Economics in the hands of its masters is an expert critique of rule by expertise. And even among its masters, there are many differing visions of the role of economics.
    —Pete Boettke

Robert Skidelsky wrote a magisterial three-volume biography of John Maynard Keynes.1 It is important to note that he titled the second volume The Economist as Savior to depict Keynes’s intellectual and political activities between 1920 and 1937. But not everyone agreed with Keynes that economists were, or could be, saviors. It is hard to imagine more polar opposites in their visions of the role of the economist in society than that of Keynes and Friedrich A. Hayek.

F.A. Hayek and the Pretense of Knowledge

When Hayek was awarded the Nobel Prize in Economic Science, he did not fail to highlight this point to the chagrin of his host and his peers. In his Nobel banquet toast, he said simply that if he had been consulted, he never would have advocated awarding Nobel Prizes to economists for the simple reason that no economic thinker should ever be provided with such public recognition, as it falsely provides a sense of authority that can be safely trusted to no economist. But Hayek wasn’t done there. In his Nobel Lecture entitled “The Pretense of Knowledge,”2 he made the following claims: First, we economists have indeed made a mess of things with our efforts at macroeconomic management of the western economies. Second, economists are led to make a mess of things because they have falsely adopted a methodology appropriate for the natural sciences but inappropriate for the sciences of man. He dubbed this intellectual mistake scientism. Third, a scientific discipline expected to be able to deliver useful, practical knowledge, which in fact it is incapable of producing, is a quick path toward charlatanism. Furthermore, this charlatanism is protected by vested interests within the economics profession and its relationship with agents of the state. There is an alliance, in essence, between scientism and statism, and there are self-reinforcing incentives that make this alliance difficult to break once it is forged. Fourth, unless this intellectual situation is resisted, not only will economic science be rendered worthless in terms of social understanding, but economists will become potential tyrants and destroyers of civilization.

For more on these topics, see the EconTalk episodes Nicholas Wapshott on Keynes and Hayek, John Papola on the Keynes Hayek Rap Videos. See also “The Erosion of Political Economy and the Retreat from Freedom”, by Pedro Schwartz. Library of Economics and Liberty, April 4, 2016.

Hayek’s essay received a revise and resubmit from the very journal he helped edit during his time at the London School of Economics—Economica. That is a very strange fate for a Nobel Lecture, but Hayek’s message was very much outside the general tenor of the times. The idea of the economist as social engineer and economics as the science that guides the engineering was then, and is now the dominant mindset across the political spectrum. This perspective shapes the advanced study of economics methodologically and analytically. But this wasn’t always the case.

Colander and Freedman’s Where Economics Went Wrong

The transformation of classical political economy into economic science, and from economic science to economic engineering is the subject of David Colander and Craig Freedman’s recent stimulating and important book, Where Economics Went Wrong.3

“Just as Adam Smith argued that the only difference between the philosopher and the street porter was in the mind of the philosopher, in our time the only difference between the elite academic economist and the ordinary school teacher is in the mind of the economist.”

The science of economics is different from the art of political economy, and the art of political economy must always begin with the recognition that we are natural equals, that economists have no privileged status in the democratic process of collective decision-making, and that the plurality of values must be weighed and incorporated into our public policy deliberations. The art of political economy must be practiced in a manner consistent with the demands of a self-governing democratic society. Just as Adam Smith argued that the only difference between the philosopher and the street porter was in the mind of the philosopher, in our time the only difference between the elite academic economist and the ordinary school teacher is in the mind of the economist. We are one another’s equal in the democratic polity, and before the law. Democracy by discussion is aimed at arriving at a consensus—an agreement—not at discovering deep truth. Truth is what science strives for; to claim truth in politics is the road to tyranny. That is a difficult pill to swallow, when so much economic nonsense abounds within political discourse, but one we must swallow if we are to avoid becoming Hayek’s tyrants over fellow citizens and destroyers of the very civilization that unleashed the creative powers of a free people.

As Elinor Ostrom summed up the problem in Governing the Commons: “The intellectual trap in relying entirely on models to provide the foundation for policy analysis is that scholars then presume that they are omniscient observers able to comprehend the essentials of how complex, dynamic systems work by creating stylized descriptions of some aspects of those systems. With the false confidence of presumed omniscience, scholars feel perfectly comfortable addressing proposals to governments that are conceived in their models as omnicompetent powers able to rectify the imperfections that exist in all field settings.”4 And, modern economics has evolved to fit comfortably into this mindset. Seeing like a state is categorically different than seeing like a citizen.

The art of political economy

How then are we to practice economics and political economy if we take this idea of the art of political economy appropriate for a self-governing democratic society seriously? How should we deal with “experts” who govern over our fellow citizens instead of seeking to govern with them? The post-WWII consensus rejected the earlier Classical Liberalism of Adam Smith and John Stuart Mill. As Colander and Freedman write: “In the profession as a whole, Paul Samuelson unarguably became one of the early and most influential voices impatient to dump Classical Liberalism and replace it with a scientifically based policy.” Many will recognize Samuelson’s neoclassical synthesis as the opposite of the teachings of Hayek and Milton Friedman. But consider the claim on the next page in Colander and Freedman’s book: “Chicago may have lagged a step or two behind the pioneers of the new modernism, but they displayed few qualms in dispensing with the Classical Liberal approach. Instead, they formulated and embraced their own version of economic science, which opposed and countered the version of economic science being promulgated.”

Hayek’s position of the economist as properly understood as a “student of civilization” was just as alien to Chicago as it was to MIT; the modernist position must be seen as a decisive break with the grand tradition of political economy as initiated by the Scottish moral philosophers of the 18th century and the British Classical Political Economists of the 19th century. Colander and Freedman correctly identify Frank Knight and Jacob Viner as the key intellectual leaders of the older Chicago School during the interwar years of the 1920s and 1930s. “Graduate students and other young economists” [throughout the profession], they argue, “embraced the cause of science-based theory and policy as providing the only reliable basis for either one.” But they also point out that at least in the 1930s, “only Chicago and the London School of Economics (where Hayek and Lionel Robbins still ruled) provided any semblance of a sustained resistance to that abandonment [of Classical Liberalism] in that postwar era.”

Classical Liberalism

The abandonment of classical liberalism would only spread through the 1950s and 1960s. The Chicago School of Economics with Milton Friedman at the helm was a different beast than when Frank Knight was the driving intellectual. That Knightian perspective would instead by pursued within the Virginia School of Political Economy. But this approach, championed by James Buchanan and Ronald Coase, ran into obstacles that according to Colander and Freedman could not be overcome. Both public choice and law-and-economics would be transformed in the hands of others in a direction away from the classical liberal methodology, instead following the post-WWII Chicago School approach. As a result, the counter-resistance to the abandonment was ignored by the mainstream of economic science. Both the science of economics and the art of political economy suffered as a result.

It might be useful to dig a bit deeper into the Virginia School of Political Economy ( I should add that George Mason University remains the final stronghold of this school within the profession). Buchanan’s position could be summarized with two statements he often made. First, economists must cease in their habit of offering economic advice as if to a benevolent despot. Second, in discussing public policy issues, economists must move the analysis to the level of rules and not limit the discussion to particular policies within the rules. This is Buchanan’s “constitutional perspective”, and it is reflected in his insistence that economists can never pick particular distributions of resources, but always must choose from among various rules of the game that will engender a pattern of exchange and production, and thus distribution.

Buchanan’s position is directly attributable to the work of Frank Knight and Knut Wicksell. But he also would often stress the work of his University of Virginia colleague and also former Knight student, Rutledge Vining. After Buchanan left the University of Virginia, he wrote in a letter to Vining: “My own worry, which you do not express so directly as I do, stems from the step taken by such an idealized professional assistant when he takes it on himself to propose changes in structure, as if he has a direct line to God. This is the arrogance I talk about, and about which I think Frank Knight was also worried.” But Buchanan, in what might surprise the modern day reader of this letter, singles out as a prime example of an economist violating this Knightian stricture none other than Milton Friedman. Friedman, Buchanan writes, “thinks and talks as if he is telling people what they should want, in terms of basic values, which is not at all his role, or so it seems to me. This is arrogant behavior, which Knight would never have engaged in.” Buchanan admits that it is extremely difficult to avoid falling into this trap, but concludes that nevertheless “we should avoid this where possible.”

So, what should classical liberal political economists do? When Buchanan assumed the directorship of the Thomas Jefferson Center for Studies in Political Economy at UVA, he argued that the goal was: “to carry on the honorable tradition of ‘political economy’—the study of what makes for a ‘good society.’ Political economists stress the technical economic principles that one must understand in order to assess alternative arrangements for promoting peaceful cooperation and productive specialization among free men. Yet political economists go further and frankly try to bring out into the open the philosophical issues that necessarily underlie all discussions of the appropriate functions of government and all proposed economic policy measures. They examine philosophical values for consistency among themselves and with the ideal of human freedom.”

This “mission statement” I would argue is completely consistent with the sort of classical liberal methodology that Colander and Freedman are discussing in their book, and should be juxtaposed with rule by experts approach whether on the right, left, or center. The “mission statement” is an indictment of the effort to see economics as providing the technical expertise that enables the efficient and judicious use of public policy to eradicate social ills. It is not an effort to ignore social ills, or to downplay their significance, but rather to discipline the way we discuss solutions to social ills and the role that economists play in a free and democratic society.


It is my hope that I have provided something to wrestle with about the role of economists in a free and democratic society. Economics in the hands of its masters, such as Hayek, is a masterful expert critique of rule by expertise, as Hayek described his own “Abuse of Reason” project where he followed the Humean dictum of using reason to whittle down the claims of reason [see David Hume]. In his essay “Individualism: True and False” Hayek argued that the thrust of Adam Smith’s system was to strive to find a social system where the institutions were so robust that bad men could do the least harm, rather than to find a system were the good and the wise could rule. To devise a system of governance in such a fashion, Hume’s advice that we must presume that all men are knaves seems to be methodologically wise for the analytical task at hand. It is equally important for us to remember that knavery comes in multiple forms- namely opportunism and arrogance. It might be the Fatal Conceit is a more general problem than just in the attitudes of our socialist and interventionist colleagues in economics. It may be endemic to the modern mind-set. And, the antidote might require that economists be knocked off their pedestal as saviors of society and high priests of the modern order, and restricted once more to our status as students of civilization, and the lowly philosophers of social order.


[1] Robert Skidelsky, John Maynard Keynes: 1883-1946: Economist, Philosopher, Statesman. Penguin Books, 2005.

[2] Available online at: The Pretence of Knowledge. Nobel Prize Lecture, Friedrich von Hayek, 1974.

[3] David Colander and Craig Freedman. Where Economics Went Wrong: Chicago’s Abandonment of Classical Liberalism. Princeton University Press, 2018.

[4] Elinor Ostrom. Governing the Commons. Cambridge University Press, 2015.

* Adapted from an address given at the Mont Pelerin Society regional meeting in Dallas, Texas, May 17-19, 2019.

Peter J. Boettke is University Professor of Economics & Philosophy, George Mason University, Fairfax, VA 22030.

For more articles by Peter J. Boettke, see the Archive.