Are Austrian Economists Always Pessimists? The Case For Optimism (From An Austrian)

Updated on

The Case for Optimism by Jeff Deist, Ludwig von Mises Institute

This article is adapted from a speech delivered at the 2014 Costa Mesa Mises Circle, “Society Without the State,” held November 8, 2014.

I promised you some optimism today. Perhaps one of the most optimistic libertarians ever was Murray Rothbard, a happy intellectual warrior if ever there was one. And he was very enthusiastic about the revolution of libertarian ideas, because he understood fundamentally that liberty is the only manner of organizing society that is compatible with human nature and human action. And it was this optimism, this unshakeable belief that we’re right and the statists are wrong, that drove him to produce a staggering body of work in defense of personal liberty. Now let me stress that Rothbard, despite his reputation as an uncompromising intellectual, saw his efforts as pragmatic, not utopian. He understood quite clearly that utopianism was the hallmark of the state’s intellectual champions, not the state’s detractors. He understood that utopianism and statism, not liberty, produced the great monsters and the great wars of the twentieth century.

Most of all, he understood that the true utopians are the central planners who believe they can overcome human nature and steer human actors like cattle. To quote Murray: “The man who puts all the guns and all the decision-making power into the hands of the central government and then says, ‘Limit yourself’; it is he who is truly the impractical utopian.” In Rothbard’s eyes a libertarian world would be better, not perfect. So while our revolution is indeed intellectual, it is also optimistic and pragmatic. We should talk about liberty in terms of first principles, and how those principles make for a better society precisely because they accord with the innate human desire for liberty. Let the statists explain their grand schemes, while we offer a realistic vision of a world organized around civil society and markets.

Now, all of us who are liberty-minded have heard at least some version of the “unrealistic” accusation, “Oh, libertarianism would be great but it’s unrealistic,” they say. It’s one thing to talk about anarcho-capitalism in a dorm room discussion or philosophy lecture, but such a society is too impractical and idealistic for the real world. States have existed for as long as human societies, you’ll never get rid of them. Some might even go so far as to claim that a market exists for government “services,” seeing how states seem to keep cropping up in human history.

But let’s examine this. If you believe the state is harmful rather than benevolent; if you believe that the state threatens individual rights and property rights, rather than protects them; if you believe that the state decreases our chances for peace and prosperity; if you believe, in sum, that the state is an overwhelming force for ill in our society, a force that makes all of us far worse off, why in the world is it unrealistic to work toward its elimination?

Notice that the charge of being unrealistic, impractical, or overly idealistic is never applied to medicine or crime prevention. Nobody says to the cancer researcher, “you should be more realistic, cancer and infectious disease will always exist. Why not just work on making the common cold a bit less severe?” Nobody says to the criminal investigator, “gee, organized crime and violence are just part of human nature, it’s useless to try to prevent them. Maybe you should just focus on reducing bike thefts.”

So why should we be apologetic or timid or less than fully optimistic in our fight against the state? We should not. Like the cancer researcher, like the crime fighter, we should be bold, we should be optimistic, and we should be vigorous in our opposition to government. We should be every bit as certain as Murray Rothbard was in the eventual success of our mission.

I’m Optimistic Because the State Is Fiscally Unsustainable

Rest assured we will win. The state, at least as currently constituted in the US and most western nations, is dying under the weight of its sheer fiscal unsustainability.

I’m curious as to whether some of you have heard of Herbert Stein. You may know Ben Stein from “Win Ben Stein’s Money” and Ferris Bueller’s Day Off. Herbert Stein was his dad. Herbert Stein was an economist, and chairman of the Council of Economic Advisors, a kind of cheerleading squad, for presidents Richard Nixon and Gerald Ford. He’s not my kind of economist, and was only faintly free market, but he was still an economist. And apparently an interesting man: in his later years he briefly wrote an anonymous “Dear Prudence” advice column for Slate and print papers.

Herbert Stein came up with his own law, known as Herbert Stein’s law. It goes like this: “If something cannot go on forever, it will stop.” It sounds simple. He used it to describe economic trends like balance of payments deficits. He meant that no program was needed to stop something that would stop by itself, something that could not be sustained. And clearly, the US federal government, the largest and most powerful government that ever existed, cannot be sustained. Not in the fiscal sense. No way, no how.

We’re not talking simply about the $17 trillion in Treasury bond debt the federal government owes its creditors. We’re talking about unsustainability on a much larger level. Economist Laurence Kotlikoff uses a concept known as the fiscal gap, which is much more accurate, and much more depressing, than tracking Treasury debt. The fiscal gap basically measures the present value of future tax revenues against the present value of future government obligations. So not just Treasury bond debt, but also Social Security, Medicare, welfare entitlements, etc. And Kotlikoff came up with a fiscal gap of more than $200 TRILLION. Let me repeat that: $200 TRILLION. Now we don’t have time today to discuss the details of the federal government’s fiscal situation, and how this fiscal gap came to be. But rest assured the reality is wildly worse than virtually anyone in government or the mainstream press will admit.

Understand that there is zero political will in Washington to cut the big ticket items like Social Security, Medicare, welfare, and defense. Zero. Remember the howls during the sequestration debates? Witness the outrage when Congress merely considers cuts in the rate of growth of certain programs! There is zero political will in Washington for huge tax increases, which wouldn’t help anyway. Politics will not solve this problem. Our federal government’s fiscal reality cannot be fixed, politically or economically. We cannot grow our way out of it. The numbers behind Kotlikoff’s fiscal gap simply cannot be overcome, they can only be put off — and made worse — by endless monetary expansion.

It may seem almost funny, but this reality should give us cause for optimism. We know the current arrangement cannot continue, so we — as liberty minded people — have a tremendous opportunity to recognize this and begin building the future. We don’t have to labor under the delusion that everything will continue as usual, that the system will work if only we reform it or tinker with it or elect the right people. We can be honest and recognize that democracy doesn’t work, it can’t work, and the sooner it is exposed as a failure the better. We should celebrate this understanding, because no progress toward liberty can occur until we understand reality and understand the problem at hand.

I’m Optimistic Because the State Is Intellectually Unsustainable

But there is a deeper and more satisfying reason for us to be optimistic. The state is not only fiscally unsustainable, it’s intellectually unsustainable as well. We should be optimistic because we’re living at the beginning of what Hans-Hermann Hoppe calls a “bottom-up” revolution. Bottom-up because it starts at the individual and hyper-local level. Bottom-up because it relies on radical decentralization and political secession. Bottom-up because it bypasses politics and traditional power structures. Bottom-up because it bypasses state schools, state intellectuals, and state media.

Governments, and the political classes who run them, are facing a nonviolent revolution of ideas that was scarcely imaginable just twenty years ago. And this revolution will strike at the heart of these states’ only true asset: their legitimacy in the eyes of those they would govern. The bottom-up revolution is based on informed individuals who increasingly don’t need elites, political, academic, or scientific, to run their lives. It is based on the recognition that national and global governance schemes have failed to solve, or even address, huge structural problems like hunger, medical care, energy, and economic development. It is based on radical decentralization, political and otherwise, because the vast diversity of individual interests demands an end to top-down government edicts and bullying by 51 percent of the electorate.

This can happen — and is happening — without even a tacit acceptance or understanding of liberty among the majority of people necessarily. They simply see with their own eyes that the state doesn’t work, so naturally they seek another way. I think this is especially true of millennials, who are not particularly libertarian but yet still deeply distrustful of government.

Technology plays a huge role in this bottom-up revolution. Technology has given us the ability to find fellow travelers anywhere in the world, and to compare notes on what our would-be rulers are doing. It has taken the monopoly over the marketplace of ideas away from traditional media outlets. It has enormously lowered the cost of learning and acquiring knowledge. It has literally brought the vast store of human knowledge to our fingertips! Governments will have an awfully hard time keeping all this information, not to mention the ideas of liberty, away from people who are increasingly connected and hungry for a better life.

The toothpaste is out of the tube, so to speak. To be absolutely clear: technology is not an ideology. And technology is used by the state, just as it is used against the state. Imagine J. Edgar Hoover with today’s NSA apparatus available to him! And technology can never change the fundamental choice before us: liberty or statism. There is no “third way.” Either humans deal with one another voluntarily, through civil society and markets, or they deal with each other using compulsion, through crime or government. Economic means or political means, the age-old choice remains the same.

But the free and virtually instantaneous flow of information has radically transformed the world. Governments like to talk about democracy. Well, they’re about to get it good and hard. Real democracy, where people vote with their feet, their wallets, and their mobile devices, across borders.

I’m optimistic that this global interconnectedness will pose a huge threat to the viability of many nation-states, and to their political ruling classes as a result. People are now connected by ideas, by interests, by shared values, by commerce and not only by geography and nationality. In fact, geography and nationality are shrinking in importance every day.

Perhaps the greatest legacy of the online revolution will be the demise of state education systems. Teacher unions, lousy and compulsory schools, huge administrative bureaucracies, outlandish pensions, and crushing student loan debt clearly are unsustainable. Government schools clearly cost too much and teach too little of importance, like classical languages, rigorous math and science, skilled trades, and money management. What they do teach is often harmful and statist — the whole panoply of victim’s studies.

Liberty is not possible in a society filled with ill-educated, state-indoctrinated people. So the need for separation of education and state has never been greater, and it’s at our doorstep. The online education revolution, still in its infancy, will make learning cheaper, easier, more efficient, and — most importantly — accountable. Market-based education will produce actual results — the antithesis of government education. We should all be happy to witness the state’s education model crumbling.

All of these happy developments will take place at their own pace, sometimes quickly — as with the fall of the former Soviet Union — and sometimes slowly. There is great cause for optimism that this bottom-up revolution can take place inexorably, and nonviolently. There are no guarantees, of course, and political interests can be expected to react violently when threatened. But many of these seismic shifts are already underway, and one gets the sense that power is flowing away from the political classes, slowly but surely. States and statists are losing their greatest asset, legitimacy.

None of this withering away of state legitimacy should surprise us. Just as Mises conclusively explained the impossibility of socialism as an economic system, the great Spanish economist Jesús Huerta de Soto and others make the case for the impossibility of statism as a social, legal, and political system. As Huerta de Soto explains, it simply is not possible intellectually to defend a coercive central state with a monopoly on aggression. Such a state cannot achieve its coordination goals, just like central economic planners cannot know the price to place on a bushel of wheat or the number of automobiles to produce. The huge volume of information an all-encompassing state would need is too dispersed, too tacit, too quickly changing, and too distorted when commanded by the state rather than received by markets.

It’s not liberty that’s impossible ladies and gentlemen, it’s statism.


Personally, I don’t care if you call yourself a conservative, a constitutionalist, a classical liberal, a libertarian, a minarchist, an anarcho-capitalist, a progressive or whatever — this message is for you. All that matters is you recognize and agree that the state is out of control, even if just in one area, like drug laws or foreign policy — we can work out the details later! We are so far from what anyone in this room envisions as a free society that many of these labels and differences seem petty, to say the least.

Murray Rothbard used a freedom train metaphor that I think applies quite well today; he actually borrowed it from the late Gene Burns, who was a phenomenal talk radio host for years in San Francisco.

The freedom train metaphor for building a movement is very simple: if you want more freedom, join us. Get on the train. You can get off whenever you like. Maybe you favor 60 percent of our ideas, or 80 percent, or 90 percent, or whatever. Just join us and go as far as you like, get off when you like. As I said earlier, we are so far from what anyone in this room considers a free society that we hardly should concern ourselves about it now. Let’s just get the train moving in the right direction! I really like this metaphor; it sure beats endlessly putting ourselves in narrow boxes.

So in closing let me encourage you to embrace an optimistic strategy for liberty. Understand that we simply don’t have to convince everyone, or even a majority of people, that liberty is better. We certainly don’t have to convince our opponents. Today, just as in colonial America during our revolution, most people are fence sitters.

As talk radio host Herman Cain recently said to a caller, we can only save those who would be saved. Far too often we let the statists frame the debate. Far too often liberty-minded people are defined by what we oppose — government — rather than by what we propose: liberty.

So propose liberty, and make the case for optimism. After all, despite the state and its depredations we still lead magnificent lives compared to virtually every human who ever walked the earth — kings and queens included. If we let the state make us unhappy or pessimistic about our future, we will have failed not only our children and grandchildren, but our ancestors as well.

Thank you.

Leave a Comment