Monday, September 20, 2010

The Excommunicated Neoliberal: More On Henry Simons

For those interested in more info on Simons, his role as a founder of neoliberalism and his eventual excommunication from neoliberalism, I've pulled together a few documents for you.

The first is a paper from the editors of the Road From Mont Pelerin which appears to be a longer, more detailed version of the Chicago School chapter.  You can find that paper here.

The second is a paper that co-opted the title of Simons' famous essay and labeled him a "democratic socialist."  You can find that paper here.

Finally, here is Brad DeLong's defense of Simons as a true neoliberal (found on the neoliberal Cato Institute's website).  You can find that paper here.

The first paper includes this interesting little reference to seeking funding from Rockefeller:

In expressing his admiration of Simons’ financial savvy, Hutchins writes: “It sounds to me as though you would get us a million dollars from Mr. Rockefeller and another million, by way of apology, from Harry Luce. When the money comes in, I will split it with you” (SPRL, Hutchins to Simons, November 5, 1943, box 3, file 58).
UPDATE: For Ray, here's an interesting section from the first paper, which suggests substantial influence from the organization funding Hayek's work:

In 1946, Leonard Read, a businessman and crusader, had obtained a loan from the
Volker Fund to buy property in Irvington, NewYork and create the Foundation for
Economic Education (FEE), an organization the Volker Fund subsidized in perpetuity.
Read tended to see the world in black and white, which was why he had earned
Luhnow’s trust: “There was no big tent in Read’s world. There was only a core group of
ideas. You could either take them or leave them….” Not surprisingly, Read advocated a
inflexible stratagem for defeating socialism: “to move beyond denunciation to ‘upholding
its opposite… expertly, proudly, attractively, persuasively’” (quoted in Hoover, 2003, p.

Apparently, the late Simons was not sufficiently infused with political virtue for
Read, because he would shortly criticize Simons’ posthumously published
Policy for a Free Society

Some of us here have carefully gone over the galleys of “Economic Policy for a
Free Society’ by Henry Simons. We had hoped this was a piece we might assist
in distributing, but it is so well loaded with the advocacy of collectivistic ideas,
that it falls entirely out of our field. The book states many positions with which
we are in agreement, but personally, I do not believe that the cause of individual
liberty and a free market economy will be aided by it (quoted in HPHI, Letter
from Read to Director, Nov. 24, 1947, Box 58 F William Volker Funds 1939-48).
Undoubtedly passages such as the following from
discomfort at the Volker headquarters:

The afflictions of bureaucracy and ossification fall no less surely on vast private thanon governmental enterprises. The efficiency of gigantic corporations is usually a vestigial reputation earned during early, rapid growth—a memory of youth rather
than an attribute of maturity. Grown large, they become essentially political bodies,
run by lawyers, bankers, and specialized politicians, and persisting mainly to
preserve the power of control groups and to reward unnaturally an admittedly rare
talent for holding together enterprise aggregations which ought to collapse from
excessive size (Simons 1948, p. 246).

Once again, Hayek was called upon to smooth ruffled feathers. He wrote Luhnow:
“I am writing to draw your attention to Henry Simons’ book,
to be any prospect of preserving the competitive system and a free society generally… it
is certainly in the spirit of that book that Director will conduct his investigation at
Chicago” (Hayek Papers, Hayek to Luhnow, December 8, 1947, box 58, folder: William
Volker Fund: 1939-48).

At this crucial juncture, we can observe the major protagonists engaged in intense
negotiations as to what it would mean to launch the Chicago School. A number of things
become apparent, which have been altogether absent from previous accounts. First, it was
the legacy of Henry Simons that was perceived to be at issue in the fledgling project. The
mere fact of a seminar identifying itself as being “pro-free market” did not cut the
mustard when it came to concocting a credo that all parties could subscribe to. Secondly,
Luhnow and the Volker officers were not mere accessories to the rise of the Chicago
school: they were hands-on players, determined and persistent in making every dollar
count. Third, all and sundry depended upon Hayek to keep the project on even keel: no
one else on home ground seemed to command the intellectual gravitas or deft punctilio to
herd the cats. In particular, Frank Knight was nowhere to be seen in the archival records
of these negotiations. Nevertheless, even with Hayek and Director pulling the strings,
success was not a foregone conclusion.

After all, the objective was to produce an
entailed something more than a minor adjustments of accent when transporting the text
Across the Pond. The politics of postwar America presumed not only a powerful state,
but also a configuration of powerful corporations whose international competitors had
mostly been reduced to shadows of their former selves. In promoting ‘freedom’, they
were primarily intent upon guaranteeing the freedom of corporations to conduct their
affairs as they wished. Thus, the Volker Fund was not interested in bankrolling a classical
liberal economic position like that of Henry Simons, for that position did not adequately
correspond to its objectives. It is our contention that the Volker Fund pushed for a
reformulation of classic liberalism in the American context to conform to its Cold War
anti-socialist agenda.
Hayek, would just have to learn to adjust.
Economic Policy were provokingEconomic Policy for a Freeit seems to me to represent the kind of attitude which must be taken if there isAmerican Road to Serfdom, and this45 The participants in the Free Market Study, and even eventually

organizations (see “Leonard E. Read’s Small Tent Strategy,”
North, in this article, also portrays the powerful influence Read had on the libertarian movement and the
adamant, uncompromising philosophical stance of Read.
Gary North, a previous Volker staff member, refers to FEE as the granddaddy of all

conveyed a similar philosophy: “We lean to freedom (speaking for myself) mainly because the world seems
to be moving in the opposite direction at an accelerating and, we think, a dangerous pace” (quoted in
Director 1952, p. 296).
Many felt that the left was winning the war for hearts and minds in the late 1940s. In 1952, Knight