Sunday, October 26, 2014

Israel is still very socialist - Friedberg Economics Institute Fellows Seminar - Fall 2014

My trip to Israel was sponsored by The Friedberg Economics Institute (HT: Bob Borens). I was participating in the second fellows seminar. Simply stated the Institute, like the partner organization the Jerusalem Institute for Market Studies (HT: Corrine Sauer and Robert Sauer), is dedicated to promoting an appreciation of the importance of economic freedoms and the market process in the hope that such an appreciation may lead to movement toward greater economic freedom in Israel. Here is the official statement.

The Friedberg Economics Institute was founded in Israel in 2014 as a non-profit organization with a mission to advance, in Israel, appreciation for the principles of economic freedom and the potential for improving growth and prosperity through application of these principles.

The Friedberg Economics Institute sponsors seminars, bringing the world’s best economists and economic policy makers to Israel to teach ideas of free-market oriented economic thinking and principles of economic freedom.

The Institute’s initial target audience is Israeli university students. Over time we hope to broaden our audience to include thought leaders in government, business, and the press.

My two lectures were concentrated on describing what might be called ‘an alternative economics’ – alternative to the standard technical fare that is taught in all but a few economics departments and business schools around the world. I pitched my content at both economics students and intelligent non-economists (of which there were a few). The first was specifically on the “closing of the economist’s mind” starting with Ricardo, but more especially since WWII as economics became more “scientific” aka scientistic. The vision of Adam Smith inquiring into the nature and causes of the wealth of nations was lost. Why and what are the consequences?

In my second lecture I talked about methodology, epistemology, ethics and political economy. More specifically I focused on how popular presumptions and mindsets determine where the burden of proof is put in any policy action.  I used Hayek’s views on knowledge and complex phenomena to explore a few themes relating to policy design and implementation that I have been working on.

There was also a discussion panel with the four lecturers, Deepak Lal, Leszek Balcerowicz, Michael Sarel, and me, as well as lots and lots of informal discussions.

I think my remarks were well received although they were regarded as very controversial and provocative in the extreme. This did not surprise me much. It is well-known that the fundamental principles underlying popular perceptions of society and how it works and ought to work are socialist in nature. Israel was born out of a blending of Eastern European socialist ideology with Jewish national aspirations. These principles run deep and span all classes of society. Even where they are opposed, as from the religious right, there is no well-articulated alternative. But, what I was surprised to find, was the extent to which formal economics teaching in all of the universities – as far as I could tell – reinforces this. Economics teachers have abandoned any attempt to foster an appreciation of that system of natural liberty to which Adam Smith referred. Hayek is never mentioned and disequilibrium is banished with a wave of the hand. Not much either about public-choice. It is standard technical fare. It seems that anyone not hewing to the party-line would not be able to get tenure or last very long in any institution of higher learning. The objective is to produce quantitative virtuosos. Any resemblance between the economics of the class room and real-world economies is purely coincidental.

I found this quite alarming. While the Israeli economy has moved significantly away from its all-pervasive socialist structure (though not nearly far enough as these still permeate most of it) to become a highly innovative, high-growth economy, the mindset has hardly changed at all. In truth, the entrepreneurial sector encompasses a minority of the population and for the rest it is socialist business as usual. The aim is to get Israelis to begin preaching what their most successful entrepreneurs practice. Perhaps with this seminar we made a small beginning and more will be done with similar events in the future.  See also here.

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