What a 16th Century Frenchman Has to Teach Us Today About Crony Capitalism

Montaigne cc

Do we want sustainability? Yes, real, not fake sustainability.

Many economists today do not have kind words for Michel de Montaigne, one of the most famous authors of all time, but not much of an economist.

Economist Ludwig von Mises coined the term “Montaigne Fallacy” to describe the famous 16th century French essayist’s blunder in describing market transactions as inherently exploitative. Mises’s student Murray Rothbard similarly took Montaigne to the woodshed in his History of Economic Thought.

Montaigne’s remarks appear in volume one of his celebrated Essays where he says that “no profit can possibly be made but at the expense of another.” This would seem to verify von Mises’s and Rothbard’s charge that Montaigne embraced this hoary old fallacy. In a real market transaction, both parties can and should benefit.

But we do need to remember that the capitalism of Montaigne’s day was mostly crony capitalism. Montaigne was making the same mistake that so many make today in confusing the two, and with more justification than now.

In another essay, Montaigne describes why he avoids doctors. This shrewd passage not only describes the doctors of his day; it applies equally well to much of what passes for medicine today.

On closer inspection, the passage isn’t just about doctors. It also describes “to a T”  today’s interventionist, usually Keynesian economists, the very economists who provide rationales for the crony capitalism that Montaigne deplored, without  understanding that it was crony capitalism, not real capitalism, that he was deploring.

Here is what Montaigne says in a chapter entitled “Of The Resemblance of Children to Their Fathers.” As this title might suggest, the author loved to digress:

“Doctors try to turn any event to their advantage. Any cure they claim;…any failure they blame on something else, usually laying the fault upon the patient [who did not follow advice with sufficient perfection]…. If we grow worse, they buzz in our ear that it had been much worse but for their remedies. He who would have had a cold and because of the doctor now has a serious illness, would have been in a deadly fever but for them….They do not much care what mischief they do, since it turns to their own [personal] profit….”

Does this not sound like the economists running the central banks of today and advising presidents and prime ministers? Is this not another instance of : “The more things change, the more they remain the same.”

Montaigne might have something to contribute to modern economics after all. He was an Epicurean, by which he meant that short term pleasure, if it only leads inevitably to larger pain, cannot be called true pleasure. Conversely, short term pain that leads to larger pleasure later may be pain, but as supposedly mature adults we should understand and accept it. This insight underlies Austrian economics, the kind of economics that is rejected by most public officials today, because it is inconvenient for them.

John Maynard Keynes took the opposite tack. He thought that his Victorian forebears had been too ready to sacrifice the present for the future. The result is that his economics may make us feel good for a time (bubble) but inevitably leads to ruin (bust). His followers, the economic “doctors” of today, not only embrace what they call sustainability while actually destroying it. They also end up, like many of the doctors of Montaigne’s day, dissembling and feathering their own nests at the expense of their patients (the rest of us).