 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 my colleague, friend, and former professor, Chris Coyne. Chris Coyne is a professor of economics and the director of graduate studies at George Mason University. He is also the associate director of the F.A. Hayek program for advanced study in philosophy, politics, and economics at the Mercatus Center. His most recent book is Doing Bad by Doing Good, Why Humanitarian Action Fails. Chris is here to talk with me a little bit about Austrian economics today. So thank you for coming in, Chris. Oh, thank you for having me. It's great to be here. So what makes Austrian economics unique relative to other toolkits that economists and other social scientists use to try to understand markets in exchange? Well, there's a lot that's distinct about the Austrian school. It's hard to do justice to it in a short answer. Let me highlight one thing, and then we can come back and perhaps discuss some others as well. And really, one of the defining characteristics of the Austrian tradition is the idea that at its core is starting with a basic axiom or principle, which is that people act purposefully. That is that people have some felt uneasiness and then take action in a purposeful manner to alleviate that uneasiness. And then from there, from that basic proposition, those working in the Austrian tradition then derive the core foundations of economic theory. What Hayek referred to as the logic of choice. That theory then, that logic of choice, serves as a set of eyeglasses that then we can use to analyze the empirical world. By that, I mean history or the past, as well as the present contemporary policy. And so this differs greatly from the way that other economists who come from a variety of other traditions start and think about economics, which is they make a set of assumptions. Oftentimes, they're extremely unrealistic or limiting assumptions. They're focused on measurement and testing certain propositions and hypotheses. And the Austrians at their core reject that. And it's more than a methodological point, actually, because once you start thinking in these terms, not only do you have a more realistic understanding of your unit of study, which is human behavior, but it opens up a whole array of possibilities. And let me just highlight a few of those. So if you say, OK, we have this core theory of logic, this logic of choice, and now we need to apply it to the world, so how do we apply it to the world? Well, a key part of applying this to the world is understanding the world. And part of understanding the world, of course, is to focus on how the human actors, which are your subject of study, perceive the world. So when Hayek talked about the facts of the social sciences or how people view and perceive the world, really what he was tying it back to was this idea of subjectivism. This idea that when we talk about any element of the world, it doesn't have some objective meaning outside of those people who are embedded in that context and how they perceive it and understand it. And so, for instance, people might say, OK, there's a relationship between a child and parents, and they might think in their head that's an objective relationship. Well, it's only objective to the extent that the parents and the children and other people surrounding them actually believe that's the relationship in the terminology, and those terms have certain meanings. And so while economics, the logic of choice provides a set of glasses, that is a general conceptual framework for thinking about the world, actually applying it to different aspects is the task of the economist and where things start to get interesting. We have to start thinking about, for instance, different institutional arrangements, both informal things like belief systems as well as formal institutional arrangements and how people perceive those and how they respond to the perceived costs and benefits that are generated by those institutional arrangements. And so a whole host of interesting questions and topics and areas of study emerge when you start to think this way. A second defining characteristic of the Austrian school that I would emphasize is the focus on market process theory. And so the idea of market process theory is that you have individual economic actors, again, who are each pursuing their own ends, diverse ends. They are plagued with imperfections and with limited knowledge and with ignorance. And instead of viewing that as a negative, as a market failure, if you will, as something that needs to be corrected by some exogenous third party, typically government, is the way that many economists view it, those in the market process traditions view markets as solving those issues. That is the thing that drives the market processes precisely are imperfections, precisely are ignorance because people's ignorance yesterday generates profit opportunities for entrepreneurs to act today to resolve those issues and to come up with new and better ways of doing things. If you make assumptions, like standard assumptions of perfect competition, for instance, where you say things like, OK, let's assume people are perfectly informed and that there's a homogeneous product and that there are an infinitely large number of firms, such that firms are price takers and that no firm can influence price and so on down the line, you can gain some analytic tractability. That is, you can have a clean and neat model which generates some predictions. But what then you need to ask yourself is how realistic is that for understanding the problem situation I want to understand as an economist, which is I look out the window and I want to understand the world. And of course, no real world market is going to match those conditions because it's impossible. And so what you're doing in some sense is setting up real world markets for failure. And no real world market can ever satisfy those conditions, so every market's going to fail relative to that, which of course then leads to market failure theory. An alternative way of modeling this or to view it is that those imperfections, those so-called market failures are actually profit opportunities. That is, if a economic actor who is alert to profit opportunities, which all actors are to varying degrees, they can see that rearranging resources or coming up with new organizational forms will generate a profit. And in doing so overcome many of the supposed market failures. What is it about Austrian economics that makes you want to draw out these particular ideas to apply them to the contemporary questions? And how do you do that? Well, let me first say that many of, if not all, of the ideas that can be traced only back to Menger are both important as an episode in history of thought. That is the marginal revolution and how economics developed. But they are of crucial importance for understanding the world today. It's not just understanding the world, but through understanding the world, informing our understanding of what we can and can to improve the world. Of course, one of the themes that Hayek touched upon throughout his career was that whether well-intentioned or not, efforts to improve the world according to the desires of a small group of individuals, often, if not always, has negative unintended consequences, which can in some cases, as like central planning, can have brutal, if not disastrous, effects on the lives of ordinary citizens. I mean ordinary just as the average citizen. So why does this relate today? Well, it's true that in most of the world, not all of it, in most of the world, the debate is no longer over capitalism versus socialism as a means of organizing economic activity. But if you look around the world today, you see things like a third way. In other words, most economic systems are organized with some mix of markets and central planning. They are mixed through some kind of arrangement of public and private partnerships, which almost mirrors the way fascist economies were set up, where you have private means, ownership in the means of production, but you have government kind of guiding how private firms act and providing them with a whole variety of subsidies and other kind of favorable treatment. But in return, having a say over what they produce, how they produce, and so on, you have massive regulations on a whole host of activities that private individuals are able to undertake. And so all of these things are important and crucial for understanding economic activity today and for understanding what makes economies dynamic and what threatens that dynamism over time as well. But then when you look internationally, when you look how nation states, that is governments that rule over a geographic area, how they tend to view, especially when we're talking about the developed world, first world governments, how they tend to treat and view governments and other societies, you see that central planning writ large is alive and well. If you look at development economics, say modern development economics, so I'm talking development economics in the post World War II period, it is actually built on the foundations of central economic planning. It is built on, came out of socialism, it came out of the economists who were working on socialism who called themselves socialists. That is well-intentioned and enlightened individuals, economists who partner with well-intentioned bureaucrats can centrally plan development in entire societies. Well, that is just a mirror of what the socialists were trying to do back in the early 1900s. Then you come to military intervention, which of course is now fused together with development. That is, it's very hard to find situations where military intervention takes place, especially on behalf of the United States, which of course is the dominant military force in the world, where development is not directly linked in with that. And so what happens then is now you really have central planning writ large, because you have not just development in terms of monetary resources flowing to build and to invest in certain types of capital or in certain types of institutions, but you have military forces going in and contributing to, for instance, regime change so that you wipe out the previous regime. And the idea is that, again, experts can somehow design a better society and implement that society according to their wishes. And that's really been the focus of my research, which is to what extent can external policy makers, and I use that in the broadest sense to mean both politicians, but also all members of government, so members of the military and so on, to what extent can they actually go into other societies and reshape and rebuild and change them as they see fit? And my argument, building off of Mises and Hayek, so I just view this as an extension of their, what they were trying to argue earlier on is that more often than not, these efforts are not just going to fail, but to impose significant harms on the very people they purport to help and support.