Ideologies, Institutions, and Interests: Why Economic Ideas Don't Compete on a Level Playing Field.

• Author: Callais, Justin T.

Economists are not outside of the economy; they are part and parcel of it.... The economist is a rational, maximizing individual, subject to the predictions of economic science. In this sense there is no way that the economist cannot be influenced by the environment.

--Robert Tollison, "Economists as the Subject of Economic Inquiry" (emphasis added)

An important feature of liberal democracies such as the United States, where freedom of speech and expression are protected, is that their supporting institutions create a climate of public discourse in which ideas can be debated. The U.S. Supreme Court has continuously ruled that citizens' freedom of speech is vital for prosperity. There exists no overt censorship by the state. When censorship has been tried, the court system has struck it down as unconstitutional.

Given this fact, both good and bad ideas are allowed to circulate in the discourse, competing for adherents. In such an environment, it is reasonable to expect that good ideas will triumph over bad ones.

But in fact there are significant problems with assuming that liberal institutions ensure the triumph of good ideas. The popular metaphor of a "marketplace of ideas" is misleading. Sometimes ideas outcompete other ideas not based on truth but because of convenience or bias. Ideas compete on margins not necessarily related to truth, which should make us skeptical that good ideas triumph over bad ones when they clash. The selection process is driven by a host of criteria, and in any particular case criteria other than veracity may prevail.

This point is particularly evident in the field of economics, which is our focus in this paper. ideas within economic discourse clash, oftentimes vehemently. Some ideas win and are promoted; others are discouraged and fall out of use. Following Robert Tollison (1986), who argues that even economists are subject to the laws of economics, we critically examine the environment within which the battle of economic ideas is waged. This analysis leads us to conclude that many powerful forces other than truth determine which ideas catch on in economics and which fall out of favor. Other economists have tried addressing the same point, considering whether gains from trade exist between economists of differing schools of thought (Popper 1968; Rosen 1997; Yeager 1997). Those in favor of trade see the missing gap that exists now in the field. Our purpose in part is to show that this gap exists.

Economists, like all purposive beings, act in their own self-interest. The economics profession is filled with rational human beings seeking to advance their careers. Due to the nature of the institutions that govern the supply and demand of ideas in economics, the ideas that make up "mainstream" economics are amenable to an "invisible hand" style of analysis (Smith [1776] 1981; see also Storr and Martin 2008). This paper focuses primarily on the relationship between academia and the managerial-administrative state as they exist today. We demonstrate that a positive-feedback loop incentivizes economic ideas that promote an academy-state symbiosis. To show how some ideas outcompete others, we draw mainly upon scholarship that deals with the nature and role of the economics profession (Bowles 1974; Henderson 1977; Rhoads 1978; Nelson 1987; Buchanan 1991; Frey 2000; Horwitz and Boettke 2005; Angner 2006; Beaulier, Boyes, and Mounts 2008; Steindl 2012; Boettke, Coyne, and Leeson 2013; Rodrik 2014; Almeida, Angeli, and Pontes 2015; Hoover 2015; Boettke and O'Donnell 2016; Salter 2019), as well as upon scholarship that deals with spontaneous order in general (Menger 1892; Galiani [1751] 1977; Granovetter 1985; Stein and Bickers 1997; White 2005).

We organize the remainder of this paper as follows: The first section critiques the metaphor ofa marketplace of ideas, showing that institutional considerations can lead to ideas winning for reasons other than truth. Next we explore the academy-state relationship that flourished in the Progressive Era. We analyze in particular the New Deal period through the lens of economics and describe how that period shaped the institutions of both academy and state. Finally, we characterize the academy-state symbiosis as a spontaneous order that emerges from the mutual impingement of academic and governmental institutions.

A word of clarification before proceeding. Nothing in our analysis presupposes that the ultimate truth of economics lies with any particular school. We are not arguing in this paper that the economic ideas that came to dominate the profession during the height of the neoclassical synthesis are false. We are instead telling a story about how those ideas came to dominate that does not rely on those ideas being true. The usefulness of this account should be apparent to all those who believe, pace Tollison, that "we are all a part of the equilibrium" and that the economics profession should not be closed off from economic analysis.

The Peculiar Marketplace of Ideas

When one says "marketplace of ideas," one is implying that ideas compete openly and freely, given a supportive legal structure as a backdrop. This idea is centered around the principle that the search for truth is most effective when these ideas circulate freely. We see flaws in this concept and follow Krill Bryanov (2018) and Stanley Ingber (1984), who see the market for ideas as having an institutional framework that can lead to ideas "winning" due to competition on several margins. The "marketplace of ideas" metaphor breaks down when we remember that markets require a specific institutional context. Markets are not abstract supply-and-demand functions but instead networks of exchange relationships and the governance arrangements that support them: "Markets are institutions of exchange; persons enter markets to exchange one thing for another" (Buchanan 1987, 246). Analogizing competition between ideas to competition in markets presumes some sort of congruence between the institutions that govern the competitive process in both social spheres. Although there are surface-level similarities, pro-competition institutions in markets sufficiently differ from those institutions that govern the promotion and dissemination of ideas that we lose more than we gain by taking the metaphor too literally.

In a competitive market for some good or service, incentives exist to ensure market competition has beneficial consequences, such as satisfying consumer preferences. (1) Goods and services that "pass the market test" are those that consumers find to be of sufficient utility to justify their price. William Anderson calls markets "arenas in which economic exchanges are made" with "rules we must follow ... as we examine market behavior" (2000, 66). In order to pass the market test, a good or service must be found useful by consumers, who then signal to producers through their purchases that producers are in fact adding value to society's scarce resources.

Does this process also govern the market for ideas? It is surely heroic to assume so, except perhaps in the trivial sense that it is meaningful to discuss the supply and demand for ideas. In the realm of ideas, however, the lack of institutions that give rise to something resembling the negative-feedback loop in markets means the differences between the supply and demand for ideas and the supply and demand for, say, potatoes are legion. If "Whig history" as applied to economic ideas is correct, there must be a specific set of institutional mechanisms at work that make it correct. We contend and will argue that the institutions that actually exist in the promotion and dissemination of economic ideas more plausibly operate on other margins. Our analysis is similar to the one given by Peter Boettke, Christopher Coyne, and Peter Leeson (2014), who use the example of Paul Samuelson's theories in their discussion of how economic ideas rise and spread. There is certainly competition in the realm of ideas, but the incentives underlying their supply and demand are such that truth is not the primary margin of contestation. "Ideas that are flawed can come to dominate the profession, while useful ideas are left on the proverbial side-walk of intellectual affairs" (Boettke, Coyne, and Leeson 2014, 531). Ideas are subscribed to and professed by individuals, and those individuals interact within social institutions, whether in markets, politics, civil society, or some combination thereof. All of these things overlap in some capacity, leading to a constant push-pull effect that determines how ideas manifest in individual and collective action.

Many other factors affect whether an idea is successful and can "win" in scientific discourse. Boettke, Coyne, and Leeson (2014) point out that even in the physical sciences, where the possibility of controlled experiments would seem to obviate much debate and contention, it is not sufficient merely to come up with significant findings. One must also be able to write a good story to convince skeptical peers. Persuasion, reputation, and intellectual fashion still matter greatly in determining which ideas the experimental sciences regard as mainstream. The difficulty of running controlled experiments in the social sciences means that rhetoric and personality play a crucial role in how ideas are produced, disseminated, and debated. Economists are ultimately storytellers (McCloskey 1998), and although good stories can be true, they need not be. More importantly, a story can be good--compelling, pleasing, and so on--for reasons that are independent of its truth. Thus, the "marketplace of ideas" metaphor...