Human Spirits

John Maynard Keynes offered the term “animal spirits” to colorfully describe the human psychology driving economics. In his view, enterprising people would always act in an enterprising fashion with the right incentives. The collective despondence of societies accounted for what turned out to be the Great Depression. Only government leaders could provide the sort of collective intelligence to guide these natural “animal spirits”.

Collectivists and statists are as uniquely stubborn in ignoring reality as say traditional conservatives are in holding on to old discredited ideas. (It is, for example, established that the contraction of the money supply by state banking authorities led to the depression.) Keynes has many intellectual and “me too” followers, including the alleged journalist Chris Matthews (“We’re all Keynesians now,”) and now the latest offering from the burgeoning academic field of “behavioral economics”. The latter refers to a new book by George A. Akerlof and Robert J. Shiller called, in apparent homage to Lord Keynes, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. Reading a review of this book can provide more than enough information on which to reject its premises and decide not to waste any part of your scarce life on reading the full exposition. Thankfully, Louis Uchitelle of the New York Times Book Review has provided that review. Among other comments he credits Akerlof and Shiller with being the “… first to try to rework economic theory for our times.” The short book (176 pages) is apparently addressed to economists as well as the general reader.

The problem with Keynes and his acolytes, and this includes the bulk of the Obama administration, is that they overlook the key difference between man and the other animals. Man is the rational animal, possessing free will. By his nature he must make choices to guide his actions. If he does not do this efficaciously he will die, as slowly or as quickly as his necessary decisions will dictate. Psychology is the study of the mind, and by the nature of humans, human psychology must study the individual mind. There is no collective mind.

Government leaders are individuals too. It may come as a surprise to many who regard them as selfless, public spirited figures concerned only with serving their society or country. They all act in their self-interest, possessing as they do those same “animal spirits” that drive economic man as conceived by the old interventionist. Governments are instituted among men to protect rights. When they deteriorate philosophically to move beyond rights protection to using coercive power to provide welfare and economic privileges and other collectivist appeals they do so at the expense of political and economic liberty. The institution becomes a state distinguished by political control over those who once had rights protection under the government instituted for that purpose.

It is a combination of the error in overlooking free will and the immoral willingness of so many to use coercive power to take from some individuals and distribute to others, while taking a generous cut for administrative purposes. There is also an arrogance on the part of politicians and bureaucrats to think that by the mechanics of a ballot box and the subsequent bestowing of favors by the elected leaders on “chosen” beneficiaries that they possess some kind of omnipotentence to know what economic man will do next.

In principle you can know that collectivism will fail to reach its objectives of providing peace and prosperity. There are numerous real world examples that have existed and continue to this day to the sad detriment of the individuals in those societies. The leaders of course live in comparative luxury and extravagance. What you cannot know is how long the tyranny will exist before collapsing under the loss of wealth creation so long exploited. This is because of free will. You cannot know what choices others will make at any time. Obama and his “behavioral economists” cannot know. They cannot tell me or anyone else what economic choices will be made in the years ahead, let alone this afternoon.

Copyright 2009 Edward Podritske

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