Mises and Fisher; W. Peterson

Misesand Fisher on Theory and History WILLIAM H. PETERSON SANTAYANA said those who don't know history will be condemned to repeat it. History, then, must be one of the subjects least known or understood by man, as must be economics ..For the drip-drip-drip repetition of government's eco nomic errors over millennia and centuries and even over recent years and months boggles the mind. Perplexed, one asks, Why? Why does bad history repeat itself while history is there for all to read? For insights we can turn to Lud wig von Mises and Antony Fisher. Before so turning, consider some evidence on· current history gone wrong over the past year or so. First, some errors. Arm twisting of commercial bankers to notch down their prime rate. Devaluation of the dollar, the second in fourteen months. Meat Dr. Peterson holds the John David Campbell Chair in American Business at the American Graduate School of International Management in Glendale, Arizona.

controls. Export embargoes on soy beans, fertilizers, steel scrap. Gen eral price freeze. Oil allocation. Gas rationing in a dozen states. Pressure for a crude oil price rollback. And all this and more is layered over economic policy er rors of much longer standing. Meanwhile, repercussions of these errors abound. Inflation ra.ges. Unemployment rises. Pub lic spending swells. Taxes become increasingly onerous. Partisan re criminations reach a crescendo in an election year. The nation's leading labor organization consid ers a resolution calling for na tionalization of the oil industry. Again, one asks, Why? Why price-fixing in this day and age, while history records, for example, the mammoth failure of Diocle tian's wage-price-fixing Edict of 301 A.D.? Why must the evils of printing press inflation go on to day, while Andrew Dickson White's brilliant Fiat Money In flation in France is in print323 324 THE FREEMAN June again, there for all to read ?-.'f Or why should Britain turn yet an other time to a socialist govern ment when the inevitable failure of socialism was abundantly spelled out by John Jewkes' Ordeal by Planning and earlier by Lud wig von Mises' Social'ism?* According to What Theory?

The answer is that there is history and there is history - or, more accurately, there are histori ans and there are historians. His torians may strive to be objective or factual in recording history. Yet probably, recording history is not their biggest problem - al though selecting and arranging, necessarily arbitrarily, the histor ical facts of man's and nature's myriad acts and happenings is it self quite a problem. The biggest problem, more likely, is in inter preting history, in seeking to give the Why of historical events (which brings to mind Acton's famous "advice to persons about to write history - don't") . The French Revolution of 1789 is a fact, by way of illustration. No denying the fact. But why is it a fact? What factors caused the Revolution? And how much weight does the historian ascribe to Factor A, Factor B, Factor C and *Available from the Foundation for Economic Education, Inc., Irvington-on-Hudson, New York 10533.

so on? Here's where interpretation sets in. Here's where the histori ans' theories and values inevitably color and shape history books. The Marxist historian, for example, is almost certain to be influenced by the opening idea of the Commu nist Manifesto, namely: "The his tory of all hitherto existing society is the history of class struggles." The vital, indeed inescapable, connection between theory and history was a major contribution to economic and historical thought by Ludwig von Mises in his Theory and History (Yale Uni versity Press, 1957). Theory, this late and deeply missed giant of the Austrian School noted, was critical in unlocking the elusive Why of history. Historical effects are relatively easy to observe; historical causes are much harder to come by, or at least the true causes are. Many historians and quite a few economists, by way of exam ple, simply write off the Great Depression as the failure of cap italism and completely neglect the impact of monetary expansion and contraction and of massive gov ernment intervention by Presi dents Hoover and Roosevelt. But these two Presidents were, in turn, counseled by advisers who had presumably studied history.

The advisers may well have known the facts of history. But, as Mises 1974 MISES AND FISHER ON THEORY AND HISTORY 325 pointed out, "Behind every fact lies a theory." Did, then, the Pres idential advisers know theory or, more particularly, did they know I the right theory? Judging from the course of the Great Depres sion and subsequent events, I am inclined to think they did not. Who Is Antony Fisher? Antony Fisher probably feels the same way, as he asks propheti cally in the title of his new pro found and provocative book, Must History Repeat Itself? (Churchill Press Limited, 1974).* Mr.. Fisher has seen as well as studied history, even made history, ever seeking out historical cause and effect. He was born in London in 1915, educated in Eton and Cambridge, served as a fighter pilot in the-Royal Air Force, and saw action in the Battle of Britain. He soon put his cause-and effect mind to work. He learned of the broiler industry while on a lecture tour in the early 1950's in the U.S.A., and in 1954 estab lished the pioneering mass production Buxted Chicken Com pany, which dramatically reduced the price of chicken to the British consumer while making record profits. Mr. Fisher became a lead ing critic of the theory and prac*Available at $6.00 from Transatlantic Arts, North Village Green, Levittown, New York 11756.

tice of the British Government's Egg Marketing Board from 1956 until it was at last repealed in 1969. In 1955 he founded the highly 8uccessful Institute of Economic Affairs in London as an independ ent research and educational or ganization, which has by now published scores of scholarly stud ies on the operation or abuse of the free market. Today he is chairman of the Institute's board of trustees. So, as doer and thinker, Antony Fisher has been something of a one-man Manchester School, long 'warning the English people in his time as Richard Cobden and John Bright did in the early 19th cen tury. Cobden and Bright warned of the dangers of protectionism and interventionism - of the dan gers of false theory. With the Irish potato famine in 1845, Parliament suddenly saw the light and switched to a policy of free trade. So Mr. Fisher insists history does not have to repeat itself. He points, for example, to the failure of the rice crop in Bengal in 1770 and the worse economic policy failure of the authorities in imme diately establishing price controls to prevent "profiteering." Prices were thereby precluded from ris ing; food disappeared and fully a third of the population died.

326 THE FREEMAN Jun(; In 1866 the rice crop failed again but, 10 and behold, the Ben gal government somehow remem bered the lesson of 1770. Far from trying to check speculation, the government facilitated it by avoid ing price controls and publishing far and wide information on ris ing rice and other food prices in the province. Rice and other food soon flowed into stricken Bengal and a national disaster was averted. Right theory and right policy saved the day. History did not repeat itself. An Orderly Universe Mises and Fisher thus are one in seeing a cause-and-effect, reason-and-action world. They would agree with Einstein, who once wrote: "I cannot believe that God plays dice with the world." They would agree that the ne cessity to correlate correct theory with historical interpretation is a problem that not only impinges on historians but on virtually every walk of life. The doctor with the wrong theory can lose a patient.

The investor with the wrong theory can lose his investments. The general with the wrong theory can lose a battle if not a war. What, then, is right economic theory and policy? Antony Fishel reflects the free market thinkin~ of Ludwig von Mises. Addressin~ himself to Britain, but very like!) comprehending a larger canvas: Antony Fisher calls for ending al government monopoly and· control Accordingly, over a period oj years he would "demobilize" thE British civil service, denationalizE the post office, cut all tariffs anc subsidies, terminate all exchangE controls, end all forms of direc1 controls over prices and incomes roll back the welfare rolls, makE unions subject to the law of con· tract, adopt Milton Friedman'f voucher system to reintrodUCE choice and competition in school ing, and reprivatize all national ized industries. Can Mr. Fisher, with his self. proclaimed "radical approach,' win this new Battle of Britain? Ii all depends on whose theory pre· vails - Le. which theory, right 0] wrong. In any event, thought h decisive. Choice is critical. And inexorably, history will tell. , IDEAS ON LIBERTY Why History Repeats Itself Some modern zealots appear to have no better knowledge oj truth, nor better manner of judging it, than by counting noses JONATHAN SWIF~ I DAVID A. FYFE • • Harbingerof MonetaryUpheaval INTERNATIONAL monetary crises over the past quarter of a century, culminating in 1971 and 1973 United States dollar devaluations, not only have become fixed fea tures of the financial scene, but seeming national curses as well, defying solution. It is incorrect, however, to offer the general pub lic the misguided notion that these crises take place without reason or warning. Monetary crises have known causes; they are the results of economic cause and effect, as sure in terms of results as any other natural laws men acknowl edge and respect. Economic his tory is filled with crises - cur rencies, and as a result economies, rising and falling over thousands of years from clearly understood, predictable causes.