Although I missed his appearances at AEI and Cato (videos here and here, respectively), I talked with Jeffrey and his wife, Shterna, in a coffee shop. I did not take any notes. He was in town to talk about his book, Engineering the Financial Crisis, but we did not discuss that. Instead, we mostly talked about our differing paths to libertarianism. His began when he was much younger, and I infer that his views became somewhat more nuanced over the years.

Friedman, who studied philosophy, history, and politics, but not economics, sees the essential insight of Austrian economics to be the fact that people have limited knowledge. Very limited knowledge, in fact, based on differing sources of information and outlook. I would note that the issue of what people know is a source of the division between mainstream and heterodox economics, nearly independent of political orientation. The mainstream views at MIT and Chicago treat information as nearly complete and homogeneous. Yes, there are stylized treatments of asymmetric information and uncertainty, but they are not what I see in (some) heterodox Keynesian or Hayekian thinking.

Friedman also insists on treating ideology as real. The temptation is to reduce ideology–particularly an ideology that differs from your own–to something else. You explain away the other person’s beliefs, even as your opponent tries to explain away yours. See one of my favorite topics, the illusion of asymmetric insight.

Friedman winces when I describe progressives as elitist. He sees no elitism in the views of the founding progressive philosophers. He says that if you go back to the first half of the twentieth century, populism and progressivism got along. Only in the last thirty years, when issues like immigration and America’s status in the world have become populist hot buttons, have progressives lined up with elites and anti-progressives lined up on the populist side. On the issue of limited government, popular support for conservatives is tepid at best. And the farther you go back in time prior to Ronald Reagan, the more one finds limited government to be the elitist position, rather than the populist one.

Here, I think that David Hackett-Fischer’s analysis of American culture, as popularized in Walter Russell Mead’s Special Providence, comes to mind. Mead’s Jacksonians are the populists. Over the past thirty years, they and the liberal intellectuals have developed an animosity toward one another. But that does not mean that Jacksonians have a permanent ideological commitment to free markets.

I think this view is a pretty discouraging one for libertarians. Note that we tend to take the progressive side on the very issues where progressives are least popular.

However, pushing back a bit, I think that there is something inherently elitist about the progressive project. Agencies like the Fed and the FDA are supposed to be run by experts, not by “the people.”

Friedman says that he thinks that too many economists prefer an incentives-based argument (public choice theory) against government intervention to an argument based on the concern that experts are ignorant. This may be where he and I most completely intersect. I think it is difficult to argue for progressive approaches to policy if one is keenly aware of the ignorance of experts and the value of competition in sifting out errors. Instead, I believe that once one takes the view that even experts or organizations can suffer from what he calls “radical ignorance,” the consequentialist arguments for exit over voice, and hence for libertarianism, become compelling.

Reader Antonio Foglia recently sent me an essay that includes this great line:

Financial markets are the worst allocators of resources, except for all the others that have been tried.

This variation on Winston Churchill’s evaluation of democracy is a good expression of the view that takes ignorance seriously.This ties in with another topic we discussed, which is the relationship of Jews to libertarianism. Although there are prominent Jewish figures (Rand, Mises, Rothbard, Milton Friedman), to a great extent the libertarian movement and Jews have shunned one another.

This is starkly in contrast with Communism. Ilya Somin wrote recently,

the overrepresentation of Jews in the movement was also caused by at least two specifically Jewish factors. First, communism disproportionately appealed to intellectuals generally. They liked its utopian nature and its seeming logical rigor. While the vast majority of Jews are not professional intellectuals, Jews are disproportionately represented in that group. Any movement that appeals to intellectuals will also tend to have a relatively high proportion of Jewish members.

Emphasis added. What does this say about libertarianism? That it is not intellectual enough to appeal to Jews? Jeffrey Friedman’s life mission, embodied in his journal Critical Review, has been to increase the intellectual heft of libertarianism.

Now might be a good time to re-read this post and the essay by Jeffrey and Shterna to which it refers. In their view, too often libertarian economists over-simplify by emphasizing incentives. Intellectuals hear that as a description of a world governed by greed, which suggests that there must be a better way. It would be better for libertarians to emphasize complexity and the relative ignorance of the individual when compared to the process of market evolution.