, infrastructure, expenditures, specific regulatory responsibilities, and certain mental welfare-related expenditures.”

So my question to you is, it seems like that is a healthy debate, right? This is part of a broad liberal tradition. Some people would want a bit more of a robust regulatory apparatus. Some would want less. Some would want more of a welfare cushion. Others would want a little bit less. Isn’t this all part of this great liberal tradition? Am I wrong there?Benjamin Klutsey

EBELING: No, historically, it has been. In the 19th century, the liberals of that time did have discussions, debates, and arguments over what are the minimal legitimate functions of government. Obviously, every liberal would say that it’s obviously the protection of the honest person’s person and property, the obligation to fulfill contract. That would be considered the minimalist laissez-faire state, the phrase usually use pejoratively “the night watchman state.”

But it is true that in the 19th century, liberals did argue for a functioning free society, a self-governing society. Self-governing meant two things for that generation of liberals: the self-governing individual, who has the liberty to guide and direct and plan and pursue his own life in free association with others, and the self-governing of political participation—representative government, democracy. It was felt that, how can a person make an informed set of decisions in their social interactions with others and in the arena of participating in representative government if they don’t have a certain amount of minimal literacy? So the issue was how much education should be covered or funded by the state or the government?

Most of them were in agreement with certain minimal funding of these things, but I would say that the balanced one about this can be found in John Stuart Mill, who’s often considered a waffler on a lot of social redistributive issues. But in his Principles of Political Economy, he makes it clear that while he thinks that it is necessary and desirable for there to be a certain minimal amount of government funding for a floor base of literacy among the population, he goes out of his way to emphasize that that should in no way make the claim that government should have a monopoly on these things. That there should not be any attempt for the government to prohibit or make it financially difficult for competition in education—in fact, in competition in any of these social services that some of those liberals might have felt is necessary for the government to provide.

The gist of the argument always is not whether the government should do this, but is there a reason to think that the market could not? Now, the British had the Poor Laws going back to Queen Elizabeth I, which are basically their version of a form of a welfare state for the unemployed and the poor. The money was collected from landowners. It was distributed through the Church of England because that was an official church, the parishes, but that began to be reformed in two directions in the 19th century.

One was felt to be a system that created intergenerational dependency. Henry Fawcett, who is one of the last of the great classical economists, has a book from 1871 called Pauperism: Its Causes and Remedies. Pauperism is dependent on the state for relief. He says in there that parliamentary studies show that there was now an intergeneration of dependency. Grandparents had gotten on this; then their children got on; then the grandchildren got on. Now three generations of interdependency—with negative effects.

First of all, the more children you had, the bigger the welfare payment. Second of all, if you had children out of wedlock, your payment was even more because then you had no man around to even give any kind of support. So, Fawcett says, notice here that this now creates a perverse incentive for children of people who cannot support them. Of course, people were expected to marry back then. I know it’s a shocking idea. Back then, when people refer to wedding nights, it was actually meant to mean something. I know times change, but anyway.

He says that this also generates immorality, by which he means children out of wedlock. And he also points out a psychology that after several generations those on the Poor Law assistance now come to view it as an entitlement, as much as a legitimate right of income as if they had earned it on a job for services rendered. Now notice, what are the criticisms that have been made often of the welfare system in the United States? Break down of the family, children out of wedlock, entitlement mentality. Well, like causes bring about like effects. But anyway, these then work on, how can we reform this? And so there were made reforms to change that welfare system, but at the same time, there emerge the friendly societies.

This has gone down a memory hole, unfortunately. But this was the 19th century liberal answer to social problems of what today we call welfare. But they were formed as associations, first to give people a sort of mutual assistance for death benefits, right? The breadwinner dies, how are you going to bury them? Then it spread out to unemployment insurance—you paid in for that. Forms of health insurance. You helped to put money aside, like a savings association, for a nest egg to buy a house. Retirement pensions. All of these were voluntary associations.

By the end of the 19th century, according to these records, two-thirds to three-quarters of the entire British population were covered by various forms of these friendly societies, voluntary associations for social welfare needs and desires. You say, “Well, two-thirds. What about the poor? The poor are probably that last one-quarter.” No, if you look at the records, historians have shown the largest proportion of members were from the lowest income or social groups. Why? Because they were the ones who were on such modest income they knew the importance of taking out the pennies for their insurance to be secure from the uncertainties and the dangers of life.

So, in fact, it was used most broadly by those in the lower income brackets. Now, what ended all that? What ended that was the first welfare programs in Britain because now the government has started offering these things for free. Well, how do you compete against free when the others are based upon the subscription premiums and donations from the friendly society members? So basically, the government, by providing it for free, priced it out of the market.

But these are the debates. What about schooling? Do we need to have government schooling? If so, should it be a monopoly or should the market be allowed to function? What about welfare dependency? Does the state have to do it? Are there private avenues? In fact, William Stanley Jevons, one of the famous late 19th century economists, because he’s one of the first formulators of the marginal utility concept, was an advocate of government welfare.

What was he saying? The private charity is too small, people are too selfish, they won’t give. . . . No, if you read him, he’s saying private charity is too big. It’s making people too lazy. We have to limit private charity because of its over generosity and use the government to only give the welfare that people could minimally need, to not prevent them from wanting to work. I mean, it’s such a change in attitudes. But those are the terms of the debate.

Now, I’ll just say about education, there was an economic historian named Edwin West, E.G. West, a Canadian. He once wrote a book called Education and the State, covering this period of Britain in the late 18th and early 19th century. He pointed out that before compulsory education, public schooling, two-thirds to three-quarters of the entire British population was made literate during those decades of the Industrial Revolution through church schools, other philanthropic enterprises, for pay.

That generated what was called the penny press because so many people were now reading, they wanted newspapers. So cheap newspapers now multiplied on the market because of the huge readership. Those were the debates, but the presumption was why do you think the market wouldn’t work? Rather than the current default position, well, the government has to. What makes you think the market can?

KLUTSEY: You had mentioned earlier that we’re trending towards illiberalism or towards an anti-liberal climate. One might push back and say, “But we are freer now,” right? If you look at minorities and people with disabilities and so on, you can see that life has gotten better overall. What’s your response to that?

EBELING: Life has gotten better. The question is what has been the prime engine for this betterment? We are all living higher standards of living. For all of the criticisms and the arguments about inequality of income and, obviously, not everybody has the same income. There are people who are very rich; some are far more modest. I know it’s called a cliché, but a rising tide does lift all boats.

If you compare the poorest people in the United States today with millions—tens, if not hundreds of millions of people—in other parts of the world, or what Americans took for granted 100 years ago as prosperity, no one in America is poor. Does that mean that everybody—I mean, don’t people fall between the cracks? I’m talking a generalized statement here. Whether you’re rich, middle income, or “poor” by American standards, your standards of living are immense—the amenities, the conveniences.

I know I’m being rhetorical. Rhetorical question: Who doesn’t have a cell phone? Who doesn’t have a refrigerator? Who doesn’t have some kind of a car? Who doesn’t have a television? Who doesn’t have any of these amenities? Everybody has these things that were considered luxuries 75 years ago, nonexistent 100 years ago.

The other issues come up about civil rights, civil liberties, and various things. This is a very controversial point, and I obviously can only speak for myself because there are debates and differences of opinion among liberals on this, and by which I mean, broadly defined classical liberals. I would argue that to the extent that these improvements have come in to those who were denied such opportunities and sometimes in abusive ways in the past, it has been due to the spirit and the ideal of that older liberalism.

What do you mean a person can’t drink from the same water fountain? What do you mean that a person can’t apply to the same state university? What do you mean one person can’t marry another of their choice because there are laws against interracial marriage? What do you mean that someone can’t enter a profession or an occupation because of rules and rigidities, or can’t choose to buy a house that another is willing to sell them in a certain neighborhood? Etc., etc. All of those were abominations, and eliminating them are all part of the spirit of the older liberalism that abolished slavery, insisted upon an equality of the rule of law and the same basic rights before the law.

But the problem came in the second half of the 20th century when people became intensely concerned about many of these. There was this blending of both the older liberalism that I’m talking about and this newer socialism, in which it was expected for the state to do paternalistic things. I believe that most of these improvements would have occurred, maybe not at the same moment, maybe not helping and affecting everyone simultaneously, if the paternalistic liberalism had not been at work.

But I believe that all of these improvements would have still occurred and would have occurred in a healthier environment politically and culturally because it would have occurred on a more volunteeristic and free-associated basis and without the antagonisms and resistances and resentments of special favors for some after wanting to abolish favors for anybody—and redistributions of wealth that some people say, “I have had nothing to do with this. Why should I have to pay for it?”

I believe that all of these improvements could have occurred basically in various forms in a certain sequence without the antagonisms and controversies that the modern American liberalism has superimposed on these attempts to assure liberty and justice for all in society. I accept the fact that I’m holding a very controversial view, but I believe it is a view that is consistent with a rightly understood notion of the freedom and dignity and the ethics of human freedom.

KLUTSEY: You mentioned ahead of this recording that some of the liberals in the classical tradition didn’t write about these injustices and discriminations enough, which was a substantial mistake.

EBELING: Yes. If you read the attempt to restore the tradition of individual liberty—liberalism rightly understood in the post–World War II period, the revival of it—much of which have had authors who have been labeled as conservative, but given these waffly labels, in their essence were more classic liberal than some notion of conservative, you find them defending individual liberty. You find them defending equal rights, constitutional rights. You find them defending limited government, the freedom of free association in the marketplace.

But what has struck me, and I’m not saying I’ve read all of them from the 1940s, ‘50s and ‘60s, for example, but I’ve read quite a few I think, is there’s this huge hole in their analysis. You have the 1940s, ‘50s and ‘60s of the civil rights movement that is concerned with injustices, particularly in the formal segregation laws of the South. I mean, how can you talk about liberty in the face of that?

What strikes me is that virtually none of them—I say virtually because a few did—virtually none of them have chapters or discussions of the problems of an equality of rights for those who are being denied them in the South. Again, as I mentioned when we were talking before we started this, it’s not like I read biographies of each one of them or some biographers drawing upon their letters, so I don’t know what they wrote in their letters, but their published works to the extent that I’ve read them from that period.

I have no indication, sense, reading between the lines that for all intents and purposes any of them were racists or segregationists. But for some reason, they have this blind spot of not realizing that just as the liberals of the first half of the 19th century took up the cause of Black slavery and insisted upon ending it and having an equality of all men before the law, an equal justice before the law, and the fervency of people like William Lloyd Garrison and others—should they have not seen that the same fervency if you believe in liberty should have put you on a path to defend, advocate, insist upon the abolition of those segregation laws with the same fervency and admonition of moral justice as the anti-slavery [advocates] in the first half of the 19th century?

The fact is, is that the classical liberal/individualist, free market–oriented conservatives, they don’t do that, at least in the books. Like I said, I’ve tried to read a lot of them. That’s the literature that first influenced me when I got interested in this in my teens and 20s in the 1960s, 1970s. That was the literature then. So, I believe that the classical liberals lost an opportunity to be part of the debate of what civil rights mean. What is the role of government to assist or not to assist, to intervene or not intervene, to give favors and privileges or not to give favors and privileges in one direction or another? We, liberals, lost that opportunity, and I think that has put us partly in the dilemma that we are.

KLUTSEY: Yeah. Now as we are moving towards the end of the conversation here, there are some who are listening who are academics, public intellectuals and so on. What advice or thoughts do you have for fostering conversations towards a new liberalism, if you will, both in the classroom and beyond?

EBELING: I was influenced by a man named Leonard Read. He was the founder of the Foundation for Economic Education, FEE. Maybe many of the people listening to this remember reading a magazine called The Freeman. That was the Foundation’s magazine for many decades. Leonard Read emphasized that if you want to change the world, don’t we all? Well, if you ask yourself over all the people in the world over whom you have the most influence, who is it? Yourself.

So changing the world begins with the process of self-improvement, becoming informed about these ideas, knowledgeable about these ideas, articulate about these ideas. Now, Read said people have different pressures of their life. Some have families. They have time-consuming professions. So, each must decide, to use the language of the economist, at the margin how much they can afford and feel intensely enough to become more self-educated about the ideas and the implications of liberty. But we’re not going to change the world unless there are a sufficient number of people who take on that self-improvement responsibility.

Well, let me use an analogy. I went to an FEE seminar when I was in my 20s when it was headquartered in Irvington, New York. It was a great week. Among others lecturing that week was Henry Hazlitt, the famous free market journalist, Economics in One Lesson. But I remember only one lecture from the whole week, and it was a lecture by Leonard Read. It was a classroom, and he had the lights turned off. He had an electric candle with a dimmer switch on it. Leonard Read now went from total black darkness to turning the dimmer switch so there was this little glimmer of light from the electric candle.

He says, “Notice that in this darkness, all of our eyes are attracted to this little glimmer of light.” Then he turns the dimmer switch more and more, and he says, “Now notice that you can see me and part of the desk in front of me.” Turns it more. He says, “Now we can see people in the front row.” And then finally, he keeps turning it on, and he says, “Look, this little electric candle has practically lit up the whole room with just a few bits of darkness in the corners.”

This is what each of us can be, a light of liberty, who through self-improvement, of understanding what freedom means, appreciating why it’s important, learning to be persuasive and articulate in our corners of society, we will illuminate ourselves and attract another one to become a light of liberty and another light of liberty and another light of liberty until the forces against freedom have been pushed back to a few dark corners of the society. Now, that’s a profound imagery. At least, it has always seemed that way to me. A metaphor, if you will.

But the other thing he then said, “But how do you persuade people? Patience, respect, tolerance, and politeness.” Nobody likes to be in-your-faced. “You’re wrong. You’re a jerk. You don’t know what you’re talking about.” I certainly don’t like it. My wife gets away with it a little bit, but that’s voluntary servitude, I guess. None of us like that, right?

When? Well, there’s no silver bullet. Some people are in a conversation with relatives over a dinner table, if people still sit together over a dinner table or restaurant. A place of work, having a cup of coffee and maybe a subject comes up in a nonoffensive or pushy way. Put your two cents in. Maybe you write a letter to the editor. Today, we would talk about social media. You just spread the word this way in every corner that you have. Eventually, you reach more and more people. You think, “Oh, yeah, how does that work?” Well, can I tell a funny story that is a true story about myself, if I may?

KLUTSEY: Sure.

EBELING: I was in graduate school. I was taking those courses with Lachmann and Kirzner at NYU, but I was making some extra money teaching in New Jersey at Rutgers, the Newark campus. But I was living in Queens, New York, so I would take this, what they call the tubes, the subway, from New Jersey to lower Manhattan under the Hudson River. I would then have to change to the New York Subway system. Well, since I had to change anyway and pay a different fare, right above the station there was a little grocery store, a shop. I would stop there sometimes to get food, then go on my way home.

So, I’m at this store and I’m in the checkout counter. This is an absolutely true story. This woman is behind me on the checkout, and she’s staring at me and staring at me. Finally she says, “Aren’t you Richard Ebeling?” “Yes.” “You teach at Rutgers, don’t you?” “Yeah.” “You have ruined my marriage.” Everybody is now looking at me. I’m thinking in my head, “Help! Help!” She repeats herself. “You ruined my marriage.” And then she says, “My husband took your class at Rutgers. He pointed you out to me one day on campus. You’ve ruined my life. My husband comes home from work now, turns on the evening news, and complains about government for the rest of the evening. You have ruined my life.” True story.

Now, who was this guy? Did he sit in the front? Did he sit in the back? Did he have an A? Did he have a C? Did he ever ask a question, or was he just a wallflower? I have absolutely no idea, but it shows you never know how you affect someone who you interact with, whether one-to-one or in a classroom or a social setting or in a conversation, where another person never says anything but something that you say rattles around in their brain and it leaves an impression. So, it’s important to become knowledgeable, articulate, patient, tolerant, and polite, and to know what you’re talking about. And if enough of us do that in our own corners of life, at the end of the day, we’ll win.

I know I’m beating a dead horse, but I can’t help, okay? Imagine that it’s 1883, and you’re attending a funeral in London. All the people around the gravesite are about a half a dozen people, and most of them are family members of the deceased. Who is this guy? Nobody comes out for his funeral. This must be a nobody who’s going to be forgotten. That’s Karl Marx! So this guy, obscure guy, being buried by his family members and Friedrich Engels, who influenced at one level world politics more than Karl Marx in the 20th century. You never know who’s going to affect what. So, you never know. It just requires each of us to do what we can.

KLUTSEY: So usually, I’ve asked all our guests this closing question, and it’s about optimism or whether you’re optimistic about the future of liberalism, but from your previous response and your tone, I would imagine that your answer would be a “yes.”

EBELING: Yes, I’m not optimistic about the short run. Hayek wrote a famous essay called “The Intellectuals and Socialism” back in 1949. And he says that basically, ideas influence intergenerationally. The politics of today are the result of the intellectual currents 20 years earlier, 30 years earlier, 40 years earlier. So, current policies are a lagged response to the ideas of the past. We’re the product of all of these collectivist and interventionist and welfare-statist ideas. That’s what’s going on, whether it be Republican, Democrat, left, right that we see in our politics today.

But there’s one thing that’s clear. All of these ideas have been shown to be hollow and ineffective and often disastrous—especially in their extreme forms—disastrous to human life. Socialism in the 20th century, fascism in the 20th century, the failure of the intervention as welfare state to end all the wars against poverty and illiteracy and everything else that LBJ promised in the 1960s.

I think that while in the short run these policies will prevail, if we can influence the climate of opinion over our own time and the next couple of decades, then they can have their impact at the end of the century. Now if that seems like, “But what about me—” Do you have children? Do you have or would you hope to have grandchildren someday? Do you want their life to be better than yours, both materially and in the social environment and political environment in which they live?

I have grandkids. I would hope that their life that they live in—and their life is going to be through most of the 21st century—can be in various and sundry ways better than mine, both materially as well as the political and social environment. So, even if our own lifetime does not see many improvements, because of this idea of policy lag that I talked about, we should be doing it because we’re concerned with our children and grandchildren.

I’ll make one other point about this. Even if it was unlikely that they would have succeeded—and here I speak for myself—I can do nothing else because I believe these ideas are right. I can’t allow myself to remain silent.

KLUTSEY: On that note, thank you very, very much, Professor Ebeling. We really appreciate you taking the time to speak to us today.

EBELING: Thank you. It was my pleasure to be here. Until we meet again.

KLUTSEY: All right.

Image credit: Friedrich August von Hayek by Levan Ramishvili/Creative Commons

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