===== PAGE 1 ===== SEE PE A Conversation With JE I ‘Murray N. Rothbard | Murray Rothbird i is the s. J. Hall distinguished profes- sor of economics at: the University of Nevada, Las s Vegas. Q Any recent thoughts on hermeneutics ?. A: That is now a history-of-thought question he ‘meneutics. ‘hag been rushed b g Syn - Hoppe and David Gordo Part of their critique isthat RE the hermeneuticists were unable to demonstrate in. - concrete terms how this: new. “turn” would improve SEE our understanding of economics: But if they hadn't been challenged, they could have carried on for years. - 0: The initial attraction fo hermeneutics tons Mises 5 link He . “ with certain rationalist pheromenologists What parts of this Murray Rothbard talked abou minstary and institutional ‘changes in Eastern Europe at the Mises Institute's link do you like and dislike? co oo E De- Socialization conference i in-April. A: The link was Alfred Schutz. He was a free-mar- ket phenomenologist and an anti- -positivist. He did Co What is your view of Hayek's statement that all prog- ‘excellent ‘work attacking the Ppositivists. for dismiss. ~~ ressin economics has been: i in the direction of subjectivism? | : ing. minds: in: favor. of Popes He. would then nl CAs Its. true, But it: hasn't been" an: upward climb. at y ! | ASR Eatly ¢ conomic- theory was rooted in the Italian, ‘ench, and Spanish traditions, which were subjec- ist oriented. Then it shifted onto the terrible path “taken by Smith and Ricardo and the British classical - | “tradition, which is “objectivist”—values are inherent in production. There was a partial shift back to sub- a that values exist, Cand epee of Bum objective: oo | analysis of subjectivity. But as Mises made cleat: its proponents don’t understand economics: ‘The . ; jectivism, but ‘it -was blocked by Marshall. Mi a y: Marsha ises © thoughts of Dilthey, Windelband, Rikert, and Weber: “brought back: the subjective-value tradition, with | -are useful for historical analysis; but’ not economic time- preference; ordinal marginal utility, and all the theory—Verstehen. not: Wirtschaftsthearie. In the pur- + rest. Thats fine, but don’t wipe out objective analysis. h suit of subjectivism, you cannot throw out: science’ and There is still a feal world out: there, with laws of cause - reason. As phenomenology developed; with. few: i © and effect, and physical’ products being evaluated by tions, it became irrationalist and collectivist. people. Through all this, we've discovered that being ‘The good parts of phenomenology. are already a. anti:positivist is not enough. Subjectivism i is not an “part of the Austrian tradition, as I pointed out inmy article on -praxeology for the Nathanson volumes, : Phenomenology and the Social Sciences. ‘The other. KE economist, John a, Hd wrote for the volume “Book Reviews .. “Conference Reports. armen snares 12 Book Bites | om, 15 : } a but he es sles it lod vi misled Misesians | should have nothing: odo: with Phenomenclogy.. I - guess. I was s trying. to diss outreach. : ===== PAGE 2 ===== absolute prineiple; itisa necessary but not sufficient : Qo Did you write the book in sequence? condition for sound methodology. ~~ © Co A: Yes. I started on pageo one awvith methodology and | Q: Positivism was linked to sociation and intervention: wo wrote itself. 0 | ism. Do you now predict its decline? Cl eT Q: Did anything get eft out of i the final version? ; A: Tt is difficult to say. ‘Positivism was central to ei CAs 1 took chapter 5 out of Man, Economy, and : socialism and planning in the same way prazeology State, which included the usual cost-curve analysis. HE is central to the free market. Positivism, eliminates 1 wrote thie whole chapter. before I realized my ap- : any kind of natural law principle—for example, eco- proach was nonsense: So I started over. [ nomic laws which can be transgressed only at your EE | own peril. With positivism, there i is. atendency to leap - Qs there any doubt that Mises was your primary a into ad hoc economic theory. SL Ea. influence? : - When Friedman wrote his fous article defend: - AT didn’ t think s 80, but J oseph Salerno once gave ing positivism, philosophy had already rejected. posi- ga talk in which he said Man, Economy, and State is j tivist methodology. But it fastened. on economics with more Bohm-Bawerk- oriented than Mises’s Human 1 | an iron grip for about 20 years. This is fairly typical. Action. I never thought of it that way, but it may be | By the:time methods are: transferred from one disci- true. When I was. spelling out capital theory, I used pline to another, they. have often been rejected by the ~~ Bshm-Bawerk primarily. I didn’t think about it since original discipline. 1t is high time for economics sto I thought Mises was a Bohm:-Bawerkian and didn’t i | throw out all analogies to the physical sciences: . gee any contradiction. I would like to see Professor Salerno explore this. It’s an example of the way an Q How did Man, Economy, and State come to be? historian of economic thought can show something A: It ended up: totally different from the way it about a person 's work that he himself didn’t realize. started. After Mises had written Human Action, the ~ Volker Fund—which promoted classical liberal and - libertarian scholarship—was looking for a college . textbook that would boil it down. and spell it: out. “Ar This is complicated. 1 received the grant in Mises hardly knew me at the time’ since 1 ‘had just. 1952, but. shortly. afterwards 1 1 had to finish my doc- . Q How many years did it take fo complete Man, Econ- omy, and, State? ter, “Money: Free and Unfree. » “They ‘showed: it to Mises: and he gave his endorsement. I then received = a many-year grant to work on it. I thought it was’ going to be a textbook. But it grew and grew. New Qo How was your. :disertation, The I Panic of 1819, re- material kept coming in. As I kept going, I found ideas ceived? Mises had left out, or steps that were implicit in Mises A: Very well. In fact, much better than any other that needed to be spelled out. I gave periodic reports of my books. Maybe that’s because I didn’t analyze the: | to the Volker Fund. Finally they asked me: “Look, is causes. I only wrote about how people wanted to cure | this going. to-be a bli a a Beith When I jt. I could have done much more work on it, and there - ig still more to say, but I am pleased with it. Plus, it remai s the only bolo on the Subject. called “The. Economics of Violent asked me to cut it out because it; 00.1 was published separately yours Tater rbytt the Institute ; for Humane Studies. EES Jel. cept’ ‘the: ‘Mis ar people and FEE 3 people like . Larry Fertig and: Henty Hazlitt. Most were non-econi-. |. + omists or friends and admirers of Mises. They were 1 ii “caterers, lawyers, clothing manufacturers. Other than. Kirzner, Spadaro, Sennholz, ‘Raico,: Reisman; : wd #l Leonard P: Liggio, senior scholar, Institute for Hu- | . and Percy and Bettina’ Greaves, there was no Aus- ~ mane Studies at George Mason University. =~ Et TE trian movement to speak of. Roy E. Cordato, economist, Institute-for Research | “ on the Economics of Taxation, Washington, DC | g hi le D id you ever ge discouraged and say Why am Idoing EE this " Peter G. Klein, ‘graduate student in economics, | : University of California at Berkeley, Mises fellow, LT A: No: “Any chance to write a book or meet new 4 and assistant editor ofthe AEN. ~~ 7 Cal 35 BE people. was terrific. But I was lonely. Mises was in his . Alexander Tabarrok, graduate student in econoin: sixties, ‘Hayek and Machlup were in their fifties, and ics, George Mason University, Mises fellow, and. a | I was in my twenties. There was nobody in between. correspondent of the. AEN. REE | With the possible exception of Baldy Harper, whowas = REINER ‘a Wheriarian, but ‘Whose Austrian. knowledge. was ===== PAGE 3 ===== limited, there was a missing generation. It had been was directed against himself. Gradually, Hayek be- wiped out by the New Deal. came more and more anti-Misesian without actually refuting what he had to say. Yet Mises and Hayek are Q: If we do an It's a Wonderful Life experiment—the still linked in academic minds. J state of Austrian economics without Man, Economy, and | State—it looks pretty grim. Q: What happened in the 12 years between Man, Econ- A: That's an interesting point. Of the econo- omy, and State and Hayek winning the Nobel Prize? mists, Sennholz became a real-estate speculator, A: Very little. There were various informal meet- Spadaro didn’t write much, Reisman became a ings, with Walter Block, and R. J. Smith. During Ricardian, and Hayek had drifted into philosophy the fifties, we had a whole group in New York, but and social thought. Kirzner was doing good work on it disbanded when Hamowy, Raico, and Liggio went entrepreneurship, but nobody was doing methodol- to graduate school. There was another group com- ogy, monetary theory, capital theory, or much else. ing up in the sixties, students of Robert Lefevre’s Freedom School and later Rampart College. At one meeting, Friedman and Tullock were brought in for a week. I had planned to have them lecture on occupational licensing and on ocean privatization, A:1liked it, but he didn’t say much about the book. respectively. Unfortunately, they spoke on these I would have preferred him to go into more depth. =~ subjects for 80 minutes and then rode their hobby horses, monetary theory and public choice, the rest of the time. Friedman immediately clashed with the Q: What were your thoughts on Mises’s review of Man, Economy, and State when it appeared in the New Individ- ualist Review? Q: Was he bothered by some of your corrections of his theories? Rothbardians. He had read my A: I don’t know because he never oo America’s Great Depression and was said. Mises and I had only two furious that he was suddenly meeting friendly arguments. One was on mo- . all these Rothbardians. He didn’t nopely theory Where he wound up Mises calling me a know such things existed. calling me a Schmollerite. oug : nobody else in the seminar realized Sch ullorite was te Q: What happened to the Volker Fund? it, that was the ultimate insult for ultimate insult for A: The Volker Fund collapse in y an Austrian. The other argument an Austrian. 1972 destroyed a major source of was on his utilitarian refutation of funding for libertarian scholarship. government intervention. I argued The president was a follower of R. J. that government officials can maxi- Rushdoony, who at the time was a mize their own well-being through pre-millenialist Calvinist, later con- economicinterventionism,ifnotthoseofthepublic. verting to post-millenialism. He had sent me a He in turn argued that those kind of politicians Rushdoony book, which I blasted. Combined with wouldn’t survive popular vote, thus changing the other reviews, he became convinced he was sur- termsofdebate. rounded by an atheist, anarchist, pacifist conspir- acy to destroy Christianity. So he closed the Volker Fund in early 1972. It was a great tragedy. A: In all the years I attended his seminar and was IHS was supposed to be established with the $17 with him, he never talked about foreign policy. If he million from the Volker Fund as an endowed think was an interventionist on foreign affairs, I never tank—publishing books, sponsoring students, knew it. It would have been a violation of Rothbard’s funding research, and holding conferences. In- law, which is that people tend to specialize in what stead, Baldy Harper had to start it from scratch. they are worst at. For example, Henry George is great : on everything but land, so therefore he writes about Q: How did The Ethics of Liberty come about? land 90% of the time. Friedman is great except on money, so he concentrates on money. Mises, however, and Kirzner too, always did what they were best at. Q: Was there a difference on foreign policy? A: I received a Volker Fund grant to write it. It was supposed to be a reconciliation of libertarian- ism with conservative culture and personal ethics, Q: Did Hayek ever attend Mises’s seminar in the U.S.? what is called paleolibertarianism today. But as I worked on it, it turned into an anarcho-libertarian treatise. By the early sixties, conservatives had become pro-war and the whole idea of reconciling us with them had lost its attraction for me. A: No. They had a very strange relationship. Hayek began making very arcane anti-Misesian com- ments in his books, but nobody knew it, not even Mises. For example, it turns out that the anti-Walras footnote in Individualism and Economic Order was Cha . ‘Ts really an anti-Mises footnote, as Hayek admitted a Q: What about Conceived in Liberty? few years later. When Mises read the article, he called A: After the Volker Fund collapsed, I got a grant Hayek up and said he liked it as an attack on formal- from the Lilly Endowment to do a history of the U. S., ism and equilibrium. He didn’t realize that some of it which I worked on from 1962-66. The original idea ===== PAGE 4 ===== was to take the regular facts and’ put a. , libertarian WA and State and Conceived i in n Liberty. It was - N assessment on everything. But. once I started to work originally going to: be a short book on the history of on it, I found many facts that had been left out, like . thought, taking the same people the. orthodox people tax rebellions. So it got longer and longer. It turned’ ~ do, reversing the judgment, and giving the Austrian Zi into the five-volume Conceived in Liberty, covering = = view. ‘Unfortunately I couldnt do that ‘since Smith the colonial period to the Constitution. Idon't liketo: = was not the beginning of economics, I had to start completely chart out my research in advance: I'go ~~ * with ‘Aristotle and the Scholastics and work up. I step by step and it always seems. to get. longer than found more and more people that couldn’t be left out. ~ anticipated. After Arlington’ House published volume. cl four, they went out of business. Volume five, on the: oo Bo How many volumes have been completed so far? Constitution, was written i in longhand and: no one. can As I can never estimate things like that, but prob- .. read my ‘handwriting. eT Co . ably two or more. And] keep underestimating how i" © much work I have to do. I thought I could finish off Q: What about conferences es during the arly se seven ties? 2 . . Marx in one chapter, but it took five: Sol canriot give » A: The first was conducted at Cornell, the summer oa projected date for finishing. of 1973. Forrest McDonald and: myself. were giving. papers. At the 1974 conference, we. added Garrison, ~~ Qe You have apparently taker an interest in religion as it: : ‘Rizzo, O'Driscoll, Salerno, Ebeling, Hutt, Grinder, = affects the history of thought. ~ and others. It was held in a tiny town in Vermont," . As Religion 1 was dominant in the history of thought which ‘we called a ‘Walrasian-General-Equilibrium Cie at least through Marshall. The Scholastics emerged ‘town because there was 10 ‘action, no competition, no "-out'of Catholic doctrine. And John Locke was a Prot- interest rates. In 1976, we had a wonderful confer- ~~ estant Scholastic. I am convinced that Smith, who |. ence at ‘Windsor Castle, but after that. TL . came from a Calvinist tradition, . | there was nothing. TL SE skewed the whole theory of value by - : eo _emphasizing labor pain, typical of a Q: Just so that we're clear, between the "7 Puritan. The whole dhjective-cost tra- 1940s and the early 1970s, you were practi~. I gp convinced that dition grew out of that. : cally the only one that did serious scholarly BE . work in Austrian economics? - 1 Adam Smith skenied . A: Well, Henry Hazlitt did adil cellent work: But then" he- was” AUD Q Why. has all this beert overlooked JE Because the’ 20th century is the g 3 entury of atheistic, secularist intellec-- credentialed. Hutt did some; but it tuals. When 1 was growing up, anyone wasn't really Austrian. Kirzner had a Puritan. 747 who. was religious was considered “written some serious articles. But basi- EET ~~ slightly wacky or even unintelligent. cally the tradition had stagnated. By — em — That was the basic attitude of all intel- the late seventies, Austrian economies ~~ ~~ lectuals. This is the opposite of the at- was considered Hayekian, not Mises- ~~ ~~ = © © + titudes of earlier centuries when ~ ian. Without the founding of the Mises Institute, I am everyone was religious. oo convinced the whole: Misesian ‘program would have The anti-religious bias even shows up in the inter- collapsed. el nH SR _ pretations of the: history of art, for example, in the Co How is your his oh 5 3 cularist and ‘positivist an gated 2 of Renais- _. A: Fine. I start with Aristotle, but don’t’ much time on the Greeks. I.leap to the early" Chris- W the ‘Herisissance. was to . |. tians. Economic theory became: pretty advanced in: ©. emp 1a8ize. the Incarnation, when God. became flesh. ~ the Middle Ages and only started falling apart later. ~~ Even if art historians aren’t interested in theology, g "Most history of thought assumes linear growth. But _- -they should realize that. the people they study were. . Tam: trying to show. that there is slippage. wi ‘The same is. true for.economics. In doing history you 3 ; . Unfortun ately; there 45.8] hole. inn my To ol cannot read your 4 own values into the past. : : the English mercantilists and Francis Bacon; which: : se0cd ot he fulfillment | took me to 1620, but then ‘bogged down : and leaped cE Ee En tobeth ef G " ~ghead. This summer am going to repair the hole; mR } | Aside from the hole, I have just finished the laissez- ~~ - © A: That's righ - We gre: living through revolution- - faire French school. The. next, step. is: to cover. the Co ary times. Its like living through the French or Amer- - pre-Austrians of the mid: 19th century. : . * jcan-revolution: and being able to watch it o : ~ .- television every night. Now the difference bet “the, United: States and the Eastern Bloc i 1 TQ There seems to be a lengthening Toten yo : | fects... i SEE + iilied States still has a communist party. EL roids, “Lf : RS A A Maybe BO. What i 18’ Suppatiog to my history of i Ld Q: This seems fo bea vindication, for yo 1 thought is ‘thes same. © thing that t happened { to. Man, ie Right b the e Prospe ts for Liberty." =. ===== PAGE 5 ===== oppression. (3) Environmentalism or antihumanism. ~The implicit idea is that man is the lowest creature and every creature or inanimate. thing has rights. Q: How are. things i in Las Vegas? A: Great. Every semester we get more students, and the Austrians are at the top of their classes. We have a Human Action study group. I'm teaching a ‘graduate seminar in Austrian economics this term and Hoppe will be teaching a seminar in the spring. Q: What i n Aus trign economics is most and least advanced? Arla methodology, we are pretty advanced, thanks to the work of Hans. Hoppe. But we can always use more since that is what sets us apart from the rest of the profession. And Jo oe Salerno i is doing great work - 2 on calculation. CE ‘Banking theory, however, has taken. a very bad SAR itn, ith free banking. We have to show that this is. he old currency and banking school argument re- 5 “* "hashed: They have adopted the banking school doc- A: Damn ri ight. Western consery ati ives catine if take "tring, that the needs of business require an expansion credit for this. They always argued that socialist of the money Supply apd cxedit, Moreover, the free totalitarianism couldn’t reform from within, Only the ba nking pecple violate the basic Ricardian doctrine libertarians considered and gloried i in this possibility. oo ol at every supply of money is optima Once a market ‘/.in‘a money-is established, there is no longer a need Q: Did you see the seeds of anti-sacialist revol when you. A ; for: more money. That is really the key point. visited Poland several years 480? AN Professor Mn. Rolin oy ey ; LQ What about the argument that 100% reserves require. A: Yes. At the first conference I attended, sovdiat a government intervention? dissident Marxists were there. But the next year, the organizers said they didn’t need them. We went ex- = pecting dissident socialists and we found followers of Al regard fractional-reserve banking as an inter- vention in the free market, as any crime against _ Hayek, Friedman, Mises, and Rothbard. The econo- person and property is intervention. With banking, mists and journalists that I met with had read many the government, allows, the crime t to be committed. - of my books and were publishing underground books | 5 ~~ How do we add the nee on free markets. ROMANS RR those ‘who say that business has a demand for credit? - ETE STIR There.are many: things. demanded on the market that Q: Now that Marxism i is. deiid where it has. etn fricd is +." are also crimes. There may be a demand for killing there anything that is useful and’ Important; Hat: should. be Ce ‘redheads. And: therei is certainly ademand for govern- remembered or kept? - ‘ment loot: What’s so great about market demand? If A: There is one good thing about Mir: he v was not: it is not within a framework of non-aggression, there a Keynesian. I recently. asked Yuri Maltsev, former - will always be a demand for fraud and theft. Soviet economist, why is it that things seem to have © The free bankers accept.a kind of David Friedman- fallen apart so rapidly i in the Soviet Union in the last ite ‘anarchism, where-there is no law, only people 20 years. He said in the last 20 years, the leaders-of engaging in. exchange and buying people out. If you | the Soviet Union have relaxed the money supply and ‘have a group that wants to kill redheads, the red- have used inflation to .solve short-term’ problems. heads will have to buy them off if they value their That spelled doom for the system. - Li hair, This is nionstrous, and this kind of anarchism: would. indeed be chaos: Just because there is a de- Q: What about the pigspets for iterty and a reer econ- | ‘mand for ¢ a thing doesn’t mean it should be fulfilled. omy in the United States? A: Everything i is getting worse, and | Very. rapidly. REE Q One of the criticisms of this position is that it is Few favor cenitral planning, but the battleground has - B norma ive and not economic. TEL shifted to interventionism. There ‘ate three areas of. A:Yes, but the response to 100% reserves is that interventionism which are the big issues, now andin "bank. entrepreneurs have the right to offer whatever | ‘the future: (1) Prohibitionism and the attempt to: “fraction of deposits they want, which is also a norma-- : “eliminate all risk. If, for example, automobiles cause tive position. Any discussion of policy is inherently ~ accidents, they should ‘bie eliminated. (2) Egalitarian- = normative, You can’t have free markets unless you | ism and the idea that victim: groups: should get special. a ~havl © property y rights. | | treniment for the next: 2 00. years. | for ‘previous LL eh EY + (contimied on page ch ===== PAGE 6 ===== Man, Economy, and Liberty: Essays - Advertising and the Market Process: in Honor of Murray N. Rothbard A Modern Economic View Edited by Walter Block and Llewellyn H. Rockwell, Jr. oo Robert B. Ekelund, Jr. and David 8. Saurman Ludwig von Mises Institute, 1988 Le Foreword by Israel M. Kirzner PEE Pacific Institute, 1988 Reviewed by Leonard P. Liggio oo - | ike the missing head of a beautiful elassionl Greek oo Reviewed by Roy E. Cordato statue, there is a major lacunae in these essays = [Wihen it comes to. the point where [competitive equi- ~ in honor of Murray N. Rothbard. There i isnoessayon. librium] ‘misleads some of our leading thinkers into . Rothbard the historian. Since I. did not have timetodo ©. ‘believing that the situation which it describes has direct relevance to the solution of practical problems, it ig high time that we remember that it does not deal | Co with the social process at all... F. A. Hayek (1945, p. 91) such an essay at the time the essays were organized, 1 - admit my responsibility for the absence. I will note that Murray Rothbard is an important ‘American historian as demonstrated by his more than four voluines on the i colonial and founding two centuries, and by his books. T he economics of advertising is one area where g on American depressions, essays and manuscripts on economists have fallen into the trap that Hayek the Progressive:New Deal eras. In addition, he is a describes. It is only since the 1960s that they have leading expert on Americar foreign policy during the = pegun to pull themselves out. With the. nearly total 20th century. Finally, he is a master of Western intel acceptance. of perfect competition as the normative lectual history as will be shown with the publication of “standard used to judge the efficiency of market activ- his magisterial history of economic thought. “ity, welfare economists have arrived at many value B Aslight flavor of Rothbard as historian is indicated judgments that are totally at odds with reality and ne 2 the essay by Sheldon Richman concerning his book. * “sommon-sense notions about the. kinds of activities reviews during a decade as scholarly analyst for the = that make people better off, William Volker Fund. Rothbard's doctoral research This is because the assumptions of perfect compe- under Joseph Dorfman for The Panic of 1819 placed him tition have little or no relationship to real world in the position of knowing the complete fallacy of Arthur market processes: From this perspective any market Schlesinger, Jr's ‘working class’ interpretation of The activity that would not exist in the never never land Age of Jackson. Jackson and Van Buren were leaders of of perfect competition has the potential for being the laissez-faire ‘middle-class opponents of. central = labeled “monopolistic.” This has been the case with 1 bet a a pA RR advertising. Obviously, in a world where producers Dp tic Party (1959) and Lee B i 2 and consumers know all there is to know about each emocra x arty an rod enson’ vi € oat: other, businesses ¢an ‘enter and exit markets cost- of Wp sonian emocra ey { hey Te the crucial lessly, i ‘and there exist no differences within product Rothbar d, cen wy istoriograp y). “Benson,” wrote lines, there would clearly be no advertising. Tradi- - Rothpard,” -: -. = tionally, instead of raising the possibility that their squarely and candidly refutes the “Jacksonian pope J view of competition might be irrelevant, industrial a | racy” thesis... Benson squarely recognizes that the: organization economists have dogmatically come to | Democrats were the Libertarian party, and the Whigs the conclusion that advertising must be monopolistic.’ the Statist party, and therefore, properly, concludes - -. ‘that the “precursors of the New Deal™in this period EE 1045, 'Ekelund and Saurman’s book would not have were not the Jacksonians but. the. Whigs. The essence of Rothbard’s contribution'to economic been necessary. But alas it wasn't, and industrial orga- . history may be summarized in his review ‘of George .. nization economists have spent decades comparing the Athan Billiag’s “The. Massachusetts Land Bankers o of MN real-world ‘apples of market activity to the irrelevant 17407: oo EN - oranges of perfect competition. Fortunately the compre- 4 | : Ea * _ hensivenesg and: forcefulness of the arguments in this "The essence of m a re . t h : learned . ree 0 lo oi om revionem.. st have © © book should finally lay to rest the notion that advertis- ing is evidence of market failure or could be anything "not poor agrarians at all, but wealthy: urban mers. © chants and real estate ‘speculators, who, while they... but welfare. enhancing. The authors pull together all of may well have. been debtors, were hardly poor”inthe the eimpotigt analysis and evidence from the economics If Hayek's ‘warning had been taken seriously in ===== PAGE 7 ===== .. Liggio... Lo .. Cordato ... sense generally used. Inflation and sound money were literature of the last several decades to present an Lo led by the respectably, sophisticated, urban mer- economic defense of advertising that will be difficult ib chants and intellectuals. if not impossible to refute. Ultimately this book As Richman emphasizes, Rothbard opposed eco- ‘should be on the required reading list of every indus- nomic determinism, as when he defended Forrest trial organization class. But first it needs to be read McDonald against the charge of determinism. by the professors of those classes. Not true, wrote Rothbard, because McDonald's very act of “atomizing” Beard’s class categories—the nub of McDonald's great contribution to historiography— The authors present their analysis and evidence under the banner of a single analytical rubric that was to shift the emphasis from Marxist class struggle | blends insights of both the Austrian school , primarily te “the actual realistic categories of individual eco- = the works of Hayek and Kir zner, and the “new-neo- nomic interest. This is, indeed, a shift from fallacious classical” economics. This is often referred to else- Marxian historiography to realistic, individualistic, ~~ Where in the industrial organization literature as the = even libertarian’, historiography.” ~ “new learning,” pioneered primarily by Chicago - I would attribute to Rothbard’s grasp of Western - School economists such as George Stigler, Harold intellectual history his important contributions to politi- ~~ Demsetz, and Armen Alchian. This approach allows cal and moral philosophy. Recently, a number of academ- the authors to utilize key Austrian insights concern- ics who have talked with Murray Rothbard have IDE the nature of entrepreneurship and competition expressed surprise to me that he is as well versed in . - @8 & rivalrous process while remaining within a "framework of analysis that could be appreciated by more traditional neoclassical economists. Whereas ~ Austrian analysis would lead to a rejection of certain issues as simply irrelevant (more on this below), the - blending of some aspects of the Austrian view into a fundamentally neoclassical approach allows the au- thors to. communicate to a wide audience of economists. ~ It should also be pointed out that the authors’ non-tech- nical approach makes the book completely accessible to anyone who is seriously interested in the issue. Implicit in Ekelund and Saurman’s analytical framework is an acceptance of the results of perfect competition as a long-run normative benchmark. This is the “new-neoclassical” influence in their approach. Co From a strictly Austrian perspective, with its emphasis medieval political and moral philosophy as in modern on subjective-value theory and the complete open- Leonard P. Liggio political and moral philosophy. Some have wondered if endedness of market processes (see Kirzner’s foreword his being deeply informed in medieval thought, like his ~ to the book), the results of perfect competition have love of Handel's music or German Baroque churches, . no normative significance. But by invoking Austrian evidenced a theological interest. Rather than a theolog:~ insights about the nature of disequilibrium market ical interest, it evidences a deep commitment to truth processes, the authors are able to argue that in a and beauty. First, he has always rejected the Progressive non-perfect world advertising acts as a catalyst that Establishment’s anti-Catholicism—as Peter Verick un- brings us closer to the perfectly competitive results. derscored 40 years ago, anti-Catholicism is the anti-Semi- For example, one traditional argument against ad- tism of the Progressive Establishment. Rothbard has vertising is that it.creates barriers to entry into markets ~ acquired a wide knowledge of Protestant and Catholic by generating brand loyalties that result in a less elastic thinking that has been expressed in: lectures and pubs: ... demand for any given product. While Austrians would lished and manuscript writings, particularly in his eri- So oo tiques of public education. Second, he has always 3 welcomed as friends, Jewish; Protestant and Catholic i believers or nonbelievers, or atheists who pester the- : ists. Since theism and especially Catholicism have been the bete noir of the Progressive Establishment, which controls the academic world, he has been partic- . ularly welcoming to them as contributors to liberty. : io One hardly needs to mention what is famous in urbi et | &P orbi (New York City and the world), Murray Rothbard’s = ~ being denounced by Ayn Rand for refusing to condemn ipso facto as not rational anyone who was a theist.. Indeed, that famous furor was due to one of the many important differences between Murray and Ayn Roy E. Cordato ===== PAGE 8 ===== Cordato .. . Liggio —Murray had a very thorough knowledge of the intel- find no normative significance in this result, it is, of lectual history of the West. Ayn Rand was very contem- course, inconsistent with a perfectly competitive | porary in sharing with current academic philosophers world, Brand loyalty implies that the product under a contempt for the history of philosophy. Murray had consideration is being differentiated in the mind of studied the Western philosophers who had followed in’ consumers. By pointing out the dynamic nature of the tradition of Aristotle and had found in them the ~~ markets. and entrepreneurship, Ekelund and Saur- source of a rational and complete. explanation: of man man are able to show how advertising is best viewed and his human actions. The Aristotelian: tradition i is =%: 888 ‘method of breaking down barriers, i.e., asa way the source of Western progress: and liberty. of gaining entry into: already established markets Of great importance” for: contemporary classical and therefore overcoming brand loyalty. Advertising liberalism has been Rothbard’s returning classical lib- is used as a way of distracting consumer’s attention | "3 eralism to its traditional moorings. Although Ludwig = - away from brands that they might be loyal to, entic- | von Mises and F. A. Hayek shared Rothbard’s tolerance + ing them to consider: alternatives. of non-pestering theists and atheists, and although. ~~ This kind of: analysis also has direct implications both founded their philosophy in Kantian thought, for the issue of ‘market concentration and “monopoly Mises and Hayek were utilitarians, as too many 18th- power. » In the traditional, static framework of analy- century classical liberals tended to be. Although clas- sis, if advertising is a barrier to entry then it would ‘sical liberalism’s roots lie in the 2300-year-old ° also lead to high concentration ratios and “monopoly” ‘Aristotelian tradition, the: Enlightenment: took clas- profits, | i.e; any revenues that are more than enough to sical liberalism on a wrong turn into: utilitarianism; cover opportunity costs. The ‘approach taken by the which meant that in the 20th century ‘classical liber- Co guthors: ‘does not question whether market concentra- alism had nothing to; stand ‘upon. For 40 years. tion or monopoly profits should have any normative |i Rothbard has emphasized the crucial importance. ‘of SL significance, as a more narrow Austrian analysis would. | natural-rights theory to classical liberalism’s restora They instead invoke market process analysis to show ~ tion to a key position in. the intellectual debate. From {hat by overcoming barriers to entry, ‘advertising can the beginning, Rothbard read widely | in natural-rights be expected to decrease. market concentration and re- -- duce prices and profits. In" pursuing this analysis they draw on a wealth of - gound empirical evidence. ~~ Another example of i. this’ kind of approach is ‘| ‘the issue of advertising | and information. Under. ~~. perfect competition con- 3 + sumers and producers fd © © have perfect knowledge. © In such ‘a setting there “would be no advertising. theory and encouraged } research in that area. The i “surface of the results is He ~ merely. scratched when’ one notes that Douglas Den Uyl and Douglas Ras- mussen publish in The ‘New Scholasticism, or ‘that * Henry Babcott Veatch’s works such as . Rational Man, Foran on co tology of Morals, or. Human Rights: Fact or - : with Rothbard Societe. It would benefit neither | 3 producers ‘nor ‘consum- | 3 | % Important contributions to this volume that relate wi ers. Again, ‘the authors. point out that the traditional to philosophy sre the essays by Ellen Frankel Paul, = literature in this area misses the boat by focusing on - ‘2 Jaflrey Paul Leland Yeager, pra Den uv , Anthony © th ond results of competition, The question that they {3 Flew, Davi h rdon, Tibor Machan, Randal Holcombe, ask is this: are consumers more knowledgeable with |-3 | David Osterfeld, and Hans-Hermann Hop pe. cowie advertising. or without it? Their conclusion is that | 4 oo Among the economics ‘essays, ‘those of Dominick co while advertising may not. have a role in a perfect 3 Armentano on monopoly theory, Roger Garrison onthe world, in an imperfect world it will definitely produce i. - theory of interest, Israel Kirzner on welfare economics, «= ‘more’ knowledgeable consumers. This point dovetails - | and E.: C. Pasour on. economic: efficiency and public “nicely with the distinctly Austrian view of marketsand - | 3 policy are required reading: Walter Block and Gregory =~ market ‘phenomena presented most forcefully by | Christainsen each made valuableco ributions regard + Hayek, who argued that the primary function of mar- | ing banking and monetary issues . kets i is to capture. and disseminate information. 2%. 1 © Particularly impressive was Roger: Arnold's g “My. emphasis ‘on the fact that Ekelund and ZS L “Prisoner’s Dilemma, Transaction Costs, and. Saurman's approach i is not an example of “pure” Aus- | Rothbard.” The important recent work in this area by <= trian economics should not be construed as a criticism ‘Robert Axelrod, The Evolution of Cooperation; ‘hasput of the book: Infact, it is clearly of value. First, it is an | on center stage academic issues Rothbard never lost excellent, example of how certain Austrian insightscan |3 =e sight ¢ of. Arnold shows pw, Rothbard's reriticism. of the. be incorporated into and i improve upon the orthodox 13 ===== PAGE 9 ===== Co - . lige... Co SE Smith was temporarily eclipsed by the state socialism | theory of transaction costs has placed him in conflict .- of Gustav Schmoller. and the German Historical. with Judge Richard Posner. Dominick Armentano’s. ‘School, the logical conclusion of interventionist “essay had introduced us to the Rothbardian critique of = ‘thinking. caused Mises and Hayek to go into exile the antitrust conuapls of both: Br Judges Richard Posner. © while the National Socialists adopted Keynesianism., ‘and Robert Bork. After 1945; Germany was able to adopt the market Arnold states the Posnerian postin. EE ideas of Mises and ‘Hayek and to bring about the Posner, drawing on the highly-idealized Consian set. German Economic Miracle. Prince Smith declared: ting—when there are zéro transaction costs and no “Liberalism only recognizes one task which the state income effects—argues that government, throughthe ~~ ¢an perform, namely, the production of security. courts; ought to assign property rights to the party = Raico quotes Gide and Rist that - who would buy them, and place liability (in liability : SE Liberalism had nowhere assumed such extravagant cases) on the party who could, have averted the acci- . © . propertions asit had in Germany. Prince Smith; who ~ dent ata lower cost. © - © ©. isthe best known representative of Liberalism after Rothbard demonstrates. that coercion 2 by the state SA “Dunoyer, was convinced that the State had nothing to decreases social welfare. Although sound social scierice =... ‘do beyond guaranteeing security, and denied that - must begin with the concept that numbers should’ not there was any ‘element of solidarity between economic count, as John Tarurek showed when analyzing agents. save such-as be results fon: the existence of a (“Should the Numbers Count?”, Philosophy and Public ~~ So™™mon marke. | Affairs 6 [1977)) whether-it could De: ‘moral to cause To extend Raico’s conception, there | is no greater set of injury to one person for two: or mg ... glants of economics than Dunoyer, Prince Brith, Mises, has indicated, according to Ar } nd, Bethburd. = ‘measure whether the “winfiers” gain more 0 utility than the “losers” lose; we can nof parantee that TP J pet therei iseven, at minimum, a viet gainto having the State, Dn ee + Cordato : Rothbard’s analyses show that the state decreases social welfare. According to Arnold, his. argument i is feaiwiiieof analysis; Second, by. framing their anal. ) ysis in a way that addresses the concerns of the One, the State uses coercion. Two, if individuals are ©. profession at large, the authors bring many Austrian coerced it follows that they are doing somethingthey ~~ insights to an audience that might otherwise reject ." © wouldn't be doing. Three, one can not get more utility 5 them out of hand. } ~ from doing something he ‘wouldnt be ‘doing than ts doing something he would want to do. We conclude Unfortunately, Austrian welfare economics has - that the State decreases: utilit \ levels—if. not: oll od not. yet been developed. to the point ‘where it could persons, of at least some. 7 0.7 sustain a full-blown analysis of advertising, or most » David Osterfeld parallels this discussion in his other normative issues. While Austrians have right- | essay: He quotes Rothbard: ~~ =~ ~~. en Re fully rejected perfect. competition as a relevant nor- . the free market benefits all its participants. We are mative benchmark, they have. not developed a - . led inexorably, then, to the conclusion. that the pro-- completely’ coherent alternative to take its place.’ } "- cesses of the free market always-lead to a gainin © Austrian criticisms of standard welfare analysis are : ~~ social utility. And’ we can say. this with absolute ~~ sound and fundamentally damaging, but no widely | validity as economists, without engaging in ethical ~~ ‘agreed-upon alternative standard of efficiency has - of judgments: (“Toward a Reconstruction of Utility and : emerged. The absence of a well-defined and agreed-on =o. Welfare Economics,” On Freedom and Free Enter- ~~. standard makes policy debate with the wider audi- prise [Princeton, 19561) 3 ence of economists difficult, if not: impossible. I . This is drawn from one of Rothbard's searlist worl, ovo In regard to this issue I would like to draw attention eflecting: an: expansion. of the basic ideas. of Mises, and’ “to Ki htful for d to this book forming a foundation. for Rothbard’s suceéeding work, TE rzner’s insightful foreword to this book (pp. xv- 7 xxii); His central point is that advertising i is best under- He Th canara ras fer aia “stood within the context of an “open-ended universe,” : the essays by Israel Kirzner and Leland Yesgs SR as opposed to the closed:-ended world of general equilib- At'this moment, we are witnessing a sedissivry. of - rium, This'is a ‘world where; not only is there imperfect . z Cable ge n:the rational ignorance sense, but where Rothbard's economic analysis bya younger generation. . Ep 1 gn the element of “surprise” is always present. It is a world of economists. They are faced on all sides by the failures ". -." where individuals not only-consider the marginal ben- of the Marxist, Keynesian, and Monetarist explana- efits associated with obtaining additional amounts of | - tions. Hayek and Friedman, as one example, have de- knowledge that they know: is out there, but are also | ~Y veloped strong critiques of contemporary monetary faced with the possibility of: discovering: information - thinking paralleling the Tork, already. Introduced by Cr =~ that they “don’t know they don’t know.” This element of Murray. Rothbard. Se “surprise,” the result of what Kirzner calls utter igno- “One of the concluding “assays, ay ohn Prince. Smith "...rance, does not exist i in the closed ended framework of and the German Free-Trade Movement” by. Ralph oo perfect competition, even when market process analy- Raico, provides an : appropriate parallel. Just as Prince Co sig is used dio amend it. In emphasizing this world view, ===== PAGE 10 ===== Kirzner is implicitly defining the context from which'an Against Mechanism: Protecting “Austrian welfare economics must ultimately emerge. The question that needs to more thoroughly be ad- - “Economics. F: rom. Science dressed is this: what is meant by economic efficiency - Co : h di Mi i when end-state results—resource allocations, market - Co P p irows 1, structures, demand elasticities, etc.—are not relevant Rowman & Littlefield, 1988 Ny issues? : ny In closing, the arguments and evidence that RE . Reviewed by Peter G- icin Co Ekelund and Saurman present are overwhelming. =. () f the new generation of economic methodolo: «|. From a public policy perspective they. demonstrate gists—Bruce Caldwell, Lawrence Boland, pet- conclusively that there is no economic justification | for Th aps Arjo Klamer—the most talented and outspoken restricting, regulating, or in any way discouraging Co may be Philip: Mirowski of Tufts University, Modern. non-fraudulent advertising. Going even farther, they ‘methodological discussions tend to fall into one of two argue that to do so actually reduces social welfare. Unfortunately this message has not yet reached Cap- itol Hill. In recent years we have heard the social - engineers in Washington call for further restrictions on all kinds of advertising—from the advertising of “categories: “meta-methodology” (What should we do about all these competing research programs?) and “rational reconstruction” (What did Friedman really ~ meanin 19537); Mi owski, by contrast, prefers a frontal fd alcohol to Saturday morning childrens’ advertising. | assatilt on the hard core of ienclassionl egomopLic theesy | ‘The authors bring sound. economic reasoning to salt rashoninis. he slaima. was ported directly Pa bear on all of these issues: In’ ‘addition, ti licy = d of these 1 2% Do te ‘mid-19th-century physics by Jevons, Walras, and their makers have also been eyeing the tax treatment of | advertising as a possible avenue for revenue raising. successors, with little thought to its applicability; and There have been several proposals to reduce the tax most of us have been using it uncritically ever since. ‘value of right-offs associated with advertising ex: ~ Mirowski has been elaborating this position over penses. Part of the argument for this has been that the last few years in scattered journal articles and ‘advertising is inherently anticompetitive and there- ‘two books (neither of which has received very much fore should be discouraged (see Cordato, 1987). attention).” A definitive statement of his thesis has Ekelund and Saurman put all such “justifications” for been in preparation for some time in the book, More | | raising revenues on the backs of advertisers to rest. ~~ Heat Than Light (now available fromCambridge). Be- SR Ultimately, those who continue to view advertisingin = cause ‘of the delay Against Mechanism, a collection of GH the knee-jerk market failure tradition. of JiR. Gal- 12 essays, most of them previously published, was braith, Paul Samuelson, and F. M. Scherer, without = = released in 1988 by Rowman & Littlefield. addressing the arguments made here, are either ©. The core of the volume, and easily the best essay, showing their ignorance or being dishonest. © + is the first chapter, “Physics and the ‘Marginalist "There have been several approaches to welfare economics that | Revolution,” an article that originally appeared in Austrians have developed and occasionally invoked (see Rothbard, = the Cambridge Journal of Economics in 1984. Here 19586; Kirzner, 1973, 1988; Armentano, 1882; and Cordato, 1989). My Mirowski offers the bold claims that (1) the distin- point is that none of them have been developed to the point where. guishing characteristic of the new marginalist eco- they could be considered a 2 fully developed alternative to the perfectly nomics of the 1870s and 1880s (at Manchester and competitive model. . . a oo - EIN aE Lausanne, at least) was not marginal utility at all, * but the fact that the new theory was patterned explic- : REFERENCES ELT © itly after physics—in particular, the new physics of Armentane, D. T 1982. Antitrust and Monopoly: Anatomy of a -. energy. and the field—-in"a conscious and deliberate Policy Failure. New York: John Wiley. © attemptto make’ economics more “scientific”; and that Cordato, Roy E. 1987. “Revising the Tax Treatment of Advertising: (2) this same 19th-century energetics model has per- Anything for a Buck.* IRET" Byline, No. 47. Washington, D. e sisted as the basis of modern economics, even long Institute for Research on the Economics of Taxation, October 22. * - “gfter jts abandonment in the physical sciences. ‘This . . 1989, “Subjective Value; Time Passage, and the Economics of. Ve thesis Mirowski savs 24-25 , Harmful Effects.” Hamline Law Review 12,No. 2. Ln os b ye (pp. hi > of oe ‘Hayek, F. A: 1945. “The Use of Knowledge in Society.” The Ameri- ex ains a Bum iy 0 issues d core ph elas can Economic Revie 85, No. 4, Page numbers refer to reprint in attempts at locating the ha os Hayek, Individualism Economic Giger | South Bend, Ind.: Gateway theory ... First, it explains why neoclassical th y = Editions, 1948, : mathematical formalism have been: indissolubly wed- Kirzner, Israel M. 1988, “Welfare Economic 4 oot A Moroni Austrian ded since the 1870s, even though gent: defense of - Perspective,” in Walter Block and Llewellyn. H. Rockwell, Jr., ed. the necessity of the link has. be ble by its ab- Man, E¢onomy, and Liberty: Essays in Honor of Murray N. Rothbard. sence. Second, it explains { f neoclagsicism JS Auburn, Ala.: The Ludwig von Mises Institute. ET in preempting « other rograms in economics . 1973. Competition and Entrepreneurship. Chsieage: University . by means of the 5 claim that it is scientific, even | of Chicago Press. Co though’ standards of #cientific discourse in the larger Rothbard, Murray N. 1856, wpoward a Reconstruction of Utility on ‘culture! have changed periodically during the last hun- and Welfare Economics,” in Mary Sennholz, ed., On Freedom. and 1 Free. oni drediyéars. Third; it explains the preference for tech- . Enterprise; Princeton, N. Ju: Van, Nugtrand, u ETE A niques of constrained maximization over any other ===== PAGE 11 ===== analytical techniques ... Fourth, it explains the persis-~ in ‘economics; the 1 review of McCloskey’s Rhetoric; and tent use of an unobservable and unmeasureable value | the first few pages of chapter 10 on Morishima’s determinant —utility—in textbooks and in applied re: Marx's Economics. Less satisf, actory, however, are the search, despite protestations that utility is not ‘chapters on Mirowski’s own version of “neo-institu- needed” for neoclassical results ... Fifth, it explains tionalist” economics, which he sees as the preferred the modern controversy. over the necessity for a “microfoundation for macroeconomics,” which can be alternative to the neoclassical orthodoxy (although interpreted as a complaint that Keynesian economics - nowhere in the volume is a research program explic- has not conformed to the hard core research strategy ~~ itly stated). Apparently Mirowski does not mean; by ‘and is therefore somehow. illegitimate: .. ©All these the way, the so-called “New Institutional Economics,” characteristics are borrowed. fron) nineteenth century Co which comprises the formal contracting and agency - energetics. : : literature and Oliver Williamson's transaction cost These general — should be familia ar to economics; none of these are mentioned | in the text, modern Austrians (who, by the way, are not cited even though this is clearly a “hot topic” in microeconom- anywhere in the book), but Mirowski goes much ics. In addition, ‘there i is no comment on any modern farther in emphasizing the details of the energetics Austrian school writers, Misesian, hermeneutician, or metaphor and the special difficulties in its applica- Sibies whe: despite. the fact that the Austrians have tion to economics. One problem is that any con- een loudly “against mechanism” for a long time. strained maximization problem assumes some sort A few other minor quibbles: Mirowski’s self-con- of conservation principle. In energetics, it is the . scious attempt to cultivate a flashy and clever writing total energy of a moving object (the sum of potential style is often forced and uninspiring; while it is cer- energy and work accomplished) that is.conserved: tainly true that “it behooves economists who repudiate : Walras’s system, it turns out; implicitly assumes. the slavish imitation of physics to rediscover their lit- that in- the process of exchange the sum of total: 6 erary and philosophical roots” (pp. 7-8), it doesn’t follow expenditure and.total tility is somehow conserved, that one cannot be: simple, clear, and direct. (Fortu- a proposition that clearly-isn’t sensible. Yet neoclas- nately Mirowski doesn’t come close to the difficult ~ sical ‘theorists have continued to: “surreptitiously” and confusing style of Georgescu-Roegen’s The En- assume some form of conservation principle i in their: = tropy Law and the Economic Process,” a work cited work (p. 19). A second problem is that the early . favorably in the text.) Furthermore, the book’s exam- | Co energetics models assumed all physical processes to . ples and illustrations from physics are not particu- "4 be fully reversible in time; that is, they should exhibit ~~ larly elegant or clear, which is unfortunate because &@ no hysteresis or time dependency. In economics this conveying a basic understanding of energetics to the ‘means that “in equilibrium bygones are bygones; thus ~~ non-specialist is so central to Mirowski’s purpose. one could practically ignoré how a market actually Also several of the chapters are burdened with an functions in real time, paying attention only. to puta- extremely annoying combination of endnote and par- tive ‘eventual’ outcomes” (p. 26). ~~ enthetical references that sends the reader flipping - back and forth throughout the book. Such assumptions are rarely questioned. (or even noticed), according to Mirowski, because the early - In sum, though, Against Mechanism i is.an impor- neoclassicals themselves didn’t fully understand the © tant work that deserves to be widely read, especially implications of the energetics metaphor, ‘and few = for its penetrating and original analysis of the mean. economists then or since have known enough physics = ing of the “marginal revolution” and the. problems of to question it. (In chapter 2 Mirowski presents corre- scientism in modern neoclassical - economics. Only ‘spondence between the mathematician Hermann - now with the appearance of More Heat. Than Light, Laurent and Walras, and later Pareto, in which Laur- however, can we judge Mirowski’ 8 OWIl neo- -institu- : ent outlines at length the mathematical inconsisten- } tionalist agenda. cies of the new economics; Walras’s and. Pareto’s responses indicate that clearly neither wag" exactly Ce sure what he was doing.) This should come as little surprise when one recalls the number of noted econ- ph books are The Birth of the Business Cycle (New York: Garland - Publishing; 1985), and The Reconstruction of Economic Theory (Bos- ton: Kluwer, 1986), a a collection of essays by several authors edited by ~ omists who began as dissatisfied physical scientists.? Mirowski. The author also makes it quite clear. that. Menger, by Ther reviewer has toad the reversibility problem acknowledged i in these criteria, is not a “neoclassical” economist at all, ~~ only one other place, W. W. Bartley's Unfathomed Knowledge, Unmea- having rejected both the law of one price and the view = sured Wealth (La Salle, Il.: Open Court, forthcoming), chap. 8 . that traded goods are equivalent in value (pp. 22-25). EE _ Cémpare, for example, Alan Blinder's personal story in Arjo | The analysis here is consistent with: the recent work iE Kiamer's Conversations with Economists. (Totowa, N.J.: Rowman and of Erich Streissler and William Jaffé on “de-homoge- - Allenheld, 1983), ~~. .. oC : nizing” the Jevons-Walras-Menger triumvirate.’ © + “Erich Streissler, “To What Extent Was the Austrian School ‘Marginalist?,” History of Political Economy 4 (Fall 1972); 426- 41, The other essays in’ the. book develop these basic William Jaffé; “Menger, Jevons and Walras De-homogenized, * Eeco- ‘themes, although the quality of the selections is some-.- «nomic Inguiry 14 (December 1976): 511-24. what uneven. Especially noteworthy are’ chapter 6, a * 5Nicholas: Georgescu-Roegen, The Entropy I Law and the Economic further exploration of the role of conservation principles Process (Cambridge, Mass. Harvard Uni iversity Press, 1971). ll ===== PAGE 12 ===== ) Hillsdale College Hosts Austrian ‘tal framework that dominates the views of even many cl RY pe ~.. anti-Keynesians. Professor Joseph Salerno of Pace Uni- N Economics Conference EE versity and Peter Lewin of Dallas, Texas, responded. | ESE SR = 7... Professor Mark Skousen of Rollins College'argued | 4 I SE Cr in “ rian Casital Theory and the Problems:of Eco-: 4 «3 n April 21-24; 1990, Hillsdale College in Hillsdale, am Austrian API ey An LE i aboard. Ozpoin sponsored psn on Austrian Lore Development in the Third World" that “only economics that testified to the current intellectual vi- capital acouinulation brought about in the free market rena ams any ofihe Universi of Newcastle, | Professor Richard Ebeling of Hillsdale College, who oe od Jobin Egor of Towson. Sots eponded. |” 1 i organized the conference, presented a history of Aus- =~ © 5 ae oe Selgin i" ys ; : trian economics, from its birth to its modern state. Professor George Selgin of the University - f Geor- | it ‘Professors Kurt Leube, of the California State Univer- - gia presented ‘Monetary. Equilibrium and the ‘Produc- IE sity, Hayward, and Norman Barry, Bowling Green Uni- tivity Norm’ of Price-Lovel Policy,” argued that HE versity were the respondents. ae “monetary authorities, instead of stabilizing the price i] A A POT TRL Tr TT ‘level, should allow it to adjust with changes in produc- Professor Hans-Hermann. Hoppe presented ‘his tivity. Professor Lawrence White of the University of paper Austrian Methodology in the Age of the Decline Georgia said that such a policy assigned to monetary Oe: oo aged against positivism, presented authorities is not a substitute for free banking. e Misesian alternative, and extended a priorism into: = = “Phere we GO tan dies and many Sai political theory and property rights. Controversy broke = There were more than 100 attendees. and many said Don Brotsasor Robert Formaini of the University he poe was as fruitful as the official | a Fonpe’s o priori political theory was foo. Comjerence feet The papers will be published by gh d unpersuastve to be incorporate dinto the Aus: Hillsdale College in its series Champions of Freedom. trian edifice. Professor J. Patrick Gunning.of the Uni- BER . oo versity of Papau, New Guinea, also responded during - this lively session. . EE SE Le Wikaiiir of Ne ire edie. . Mises Institute Hosts i.°-f Professor lsrae irzhier of New York University. = = T)a& PEA TREY a i presented his paper “The Idea of ‘Competition’in Con- ~~ De-Socialization Conference. ; temporary Economic Theory and the Austrian Theory ~~ ITE RE O'Driscoll’s position that Mises held a neoclassical view von Mises Institute sponsored the first Austrian of monopoly. Professors Stephen Littlechild of the Uni- - = look at the post-socialist age: “After the Revolution: versity of Birmingham and W. Duncan Reekie of the = De-Socializing the Socialist Bloc.” It went a long way University of Witwatersrand were the respondents. ©» foward developing a blueprint, consistent with the Aus- Professor Peter Boettke of New. York University’ ~~ trian tradition, for dismantling the command economy presented “The Austrian Critique of Central Planning after the 1989 anti-socialist revolution. ~~ and the Decline of Socialism around the World” which ~~ "Professor Hans-Hermann Hoppe of the University 5 addressed issues. of economic calculation and Soviet . "of Nevada, Las Vegas, who is from Germany, noted the 3 attempts at reform. Professor Samuel Bostaph of the “mistakes that have been made already on the path to © University of Dallas fesponded, and Boettke fielded. ‘German unification and offered an alternative route questions from Soviet experts in the audience, ~~: that avoids the stagnation of social democracy. Professor Jack High of George Mason University = = Professor Krzysztof Ostaszewski of the University | 3 presented “Government Regulation and the Austrian . of Louisville, a Polish emigré, critiqued Poland’s limited. |- Critique of Industrial Organization: Theory.” He at- = reforms and described the obstacles t to be faced in. ‘| - tacked static monopoly diagrams on Hayekian grounds ~~ attempting to become a fully capitalist society. a and offered a public-choice critique.of regulation. Pro- Dr. Yuri N. Maltsev of the International Center for fessors Charles Van Eaton of Hillsdale College. and ~~ Development, Policy, and former reform adviser to... "| Sanford Tkeda of California State University, Hayward Gorbachey, described the miserable standards of living J “responded. oo oan oo in the Soviet Union and- explained how the economy. {i "Professor Roger Garrison of Auburn University pre- Sold be fully privatized, His short-term outlook for the sented “Austrian Capital theory and the Future of © Soviet economy was extremely pessimistic. - 5 Macroeconomics,” in which he surveyed macroeconomic. .. Profess Gottfried Haberler, of the American En- Cog ===== PAGE 13 ===== Economic Association, introduced Dr. Maltsev, and = | i In noted his elation at the revolutionary events, “I only oo Mi ses stitute’s | wish Ludwig von Mises could have seen n hig prediction oo a ‘Lawrence Fertig Center ~ @& true,” said Professor Haberler: =~ ~~~ Hosts Lithuanian Delegation Dr, Kestutis Baltramaitis, of the & ‘Beonomic reform oe oo team of the Lithuanian Council of Ministers, was the ~ special guest lecturer. He spoke of Lithuania's planto I. completely privatize their industry. and dramatically =~... F cut the size of their public sector. He assured the audi- ence they want complete de-socialization, ‘Especially 2 notable was his revelation that’ Lithuania plans to offer foreign entrepreneurs free and total access to its mar-. kets and resources, with no restrictions on the. size or © type of investment. - SET "he Fertig Center of the Ludwig von Mises Insti- “ie tute; in Fairfax; Virginia, hosted a delegation of Lithuanian’ economists for a productive three-hour eolloquium- on: the future of free markets in their country. : Dr.’ Bd ‘Hudgins of the Heritage Foundation gpencd the meeting with a.discussion of the central elements of a capitalist economy: private property, Professor Murray Rothbard of the University of freedom of contract, and the rule of law. Professor | Nevada, Las Vegas explained that Mises and the Aus- David Meiselman of Virginia Polytechnic Institute *. trians forecasted the collapse of socialism, and pointed spoke on stock markets, emphasizing their multi- tothe tremendous opportunity that now exists foranew = farious.structures and their evolution out of the. social experiment in freedom. He focused specifically ¢ on market. Richard Hite, a Mises’ fellow, urged com- what must be done—monetarily, institutionally, and pletely open borders, with no import or export re- ideologically—to achieve it, and. urged a 8 stroke-g of the- strictions, tariffs, or subsidies. Dr. Roy Cordato of pen dismantling of of fhe: phe order. © oi Fowniiithe Ingtitute for Research on the Economics of Tax- FEN ES Cation: ‘explained how: taxes can be destructive to . + “prosperity. ‘Sheldon" Richman of the Institute for “Humane Studies cautioned against starting a state . social security or welfare system and explained how “private alternatives are more responsive to people’s ‘needs, Edwin Vieira of the National Right to Work Foundation lectured on the economics of labor and monetary reform. Joe Cobb of the Joint Economic ~~ Committee gave a blueprint for moving away from — “the ruble toward a sound Lithuanian currency. _ ‘Doug Bandow of the Cato Institute chronicled the failures of foreign aid and urged them not to accept “any if offered. Dr. Yuri Ni. ‘Maltsev, International - Center for Development: Policy, and former eco- "nomic reform adviser to Gorbachev, spoke about the obstacles, in the form of foreign interference and special interest pleading, that they face in privatiz- ing industry. Alex Tabarrok, a Mises fellow, urged that reforms take the shape of revolution rather 7 than evolution, and credited: Ludwig von Mises with -- laying the proper ‘theoretical discussion. Fertig Center Director Jeffrey Tucker organized the con- | ference and moderated the discussion. _ _——— BE Kestutis- Baltramaitis, member of the Lithuanian Ce The Lithuanians. attending were pleased with se - delegation, spoke in Russian on the transition.toa - | free market in: Lithuania while Yuri Maltsev trans- wn the advice they received and engaged i in a wide-rang- la ted into © English for the avdionse, - Co oo ~~. ing question and answer session. The Lithuanians . Co Lindi were; Filomean Jagévicione, head of the economics 2 Finally Joseph Sobran of National Review cau B Claveokac, totes oF piotioniics at Vilnius Univer- fons “hay 259, sali for hoary of sity (and translator of The Incredible Bread Ma- export froe marke sonics and ts Founders vision gone Neituile Beltianitiig, member of the of the liberal society. Fe = F— +. Economic Reform Commission of the Council of Min- CT + istries;Algis Dobrovelskis, minister of social security; "® Attending the conference were \ University profes. ~. Vytenis Aleskaitis, member of the Economi¢ Reform sors and students, local think-tank scholars, and Mises ~~ Department in the: Ministry of Economic Affairs; and - Institute members from around the country. Tapesfrom = Romualdas Visokavicius, president of the Bank of thie conference : are now. ‘available from the Mises Insti- Commerce and Industry. Saul Anuzis, Michigan po- tute. and the papers: wills soon nbe © published. LTR oo - B litical consultant, served as § their interpreter. 18 ===== PAGE 14 ===== Some Remarks to the Lithuanian Delegation by RoyE. Cordato iE CL oo : : ‘by Alexander T Tabarrok | There is no point in talking about taxes i in \ the SURETY There are two opposing schools of thought on how 3 context of a socialist economy without private prop- .- quickly to de-socialize: the evolutionary and the rev-. erty, a price system, or rational economic calculation: - “olutionary. The evolutionists argue that to avoid pain- So my remarks assume you have slieady made radi- ful ‘dislocations ‘and. frictions de-socialization must cal changes toward a free market. Cs eo occur gradually and it must follow a well-publicized Taxes are an intrusion into the free market “plan, According to this argument, slow and well-pub- system and keep it from operating as efficiently as ~~ licized privatization, de-regulation, and spending "it otherwise would. In a fundamental sense, taxa- ~~ cuts gives people time to adapt themselves to tion subverts private property and is inconsistent changes. which they know’ must eventually occur, ~ with the notion of voluntary exchange. I emphasize ~¢ thus reducing ‘the costs of de-socialization. In my this point because taxation should not be viewed as = judgment instituting this plan would be a profound a ‘tool of fiscal policy,’ i.e., as a way of enhancing ‘mistake. A successful program to de-socialize must “market outcomes or. ‘controlling aggregate involve rapid change on all fronts. It requires revo- demand’ —regardless of what you may have read in - lutionary change, a complete break with the past. Paul Samuelson’s textbook on the principles of eco-- = There are three reasons for the superiority of a nomics. If you must. have taxation, it should be revolutionary program of de- socialization: ‘political, “structured so that it does the least amount. of dam-- economic, and empirical. ‘age to market decision-making. and the’ ‘price’ sys. First, the political reasons, The socialist state benefits : tem as possible. I would like to mention a few basic ~ special interest at the expense of the general interest. principles. LD De-socialization, whether done quickly or slowly, upsets First, a tax system can easily be a deterrence to the status quo. Many groups in society will initially lose saving and investment. Broad-based income taxes are, power, prestige, and ‘Wealth, ‘There: will be a time of by. their very nature, biased against: saving DE LE political turmoil when such relative toconsumption. There are many ways: EE 0‘ groupsmay evencomprisea ~ of demonstrating this point but the easiest is ee e— Fi A = . . - majority of the population. ~ There are, short-term 4 ax Syston should serve to losses which must precede a long-term gains. Although “make ‘people acutely. aware of everon o in society will a to simply point out that, under such a. system, Rn - the returns to savings, for example* interest income, is taxed while the returns to consum: