===== PAGE 1 ===== Vel 15% { Austrian Economics Newsletter many other areas of economic theory and applica- tion. A follow-up volume, Power and Market (1970), extended the analysis of the consequences of govern- ment policy and formed the basis of much of con- - temporary libertarian political theory. Rothbard was a generalist in an age of ever-in- creasing specialization, and his contributions cover all the major areas of economics. He was initially in- terested in monetary and business-cycle theory, His Ph.D. dissertation, The Panic of 1819 (published in 1962), remains the standard reference on its sub- ject. There he develops the thesis that monetary manipulations by the Bank of the United States had caused this country’s first major economic cri- sis. In America’s Great Depression (1963), he exam- ined the Depression from the perspective of Austrian business-cycle theory. His The Mystery of Banking (1983) and The Case Against the Fed MURRAY N. ROTHBARD (1926-95) (1995) argue against fractional-reserve banking and make the case for abolishing our central bank. His best-selling work, What Has Government Done to Our Money? (1963), records the history of Ameri- can monetary devaluations. He also wrote widely on political and economic history, the history of economic thought, compara- tive economic systems, utility theory, ethics, and methodology. Regarding the latter, Rothbard was a strict defender of Misesian praxeology and a critic of the various “postmodern” approaches that have be- come fashionable recently within the Austrian school. urray N. Rothbard, economist, historian, po- litical theorist, and philosopher, died on Janu- ary 7, 1995. The leading contemporary Austrian economist and the founder of the modern libertar- lan movement, he will be remembered for his many contributions to economic theory and its applica- tions, the history of economic thought, political the- ory, and the philosophy of social science. Rothbard had already begun graduate work in economics at Columbia University when he discov- ered Ludwig von Mises and the Austrian school in 1949. That same year saw the beginning of Mises’s N.Y.U. seminar, which Rothbard attended from its inception, and the publication of Mises’s Human Ac- tion. In that book Rothbard found the coherent body of positive economic theory he had been searching for, and he set about to solidify, defend, and extend Austrian theory. Robert Higgs: Austrian Economics and the He published his magnum opus, the two-volume New Economic HIStory .......cnvoeumerinrinruncannenns 2 Man, Economy, and State, in 1962 at age 36. A com- prehensive, systematic treatise covering all branches Mark Thornton, Peter Boetike: Book Reviews... 3 of economics, Man, Economy, and State compares Donald Boudreass, William Butos: only to Human Action in scope. It also contains Recommended Reading 6 Rothbard’s original contributions on monopoly, rent | {~~ Tm theory, the analysis of government intervention, and Notes and Transitions ............cooo.ovwerereeesrrsennsnn, 8 ===== PAGE 2 ===== Rothbard’s last major work, the two-volume Aus- AUSTRIAN ECONOMICS trian Perspective on the History of Economic Thought AND THE NEW (1995), is a unique treatment that focuses on many lesser known figures and emphasizes the social, cul- ECONOMIC HISTORY tural, and religious forces that shape the develop- ment of economic doctrine. Early reviews compare it to Schumpeter’s History of Economic Analysis in breadth, depth, and originality. by Robert Higgs he awarding of the Nobel Prize in economics for 1993 jointly to economic historians Robert Beyond his purely scholarly activities, Rothbard W. Fogel and Douglass C. North spotlights the New was a key figure in the revival of Austrian economics Economic History. This approach, also known as after 1974 and a mentor to many of the current gen- cliometrics, 1s nearing its fortieth birthday, and the eration of Austrian economists. Along with his con- Young Turks of the 1950s are now graybeards of the temporaries Israel M. Kirzner and Hans F. Sennholz, academy. Today, i In an economics department that of- Rothbard was also a link to Mises and the days of the fers courses in economic history, the professor prob- Austrian school in Vienna. He will be sadly missed. a ably will be a cliometrician, Does cliometrics offer anything of value to the Austrian economist? wr Mark Brandly At first glance one might well answer no. The New Economic History has always been part of mainstream economics. In its paradigmatic form, cliometric research combines neoclassical economic theory as a source of testable hypotheses and classi- cal statistical inference as a method of testing the hy- Au strian potheses.' Hence one might view cliometrics as nothing more than mainstream empirical analysis us- ing old data. Austrian economists, conceiving of eco- nomic theory as the pure logic of choice based on apodictic axioms, seem to have little to gain from Economics Newsletter Volume 15, Number 1 cliometrics. CONTRIBUTORS TO THIS ISSUE Upon closer inspection, however, one may revise Peter J. Boettke is assistant professor of economics at New this assessment. Austrian economists do sometimes York University. write economic history——witness such luminaries as Mark Brandly is a graduate student in economics at Auburn Ludwig von Mises, F. A. Hayek, and Murray Rothbard, University. as well as many of their followers. In this mode, Austri- Robert Higgs is research director at the Independent Institute ans tend to go about their work in the manner of “old- in Oakland, California. fashioned” (i.e., noncliometric) economic historians, Mark Thornton is O. P. Alford Ill Assistant Professor of Eco- except that they bring Austrian economic theory to nomics at Auburn University. bear to interpret the historical data at hand. Austri- STAFF ans engaged In historical interpretation cap some- Editor: Peter G. Klein/ University of California, Berkeley times benefit from some cliometric work.” Associate Editor: Jeffrey A, Tucker / Ludwig von Mises Institute In Theory and History Mises called the study of Contributing Editors: Mark Brandly, Doug Butler, Pete Calcagno, Paul specific historical action “thvmolo ») This study re- Cwik, Jim Kee, Sandy Klein, Keith Reuter, Shawn Ritenour, John P orical action “thymology.™ fis study r Thompson, Doug Walker, Gilbert Werema/ Auburn University veals that in the past definite MEN Or groups of men Managing Editor: Judith F. Thommesen were valuing and acting in a definite way (p. 272). Thymology can “establish the fact that certain traits PERMISSIONS AND SUBMISSIONS appeared in the past as a rule in connection with cer- Send questions pertaining to submissions of articles and book tain other traits” (p. 274). In historical analysis, eco- reviews and change of address and subscription requests, to ic th al is insuffici “If the ob : the Austrian Economics Newsletter, Mises Institute, 415 W. Mag- nomic t eory one 1$ insurncient. the observer 1S nolia, Suite 101, Auburn University, Auburn, Ala. 36849-5301. not familiar with the ideology, the technology, and the Articles that are submitted should be double-spaced with therapeutics of the men whose behavior he observes, i notes and references corresponding to the style found in the he cannot make head or tail of it” (p. 284). Thymologi- AEN. Articles that are accepted will be requested on an IBM cal study leads to the discovery of how specific human format diskette, when possible. There is no submission fee. | valuations produced particular patterns of related eco- Permission to reprint articles is hereby granted provided full nomic events at definite tines and places. credit and address are given. Mises’s explication of thymology as dealing with The Austrian Economics Newsletter is published periodically by the Lud- P ymology § wig von Mises Institute, Auburn Unversity, Auburn, Ala, 36649-5301; “the content of human thoughts, judgments, desires, (334) 844-2500; fax (334) 844-2583; internet: Ivmises@mail auburn edu. and actions” (p. 266) parallels a distinction made by Copyright © 1995 Ludwig von Mises Institute James M. Buchanan in his essay “Is Economics the 2 / AUSTRIAN ECONOMICS NEWSLETTER Summer 1995 ===== PAGE 3 ===== Science of Choice?”* There Buchanan noted that “In nomic events, including changes in institutions and 8 8 the pure logic of choice, the arguments in the utility other variables traditionally regarded as exogenous in function are not identified; ‘goods’ and ‘bads’ are un- neoclassical theory, these findings can serve as valu- known to the external observer. In any science of eco- able materials for Austrians practicing their own dis- nomic behavior” —that is, in any attempt to tinctive style of interpretive economic history. understand the patterns formed by actual economic events at specific times and places—*“the goods must N be classified as such” (p. 45). Both Mises and Buchanan otes rake the rationality of action for granted. Muses s thy- Many contributions, however, including most of those mology and Buchanan's “science of economic behav- by Fogel and North, do not take this standard form. Some ior” deal with the specific expressions of that feature theoretical discussions without classical statistical in- rationality. ference; others feature systematically compiled quantitative evidence without classical statistical inference. *When cliometricians have based their analyses on such concepts as aggregate production functions or social welfare Cliometrics relates to these Austrian perspec- tives on historical interpretation because the cliomet- ricians have employed statistical methods to describe functions, which Austrians consider vacuous, Austrian the particular patterns that existed at many definite economists can only avert their eyes. places and times. The cliometricians’ own under- Ludwig von Mises, Theory and History: An Interpretation tandine is that th ine h h derived of Social and Economic Evolution (New Haven: Yale Univer- Standing 1s t at tney are testing ypotheses derive sity Press, 1957; reprinted, Auburn, Ala.: Mises Institute, from neoclassical economic theory. But suppose one 1985), pp. 264-74 and 312-15. were to reinterpret their findings as merely descrip- Reprinted in James M. Buchanan, What Should Econo- tive statistics showing how, and how closely, certain mists Do? (Indianapolis: LibertyPress, 1979), pp. 39-63. variables were related. In this light the R® and ¢ statis~ “For a recent major work whose authors presuppose the 1 f regression anal sts, for le. are sort or compatibility between Austrianism and cliometrics ties ol reg ] $ on . Ly oF examp boon o that I have described, see Richard Vedder and Lowell Gai- measure only the ughiness ot a particuiar observe laway, Out of Work: Unemployment and Government in Twenti- concatenation of variables, that is, the degree to eth-Century America (New York: Holmes & Meier, 1993). a which the variables formed a definite pattern, and one need not accept either the applicability of classi- cal statistical sampling theory or the scientistic un- derpinning of neoclassical economics. Reinterpreted . in this way, cliometric methods provide a powerful 4 A, /) Book Reviews tool for establishing which patterns actually existed and which did not, because the statistical controls built into the methods help the analyst to identify re- Strategic Factors in Nineteenth Centur lationships that are spurious and those that exist 8 Jy : : : American Economic Growth: only in the sense of partial (other things equal) cor- relation—discoveries beyond the powers of the old- A Volume to Honor Robert W, Fogel fashioned historian. Edited by Claudia Goldin and Hugh Rockoff University of Chicago Press and NBER, 1992 In addition, the new economic historians at their best have displayed a keen awareness of the potential flaws of historical data, such as errors of measure- Reviewed by Mark Thornton ment and unrepresentativeness of samples, They . : have carefully considered potential problems such as Rober Fogel is a remarkable scholar. He received the the unreliability of surrogate variables and the sensi- 1993 Nobel Prize in economics (along with tivity of conclusions to specific data sets or particular Douglass North) for his demonstration that State sub- sample periods. All students of history, including Aus- Sidles lor the in Faster of the American railr oh trian economists engaged in historical interpretation, bl not fain bee © poe economic growth, stand to gain by such careful handling of the empirical and may flave even been a hindrance. evidence underlying their conclusions. | His book Time on the Cross (with Stanley Enger- man) shocked the economics and history professions and exploded into the public spotlight with evidence that slavery was a highly successful and profitable system. Fogel has continued to push the profession forward with his investigations of the role of religion in politics and the causes for the decline in mortality. His focus on the “big issues” has established him as Cliometricians have also played pioneering roles in expanding the scope of neoclassical analysis to in- clude changes in technology, demographic charac- teristics, ideology, property rights and other institutions. Austrians may find these studies espe- cially interesting and helpful. In sum, Austrians need not dismiss all the find- perhaps the world’s leading economic historian. Don- ings of the New Economic History. Viewed as a ald McCloskey has called him “the best historical body of statistically described patterns of past eco- economist since Schumpeter.” Summer 1995 AUSTRIAN ECONOMICS NEWSLETTER / 3 ===== PAGE 4 ===== responsible for changes in lending that accompany the business cycle. Clayne Pope and John Komlos found that both life expectancy and average heights of free blacks fell during the late antebellum pe- riod, while Stephen Crawford established that two-parent slave families tended to enhance the owner's profits. Ann Car- los and Frank Lewis support Fogel’s fa- mous finding that government subsidies for railroad infrastructure did not con- i tribute to the public good. Joseph Reid and Michael Kurth show that spending on public goods replaced patronage in city government as urban populations became wealth- ier and more homogeneous, and Gerald Friedman says that such spending helped politicians divide the labor movement. Fogel’s most important and lasting contribution, however, is in method. He is at the center of a methodological revolution that has transformed eco- nomic history from a largely qualitative discipline to a quantitative, statistical one. Understanding the past now means measuring it. Fogel is first and foremost an em- piricist @hd positivist. Many of his publi- cations are of an explicitly methodological nature, promoting and showing the viability of cliometrics, the use of econometrics to study the past. Viewed in this light, his applied research seeks to prove the viability of this “new” economic history. L By most indications, Fogel’s program has been a tremendous success. The new economic history that he advocates now dominates the profession. The ma- jor journals have gone in the direction of this type of 10 quantitative research. Fogel has directed 68 disserta- advocated by Fogel and the cliometricians — the use tions at Chicago, Harvard, Rochester, and Brandeis, of large cross-sectional and longitudinal data sets and more than a handful of his students have become garnered from original sources — sounds very im- major contributors in economic history and leading pressive, Yet this method is fraught with difficul- lights in the profession. Many of his coauthors, col- 11€8§, shortcomings, and pitfalls, and Austrians E leagues, and fellow economic historians have been are particularly weary of its explicit positivist profoundly influenced by his work. foundations. First, the data themselves contain several crucial problems. The data sets are typi- While such tidbits are appealing, one needs to be very cautious in using such information. The method { Fogel’s influence on the profession is clearly cally incomplete samples requiring substantial ex- shown in the pages of Strategic Factors in Nineteenth trapolation (i.e., guesswork) and cleaning up. Century American Economic Growth: A Volume to Second, these data were not originally collected Honor Robert W. Fogel, edited by former students to test economic theory and often do not con- Claudia Goldin and Hugh Rockott. Like its predeces- tain the necessary explanatory information. Most sors Long-Term Factors in American Economic of the data were collected for some official gov- Growth (1986) and American Economic Growth and ernment purpose (probate records, census manu- i Standards of Living Before the Croil War (1992), the scripts, licenses, taxes, and so on). While such i book is an attempt to investigate America’s indus- records may be more thorough than other sources } trial revolution while avoiding all the controversy like business records, making them more appealing and confrontation associated with the study of the for statistical testing, they are not reliable as histori- British industrial revolution. The articles are all writ- cal documents. ten by his students, with his famous coauthor Enger- man and former colleague McCloskey penning Careless application of the cliometric method to ] appreciations. The body of the text is divided into government statistics can generate numbers and re- four sections that roughly parallel Fogel’s applied re- sults that are both misleading and dangerous. Test search: labor, capital, demography, and political econ- statistics generated to the forth decimal place imply omy. an exactitude unfounded by the underlying data. The book does contain tidbits of information And despite painstaking efforts to the contrary, mis- i takes can and do happen. In Time on the Cross Fogel that when carefully examined are valuable both to Lo : SR and Engerman dismissed sexual abuse of slaves in economic historians and economists engaged in : : « i part because no slaves were listed as prostitutes in modern” debates. Kenneth Sokoloff and Georgia : : Nashville, Tennessee; in fact, the census manuscript Villaflor found that everyone” benefitted from for Nashville listed no occupations for slaves. America’s industrial revolution and that wage differ- entials decreased, Howard Bodenhorn and Rockoff Some recent NBER volumes have suggested a re- found that credit markets worked better before the newed interest in economic theory, and Austrians National Banking Act of 1863 (of particular interest surely have an intense interest in history. Yet readers to modern free-banking scholars), while Michael should remember the fundamental rejection of eco- Bordo, Peter Rappoport, and Anna Schwartz found nomic theory that still underlies the empiricist meth- that monetary factors, not banking practices, were odology of the new economic history. 4 / AUSTRIAN ECONOMICS NEWSLETTER Summer 1995 ===== PAGE 5 ===== Requiem for Marx was never much of an analytical system, and the so- cialist system (in all its varieties) should never Edited by Yuri N. Maltsev have been accepted as a progressive ideal. Ludwig von Mises Institute, 1993 Praxeology establishes parameters on our uto- pias. Through its principles we learn the limits of eco- Reviewed by Peter J. Boettke nomic and social policy. Its teachings allow us to find the necessary conditions for economic prosperity and the continuing progress of the human condition (in- cluding the least advantaged in society). And what praxeology has established clearly is that nothing in the socialist project is consistent with the goal of increasing the welfare of the mass of citizens in a society. A few may benefit, but the masses suffer in economic misery and live under political tyranny. his volume is advertised by its editor, Yurt N. Maltsev, as “the most anti-Marxist collection ever published” in the scholarly literature, and this is not hyperbole. There have been major critics, both serious and silly, of Marx’s economics since the first volume of Capital was published in 1867. None of the criticisms leveled against Marx compares either in depth or fatality to those that have emerged from the Aus- trian camp. Eugen von Bohm-Bawerk’s Karl Marx and Maltsev’s introduction does a wonderful job dis- the Close of His System, for instance, is usually cred- secting the rhetoric of the reform efforts in the for- ited with having dealt a devastating blow to the ana- mer Soviet Union, and even the so-called “shock lytical foundation of Marx’s theory. But the promise therapy” reforms of Yeltsin’s Russia. As Maltsev of socialism for a better world would not go away sim- points out, “the Yeltsin government has proven an- ply because of the analytical problems of price theory other point: Gorbachevian socialism was not the raised by Bohm-Bawerk. And neither Ludwig von only way to ruin an economy's wealth-creating po- Mises’s famous 1920 article or 1922 book, Socialism, tential.” The Yeltsin program was not a market-ori- which argued for the impossibility of economic calcula- ented reform, but was directed at “restructuring tion in the socialist commonwealth (perhaps the single the state regulatory mechanism.” Western intellectu- most important insight generated in twentieth-cen- als and politicians are thus ridiculous in blaming tury economic science), nor F. A. Hayek’s demonstra- “market” reforms for Russia’s poor economic per- tion in The Road to Serfdom of the inherent formance in 1992 and 1993 and for the public’s reac- totalitarian tendency of socialist economies (even if tion at the voting booth in the fall of 1993, The idea, democratically sanctioned), could dissuade progressive put forth by some of Russia's political leaders, that the intellectuals from pushing socialist schemes to save man- period of market romanticism has been tried and failed, kind from poverty, squalor, and ignorance. Today, de- and that it is now time to move to non-monetary spite the collapse of communist regimes in the late means of economic control (read: wage and price con- 1980s, a modified version of socialism is still the dream trols) would be laughable were it not so tragic. of many. Hope springs eternal for the idealist. As Re- z Contemporary political events, however, are not guiem for Marx so aptly shows, however, Marxism porary p ’ ’ the focus of this volume. The main papers are by David Gordon (on the logic of Marx’s system); the aaa LENE EN NR late David Osterfeld (showing that Marx's inability RES SR to distinguish between restricted and free exchange did not permit him to properly analyze capitalist rela- tions, and therefore that Marx’s critique of capital- ism 18 no critique at all); Hans Hoppe; Ralph Raico (both on the theme of class analysis and demonstrat- ing how the libertarian “class” analysis provides a more coherent and powerful analytical tool for social analysis than traditional Marxian class theory); and Murray Rothbard (providing a brilliant intellectual history of Marx’s vision), These papers focus on Marx’s fundamental intellectual contributions, while RN ye h adm TAA " : SIRE So ay re A hy " ~, Samy . Sy Le , . - - AINA ATE & Tn A NARA : - ) Shas = a tn Ta a Cp pa a ERY Gary North’s paper provides an examination of BR RS Marx’s personal biography — some of which is quite RS SEIN EE 1995. CoA & revealing, I think the papers by Hoppe, Raico, and SIR FRAT RRR Rothbard are the strongest in the collection. Raico’s and Rothbard’s contributions are consistent with what we have come to expect from these two over the years ww \ a = Xv ek . 5 re. - Cel, . ’ . - AL RINE sbureda: — learned, well written, and at times (especially in EER Nn Rothbard’s case) highly entertaining. Hoppe’s paper 0) he . . : ENN EE A, a, Jv. She, N provides a good discussion of libertarian class theory, No Summer 1995 AUSTRIAN ECONOMICS NEWSLETTER / 5 ===== PAGE 6 ===== with some illuminating examples drawn from the New Left historians of the 1960s and 1970s. In this sense, Hoppe’s paper fits in with the 1972 collection edited by Rothbard and Ronald Radosh, A New His- AIRE N NN SRN NN \ AR RY oa ETN RR h 1, . RN SRR) 0) = We Nhe Nat tory of Leviathan. Osterfeld’s essay points in an in- Sed ha roy Rg = NH teresting research direction, but ultimately promises nw ~ IER 2 IR ns RADI NN more than it can deliver. Gordon's paper contains a Nu 3 REN & Rk Ro ber = x Te 2 RE few logical leaps that prevent it from possessing the Sh RD ee analytical sting intended. North provides some very 2 interesting material (like Marx’s real income), and Laid IR writes in his characteristic lively style. AR NN = nN A Requiem for Marx 1s more than a “Bronx cheer” for the Marxist system and the havoc it has wrought on humanity during the twentieth century. The book’s argu- ments devastate Marx’s teachings. It deserves a wide So readership, which hopefully will include many of those a i A who remain unconvinced of the merits of claims derived a oN ai = 3 Se from praxeology. For many intellectuals, socialism re- Ne AN DR San mains a worthy ideal, one that mankind was unfortu- SSRN NR nately unable to live up to in practice.! This, of EN Ne aTOh:t’:tR: TER omy. course, gets the problem exactly backwards: It was AN rm socialism that failed to live up to the worthy de- haa. mands of mankind. The realization of mankind’s de- mand for economic prosperity, political freedom, and a cooperative social order can only be accom- plished under a system of private property and the unfettered market economy. A strong (and counter- intuitive to many) claim of praxeology is that the free market system outperforms all other coordina- tion devices on both efficiency and fairmess grounds. Requiem for Marx hammers this message home repeat- edly, and as such is a worthy continuation of Mises’s work on the economic and sociological analysis of so- cialism. of the first 100 years of America’s “antitrust experi- ment.” Contrary to the view of too many econo- mists, Dewey rightly recognizes that American antitrust legislation does not constitute the “Magna Carta of free enterprise.” Dewey’s exceptional techni- cal skills are happily combined with his genuine wis- dom in understanding the limits {and, therefore, the possibilities) of neoclassical heuristic tools. Donald Dewey does price theory in general, and antitrust eco- nomics in particular, the way they ought to be done. William N. Butos and Roger G. Koppl recently expiored “Hayekian Expectations: Theory and Em- pirical Expectations” in Constitutional Political 'See, for example, Ray Jenkins, “Socialism’s Nobel Economy 4 (Fall 1993), pp. 302-29. Butos and Aims,” New York Times, January 23, 1994, section 3, p. 13. A Koppl offer an advanced understanding of Hayek's cognitive theory, showing when expectations will — and when they will not — “serve as reliable guides to action.” The subtleties of this paper are too many to review here, but Butos and Koppl’s fundamental point is that markets dominated by “big players” will promote less reliable expectations, and, hence, less or- der than will markets consisting of small actors. Note Recommended Reading Two essays in the May 1994 American Economic DONALD J. BOUDREAUX : Review, Papers and Proceedings (vol. 84) are worth a Associate Professor of Legal Studies look. One is Robert Nozick’s “Invisible-Hand Expla- y nations” (pp. 314-18). Nozick distinguishes between One of this century’s keenest and most careful “invisible-hand explanations” and “hidden-hand ex- students of antitrust policy is Donald Dewey, emeri- planations.” The former are the well-known stuff of tus professor of economics at Columbia University. market economics (Menger’s theory of the origin of In his 1990 book The Antitrust Experiment in Amer- money, for example), while the latter are the increas- ica (Columbia University Press), Dewey collects ingly known subjects of public choice theory (for in- many of his recent papers on antitrust, and he intro- stance, analyses showing that seemingly undesirable duces them with an astute introduction taking stock outcomes of certain public policies are, in fact, the EE 6 / AUSTRIAN ECONOMICS NEWSLETTER Summer 1995 ===== PAGE 7 ===== planned outcomes of politically influential interest groups). Nozick then dispenses several provocative insights about the evolutionary origins of time pref- erence and rationality. The second essay of inter- est 1s Oliver E, Williamson's “Visible and Invisible Govern- ance” (pp. 323-26), Williamson Donald J. Boudreaux continues to develop his rich the- ory of the firm, emphasizing in ~ this paper the important point that firms emerge within markets in part because of the need for fiat. Fiat 1s necessary because the real-world market is not, and can never be, so impersonal and so automatic that the necessity for creative human decision making is obliter- ated. Fortunately, Anglo-American contract law coop- erates with this need for fiat by refusing to hear disputes between divisions within firms, although government courts would hear such disputes if the disputing divisions were two or more separately owned enterprises. (Williamson calls this legal prac- tice “forbearance law.”} That is, the firm itself “be- comes its own court of ultimate appeal” for all disputes that occur internally. To this extent, less knowledgeable judges do not interfere with the decisions of more knowl- edgeable decision makers and owners. WILLIAM N. BUTOS Associate Professor of Economics Trinity College Comparisons between Austrian business-cycle theory and competing approaches are well repre- sented by Rudy van Zijp’s Austrian and New Classi- cal Business Cycle Theories (Elgar, 1993) and John Cochran and Fred Glahe’s “The Keynes—Hayek De- bate: Lessons for Contemporary Business Cycle Theorists,” History of Political Economy 26 (Spring 1994): 69-94. Ever since Robert Lucas started quot- ing Hayek, many have been intrigued by the ques- tion of linkage between Austrian and new classical cycle theory. Van Zijp’s book addresses this impor- tant question by examining in detail the original works by Austrians (primarily Mises and Hayek) and new classicals and the large volume of interpretative work that has emerged during the past decade. Cochran and Glahe’s paper encourages re- searchers to pursue Austrian cycle theory because it represents a viable and distinct alternative to Keynes and to Keynesian (old and new) and classical {old and new) approaches. Of particular note is their emphasis on the importance of capital theory as a distinguishing feature of Austrian cycle theory. Cochran and Glahe see Austrian economics as a progressive research program for addressing questions in “economic fluctuations, r-, Lo —— economic growth, and the proc- ess of capital accumulation” and suggest that contemporary Aus- trians and mainstream econo- mists alike reexamine and address the issues raised during the inter-war years by Mises and Hayek. According to the authors, the debates — and les- sons not learned — during the 1930s hold important starting points for contemporaries, a variation on Leland Yeager’s claim that post-World War II monetary economics was a Keynesian diver- sion. William N. Butos One of those nearly forgotten monographs on business cycle discussions during the 1930s is Alec Macfie’s Theories of the Trade Cycle (Kelley, 1934; re- printed 1971). As noted in Brian McCormick’s Hayek and the Keynesian Avalanche, Macfie’s book made it onto Hayek’s reading list for his course on Indus- trial Fluctuations at the LSE. The book is a quick and informative read that concentrates on Hayek and the “acutely virile Austrian analysis” of business cycles. Jack Birner and Rudy van Zijp have edited Hayek, Co-ordination and Evolution (Routledge, 1994), which provides a panoramic view of Hayek’s legacy in the moral sciences. The essays examine the Hayekian themes of “the role of knowledge in society, the notion of spontaneous order and the problem of complex- ity.” The editors should be congratulated for assem- bling a collection of essays they correctly describe as “critical and creative rather than hagiographic ru- minations.” Besides Birner’s thoughtful introduc- tion to “Hayek’s Grand Research Programme,” seventeen essays (by European scholars except Roger Garrison and Gerald O’Driscoll) address and extend Hayek's contributions to economics, social and legal theory, and the philosophy of mind and sci- ence. D. 2 O’Brien’s closing entry on “Hayek as In- tellectual Historian,” which serves reasonably well as a summary piece for the volume, admirably over- views and assesses Hayek’s scholarship. On the whole, O’Brien praises Hayek, although he accuses Hayek of seriously misrepresenting Marshall and Ri- cardo. The remaining essays are uniformly interesting and often provocative. Any reader interested in Hayek will surely profit from this book. I particularly enjoyed (even if I did not always agree with) the essays by De- sal, Rosner, and van Zijp and Visser on issues and im- plications of the “knowledge problem” and Hayek’s relation to recent enthusiasms in monetary econom- ics. Together, these essays raise some important ques- tions for Austrians. The entry by DeVries on Hayek’s cognitive psychology is a welcomed addi- tion in an area too long neglected by most Hayekian scholars. a Summer 1995 AUSTRIAN ECONOMICS NEWSLETTER / 7 ===== PAGE 8 ===== Notes and Transitions The Mises Institute’s Brown Bag Seminar meets Wednesday afternoons in the library at the Instu- tute’s Auburn University headquarters. Speakers in the Fall 1994 included Mark Thornton on “Who De- Robert Batemarco, adjunct professor of econom- “stroyed Baseball?”, Peter Klein on “Microsoft and the ics at Marymount College in suburban New York New Trustbusters,” David Laband on “Ticket Scalpers City, is the book review editor for the Freeman, pub- and Other Heroes,” Thomas Dil.orenzo on “Taxing lished by the Foundation for Economic Education. ‘Sin,’” Charles Adams on “Tax Revolts in the An- He also serves as Marketing Manager for Economic cient World,” and Wohjchiech Zeianiec on “Mises Analysis at a major New York-based apparel com- and the Concept of Action.” The Spring 1995 lineup pany. Batemarco taught a course in Austrian econom- featured Mark Brandly on “The Origins of the In- ics at Marymount in the fall of 1994. come Tax,” Clyde Wilson on “John C. Calhoun on Free Trade,” Roger Garrison on “Reflections on the Austrian Revival,” Jeffrey Herbener on “A Short His- tory of Equality,” and John Wells on “How Bad Charity Drives out Good.” Other recent speakers in- cluded Michael Hill, Lew Rockwell, Jeffrey Tucker, Doug Walker, James Kee, Shawn Walter Block, professor of economics at Holy Cross, is guest editing a 1995 issue of Cultural Dynamics focusing on the economics of Ludwig von Mises. Block was guest editor of a previous volume of that journal (vol. 5, no. 3, 1992), which also centered on Mises and fea- tured articles by W. Duncan Reekie, Glenn Fox, Gary M. Anderson, E. C. Pasour, John Conant, Deborah Ritenour, Patrick Allitt, John Denson, Charles Walker and Stuart D. Warner John P Cochran and Spindler, William Murchison, Gilbert Werema, Fred R. Glahe, and Laurence gS Moss. Donald Livingston, Sam Francis, Paul Cleveland, Robert F. Hébert, Russell Professor of Econom- and Keith Reutter. ics at Auburn University, spent the spring of 1995 as Among FE A. Hayek’s lesser-known contributions a Fulbright scholar in Paris, where he continued his is his research mn psychology. His study of the theory research on eighteenth- and nineteenth-century of perception, first written as a response to certain French economic thought. theories of the philosopher Ernst Mach when Hayek Volume 7, no. 2 of the Review of Austrian Eco- was an undergraduate in Vienna, was only published nomics (1994) features Robert Higgs on “Banning a in 1952 1n his book The Sensory Order and has Risky Product Cannot Improve Any Comsumer’s drawn little attention since. A recent obituary for Welfare (Properly Understood), with Applications Hayek by the psychologists Michael J. Mahoney to FDA Testing Requirements,” Mark Thornton on and Walter B. Weimer summarize this aspect of “Slavery, Profitability, and the Market Process,” Hayek's thought. See the American Psychologist 49, no. Hans-Hermann Hoppe on “How is Fiat Money Pos- 1 {January 1994). sible?” and Murray N. Rothbard on “The Consump- Jeffrey Herbener, associate professor of econom- tion Tax: A Critique,” as well as exchanges between ics at Washington & Jefferson College in Pennsylva- Leland B. Yeager and Joseph T. Salerno on Mises nia, spent the Spring of 1995 as O. P Alford III and Hayek on Calculation and Knowledge,” and be- Visiting Scholar at the Mises Institute, where he di- tween Barry Smith and David Gordon on “The Phi- rected the weekly Austrian Economics Workshop losophy of Austrian Economics. on money, capital, and interest theory. Peter Klein is Volume 8, no. 1 (1994) of the RAE contains arti- conducting a summer workshop on Murray Roth- cles by Roger W. Garrison on “The Federal Reserve: bard’s Austrian Perspective on the History of Eco- Then and Now,” Don Bellante on “Sticky Wages, Ef- nomic Thought, and Roger Garrison will conduct a ficiency Wages, and Market Process,” Walter Block fall workshop. on “The Total Repeal of Antitrust Legislation: A Cri- tique of Bork, Brozen, and Posner,” Joseph T. Salerno on “Ludwig von Mises’s Monetary Theory in Light of Modern Monetary Thought,” and David Gordon on “Justice and Redistributive Taxation.” Making Economic Sense, a new collection of Mur- ray N. Rothbard’s essays from The Free Market newsletter, will appear in the fall. Excellent for class- room use, the volume will contain more than 100 brief articles on applied economics and economic policy, including such topics as Clintonomics, privati- zation, health-care reform, Nafta, school vouchers, and taxes. Contact the Mises Institute for details. The newest volume of the RAE is volume 8, no. 2 (1995), featuring articles by John Egger on “Arthur Marget in the Austrian Tradition of the Theory of Money,” Jesiis Huerta de Soto on “A Critical Analy- sis of Central Banks and Fractional Reserve Free The Mises Institute has a new home page on the Banking from the Austrian Perspective,” Murray Internet’s World Wide Web, with information about Rothbard on “Egalitarianism and the Elites,” as well all Institute publications and events, and including a as notes by Walter Block and Nicolai Juul Foss and full-text, searchable version of the AEN. Point your a review by David Gordon. web browser to http://www.auburn.edu/~lvmises. 4 8 / AUSTRIAN ECONOMICS NEWSLETTER Summer 1995