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The Smith-Hayek Economist: From Character to Identity : Daniel B. Klein
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Perhaps ten percent of economists in the United States share the broad character represented by Smith, Say, and Bastiat. Would it make sense for them to distinguish their character in some way? Would it make sense for them to cultivate a suitable identity? In this essay, I explore the heterogeneity of character types in economics, delineate the "Smith-Hayek" character, and explain why it might be beneficial for that character to establish an identity that functions in both the professional and public cultures.

Smith-Hayek: A Few Characteristics

One of the broad and venerable characters is that of Adam Smith and Friedrich Hayek—and of Hume, Say, de Tracy, Bastiat, de Molinari, Menger, Böhm-Bawerk, Schumpeter (kinda), Mises, Cassel, Wicksell, Heckscher, Leggett, Perry, Cannan, Hutt, Röpke, Hazlitt, Seldon, Rothbard, Simon, Bauer, Friedman, and hundreds of other economists no longer living and still available to readers. That broad character is also alive in thousands of living economists, including Buchanan, Tullock, Coase, Brittan, Becker (kinda), Sowell, Kirzner, McCloskey, V. Smith, North, Gwartney, and Williams.


The Smith-Hayek characteristics include the following:

  • a tendency to make the distinction between voluntary and coercive action clear in formulating many basic economic categories, principles, and arguments;
  • an appreciation that knowledge is not merely information, but also interpretation and judgment, and as such is highly particular to the individual and the moment; it is essential for humans to err, in the sense that they kick themselves for having interpreted or judged badly;
  • a sense that economics must be relevant and serve social purposes, and that such service necessarily entails heavy engagement with non-economists, notably laypeople and policy-makers;
  • a sensibility that economic reality is incredibly complex, inspiring the eschewal of efforts to paint a picture of the economy or how it "really" works;
  • a sober, non-romantic view of government—since economic reality is scarcely knowable, we should be wary of those who pretend to manipulate it beneficially;
  • a presumption in favor of liberty, not the status quo.

The Smith-Hayek characteristics are by no means typical of economists today. As one who shares those characteristics, I wonder if Smith-Hayek economists could do better. Maybe they would do better if they created an effective "we."

On the Fringes

In economics, the Smith-Hayek kin have a problem. That the character can be fairly well drawn is a contention that need not divert us here. But the character does not have a suitable identity. There is a Smith-Hayek character, shared by thousands. But there is not a Smith-Hayek identity.


"Free-market economist" is misleading. First, it seems to insist on markets being absolutely free. Second, it would seem to signify any economist who favors free markets, regardless of other aspects of his character. Although every Smith-Hayek economists tends to favor freer markets, not every free-market economist shares the Smith-Hayek character. Enthusiastic young libertarians often have simple formulae that need to be overcome to grow into the Smith-Hayek character. And, further down the path of life, a mature economist who never did relevant or meaningful research, and instead only practiced and affirmed arid applications of certain scholastic modes of discourse, and deprecated scrutiny of normal science, would not be a Smith-Hayek economist no matter how strongly he favored free markets. These reasons speak also against "libertarian economist" and "classical liberal economist." Yet another problem with such names is that, while the character is outspoken, it is just too pushy to announce political opinions in the identity name.


"Austrian economist" has a certain professional standing, but, in fact, that identity speaks of characteristics some of which conflict with Smith-Hayek, even broadly defined. Moreover, "Austrian" signifies Austria. Once explained, it is terribly backward looking—the last time a prominent Austrian economist was born in Austria was in the 19th century. These problems and others make it a flop in the public culture


Many Smith-Hayek economists think of themselves as simply "economist." But "economist" simpliciter is no good. Most people conventionally and institutionally recognized as "economist" are at great variance with the Smith-Hayek character. Most do not maintain Smith's presumption of liberty. It is doubtful that most even subscribe to Smith's conception of liberty. As for their decisions regarding research questions, modes of discourse, audiences to address, and so on, most economists are at odds with Smith-Hayek economics. For example, normal economics exalts equilibrium model building to such a degree that it reserves a very important word for it—"theory"—as though an explanation or body of analysis is not worthy of being called "theory" unless it takes the form of a mathematical model. Another example: Many economists avoid any kind of public discourse, and disparage those who do engage the public.


Moreover, "economist" simpliciter denies one of the primary purposes of the Smith-Hayek economist: making it clear that economist characters are multiple and conflicting. Perhaps in the days of Smith or Bastiat "political economist" worked, but those days are long gone.


Smith-Hayek needs to go from character to identity. That would depend critically on admitting, establishing and publicizing the heterogeneity of characters within economics. Only if heterogeneity is recognized does it become possible to achieve widespread recognition of a Smith-Hayek character. As an established identity, the competition between it and alternative identities would be more meaningful and productive. Hayek's insights about competition as a discovery procedure also apply to culture.

For Starters, It Would Need a Name

The development of an identity—functioning in both the professional and public cultures—would require a good name. Actually, "Smith-Hayek" is not one I would nominate. For starters, it depends on getting Smith right, and that is no small matter. Second, it is probably never a good idea to build on the identities of individuals (the success of "Christian" notwithstanding). It isn't all in Smith and Hayek, of course, and they too were fallible. Furthermore, some will say, why not Smith-Friedman? Et cetera.


In this essay, I have resorted to a term ("Smith-Hayek") that I would not even nominate. That speaks of the very problem we face. I do not have any great suggestions. Here the issue is the need of identity. If that is something Smith-Hayek people agree on, they can subsequently pursue the issue of a name.

Embracing Heterogeneity (While Not Overdoing It)

The Austrians eagerly embraced heterogeneity. Their boldness and temerity blazed many trails, including important criticism of other, dominant types of economics. Austrianism also may have tended to attract libertarian screwballs and misfits (including me?). In my view, it often overdrew distinctions and overplayed the differences. It often set up strictures that not only separated them from most conventional economists, but also from most of those within the wider Smith-Hayek tent.


However, within that wider tent, there is a converse attitude—an attitude I am more anxious to appeal to here. It is the tendency among many Smith-Hayek economists to resist heterogeneity, from a desire to address young students or sympathetic readers with the authority of economic science.


Discourse is contextual and affords some wiggle room. The point here is that beyond the initiation of youngsters and edification of "the choir," Smith-Hayek economists face challenges that call for the embrace of heterogeneity. Advanced economics students know that most economists have characters importantly different from Smith-Hayek. As for the general public, they hear that even if you lay all the economists end to end they still would not reach a conclusion.


If people presuppose that economics has a homogenous character, an economist can better claim to represent that character the more prestigious are his accomplishments, honors, and position. In the battle of credentials for the identity "economist," Smith-Hayek economists are generally outgunned. Much research has been done on the character of academic economics and its cultural and institutional structure, all finding that the Smith-Hayek character has little presence or vitality in the most prestigious departments and journals. There are remarkable figures like Milton Friedman, Gary Becker and my Nobel colleagues Vernon Smith and James Buchanan here at George Mason, a bastion of Smith-Hayek folk. There are a few promising younger figures like Edward Glaeser and Jeff Miron. But the Smith-Hayek character otherwise only lurks in the shadows of the top graduate programs, faculties, associations, textbooks, and journals. That character is more easily ignored or slighted as "fringe" as long as the preconception of homogeneity prevails.


Identity reduces the "transaction costs" of finding and cooperating with kin, yielding fruits in identification, recruitment, mobilization, and organization. It clarifies the message and emboldens the spirit. But, moreover, by breaking down the preconception of character homogeneity, it can alter the terms of discourse. At one extreme, a discipline can take the form of a scholastic structure of established belief dispensed by priests to the masses. At the other, it can take the form of equitable conversation and debate. Establishing a Smith-Hayek identity can help to move economic science in the debate-oriented direction.


The embrace of heterogeneity is a question of degrees. The proclaimed differences need not be so great so as to leave no bonds of common understand and purpose between Smith-Hayek and "normal" economists. All economists can still agree about many basics, such as the emphasis on thinking through the individual's incentives as she understands the situation. That point of view is common to most economists and leads directly into ideas of scarcity and trade-offs. Such characteristics will continue to unite economists. In fact, it is probably fair to say that during the past twenty years "normal" economists have become more supportive of teaching the power of mutually beneficial exchange to generate widespread social betterment. Also, during that period, the prestige of mathematical model building has come down a notch.

From Character to Identity

I reckon that in the United States about 10 percent of economists fit a Smith-Hayek character, broadly construed. Hundreds of them are members of the Association of Private Enterprise Education, the Public Choice Society, the Southern Economics Association, and the Society for the Development of Austrian Economics.


The virtues of the Smith-Hayek character will, however, continue to speak to members of the new generation. The power of Smith-Hayek hangs in part on whether they make an effective identity for that character.


Hayek, F.A. 1944 (lecture). "On Being an Economist." First published in Hayek's The Trend of Economic Thinking: Essays on Political Economists and Economic History. Edited by W.W. Bartley III and Stephen Kresge. Chicago: University of Chicago Press, 1991: 35-48. Reprinted in Klein 1999b: 133-49.