On Molinari, Hayek, and Rationalism

   

The role of rationalism in Molinari’s social theory cannot be described, as Matt seems to, as “locking [himself] away in [his] closet and thinking about it hard enough.” This would be a caricature that ignores Molinari’s intense activity in the real world as an economic journalist, activist for workers’ rights and free trade, observer of socialist clubs, participant in revolution, and travel writer. In a broader context, it is a misunderstanding of the academic and publishing agenda of the entire group of political economists associated with the Guillaumin publishing firm, which from the early 1840s published a steady stream of books, dictionaries, and collections of economic data about all the major industries and national economies of Europe.[1] At the heart of the classical-liberal political economy movement was an empirical program to observe the economic world as it currently existed, to try to understand it using the latest economic theory, and to revise and extend that theory in the light of this new empirical knowledge; in other words they had an interest in both “Theorie und Praxis.” As Robert Leroux has observed, they considered what they were doing to be a “science” that was rational, testable, and subject to constant revision.[2] What made them escape the trap of “scientism” was their belief that they were dealing with individual economic actors who could think and choose, and who would act on these choices if the state left them free to do so. They were not the plastic pawns that socialists like Charles Fourier thought could be molded into “phalanxes” and other artificial social and economic structures.

Beneath the scaffolding of economic data that they so carefully collected and published was a well-developed theory of individual liberty based upon natural-rights theory, a theory of politics based upon constitutional limited government and broadly based voting, a social theory of class conflict and societal evolution through stages, and an economic theory of free markets and laissez faire. Like the good empiricists they were, the political economists thought they could observe patterns and regularities in human behavior that they called “economic laws,” which were analogous to the laws observed in the physical, or hard, sciences, hence the subtitle and opening quotation in Molinari’s book Les Soirées:

Like the good heirs of the French Enlightenment that they also were, the political economists believed that Reason provided a gateway into understanding the nature of the human condition, what principles made it possible for human beings to live peacefully and productively in society, and why living peacefully and productively were important things to strive for. Thus their belief in things like the benefits of free trade and limited government intervention in the economy were supported by two ways of thinking that mutually reinforced each other -- the empirical economic reality that surrounded them and the logic of human action that they could think and reason about by means of internal reflection. That each way of thinking seemed to support and reinforce the other in grounding the principle of individual liberty on the one hand and free-market societies on the other gave the political economists the confidence to agitate for radical reform.

Bastiat went further than his colleagues in developing an Austrian-like theory of human action in his use of thought experiments involving Robinson Crusoe and Friday; through these thought experiments he would explore, firstly, the possible choices Crusoe faced based upon the resources he had at hand, the time available to him, his skills, his time preferences, and so on.[3] Then Bastiat introduced a second player into the game, Friday, and explored how a second person opened up the possibility of the division of labor and exchange. This procedure broke dramatically with traditional classical political economy, which was concerned with the creation of “wealth” and “exchange” (Richard Whately explicitly rejected the use of Crusoe to explain economic action because as a single individual he did not engage in exchange, which for Whately defined economics. Hence what Crusoe did was not “economics”).[4] With these thought experiments (which he was the first to use in a serious way), Bastiat came closest to Matt’s picture of the rationalist locking himself away in a room and spinning economic ideas out of his head. Yet one should also keep in mind that Bastiat was no Luftmensch, since his command of masses of economic data was very impressive, as his political colleagues recognized when they appointed him vice president of the Finance Committee in the revolutionary government in 1848. In all his writings, especially the Economic Sophisms, which were written between 1845 and 1848, Bastiat constantly draws upon economic data to support his case for economic liberty, and I have only found one occurrence where I was not able to confirm his accuracy. (It concerned state subsidies for the colonization of Algeria.) I think Bastiat exemplifies the mid-19th-century French liberal combination of reasoning from first principles, confirming these principles through empirical observation, and then engaging in “reasoned action” in order to bring about liberal reforms. His young friend and colleague Molinari was not far behind him in this.

The area in which the reasoning of the economists fell down most badly was the Malthusian theory of population growth. The data available to Malthus were patchy, and his predictions of the future growth of both population and food production may have seemed plausible in the 1790s. But they were exposed as wrong as the 19th-century explosion of industrial development progressed. Yet Molinari remained an ardent Malthusian throughout his life, publishing works on Malthus as late as the 1880s, when he was the editor of the Journal des Économistes and was becoming increasing pessimistic about the prospects for liberty given the rise of socialist parties in the Third Republic, the resurgence of support for protectionist policies, and the dismemberment of Africa by the European colonial powers. Bastiat, on the other hand, as early as the late 1840s wrote some revisionist essays on Malthus’ theory, ultimately rejecting it as false on theoretical grounds because it ignored the positive aspects of his theory of human capital and the extension of the division of labor made possible by a larger population, and on empirical grounds (which were not yet fully apparent to observers in 1850 but were predictable) as the benefits of international free trade brought grain and meat producers in Russia, Australia, and the USA into the world market, thus drastically lowering the cost of food.

Finally, I would like to pose a few questions to the Hayekian opponent of rationalism: 

In the mid- and late-1840s Molinari and Bastiat actively sought to reform the French state by agitating for the right of workers to form unions, opposing the policy of tariffs and subsidies for French industry, opposing slavery, and opposing French military and colonial policy. In none of these areas were they successful. When revolution broke out in February 1848 they seized the chance offered to influence the direction the revolution might go in. They engaged in street journalism, publishing, electoral politics, and intellectual activities, such as attending the debating societies that sprang up once the censorship laws had broken down. Needless to say, they were not successful, being outnumbered on the left by the socialists and on the right by the Conservatives and the Bonapartists. What would Hayek have done if he had been living at this time? What would Hayek have done if he were a young man on the streets of any of the Eastern Bloc countries in 1990-91? Would he have been handing out free trade articles on the street like Molinari and Bastiat did in 1848?

Bastiat died at the end of 1850, and Molinari left France to continue his academic activities in Belgium during the 1850s and 1860s. His subsequent career as a journalist, author, and editor shows that events pushed him into adopting a long-term Hayekian strategy of intellectual, not political, agitation for the rest of his life. Perhaps in this case, Hayek does in fact have the Ultima verba.

[1] Articles with tables of economic and statistical data were a feature of the main periodicals of the Guillaumin press, the Journal des Économistes (1841-) and the Annuaire de l'économie politique et de la statistique (1844-). See also the data included in the hundreds of articles in the Dictionnaire de l’économie politique (1852-53). Almost every book published by Guillaumin also contained economic data on a huge range of topics.

[2] Robert Leroux, Chap. 4 “Salvation through Science” in Political Economy and Liberalism in France: The Contributions of Frédéric Bastiat (London: Routledge, 2011).

[3] References to Robinson Crusoe can be found in Economic Sophisms (ES) 3 14 (forthcoming), “Making a Mountain out of a Mole Hill” (c. 1847), and ES2 14, “Something Else” (March 21, 1847) </title/276/23402>. In addition, there is a discussion of how a negotiation might have taken place between Robinson and Friday about exchanging game and fish in “Property and Plunder” (July 1848), Collected Works, vol. 2, p. 155 </title/2450/231341>; and there are 16 references to “Robinson” in the Economic Harmonies, especially in Chapter 4 “Exchange” </title/79/35504>.

[4] Richard Whately, Introductory Lectures on Political Economy (1831), Lecture I. “A man, for instance, in a desert island, like Alex. Selkirke, or the personage his adventures are supposed to have suggested, Robinson Crusoe, is in a situation of which Political-Economy takes no cognizance,” </title/1377/35830/1403616>.