The Intellectual and the Marketplace — Schumpeter & Stigler

Having dispensed with the ever-dynamic Marx, the Schumpeter Roundtable continues through Capitalism, Socialism, and Democracy this week with a close read of Part II — Can Capitalism Survive?  After some wonderful writing on Creative Destruction in Chapter VII, we move on to the projected demise of capitalism, oh, sometime in the next 100 years or so. (Of course, this was published in 1942, so we could still be on schedule).  In Chapter XIII we are faced with “Growing Hostility,” and Schumpeter provides us with some rather inflammatory views of the “The Sociology of the Intellectual.” To wit, Schumpeter contends that “unlike any other type of society, capitalism inevitably and by virtue of the very logic of its civilization creates, educates, and subsidizes a vested interest in social unrest.”

That vested interest, of course, is the intellectual.  It is not my purpose here to endorse or to attack Schumpeter’s views (is he analyzing or just venting?), but rather to point to George Stigler’s concise “The Intellectual and the Market Place” as another giant of the profession trying to come to terms with why intellectuals seem — at least to these authors — to be be hostile to market economies.

There seems to be a remarkable continuity between Schumpeter and Stigler’s views of intellectuals. As if following up on Schumpeter’s point, Stigler says:

Since intellectuals are not inexpensive, until the rise of the modern enterprise system no society could afford many intellectuals… Not only have the productive achievements of the market place supported a much enlarged intellectual class, but also the leaders of the market place have personally been strong supporters of the intellectuals, and in particular those in the academic world.

Indeed, the two seem to agree that capitalism and intellectuals go hand in hand.  So how do intellectuals view the marketplace? Here is a taste of Stigler:

It is an interesting illustration of the great influence of the intellectual that the market place itself has become apologetic of its pursuit of profit. The captains of industry now, in a world in which public relations are becoming as important as efficiency, list among their major achievements the great number of bowling alleys or college fellowships they have given to their employees. To boast that large profits demonstrate great efficiency in producing existing products and introducing new ones is considered even by them to be too archaic a form of thought for public consumption. The patron saint of economics, Adam Smith, once wrote:

I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.

I wonder what those very few words were

Check it out for yourself if you have a minute.  One of our own Faculty Roundtable members had this rather pithy offering:

Stigler compares the possibility of intellectual coercion in the marketplace of ideas (through reigning fashions, etc) to monopolistic practices in the capitalist marketplace. In both cases, he points out that the actual instances of coercion/monopoly are rare and of little importance in the long run. Of course, Schumpeter goes further and argues that various “monopolistic practices” are actually responsible for greater long-term efficiency and production, even though they look in the short-run to be wasting resources, etc… (Chapter VIII of CSD).  It occurred to me that Stigler’s analogy with intellectual coercion is related to Schumpeter’s “Science and Ideology” speech: while a reigning ideology may seem to be obstructing paths of inquiry or distorting scientific “truth,” in fact the competition of these visions is the essential mechanism of scientific progress … creative destruction in the intellectual sphere.

A really interesting point, and one of the reasons it’s fun to read with these folks.

I happened upon this totally by coincidence at Steven Landsburg’s blog.

He approves of Stigler’s message.

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