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David Colander and Craig Freedman, Where Economics Went Wrong: Chicago’s Abandonment of Classical Liberalism

Ross B. Emmett
p. 397-401
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David Colander and Craig Freedman, Where Economics Went Wrong: Chicago’s Abandonment of Classical Liberalism, Princeton: Princeton University Press, 2019, 267 pages, ISBN 978-069117920-9

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Crédits : Princeton University Press

1Colander and Freedman use their story of the Chicago School’s abandonment of classical liberalism as a way to get at their fundamental argument, which is about the failure of American economics generally to maintain appreciation for both economic science and the art of economic policy. Economists, the authors argue, have subsumed art within science in the effort to turn economics into an applied policy science. The focus on the Chicago School emerges from Craig Freedman’s extensive familiarity with the Chicago tradition through his interviews with Chicago economists, and his previous book Chicago Fundamentalism: Ideology and Methodology (Freedman, 2008). Colander adds part of the argument’s frame—the emphasis on the lost art of economic policy (Colander, 1992), his knowledge of the American Keynesian tradition (Colander and Landreth, 1996), and his clear writing. After a brief restatement of their argument, this review will focus on the part that Chicago economics plays in their story, and some brief remarks complicating Colander’s story of the lost art of economic policy.

2In brief, Colander and Freedman’s argument is that modern economics traded the appropriate balance between science, ethics, and the art of policy-making, found in the classical political economy of John Stuart Mill and John Neville Keynes, for the hope of creating an economics discipline that could shed the woolly-mindedness of ethics and art, and stand on its own as the true applied policy science. Both Milton Friedman and Paul Samuelson, who shared the classroom as students of the classical liberals Jacob Viner and Frank Knight at the University of Chicago in the early 1930s, share responsibility for this move (which neither Viner nor Knight would have approved of). “The Methodology of Positive Economics,” Friedman’s (1953) famous essay, provided a framework for Chicago-oriented economics, while Samuelson’s various welfare economics essays set the framework for American Keynesianism. The policy science that emerged was seen as the equivalent of a mechanic finding the right tool to fix your car’s engine (Friedman’s analogy), or a dentist choosing the right tool to clean your teeth (see Keynes, 1930). In this sense, post-war Keynesianism and post-war Chicago, including the latter School’s considerations of industrial organization, externalities, public finance and the rest, enshrined the “economist as applied policy scientist” as the new archetype of a modern policy advisor. Of course, the two schools differed in their findings, and Colander and Freedman argue that Chicago economists in particular came to emphasize empirical evidence as the conclusive difference. In that context, ideological leanings and empirical evidence often conjoined to produce policy studies that followed predictable patterns. Time after time, Chicago economists provided empirical evidence to support free market policies; mainstream economists used empirical studies to support Keynesian policies.

3At its core, then, modern economics, especially at Chicago, wedded ideology with methodology in the quest to create an applied policy science. Here I want to point out that Colander and Freedman’s argument about Chicago economics could have been strengthened if they had made more use of the Chicago School’s second foundational methodological assumption, encapsulated in the Latin expression which gave the title to the article articulating the principle—De Gustibus Non Est Disputandum (Stigler and Becker, 1977). Assuming that no account need be given for tastes or values means that Chicago-oriented economists can take tastes as given, and make observed changes in costs or constraints the explanatory factor in scientific policy evaluations. Friedman’s method and the Stigler/Becker de gustibus assumption fit together hand-and-glove to create the methodological framework for the Chicago School’s work from the 1960s to at least the early 1990s.

4There is much to appreciate in Colander and Freedman’s account of what went wrong with economics. To their credit, they do not seek to counter the scientific conclusions of modern economic research. Nor do they attempt to extend their research beyond Becker’s time at Chicago. What they do in the final three chapters, however, does extend their research by considering a) the “Virginia School”—best represented they say by Ronald Coase and Jim Buchanan (Colander has seen an advance copy of Levy and Peart, 2020), b) what a classical liberal alternative focused on “argumentation for the sake of heaven” (see chapter 8, 120-138) could provide, and c) a look at several contemporary economists, including Amartya Sen, Paul Romer, and Dani Rodrick, who the authors believe embody the classical liberal alternative today. The conclusion of those chapters is upbeat, suggesting the promise of what might be if these various ideas or personal styles of applying theory to policy are followed. Perhaps an appropriate follow-up to those chapters could have been the contrast of the views presented there with an evaluation of the consequences of the abandonment of economic theory for piecemeal studies using experimental methods that render economic theory superfluous (Biddle and Hamermesh, 2017). Much of the experimental and random control trials literature shows little of the judgment about the application of their science to economic policy that Colander and Freedman emphasize. Vernon Smith, a missing classical liberal voice in this book, would have usefully served as a another voice crying from the wilderness, in this case, of experimentalism (see Smith and Wilson, 2019).

5 Colander and Freedman mount such an effective argument for the resurrection of a classical liberal attitude toward the science, ethics, and art of economics that one almost misses a potential line of criticism that only a Frank Knight or some members of the Virginia School might catch. To appreciate the criticism, we need to return to the world of the two classical liberals Colander and Freedman lead off with—J.S. Mill and John Neville Keynes. Both Mill and Keynes lived in a world where democratization was incomplete, and the policy-maker was a gentleman of a certain class whose education Neville Keynes shared. Mill was born during the debates that led to the abolishment of the slave trade, was a young man as the vote was extended to middle class men and slavery abolished, and died a decade before working class men received the vote. Harriet died fifteen years before J.S. did, and it was another fifty years before women received the same rights to vote as men. Neville Keynes was born into a world where working class men had just received the vote, and lived to see women receive the same rights. He and his son Maynard also lived to see the social and political order that had been the context for classical liberalism ripped to shreds twice. Those results were frightening. Maynard Keynes’ conclusion was “that civilization was a precarious crust erected by the personality and will of a very few” (Toye, 2000); the judgment of that few would decide whether civilization or chaos would continue.

6Frank Knight drew a somewhat different conclusion. Colander and Freedman recognize in a footnote the infamous Knight lecture “The Case for Communism: From the Standpoint of an Ex-Liberal” (Knight, 1991). “The Case for Communism” was delivered on the eve of the 1932 presidential election, and contained a paradoxical exploration of the prospects for positive change in a democratic society (Burgin, 2009). If the radical challenge of communism focuses on the weakest aspects of capitalism, and if democracy is “government by discussion,” but public discussion seldom takes the real problems of a democratic society seriously and often devolves into salesmanship and political posturing, is there still hope for a liberal democratic society such as the one that Mill and Neville Keynes promoted? Despite his constant and paradoxical questioning of free markets and democratic discussion, Knight’s arguments in the lecture consistently point back to the core tenets of the classical liberalism that he (and Colander and Freedman) believed was in danger of being abandoned: markets function sufficiently well in terms of the spontaneous coordination that economic theory indicates, a constitutional framework consistent with markets and democratic discussion creates constraints on political disorder, and family and social life create a framework that enforces social norms. For Knight, the future of a liberal society did not depend upon the elite few who knew what was right (Knight, 1946). Good judgment in a liberal democratic order would balance the insights of economic theory, ethics (Knight, 1951), democratic theory, family and societal order, political theory, and institutional analysis (Knight, 1935) to create a civilizational context within which freedom would survive. Throughout the rest of his career, Knight sought to find the balance of economics, democratic philosophy, and ethics that would enable a liberal society to survive. Colander and Freedman remind us that the same challenge remains with us today.

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Biddle, Jeff E. and Daniel S. Hamermesh. 2017. Theory and Measurement: Emergence, Consolidation, and Erosion of a Consensus. History of Political Economy, 49(Suppl.): 34-57.

Burgin, Angus. 2009. The Radical Conservatism of Frank H. Knight. Modern Intellectual History, 6(3): 513-538.

Colander, David. 1992. The Lost Art of Economics. Journal of Economic Perspectives, 6(3): 191-198.

Colander, David and Harry Landreth. 1996. The Coming of Keynesianism to America: Conversations with the Founders of Keynesian Economics. Cheltenham: Edward Elgar.

Freedman, Craig. 2008. Chicago Fundamentalism: Ideology and Methodology in Economics. Singapore: World Scientific.

Friedman, Milton. 1953. The Methodology of Positive Economics. In Essays in Positive Economics. Chicago: University of Chicago Press, 3-43.

Keynes, John Maynard. 1930. Economic Possibilities for Our Grandchildren. In Essays in Persuasion, The Collected Writings of John Maynard Keynes. London: Macmillan, IX: 321-332.

Knight, Frank H. 1935. Economic Theory and Nationalism. In The Ethics of Competition and Other Essays. New York: Harper & Bros, 269-351.

Knight, Frank H. 1946. The Sickness of Liberal Society. Ethics, 56(2): 79-95.

Knight, Frank H. 1951. The Role of Principles in Economics and Politics. American Economic Review, 41(1): 1-29.

Knight, Frank H. 1991. The Case for Communism: From the Standpoint of an Ex-Liberal. Research in the History of Economic Thought and Methodology, 2(Archival supplement): 57-108.

Levy, David M. and Sandra J. Peart. 2020. Towards an Economics of Natural Equals: A Documentary History of the Early Virginia School. Cambridge: Cambridge University Press.

Smith, Vernon L. and Bart J. Wilson. 2019. Humanomics: Moral Sentiments and the Wealth of Nations for the Twenty-First Century. Cambridge Studies in Economics, Choice, and Society, Cambridge: Cambridge University Press.

Stigler, George J. and Gary S. Becker. 1977. De Gustibus Non Est Disputandum. American Economic Review, 67(2): 76-90.

Toye, John. 2000. Keynes on Population. Oxford: Oxford University Press.

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Ross B. Emmett, « David Colander and Craig Freedman, Where Economics Went Wrong: Chicago’s Abandonment of Classical Liberalism », Œconomia, 9-2 | 2019, 397-401.

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Ross B. Emmett, « David Colander and Craig Freedman, Where Economics Went Wrong: Chicago’s Abandonment of Classical Liberalism », Œconomia [En ligne], 9-2 | 2019, mis en ligne le 01 juin 2019, consulté le 18 novembre 2019. URL :

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Ross B. Emmett

Center for the Study of Economic Liberty, School of Civic and Economic Thought and Leadership, Arizona State University.

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