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.

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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.

188).

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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

Economic:

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,

Society…

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
Footnotes:

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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 libertarianwww.lewrockwell.com/north/north117.html).

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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