[lbo-talk] The Invisible Hand, ed. Adrian Klaasen, circa 1965

Jim Farmelant farmelantj at juno.com
Sat Feb 3 10:48:24 PST 2018

Recently, I was looking through an old book, from 1965, The Invisible Hand, ed. Adrian Klaasen. Klaasen was an economics professor at Hope College in Michigan. The book consists mostly of pieces from economists of either the Chicago School or the Austrian School. It includes some big names like Milton Friedman, Ludwig von Mises, and Friedrich Hayek, as well as people who would be less well known today. The book billed itself as a collection of essays in classical economics, which was arguably a misnomer, since most of the writers were, arguably, neoclassicals, in the tradition of Jevons, Walras, Marshall, Menger, etc., and not directly in the tradition of Adam Smith and David Ricardo. In fact, Klaasen does invoke the name of Adam Smith, but that is basically because he identified with the laissez-faire approach to economic policy that is attributed to Smith.

One thing that is clear about this book is that it was very much a product of the cold war period and that anticommunism was very much the driving force behind it. One would think that given that, a critical engagement with the writings of Marx and his disciples would be characteristic of this book, but you would be wrong. It is evident that most of the contributors to the book had read very little of Marx and his disciples. There are some real howlers in this book. Thus, in an essay, by the editor, Adrian Klaasen, titled, “National strength through economic knowledge,” we are told such things that Marx derived his thesis that capitalism would eventually self-destruct from Thomas Malthus: “that as a population prospered it would expand and the resultant expansion would create an oversupply of labor. The oversupply of labor, in turn, would drive wages down until finally and inevitably all workers would be reduced to a basic subsistence level of existence.” We are also told that Marx derived his thesis that capitalism is driven to imperialist expansion from Hobson. Given that John Hobson was born in 1858, he was still a rather young dude when Marx died, that seems rather unlikely. What is far more likely, is that Klaasen confused Marx with Lenin. Apparently, Klaasen’s notions concerning economic knowledge did not include the ability to do basic scholarship. One might have expected more from an economics professor.

On the other hand, the book does include a piece by Henry Wallich, who was an economist who would later serve on the board of governors of the Federal Reserve, under Nixon. His piece, “Economic freedom versus Organization”, from his own book, Cost of Freedom, seems a bit more intelligent than some of the other pieces in this book. While very much opposed to communism and socialism, he openly acknowledged that it made little sense to argue that these systems could not work, since by the early 1960’s, the Soviets had some stunning achievements under their belt. As he wrote:

“In addition to closing our eyes for too long to Russian accomplishments, we have been guilty also of closing our minds to the menacing power of Marxist doctrine. Those who have said that the philosophy of Communism consists in keeping the people in poverty, so that poverty may keep them in Communism, show little perception of the intellectual capacity of their adversary. Communism is a formidable intellectual structure, built by first-rate minds over many decades, with an inner logic and consistency that capitalism might envy. The average American, debating with a Russian the merits of their respective systems, would soon find himself in hot water, unless he were exceptionally nimble. An American economist facing a trained Marxist dialectician might find the going even harder.”

It seems clear that Wallich was not overly awed by the arguments of people like Mises or Hayek that socialism was necessarily doomed to failure. Rather, his position seems closer to Schumpeter’s which was that intelligent and dedicated socialists might well find ways to make it work, even though he might that find that outcome to be undesirable.

Jim Farmelant http://independent.academia.edu/JimFarmelant http://www.foxymath.com Learn or Review Basic Math

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