Rescuing Menger from the Austrians

I have written before of Carl Menger’s Lectures to Crown Prince Rudolf of Austria (trans. Monika Streissler and David F. Good; Aldershot, 1994).

That book shows that the founder of Austrian economics was worlds apart from the modern cult of anarcho-capitalism.

In chapter VII of Menger’s book, we find him endorsing the following:

(1) public works constructed by the state such as roads, railways and canals:

“Important roads, railways and canals that improve the general well-being by improving traffic and communication are special examples of this kind of enterprise and lasting evidence of the concern of the state for the well-being of its parts and thereby its own power; at the same time, they are/constitute major prerequisites for the prosperity of a modern state.” (Menger 1994: 121).

(2) government established agricultural and vocational training institutions (Menger 1994: 123).

(3) government subsidies to certain sectors:

“The state may also well support the various sectors of the national economy by actual subsidies, of course only when it is useful to the citizens but surpasses their individual means: strictly speaking, such subsidies are intended to become a useful public good, owned by the community as a whole.

This will occur, for example, if the state wants to promote agriculture and especially cattle breeding by purchasing prime quality breeding animals whose price exceeds most people's means; by becoming public property, the animals best serve their purpose, to serve all alike.” (Menger 1994: 123).

(4) state intervention to stop clearing of forests on private property in the mountains of Austria when this clearing had serious and bad effects on agriculture, such as soil erosion and floods on the plains:

“The Southern Tyrol, Istria, Dalmatia are sad object lessons of the blind greed of individuals and thoughtless negligence of former governments”. (Menger 1994: 131).

(5) government intervention to stop child labour (Menger 1994: 129).

All in all, the founder of Austrian economics appears to have accepted the existence of the state and a number of interventions, perhaps on utilitarian grounds.

The progressive liberalism and Fabian socialist sympathies of later Austrians like Eugen von Philippovich, Friedrich von Wieser and Richard von Strigl were not deviations from Menger’s ideas on the state, but a development of them.

BIBLIOGRAPHY

Menger, Carl. 1994. Carl Menger’s Lectures to Crown Prince Rudolf of Austria (ed. by Erich W. Streissler and Monika Streissler; trans. Monika Streissler and David F. Good), E. Elgar, Aldershot.

A Question for Austrians: Who Wrote This?

Who wrote this passage?:

“Government thus has to intervene in economic life for the benefit of all not only to redress grievances, but also to establish enterprises that promote economic efforts but, because of their size, are beyond the means of individuals and even private corporations. These are not paternalistic measures to restrain the citizens’ activities; on the contrary, they furnish the means for promoting such activities; furthermore, they are of some importance for those great ends of the whole state that make it appear civilized and cultured.

Important roads, railways and canals that improve the general well-being by improving traffic and communication are special examples of this kind of enterprise and lasting evidence of the concern of the state for the well-being of its parts and thereby its own power; at the same time, they are/constitute major prerequisites for the prosperity of a modern state.

The building of schools, too, is a suitable field for government to prove its concern with the success of its citizens’ economic efforts.”

Was it some evil statist?

Well, no, it was none other than Carl Menger, the founder of Austrian economics, in his Lectures to Crown Prince Rudolf of Austria, p. 121.

A hat tip to Isaac Marmolejo. Please see his original post here:

Isaac Marmolejo, “A Passage by Carl Menger on the State,” The Radical Subjectivist, August 3, 2012.

This confirms for me how far some of early Austrian school were from the modern extremism of Rothbardian anarcho-capitalism.

In fact, some of the early Austrians such as Eugen von Philippovich, Friedrich von Wieser and Richard von Strigl had progressive liberal and even Fabian socialist sympathies, as I have noted before in this post:

“Why are There No Austrian Socialists?,” June 3, 2011.

BIBLIOGRAPHY

Menger, Carl. 1994. Carl Menger’s Lectures to Crown Prince Rudolf of Austria (ed. by Erich W. Streissler and Monika Streissler; trans. Monika Streissler and David F. Good), E. Elgar, Aldershot.

State Intervention and the Computer

There is a perennial debate about the history of the computer, and the extent to private enterprise or government intervention was the driving force behind its development. Of course, both were involved, but the influence of government was very important and most probably the major factor:

“Transistors were developed in a private laboratory, Bell Labs, but it was a monopoly. There was no market and there was no consumer choice. Since it was a government-supported monopoly, they could charge monopoly prices, which is in effect a tax. As long as they had the monopoly, Bell Labs was a very good lab. They did all sorts of things at public expense. As soon as it was deregulated, Bell Labs went down the tubes.

Quite apart from that, Bell Labs was using state-generated wartime technology. Furthermore, they had nobody to sell the transistors to. For about ten years, the only market for high-quality transistors was the government, just like computers. During that period they were able to develop the technology, the scale, the marketing skills so that finally they could break into the market system.” (Barsamian and Chomsky 2001: 18).

In addition, the development of modern computers also occurred in Japan, where this happened by direct Japanese government industrial policy through their Ministry of International Trade and Industry (MITI):

“The real success of Japanese producers, American industry sources conclude, came only after the mid-1970s. [The Ministry of International Trade and Industry] targeted the computer and telecommunications markets as central to Japan’s future. Establishing a national goal to lead in those industries, the government offered substantial incentives to encourage R&D and investment, besides restricting foreign access to Japanese markets.” (Okimoto et al. 1984: 17).

The Japanese industrial policy was so successful that America semiconductor manufacturers were under extreme pressure by Japanese competitors by the 1980s (Nester 1997: 115–116), especially by the dumping of dynamic random access memory chips (DRAMs) on world markets. The American response to that Japanese threat was protectionism in the form of the Semiconductor Trade Agreement (STA) in July 1986 and tariffs on Japanese electronics imports in April 1986, to give US manufacturers relief. This eventually allowed them time to innovate and develop new generations of microprocessors and regain market share.

BIBLIOGRAPHY

Barsamian, D. and Chomsky, N. 2001. Propaganda and the Public Mind: Conversations with Noam Chomsky, Pluto Press, London.

Nester, W. R. 1997. American Industrial Policy: Free or Managed Markets?, Macmillan, Basingstoke.

Okimoto, D. I. et al. (eds). 1984. Competitive Edge: The Semiconductor Industry in the U.S. and Japan, Stanford University Press, Stanford.