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Download Papers of 12th Gottfried von Haberler Conference

haberler conference 2016

Central Banks, Fiscal Policy
and the Betrayed Citizen

The XII. International Gottfried von Haberler Conference took place on May 20, 2016 in Vaduz, at University of Liechtenstein. Topic: “Central Banks, Fiscal Policy and the Betrayed Citizen” (German translation: “Über Zentralbanken, Schuldenpolitik und den geprellten Bürger”). The event was organized and hosted by ECAEF – European Center of Austrian Economics Foundation. Conference papers can now be downloaded here:

On Central Banks and the ‘Taylor Rule’
- John B. Taylor (USA)

Falsche Zentralbankpolitik, Konsequenzen und mögliche Alternativen
- Peter Bernholz (CH)

Über die Schulden-, Transfer- und Bankenunion - Tillman C. Lauk (ES)
Fiskalpolitik: Keynesians vs. Austrians - Thorsten Polleit (D)

Über Rechte und Freiheit des Bürgers - Henrique Schneider (CH)
Overdose! The Corrupting Effects of Easy Money - Johan Norberg (S)

Relevant literature also offered for sale at

Excellence is Ordinary

by Raffaele De Mucci*

    To be sure, over the last years we have witnessed – especially in the media – an increasingly indiscriminate and misleading use of the term “excellence”, which is usually seen as the sole route towards modernization and social, political and cultural development. Yet it takes some qualifications and a bit of caution, if we are to employ the concept as it is largely employed nowadays, that is, to indicate situations or personalities which rank above what we consider the “élite” – something even beyond the logic of “meritocracy”, which is solely applied to competitive aristocracies whose members possess particular knowledge and skills which grant them some sort of supremacy.
To begin with, the ambiguity of the term is partly due to its etymology. “To excel” derives from Latin ex-cellere, literally “to take out”, but soon becomes synonym with “sublimity”. It was no chance that, until of late, the word commonly recurred in honorary and ornamental titles, such as “Your Excellency” or “His/Her Excellency”. In the past these titles were addressed to monarchs, especially during the age of Longobards and of Franks up to the fourteenth century, and then to ambassadors, high state representatives and archbishops.
In Italy, as in many other European countries, traditions and protocols still demand the use of the title, which also recurs, with a more strictly juridical connotation, in politics (for local ambassadors and, in official ceremonies, for chiefs of state and ministers), administrative (for local prefects), juridical (for presidents of the higher courts and general attorneys), religious, noble, and military – a routine which was consolidated and became compulsory under fascism.
[…] As it mainly consists in mechanisms to achieve a consensus based on the electoral majority, democracy is structurally inadequate to identify “excellence”. While democratic procedures are meant to allocate power and governmental positions, it is not to be taken for granted – as Aristotle knew pretty well – that in a democracy only the more capable and the more competent will succeed. On the contrary, the motives which orient electoral choices are so diverse and so often alien to merit – in its aristocratic meaning – that “democracy” and “meritocracy” are generally seen as contradictory locutions. Thus, relying on civic virtues is apparently not the best way to allow “excellence” to emerge, for popular consensus is largely built on irrational arguments, mostly explicable in terms of mass psychology. The moral and institutional supremacy of democracy lies – as Karl Popper knew well – in its emphasis on the choice not of those who rule, but of those who control (and can potentially remove) those who rule. And this is precisely what, according to the rule of law, is labelled “balance of power”.
Accordingly, the “original sin” of democracy – which is taken by some as a good reason to criticize the parliamentary system – is its fatal tendency to turn into the “tyranny of the majority”, i.e. a new sort of absolutism or totalitarianism under the appearance of modern omnivorous statism. And this in turn explains how a democratic system which neglects both the spirit and the practice of pluralistic competition can let the worst emerge, as Friedrich von Hayek lamented.
It is no coincidence that the most widely adopted antidote against such collateral effects of democracy, which mystify and mortify the very notion of merit, is technocracy. Once we have established that excellence is not, and cannot be, the basis of democracy, we may yet observe that other political systems are more compatible with excellence. Aristocracy, hierocracy, timocracy, paternalism, technocracy, and Plato’s kingdom of philosophers are likewise cases in point.
Among these systems, technocracy – i.e. the government of non-elected experts – is the most popular nowadays. Here’s a list of its main features: (1) power is held by men or women who are not politicians strictly speaking, but who can nevertheless coerce people into doing what they otherwise would not do; (2) such power is perfectly legitimate, being exerted by means of the state monopoly of coercion; (3) politics rules over society and economy. Technocracy is thus a true ideology having as its cornerstones competence and efficiency, which is what mass democracy is unable to achieve. It postulates an objectivistic conception of the common good, which can be rationally grasped by means of scientific method, after replacing political ideologies with a rationally sound view of reality which is supposedly immune from particular interests. It was Pareto who observed that “you may sin through ignorance, but you may also sin for interest. Technical competence may avoid the former, but can do nothing to avoid the latter”2. The risk of falling into corruption does not belong to politicians alone, but to whoever can exploit the public system at the expense of others. Also, the alleged objectivity of scientific method is yet to be proven, especially if we are to take seriously Popper’s epistemology, which “puts forward a view of science as open to falsification and not liable of conclusive demonstration”; “and this is why, while predicating the end of ideologies, technocracy is an ideology of its own”3. In addition, even if technocrats could get any closer to a criterion of impartiality, such criterion could solely pertain to the means and not the ends – as we know from Mises’ view of economics as science of human action in general, i.e. “science of the means”; means that’ll serve ends whose choice is always discretionary and arbitrary. In short, technical knowledge can only decide on the “how”, rather than the “what”, for the latter always implies a judgment of value.
Thus democracy, almost by definition, is not based on excellence. To talk about excellence is in fact misleading, since democracy – as Kelsen put it – is essentially a set of procedures, rules and conventions; or – as Schumpeter put it – a process of institutionalization of conflict by means of shared values and rules, the acceptance of which is not a barrier to the emergence of the “non-excellent” (the perfect representatives of the average electorate), let alone of the worst. And the criterion of inclusivity is precisely that which democracy consists in.
Crucial to democracy is also the rule of majority. In its simplest formulation, beside solely creating sum-zero games (where the sum of the utility created is always null, since those who win, win it all, and those who lose, lose it all – differently from the market which always creates positive-sum games, which make all the actors better off), this principle rules out the possibility of external evaluations or decisions, even if made in accordance with the principle of excellence. Thus, not only does excellence not lay at the foundation of democracy, but it is unable to, since any choice based on excellence is by definition a choice not based on the rule of majority.
[…] The notion of “excellence” is undoubtedly much more debated in the economic than in the political domain – both by public opinion and specialized literature. As to the latter, that notion is generally referred to the needs of firms of reaching their goals. After establishing its specific criteria, scholars then indicate the path to achieve it, as in the ambivalent title of the most popular book on the subject: Tom Peters and Robert Waterman’s In Search of Excellence. The focus here is on business performances, the big scale of the business, the quality of the working environment (cf. the international index “Great place to work”), the high levels of productivity, the working specialization, innovation and research investments, the quality of the product, customer satisfaction, customer care and business know-how, and also a definition of “total quality management”.
If we focus on the public debate rather than the academic literature, we notice that much of the emphasis on excellence comes from the media, often from those who are particularly touched by the issue. For instance, one of the domains where the issue of excellence frequently comes up is that of small enterprises. Thus, we can hear of a troubled country, Italy, which presents nonetheless some “niches of excellence” (i.e. enterprises selling quality products – e.g. Murano glass); we can hear of enterprises navigating against the tide, i.e. innovating and exporting more than others despite the crisis; we can hear of the excellence of “made in Italy”, rendered possible by a special managerial approach (i.e. the industrial districts). Behind these sorts of discussion there lay perhaps just a sort of boastfulness, if not the attempt to draw special fiscal attention.
Beside the role of excellence in the formation of a political system, there is a further dimension which is not to be overlooked: namely, the fact that within a political system actors do produce. By focusing on what a political system “does” rather than what it “is”, once again we are intertwining the issue of democracy with that of excellence, and we are thus wondering whether the latter can coexist with the former.
To speak of excellence is to focus on the tip of the iceberg. Those policies which are based on the idea of excellence are thus concerned with the higher levels of the observed category. Once the right target is identified, there can be different attitudes towards excellence: indifference, aversion, or approval.
In the first case, there is no action – either “for” or “against” excellence – for us to analyse, and we can thus ignore it. The second attitude is generally epitomized by the “levelling” action, variously defined, of egalitarian groups. The third and last attitude is the most widespread, as virtually no-one – and certainly no democratic regime – has ever officially declared him- or herself “against” excellence. Accordingly, there are two decisions that policy makers may take to favour excellence: they can assist them or set them “free”. In other words, they may either finance them or give tax cuts; they may either direct them – perhaps by assigning them to special duties or granting them special rights or juridical statuses – or let them do as they like. It is worth pointing out that such phenomenon does not solely belong to the economic field, but arguably also to the bureaucratic and the juridical. And yet it is still an economic phenomenon, for – as we know from Mises – not only every public decision, but also every action as such, has its own costs.
The notion of excellence is related that of “merit”, which is yet different from “meritocracy”. While “merit” is a dynamic phenomenon which naturally belongs to competition, “meritocracy” is often seen with suspicion – as a likely path to absolutism. Excellence, conversely, is not only a dynamic measure of quality but also a static attribute of honourability. By the same token excellence could refer us to (Montesquieu’s) timocracy, where excellence coincides with honour – that is, honorary attribution and static reverential presence, perhaps acquired by heredity or cooptation, rather than merit.
The policies aimed at promoting excellence may thus prima facie reward the “capable and deserving”. What is, then, the relation between the policies that promote merit and those promoting excellence? Are they similar, unrelated, or perhaps contradictory?
From this perspective the notion of merit seems to include that of excellence, being somehow broader: while promoting excellence means focusing on the top of the pyramid, meritocracy is also concerned with the bottom of the structure. Merit implies, in fact, both bottom-up and top-down social mobility. Policies in support of excellence – such as those aimed at containing the so-called “brain drain” – are (negatively) concerned with eliminating the barriers to the emergence of excellent people; conversely, meritocratic policies positively remove the privileges of the non-excellent (e.g. by intervening against corporations), sometimes with direct penalties: those who excel are to receive more than those who do not.
It is clear, then, how uncertain and tricky our very concept of “excellence” is, and how easy it would be to take for granted its meaning, let alone its actual existence in the world. Yet we would be wrong in assuming that everyone uses the term (the form) having in mind the same meaning (the substance). The sole way to avoid superficiality and reason scientifically is to begin with definitions. What is, then, excellence? The answer might seem easy if not tautological, commonsensical: “excellence is what everyone knows to be excellent”. Alternatively, some may provide an ex cathedra definition, given by an expert whose intention is not to describe what people do believe, but rather to prescribe what people ought to believe. As an expert, he/she would thus be establishing the criteria that others are supposed to follow. Quite obviously, both solutions would lead us to infinite speculations, which in turn would legitimise the experts themselves – the latter simply by assumption, the former because the analysis of what everyone thinks is necessarily an analysis of what “each” thinks. An endless series of variables which cannot be cut down but arbitrarily. And yet the matter has its own depth. When someone argues that something is or is not excellent, he/she is providing an evaluation. But all evaluations are subjective (we’re still in the field of social, rather than natural, sciences), as we know from both the Austrian School of Economics and the subjective theory of value.
Let us assume we are to define the notion of excellence for more than one person. Who is to define it? According to what criteria? Who is to decide the criteria? And who is to decide who is to decide? These are far from pleonastic questions. There are three possible solutions: (1) decisions are taken by one person; (2) decisions are taken by a majority vote; (3) solutions are reached spontaneously, as they emerge from the interaction of individuals, each making up their own minds. Behind these solutions, it is easy to see three different systems. The first can either reside in authoritarianism, dictatorship, statism, paternalism or technocracy, characterized as they all are by different forms of “abuse of reason”; the second is democracy; the third is represented by the market, according to a broader conception which does not discriminate between economic life and the rest of social life.
Obviously enough, these are but simplifications, for in reality we always find a mixture of these three models, whose dosage is given by our judgments of value.


*Raffaele De Mucci is Professor of Political Sociology and Comparative Politics at the Department of Political Sciences, Luiss-Guido Carli University (Italy), and Director of Luiss-Laps (Laboratory of Political and Social Analysis) in Rome. His original article ‘L’eccellenza è mediocre’ was published in il foglio, translated from Italian to English by Federico Morganti (LUISS-Labs).

Economic riders of the apocalypse

GIS* statement by Prince Michael of Liechtenstein

The G20 finance ministers and central bank governors have already met twice this year to discuss the world economic situation, writes Prince Michael of Liechtenstein.

After the February meeting in Shanghai, they released a cautiously optimistic communique congratulating themselves for “important achievements” in bolstering growth and stability. This was revised to an even more optimistic assessment of global recovery at the April 14-15 meeting in Washington.

Washington, D.C., April 15, 2016: G20 finance ministers and central bankers gave themselves a pat on the back, but also warned of “downside risks and vulnerabilities” (source: dpa)
Washington, D.C., April 15, 2016: G20 finance ministers and central bankers gave themselves a pat on the back, but also warned of “downside risks and vulnerabilities” (source: dpa)

The picture looks different if one takes a longer view, especially from the standpoint of business and trade. The G20’s achievements have been mostly in the verbal sphere, with the sole tangible result of imposing more regulations, guidelines and controls. This is the only area where the various countries seem to agree.

More government intervention and the expansion of an already oversized and inefficient regulatory framework, both national and global, can only harm innovation and trade. It fosters protectionism, regardless of the G20’s declarations to the contrary. By stalling the real engines of sustainable long-term growth – free enterprise and free trade – such measures steal prosperity from all parts of society, especially the poor.

Regulatory risk has become a huge obstacle to financing infrastructure projects, which are vital to any improvement in living standards. Irresponsible government interference in markets, usually for populist reasons, has become common in the energy industries and public utilities of many countries, to give just one example.

Perhaps aware of these difficulties, the finance ministers and central bank governors betrayed a certain uneasiness in Shanghai. In the official statement, they published a list of apocalyptic riders that could spoil the results of their good work, and for which they could take no responsibility …  Continue reading -> GIS Statement

*GIS is a global intelligence service providing independent, analytical, fact-based reports from a team of experts around the world. We also provide bespoke geopolitical consultancy services to businesses to support their international investment decisions. Our clients have access to expert insights in the fields of geopolitics, economics, defence, security and energy. Our experts provide scenarios on significant geopolitical events and trends. They use their knowledge to analyse the big picture and provide valuable recommendations of what is likely to happen next, in a way which informs long-term decision-making. Our experts play active roles in top universities, think-tanks, intelligence services, business and as government advisors. They have a unique blend of backgrounds and experience to deliver the narrative and understanding of global developments. They will help you develop a complete understanding of international affairs because they identify the key players, their motivations and what really matters in a changing world. Our experts examine the challenges and opportunities in economies old and new, identify emerging politicians and analyse and appraise new threats in a fast-changing world. They offer new ideas, fresh perspectives and rigorous study.

Semantic Traps: Politics with Loaded Terms

Semantic Traps

Semantic Traps:
Politics with Loaded Terms

A Seminar for Scholars, Journalists and Entrepreneurs

“One must always repeat the truth, because even the error around us is preached again and again. And not from individuals but from the crowd.” J.W. von Goethe

When political speech writers pen speeches for presidents, prime ministers, and other influential dignitaries, they choose their words carefully, knowing that rhetoric matters. A classic case of an intentional deception of words, according to Schumpeter was the hijacking of the term liberal. In a similar fad, the market economy is increasingly condemned as a system of crony capitalists, the empty notion of social justice turned into a general verdict on our society’s moral status, or carbon pollution became a substitute for the greenhouse gases. In chapter 7 of The Fatal Conceit, “Our Poisoned Language,” F.A. von Hayek lists over 100 words before which we put social ranging from social accounting to social property to social waste, and in each case obfuscate their meaning.
Have you ever wondered how many of our habitual political terms have assumed quite different meanings or, maybe deliberately, have even taken on undertones that suggest something detrimental to what we want to get across? It seems as if the old Confucius warning “when words lose their meaning people will lose their liberty” has more relevance today then ever before.
With Confucius’ admonition in mind, PERC, Liechtenstein Academy, and ECAEF have teamed up to organize a seminar on “Semantic Traps: Politics with Loaded Terms”. Details including the agenda are listed below. If you are interested in finding out more about the seminar, contact co-directors, Terry Anderson or Kurt Leube.

Seminar Date: June 9-11, 2016 (Thu evening to Sat noon)

Location: Liechtenstein Academy Foundation Campus: Freudenfels Castle at Lake Constance, Eschenz, Switzerland

Admission Fee: Free Admission

Program Director: Hans-Rudolf Maag

Academic Directors: Terry L. Anderson and Kurt R. Leube

Seminar Program

Thursday – 9 June, 2016:
tbd Opening Dinner (optional) and welcoming remarks by H.S.H. Prince Michael of Liechtenstein

Friday – 10 June, 2016:
09:00 – 09:30 Registration
09:30 – 10:00 Welcome and Opening
Member of the Princely Family (LI), Hans-Rudolf Maag (CH) and
Terry L. Anderson (USA)

Session I: Politics
10:00 – 10:30 «On the Confusion of Terms in the Political Debate»
Michael Wohlgemuth (D)
10:30 – 10:45 Discussion
10:45 – 11:15 Coffee break
11:15 – 11:45 «Justice, Fairness, Solidarity! The Prophecy of a ‘Socially Just’ Society»
Hardy Bouillon (D)
11:45 – 12:00 Discussion
12:00 – 12:30 «Is the ‘Public Interest’ really in the Public’s Interest?»
Carlos Gebauer (D)
12:30 – 12:45 Discussion
12:45 – 14:00 Buffet Lunch for all participants at seminar site

Session II: Economics
14:00 – 14:30 «Are the Poor really Getting Poorer as the Rich are Getting Richer?»
Erich Weede (D)
14:30 – 14:45 Discussion
14:45 – 15:15 «In Defense of Private Property»
Gary Libecap (USA)
15:15 – 15:30 Discussion
15:30 – 16:00 «Fair Trade and Sustainability: Is Globalization Evil?»
Robert Nef (CH)
16:00 – 16:15 Discussion
16:15 – 16:45 Coffee break
16:45 – 18:00 Q&A, Session I and II
19:00 Dinner at the seminar site (Freudenfels Castle; mandatory); Speaker TBA

Saturday – 11 June, 2016:
08.00 – 09.15 Breakfast
09:30 – 09:45 Directorial Remarks
Hans-Rudolf Maag

Session III: Environmental Issues
09:45 – 10:15 «Dynamic Economics and Dynamic Ecology: The Essence of Free Market
Terry L. Anderson (USA)
10:15 – 10:30 Discussion
10:30 – 11:00 «On Secular vs. Non-Secular Environmental Beliefs»
Mark Pennington (UK)
11:00 – 11:15 Discussion
11:15 – 11:45 Coffee break
11:45 – 12:15 «Unleashing the Power of Free Market Environmentalism»
Martin Hostettler (CH)
12:15 – 12:30 Discussion
12:30 – 12:45 Closing remarks
Member of the Princely Family (LI), Hans-Rudolf Maag (CH) and
Terry L. Anderson (USA)
12:45 Individual departures

A Theory of Conspiracy

by Raffaele De Mucci*

previously published as ‘Antidotes To The Methodological Individualism Poisons Of The Conspiracy Theory Of History And Society’ in: Sociologia. Rivista Quadrimestrale di Scienze storiche e sociali, XLIX, n. 2, 2015, pp. 15-21

Introduction: plots and conspiracies in the society and history

The conspiracy theory is a theory that circumvents the common understanding of historical or current events, claiming that these are the result of a manipulation on the part of one or more occult powers or conspiracies. “Conspiracy Theory” is used to refer to unconventional theories about historical or current events, which may appear unfounded, outlandish or irrational. Generally, conspiracy theories claim that a particular event, such as an assassination, a revolution, or even the failure of a product, is not due only to visible actions of individuals who belong to political or market forces, but rather to collectives and usually hidden conspiracy or actions.

The conspiracy theory is one of the most consistent of the “Poverty of historicism” [Popper 2013]: it wants to believe that history always has an end result, more often than not, a blatant or surreptitious planning as in the perverse logic of Constructivism [Hayek 1967], due to the work of any entity more or less abstract, more or less personified – you may name Providence, Destiny, Fate, Chance, you resort to Bentham’s Panopticon metaphor or to the Moloch of Big Brother Orwellian’s memory or to the more recent and familiar myth of the Great Old Man, which pursues objectives of putsch and terrorist actions by the extreme left and the extreme right, or more – and that this purpose is always beyond the combination of unintended, unwanted or unforeseen effects, related to always intentional human action [Hayek 1967: 110 seq.].

In the Open society and its enemies, Popper himself says: «The conspiracy theory of society or the world is nothing but a modern version of Theism, belief in Gods whose whims and desires command over all. If you remove the Gods (…) then instead of them, powerful men and groups will be placed – the dark powers – which is attributed to all» [Popper 1974: 125-26]. Popper holds to reiterate that he did not believe that the plots are impossible, but rather, they are typical social phenomena that become important every time you come to power just people who believe in the conspiracy theory. Ultimately, the plots or fail and are soon in the light (the murder of Julius Caesar), or fail and are still in the light (Cicero and Catiline). In short, the plots always emerge if really exist [Eco 1988] …

Download the entire essay here -> A Theory of Conspiracy (PDF)

The attacks in Charlie Hebdo (2015), the shooting of MH17 in Ukraine (2014), the death of Hugo Chavez in Venezuela (2013) – all results of collective hidden conspiracies? The reconstruction of an event through the use of a conspiracy hypothesis can give life to the logical process of counterfactual judgment. Raffaele De Mucci published a ‘Theory of Conspiracy’.


*Raffaele De Mucci is Professor of Political Sociology and Comparative Politics at the Department of Political Sciences, Luiss-Guido Carli University (Italy), and Director of Luiss-Laps (Laboratory of Political and Social Analysis) in Rome