 Hello, my name is Jamie Lemke. I'm a senior research fellow and associate director of academic and student programs at the Mercatus Center at George Mason University. I'm here with Pete Betke, professor of economics and philosophy at George Mason University, also the director of the FA Hayek program for advanced study in philosophy, politics, and economics, and vice president for research at the Mercatus Center at George Mason University. His most recent book is Living Economics Yesterday, Today and Tomorrow. And we're here right now to have a conversation about the inspirations and influences of the FA Hayek program. So you and your research and a lot of the people you work with, they draw from Austrian economics, from Virginia political economy and public choice, and also from Bloomington institutional analysis, which is also heavily rooted in public choice. Why these three? Why do you pick these three as the foundation? So there's two different ways to tackle an answer to that question. The first one is to recognize a point that Hayek made, which the other thinkers also share in common. Hayek argued in an essay in the 1950s that nobody can be as dangerous as an economist who only knows economics. I like to add a caveat to that, which is that nobody is as dangerous an economist who's only an economist, except perhaps a moral philosopher who knows no economics at all. They can do a hell of a lot of damage. But this idea of the interdisciplinary nature that economics is always, as the study of economics is embedded in philosophy and in politics. Buchanan, when he started the Thomas Jefferson Center for Studies in Political Economy, which eventually became the public choice center and then the foundation of public choice, he argues that the task of political economists is not limited to the study of the technical principles of economics that are necessary in order to study comparative institutional arrangements. That is key. But he says the political economist then takes the next step as well and examines the underlying philosophical positions of people and also the philosophical positions that are implied in all statements about how to have the appropriate role of government or improvements in the role of government. And Vincent Ostrom as well sort of talked about this relationship between philosophy, politics, economics, and what is the underlying structure to make the self-governing democratic social orders. But what was common among all of those various people was an approach set in motion by Karl Manger, that is methodological individualism. That the focus is on the individual and the decisions that the individual is not a maximizing agent per se. As one caricature has it, you know, Veblen used to say that in standard economics the utility maximizer is like a lightning calculator of pleasure and pain. But Veblen himself understood that Manger didn't make that same merit. And that was what unites the Bloomington School, the public choice school, and the Austrian school in this regard, it's all versions of methodological individualist social science. The second one is a focus on processes of adjustment, continual processes of adjustment because all three of those schools made it their core to deny the assumptions of omniscience and the assumptions of benevolence in terms of economic actors and public actors. So they wanted to look and see in which the institutional environment impacts the way that these individuals make their choices and interact with one another. So we had methodological individualism. We have that methodological individualist not imbued with cognitive capacities that minimize differences in institutional frames. But instead, that institutional frames are important for dictating the way that individuals, so this is what Vernon Smith later on referred to as what he called ecological rationality. It's an idea he gets from the cognitive theorist, Gerd Giger-Inzer, and Giger-Inzer builds on Simon, Herbert Simon, and he refers to the Simon scissors, which is that human decision making is a function of our cognitive capacity and our circumstances within which our choice. And so it's that, so that's the way that we translate that into this framework is that it's institutions, then what that does is it creates the context within which the individual makes a choice and that contextual nature of our choices influences the type of incentives that we face and the type of information that we process in making our choices. So context matters. You'll hear that in Buchanan and Tellich, you'll hear that in Lin and Vincent, and its origin is in Mises and Hayek. And so, you know, so Mises as early as 1920 is in the socialism, the economic calculation of socials commonwealth is arguing this context matters point. And of course, it becomes famous in Hayek's use of knowledge in society when he says that, you know, it's the knowledge of time and place, right? Which is this context. So one way to think about what happened is, so Mises and Hayek set this foundation in the 1930s, 40s, and 50s, and then in the 50s, and 60s, and 70s, the Ostroms and in the Bloomington School and the Buchanan and Tellich in the Virginia School sort of took those ideas and developed them in political science, all right? And in their own sort of respective ways. And so what we're trying to do again is reintegrate these projects in our own work here at George Mason. And that's, you know, that's kind of what we're doing. So another way to think about this is that a lot of social science has this invisible hand proposition, okay? And then you have, or a visible hand theorem about the self-correcting mechanisms of social order of the market. And then a lot of economists work from a postulate of a rational choice postulate. So we have this rational choice postulate. And what you do is you, how do I derive the question intellectually is how do I derive the invisible hand theorem from the rational choice postulate? And most standard ways to do that, to derive that theorem, is to imbue in the rational choosers very strong cognitive capabilities. And to put them in an environment which is very frictionless, right? So you have a frictionless environment with cognitively superhuman agents. And then what happens is the rational chooser postulate falls into the invisible hand theorem almost as a matter of like just biblain and scribbling. Boom, there you are. And then you can critique the world by saying that if I can show that agents are less than perfectly rational or the environment is less than perfectly frictionless, then I'm not gonna get the invisible hand theorem and therefore I need the government to step in and do things. Well, what we do and what the various schools of thought, the Austrians, the Bloomington School and the Virginia School did was they didn't permit that kind of step. They wanted to study the invisible hand theorem and invisible hand processes in the social order. They wanted to start from a methodological individual's point of view or a rational choice modeler, but they didn't wanna imbue cognitive capabilities of a superhuman. They wanna deal with men sometimes smart, sometimes stupid, sometimes good, often times bad. What are the incentives that they face? And then what they say is they derive the invisible hand theorem from the rational choice postulate via institutional analysis. So the one thing that's common again among all three of them is a focus on what Buchanan would call later the rules level of analysis. So the nature of the game is always a function of the rules that we're following. And so this is the informal and formal rules and their enforcement are gonna dictate whether or not you're gonna be able to derive the invisible hand theorem from the rational choice. So if there's a problem in that you find it in the rules. So Buchanan summarized this in a very nice little way. He said same players, different rules produce different politics, right? So the focus isn't on different players. We assume some thing about the same in the players what they call the assumption of behavioral symmetry. But then all the explanatory focus is on the institutions. So you have behavioral symmetry but then you vary the institutions and then you get different outcomes because of the institution. So you focus on that. So again in our research, our research empirical element is to dig deep into the institutional environment because that's where the explanation for different levels of performance is gonna be.