The power of ideas

A book review of The Second XXth Century, by Donald J. Boudreaux, has just been published in the November 2008 issue of the International Journal of the Economics of Business.

Boudreaux rightly emphasizes that while I share the classical-liberal appreciation of the virtues of markets and suspicion of centralized authority, I reject “Hayek’s (and Keynes’s) claim that ideas play a leading role in determining the nature of a society. For Rosa, as for Marx, the causal relationship runs in the opposite direction: the economy determines the nature of ideas. These ideas might, in turn, polish, reinforce, and rationalize the economic forces at play in determining society’s institutions. But for Rosa, ideas don’t have consequences; ideas are consequences and only consequences.”

While I tend to agree with this summary, I disagree however with the last two words, “only consequences”. I do not deny that ideas are created by enterprising individuals following their own logic, and thus are not necessarily a simple mirror image of existing social structures. Obviously, many ideas about the socio-economic order are created by critics of these orders, or even by utopian intellectuals. But these ideas are selected by competition on a market. And those ideas that are widely circulated, and thus succeed, are predominantly those that tend to reflect the existing order, because they are in demand.

I believe that in the competition of political and organizational ideas, only those consonant with the prevailing mode of organization get a broad hearing at a given time. Look at what happened to Hayek in various periods of his lifetime: when contrary to the prevailing dirigiste or socialist order they were neglected and remained a minority view, until the liberalization wave of the 80s that, finally, changed the profession’s and the public’s recognition of his contribution to the fields of economics and politics.

Ideas do play a role in persuading people to adhere to the dominant - or emergent - mode of organization, and in that sense they are socially useful, and they do have consequences as a “normal” or “normalizing” worldview. Just like Kuhn's "normal science" they will change when their dissonance with reality reaches a crisis level. Otherwise, non conservative or unorthodox ideas are marginal and their market is small. And I doubt that, in that case, their impact is such that they could independently change the prevailing organization against economic and technological determinants of that order. As instruments they have some power, but a limited one. Intellectuals of course are free to believe otherwise.

Anyway, I owe many thanks to Donald Boudreaux for a fair, in-depth, and thought provoking review of the book.