[7] News from Absurdistan - The Rule of Men and Bad Economics

While Germans are proud of their Rechtsstaat ("a state/country/government under the rule of law"), it is, in fact, the 'rule of men' not the 'rule of law' that they practice. Yet, they cannot have their cake and eat it. If democratic license entitles certain agents to determine at will what the law is to be and to shift the posts while the economic game is under way to serve certain groups or goals in violation of general rules applicable to all, you might end up with a soziale Marktwirtschaft but you cannot have a Rechtsstaat.

If you do not wish to have capitalism, you must relinquish the rule of law. If you insist on the rule of law, you cannot have a soziale Marktwirtschaft.

It is amazing that no one seems to notice the contradiction.

Why such incongruence would go unnoticed has to do both with the tradition of legal positivism in Germany - the idea that law is whatever those (legitimately) in power declare it to be - and with the fact that economists (not only in Germany but all over the world) have lost sight of their subject-matter.

Economics ought to explain that self-generating order that comes about when free individuals do commerce with one another based on generally applicable rules of just conduct. However, in economics, little attention is paid to freedom and justice and the discovery process set in motion by them, the dynamics and evolution, the creative destruction inherent in a free economy. The most essential features of a capitalist economy are excluded from the models purporting to represent it: instead economics focusses on equilibrium, precisely the kind of state at hand when the driving forces of a vibrant capitalist economy - change, competition, discovery, innovation - have lost their relevance and disappear from sight.

Economists are eager to be seen as practitioners of an exact science and, therefore, awkwardly and obsolescently, try to satisfy the scientific ideal of the 19th century - the precision of mechanics. To that end, they must turn their subject-matter into something tractable in terms of mechanics. The anally retentive fetish of precision supersedes the business of comprehension.

Their description of the economy is a travesty of the "real thing", an embarrassment that does not fail to be noticed. Rather than realizing that their approach to conceptualizing the economy is wrong - oh no, it is mathematically too beautiful to be given up - the incongruence of the theoretical and the real economy is assiduously ascribed to something being wrong with the economy - namely, the tremendous incidence of "market failure" - meaning: equilibrium does not work, does not show up in the evidence - ah, hence, the economy does not work.

Not economics is flawed, but the capitalist economy is. In fact, it is, due to all that "market failure", a pretty wobbly something that, indeed, needs a lot of fixing. That is why the majority of economists are easily convinced of the need of intervention in the economy, and - in Germany - very fond of the soziale Marktwirtschaft.

In this way economists, who should know better, act as an authority that rehabilitates the propaganda lies of 19th century socialists, on which the general disdain for "pure capitalism" is entirely based - to this day, July 4, in the Year of The Lord 2007.

There is something inherently wrong, fundamentally vicious about the unfettered capitalist economy - actually, an idea intrinsically pre-economic, a savage notion held when economic analysis had not yet been at the disposal of mankind, and the roundabout, counter-intuitive workings of anonymous interactions by suspicious individuals such as traders insulted the values and thinking habits of close-knit tribal communities.

Thus, let us appeal to wise men (the rule of men) to straiten things out.

Let us not follow impartial rules designed to set free the enormous powers of a spontaneous order coordinating billions of people (as opposed to the commands that give cohesion to a horde), let us go for persuasive whims and interests and hope for share outs and windfalls for you and me.

Let us pretend that we are still a smallish community tied together by similar experiences and circumstances, a great family of hunters and gatherers, rather than six billion human beings, who form an abstract order that must follow abstract rules, not parochial conceit, if its incalculable, unbounded, unsurveyable diversity is to bring forth prosperity and peace, not strife, not "order" by domination and subjugation.

Let us make promises of the familiar, even more: of the familial, let us be guided by tribal instincts...and...bang goes the rule of law. Bang comes the soziale Marktwirtschaft.