Utopia, you are standing in it!

Ludwig Von Mises worked as an economic-policy advisor to the Vienna Chamber of Commerce from 1909 to 1934. As Richard Ebeling notes:

What comes out from reading Mises’s policy writings from this period of his European career is that if you had asked him a fiscal, or monetary, or regulatory-policy question in the context of his role as analyst at the Chamber of Commerce, he would not have said, and did not simply say, "laissez-faire" — abolish the central bank, deregulate the economy, and eliminate taxes.

Mises accepted the context of which his policy options must be worked out. Ebeling went on to note that Mises seemed to think in three policy horizons:

1. The most optimal institutional and policy arrangements in society for the fostering of the classical-liberal ideal of freedom and prosperity, based on the knowledge that he thought sound economic theory could provide;
2. the actual circumstances of the present, but focused on the intermediary goals that would be leading in the direction of that more distant, "optimal" horizon; and
3. current situation and the immediate future

In the 1970s, Rothbard criticised Milton Friedman for advocating indexation of prices and wages as a method to reduce some of the negative effects from an on-going inflation. Rothbard regarded this as a sell-out.

Richard Nixon’s responses to Milton Friedman were rather more flattering in terms of his policy purity:

I don’t care what Milton Friedman says, he’s not running for re-election.

In 1922, during the worsening Great Austrian Inflation, Mises proposed indexation of wages and prices. Ebeling explained Mises as follows:

• what was inefficient and unnecessary in the three-tiered Austrian bureaucratic system of federal, provincial, and municipal regulators and taxing authorities;
• what specific reforms should be introduced, how they could be experimented with in smaller regions of Austria; and
• how best to overcome the resistance of those in the bureaucracy fearful of losing their jobs

Milton Friedman was purer than this – always the first best advice:

The role of the economist in discussions of public policy seems to me to be to prescribe what should be done in the light of what can be done, politics aside, and not to predict what is ‘politically feasible’ and then recommend it.

Little wonder that Friedman had little time for those economists who promised more than they could deliver and warned less than they should of the hazards and difficulties that may lie ahead the particular policies that were being considered:

A major problem of our time is that people have come to expect policies to produce results that they are incapable of producing. …

we economists in recent years have done vast harm—to society at large and to our profession in particular—by claiming more than we can deliver.

We have thereby encouraged politicians to make extravagant promises, inculcate unrealistic expectations in the public at large, and promote discontent with reasonably satisfactory results because they fall short of the economists’ promised land.

W.H. Hutt steered the middle course that I favour:

In our judgment, the best you will be able to get away with is programme A along the following lines; but if you could find a convincing way of really explaining the issue to the electorate, our advice would have to be quite different.

We should have to recommend programme B, along the following lines.

James Buchanan emphases political realities in a similar way:

We start from here, from where we are, and not from some idealized world peopled by beings with a different history and with utopian institutions. Some appreciation of the status quo is essential before discussion can begin about prospects for improvement.

Ebeling ends by saying:

Even as that uncompromising and principled proponent of individual liberty and the free market, Mises was called upon in his role as policy analyst and advocate to sometimes devise "second-" and "third-best" policy proposals in an imperfect world dominated by collectivist and interventionist ideas and practices.

for those who have sometimes asked, "Well, but how do you apply Austrian Economics to the ‘real world’ of public policy?" here is the answer by the economist who has been considered the most original, thoroughgoing, and uncompromising member of the Austrian School over the last one hundred years! His policy analyses provide us with warning signs and guideposts to assist us in thinking about and designing better policies for our own time.

In The Prince, Machiavelli said in a chapter on how to choose wise advisors and avoid flatterers.

Therefore a wise prince ought to hold a third course by choosing the wise men in his state, and giving to them only the liberty of speaking the truth to him, and then only of those things of which he inquires, and of none others; but he ought to question them upon everything, and listen to their opinions, and afterwards form his own conclusions.

With these councillors, separately and collectively, he ought to carry himself in such a way that each of them should know that, the more freely he shall speak, the more he shall be preferred; outside of these, he should listen to no one, pursue the thing resolved on, and be steadfast in his resolutions. He who does otherwise is either overthrown by flatterers, or is so often changed by varying opinions that he falls into contempt…

A prince, therefore, ought always to take counsel, but only when he wishes and not when others wish; he ought rather to discourage every one from offering advice unless he asks it; but, however, he ought to be a constant inquirer, and afterwards a patient listener concerning the things of which he inquired; also, on learning that any one, on any consideration, has not told him the truth, he should let his anger be felt.

I think Mises read less of Machiavelli and more of the now 400 year old book written by an French courter called  not to A Practical Guide for Ambitious Politicians, or Walsingham’s Manual which Gordon Tullock republished in 1961.

I have a copy of this rare book republished in 1961 which was translated again in 2007 under the title Treatise on the Court. The Early Modern Management Classic on Organizational Behaviour.

For Mises to survive and prosper as a policy advisor as he struggled for position within a small elite group amidst fierce competition, he had to know how organisations worked, how to find the levers of power and press them. That is why is pitched his advice in light of the immediate,medium term or long term policy horizon horizon as set out in the dot points above.

Walsingham’s Manual has a whole chapter on when the courtier should warn of the hazards and difficulties that may lay ahead and when he should humour the prince in his inclinations that mesh well with what Mises did. There is another chapter on how to deal with rival courtiers that made Sir Humphrey proud:

Those who feel compelled to compete with you will not be won over by shows of respect or veneration. You can, however, coax them onto a different path by

• encouraging them to aim for a goal more ambitious than yours,
• helping them achieve this goal,
• offering to help advance their ambitions, and
• playing down your own goal as being too insignificant for them to aspire to.

Imply that you have no choice but to pursue your goal because you aren’t capable of competing (as they are) for any­thing better. By way of contrast, praise your competitors’ reputation, power, abilities and merit: suggest that they can do far better than you and should set their sights higher.

If ever you come to fear that a competitor may get ahead of you, raise doubts and insecurities in his mind about what he wants to do. Discuss the pros and cons of the matter, but always in a way that reinforces why he should give up and look elsewhere.

Your best and quickest course, though, is to disguise or hide your objective until it’s too late for anyone to compete with you or block you.

Pushing an ambitious plan too openly may repel the very people who would have helped you if you’d been more discreet, making your task more difficult and damaging your chances of success.

Then, if you do prevail, you’ll attract more envy than you would have otherwise, and if you fail, you’ll look that much more foolish. Your safest course is to do as rowers do, turning your back on your objective and showing every sign of having some other destination.