Coauthored by Dr. Wayne Brough, chief economist and vice-president of research at FreedomWorks
This week, an economics professor from a small liberal arts college in Virginia did something no one else has ever done: He handily defeated the sitting House Majority Leader in a primary election.
David Brat’s upset of Eric Cantor has sent shockwaves through the GOP establishment. Democrats are scrambling to tar the insurgent as an extremist Tea Party candidate. Yet Professor Brat’s published research is hardly extreme. His interests lie in understanding what drives economic growth and why some societies -- and their institutional structures -- outperform others.
Brat goes back to the work of Adam Smith, the father of modern economics, in an attempt to identify how individuals and societies can prosper. Importantly, he understands the power of markets, the ability of decentralized decision making by individuals pursuing their own self interest to improve the welfare of society as a whole, an insight made by Adam Smith in 1776 in his opus "An Inquiry into the Nature and Causes and Wealth of Nations."
Seventh District US Congressional Republican candidate, David Brat displays an immigration mailer by Congressman Eric Cantor during a press conference at the Capitol in Richmond, Va., Wednesday, May 28, 2014. (AP Photo/Steve Helber)
Markets are powerful means of allocating resources and coordinating the plans of disparate individuals through voluntary, mutually beneficial exchange. The engine of capitalism has lifted millions out of poverty; Brat’s ardent support for markets reflects his work on these economic questions.
In addition to his economic credentials, Brat also earned a master’s degree from the Princeton Theological Seminary, so it is not surprising that his interests are broad. As Brat notes, “Many academics fail to see the full system which Smith had in mind as they only look at the economic system he constructed. Economics is only a sub-system.” Even so, his work tackles problems at the core of economics, attempting to identify the forces at work that guide human behavior.
In “The Philosophy of Economics,” Brat attempts to bridge the growing gap between overly technocratic neoclassical economics and ethics. “The dominant methodology in economics is in serious question, if not dead,” he writes. He is skeptical of overly scientistic economic models where individuals are reduced to rational, self-interested automatons that can be easily distilled to the variables of a mathematical exercise.
This provocative view is hardly radical anymore, echoing the works of Nobel Prize winners such Friedrich Hayek, Douglas North, and Elinor Ostrom. All raise similar concerns, stressing the importance of institutions with respect to economic growth. Markets are not an abstraction, they are a set of institutions that shape the interactions between individuals that comprise a society.
In a market order, important constraints on individual behavior include property rights, the rule of law, and the enforcement of contracts. Adam Smith and his contemporaries in the Scottish Enlightenment spent a great deal of time examining these issues and their influence can be seen in the works of the Founding Fathers. Indeed, these institutions are hard-wired into the U.S. Constitution.
Brat dives deeper, examining the values and ethics necessary for a prosperous society. He may challenge some in the economic profession in his attempt to better understand prosperity and economic growth. In particular, Brat stresses the importance of the moral foundations of capitalism.
Drawing upon another important work of Smith, "The Theory of Moral Sentiments," Brat attempts to identify the values and ethics that allow markets and nations to prosper. Smith developed a moral philosophy that stressed, in addition to their natural self-interest, humans also possess sympathy, an inherent trait that has led societies to establish some form of justice to guide social interaction.
In his studies of economic growth, Brat, like Max Weber and others, identifies the Protestant ethic as an important contributor to prosperity. The prudence, justice, and virtue embodied in that ethic proved more conducive to economic growth than other social norms.
David Brat (AP Photo/Steve Helber)
For Brat, values matter, culture matters. While this may seem like common sense, such discussions are often overlooked or ignored by economists working in a positivist tradition. Brat observes, “In fact, we [economists] are not doing positive science and no one really comes around to clean up the normative mess we leave behind. To get it right, we must go back to the father of economics, Adam Smith, the author who unifies our moral and economic universe.”
Brat draws from an earlier tradition of economics. Smith examined political economy and would probably find today’s artificially isolated field of economics odd. Smith’s political economy spanned economics, politics, and morals. Similarly, Brats’ attempt to identify the moral foundations that promote economic growth touches on topics that the economics profession as a whole has ignored to some degree.
But this does not make him an extremist out of touch with the modern economics profession. Other economists are also working to push the profession beyond the traditional neoclassical economic model. Austrian economists have long challenged the stranglehold of neoclassical economics, and more recently, institutional economists and behavioral economists have been working to enrich our current understanding of markets. These efforts all attempt to enhance economics and ultimately provide a better understanding of social orders.
Our conclusion is simple. David Brat is an economist of substance who will quickly caucus with the young, insurgent “ideas wing” of the GOP.
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