The Ideas behind the Man

To understand history look beyond the historical figure

Introduction

Too often history is presented as a succession of individuals and the task of understanding is reduced to biography. I wish to propose a new perspective. The historic significance of an individual lies not in the concrete person but in the ideas that he or she represents either intentionally or by projection. To illustrate this point I will use the contrasting entrepreneurship theories of Joseph Schumpeter and Israel Kirzner applied to the economics of history. The central question is this: are individuals exogenous shocks which a society adjusts to or are individuals the culmination of an evolutionary competition among ideas held in society? I will finally give an example of this analysis by viewing the election of Donald Trump as President of the United States in this perspective. Is campaign rhetoric merely a means to an end or is it a mirror into preexisting ideas that have historical consequences?

Schumpeter and Creative Destruction

“We have seen that the function of entrepreneurs is to reform or revolutionize the pattern of production by exploiting an invention or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, by opening up a new source of supply of materials or a new outlet for products, by reorganizing an industry and so on… This kind of activity is primarily responsible for the recurrent ‘prosperities’ that revolutionize the economic organism and the recurrent ‘recessions’ that are due to the disequilibrating impact of the new products or methods.” — Schumpeter “Capitalism , Socialism, and Democracy” pg. 132

According to Schumpeter historical progression could be modeled in the following way. If we were to take an aerial view of an economy we would find it in an equilibrium state. Sellers will find buyers and buyers will find sellers and X will mark the spot in Marshall’s famous footnote. At some later point in time, though, an entrepreneur will enter the economy with a new invention that shocks the market. Plans will have to be radically changed and what ensues is an adjustment process, with all the countervailing forces of the business cycle, that ultimately ends in a new equilibrium. This shock-adjustment process is thus the mark of economic history.

In my opinion, current popular theories of historical understanding utilizes (knowingly or not) this type of model. Take for instance, how you are taught history in high school. In the typical unit on the American Revolution do you study the philosophies of Jean-Jacques Rousseau, John Locke and David Hume, and how their ideas were distributed and consumed throughout the colonies? No. You are introduced to a list of historical figures like George Washington, Benjamin Franklin, and Thomas Jefferson. They will inevitably have been presented as outside forces of change which the rest of the colonial population adjusted to.

Over long periods of historical time this shock-adjustment model is convenient to summarize the complex and infinitely large network of social interactions that makes up history. This can be seen in the peace-time/war-time dichotomy. In 1916 the United States is in a peaceful equilibrium state in relation to the rest of the world. But in 1917 the U.S. is thrown into disequilibrium. By 1919 a new equilibrium is attained only to be thrown off by shock of December 7, 1941. And so on the story goes. However, in reality, the ideas and philosophies that make war possible between human beings (it would be naive to try and list them here) are ever present. In the next section, Kirzner’s entrepreneurship theory will help us see that historical figures are the result of underlying philosophical and ideological processes.

Kirzner and History as a Process

“The brash, bold entrepreneurs who introduced the automobile to the U.S. market indeed set in motion market movements which, in one sense, disrupted the plans of many investors and workers in the industries they displaced. But their doing so, we now see, constituted not an act of destruction in itself, but one which revealed the wastefulness and the misallocated character of the enormous volume of investor and labor decisions that mistakenly committed resources to the horse-drawn carriage industry. The superficial placidity of the situation in that industry on the eve of the emergence of the automobile was indeed just that, merely superficial. The truth, as we now know, is that it was an industry sitting on a powder keg waiting to explode.” — Kirzner, “Creativity and/or Alertness” pg. 15

As opposed to Schumpeter’s model of shock and adjustment, Kirzner explains the market as a coordination process. Individuals at a every point in time will create plans so as to maximize lifelong utility. However, instead of positing sudden exogenous change, in Kirzner’s story market data changes all the time. Change can take the form of different prices a consumer faces, or different desires. Choosing to become a teacher instead of an oil and gas lease analyst is just as much an economic change as a 2.7% change in GDP. Building on Friedrich Hayek, Kirzner notes that this creates quite the paradox. If every individual creates their own subjective plans and is constantly changing, modifying, and molding these plans as data changes at rapid speed how does anything get done? What should we produce? Where? For how much? For how long? If any individual or board of economic managers tried to solve these problems they would fail miserably. The answer is that prices and profit/loss accounting allow for such an equilibrating dovetailing of plans.

Historical progress works in much the same way. Individuals do not come into the world as blank slates independent of their environment. When you become a conscious being, you are thrown into a certain facticity. You inherit not only a language and a family, but norms, beliefs, social institutions and interpretive instincts, which for the moment I’ll include in a broad “ideas” category. From this point an evolutionary process takes place. You either reproduce the inherited ideas or you can change or renounce these ideas. Both options are subject to inter-temporal survival competition. (A similar idea is present in Roland Fryer “An Economic Approach to Human Capital”) Once any idea has successfully gone through this process it will become manifest in an individual picking it up and acting on it. Individuals that seem shocking to the public sentiment were really just the result of this ideological “powder keg waiting to explode.”

The Triumph of Trump

If we wish to understand the election of Donald Trump then I would suggest the Kirzner model of historical understanding. Immediately after the election many in the “elites” in the media and “plebeians” on their Facebook and Twitter accounts proclaimed their surprise at the outcome. The scapegoating of the polls began immediately. Now, after some reflection, many journalists are starting to notice the signs that they missed along the campaign trail. Most of their accounts follow the same narrative: “We focused on Trump when we should have focused on the enthusiasm of his supporters.” While many people (myself included) scrutinized the ridiculous and shameful character of Donald Trump, they did not ask from what ideological foundation he sprung forth.

Trump is not an outside force. We would be remiss to push this election aside as an outlier and cower behind the idea that we can’t do anything so we might as well “give him a chance” and meet back up four years from now. Trump is a harbinger of the ideas that fueled his campaign. If these ideas go unquestioned they become normalized in our social discourse. It is the normalization of ideas that have historical consequences. These ideas can be for good (see Diedre McCloskey “Bourgeois Equality” or for evil (see Ibram X. Kendi “Stamped from the Beginning”). It is thus our responsibility to not take naive comfort in the fact that Trump will not be able to actually achieve many of his campaign promises, but to stay vigilant of the rhetoric of himself, his staff, and his followers.

It is not the scope of this article to give a full rhetorical analysis but to establish a starting point for future research. Clearly, the United States is a deeply divided nation. If it is true that this division comes from a clash of ideas, then I believe much is to be gained from studying history and the history of ideas in the strain of Kirzner instead of Schumpeter. I will end this article with a quote from Hayek that serves as inspiration for this task:

“We are still, largely without knowing it, under the influence of ideas which have almost imperceptibly crept into modern thought because they were shared by the founders of what seemed to be radically opposed traditions. In these matters we are to a great extent still guided by ideas which are at least a century old, just as the nineteenth was still guided by the ideas of the eighteenth… But I doubt whether it is possible to overestimate the influence which ideas have in the long run. And there can be no question that it is our special duty to recognize the currents of thought which still operate in public opinion, to examine their significance, and, if necessary, refute them.” — Hayek, “Counterrevolution of Science” pgs. 399–400.