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veld No 3

Austrian Economics Newsletter

W. H. Hutt’s Pen Falls Silent

by Morgan O. Reynolds

One of the great economists of our age, W. H. Hutt, died
in June, just two months shy of his 88th birthday. As he
once told me, “I was born in the century of Napoleon.” The
comment typified Bill Hutt's amiable pride and gentle
character.

Hutt’s admirers have long lamented their hero’ s lack of
fame and influence—no knighthood, Nobel prize, ete. Yet it
was partly due to Hutt’s fateful decision to depart his native
England for South Africa in 1928, a career venue almost
guaranteed to insure academic obscurity. In recent years,
however, a distinct Hutt revival has been underway. And
the timeless quality of Hutt’s contributions to our body of
knowledge promises a growing Hutt impact.

Hutt’s academic career began with a 1926 Economica
article exposing the myth that production methods were
antiworker in “The Factory System of the Early Nineteenth

~Century,” since reprinted in Hayek’s Capitalism and the

Historians. Hutt was amused and pleased that he still

ceived about $40 a year in royalties from a 60-year-old
paper.

The article was only the beginning. His minor classic,
The Theory of Collective Bargaining (1930), effectively de- ;
bunked the errors of countless labor writers and economists W. H. Hutt 1899-1988

by demonstrating the anti-labor consequences of union coer-

cion; Economists and the Public (1936) unfortunately was on market competition impoverish the poor and disadvan-
swept away by the Keynesian tide; The Theory of Idle Re- taged rather than helping them; that free-market pricing is
sources (1939), perhaps Hutt’s most original contribution to the only device available to coordinate and maximize employ-
economics, was a general theory of unemployed resources ment and output; that politically expedient concessions to
clearly superior to Keynes's theory; The Plan for Reconstruc- sectional interest groups harm the social interest; that every
tion (1943) was a valiant if utopian scheme to dismantle increase in employment and output via a price cutadds tothe
market impediments in the postwar world; his important source of demands for noncompeting outputs and employ-
1954 article, “The Yield from Money Held,” extended Mises’s ment; and that free markets maximize employment and
theory by integrating the demand for money assets into the (Continued on page 15)

general theory of the consumer; Keynesianism--Retrospect
and Prospect (1963), later revised as The Keynesian Episode:
A Reassessment (1979), was a wide-ranging dissection of
faulty macroeconomic analysis; The Strike-Threat System

(1973) exhaustively showed that union aggression inthelong Explanation of the October Crash, by Joe Salerno ...... 2
run cannot deliver on its claim to redistribute income from A “New” World Currency, by Ludwig von Mises .......... 7
the owners of capital to owners of labor services; and A On the Issue of Causality, by Roger Garrison ................ 7
Rehabilitation of Say’s Law (1975) straightened out Keynes's Replies to “Justice of Economic Efficiency”...............

tistortions of Say’s law and focused on the real villain in George Selgin’s The Theory of Free Banking
Wticficient employment and output: “defects in the pricing reviewed by Leland Yeager . SSRI ¢.
system.” Notes & Transitions ......ccoveeeercvecrererararseasssrirensrinirens 14
Hutt’s key ideas—that fiscal and monetary policy cannot Contributions of W. H. Hutt .. rrererneninreneirsinene 10

offset pricing problems, except temporarily; that restraints



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A Monetary Explanation of the
October Stock Market Crash:
An Essay in Applied Austrian

Economics

by Joseph T. Salerno

This article will attempt to place the events of “Black
Monday” in perspective by explaining how they fit into the
broader boom-bust cycle, as this sequence of phenomena is
conceived by the Austrian theory of the business cycle. The
monetary aggregate known as TMS, initially outlined in the
works of Murray Rothbard, plays a central role in my expla-
nation. In particular, I will argue that the October stock
market crash was the inevitable consequence, not of new-
fangled computer trading programs, but of an old-fashioned
inflationary boom. As in the case of all inflations, the Great
Inflation of 1982-87 was fundamentally a monetary phe-
nomenon, orchestrated by the Federal Reserve System and
financed by a massive and prolonged increase in TMS.

Setting the Stage:
The Inflationary Boom of 1982-1887
In analyzing the development of the inflationary boom, I
focus in turn on developments in the supply of money, the
market for consumer goods, capital markets, and foreign
exchange markets.

The Supply of Money

The Penn Square bank failure and the threat of default
by Mexico and then other LDCs on their international loans
in the summer of 1982 underscored the precarious stability
of the world financial system, including and especially U.S.
money-center banks. These events in conjunction with the
continuing recession in the U.S, economy-whose persistence
had repeatedly defied official forecasts.prompted the Federal
Reserve System, in July of that year, to initiate a policy of
vigorous monetary expansion.

The dimensions of this inflation of money, which pro-
pelled the U.S. economy on a rapid recovery from the reces-
sion of 1981-1982, can be seen in the sharp acceleration of the
growth of adjusted bank reserves.! From III-82 (third quar-
ter, 1982) to IV-83, adjusted reserves increased from $49.3 to
$54.2 billion or at an annual rate of 9.94%, which represents
a tripling of the 8.31% annualized rate of reserve growth oc-
curring over the seven quarters from IV-80 to IlI-82.2 To
supplement its reserve-creating open market operations and
to emphatically signal the markets of its resolve to reinflate
the economy, the Fed cut the discount rate seven times just
in the latter two quarters of 1982. Fueled by this rapid
increase in bank reserves and by the introduction of
MMDA'’s, TMS shot up from an average of $929.8 billion in
[11-82 to an average of $1355.2 billion in 111-83, equivalent to
a 45.75% annual rate of growth.

By the fourth quarter of 1983 the Fed had switched to a
more restrictive monetary policy, signalled by a freezing of
adjusted reserves at a level of $54.2 billion from III-83 to
[V-83. The restriction of reserve growth constricted TMS

growth over the same quarter to a per annum rate of 2.7%.
The Fed's less expansionary policy remained in force through
thefourth quarter of 1984. Over the five quarters from I11-83
through IV-84, adjusted reserves expanded at an annual rate
of 6.05%, from $54.2 to $58.3 billion, a reduction of more than!
3 1/2 percentage points in its annual growth rate when
compared to the previous four quarters. Inthe same period,
TMS was inflated at an annual rate of 4.27% or from $1355.2
to $1427.6 billion.

The third quarter of 1984 saw the reduction of the rate of
money creation beginto ‘bite’ into the real economy, causing
a “growth slowdown’ and precipitating fears of an imminent
recession. By IV-84, real GNP growth had slowed to an
annual rate of 1.7%, compared to 10.7% and 5.5% in I-84 and
11-84, respectively (Federal Reserve Bank of St. Louis 1987).
In addition to the looming specter of an economy-wide reces-
sion, the Fed also confronted localized depression in particu-
lar U.S. export and import-competing industries, attribut-
able to ongoing international shifts in comparative advantage
and the relentless strengthening of the dollar on foreign
exchange markets. Thus, as early as August 1984, some

¢...the October stock market crash was
the inevitable consequence, not of new-
fangled computer trading programs, but
of an old-fashioned inflationary boom.”

members of the policy-setting Fed Open Market Committee
(FOMC) were advocating a return to vigorous monetary
stimulation, couched in terms of “a lessening of reserve
restraint” (Hafer 1985). Between the FOMC’s November
and December meetings, open market operations were “. ..
directed at achieving some reduction in pressures on bank
reserves against the background of lagging growth in the
narrow money supply, generally sluggish expansion in the
economy, subdued inflation, and continued strength of the
dollar in the foreign exchange markets” (Hafer 1985). Fi-
nally, at the December 1984 meeting, an imminent renewal
of the inflationary boom was declared in euphemistic terms,
as “ . . most of the members expressed a preference for
directingopen market operationstoward some further easing
of reserve conditions to encourage satisfactory growth in M1
and to improve the prospects for economic expansion in
1985" (Hafer 1985).

Thus the third and final phase of the boom was ushered
in at the beginning of 1985 when the Fed unleashed anew and
sustained burst of monetary inflation on the U.S. economy
with the aim of forestalling the impending recession and
driving down the value of the dollar on world currency
markets. From December 1984 tothe end ofthe boom in May

|
|

1987, adjusted reserves grew by over 24% (from $58.4t0$73.9) y |
e

billion) or ata rate of slightly more than 10% per annum. Th
result was an explosion in TMS, which increased by almost
34% in this period (from $1452 to $1942.2 billion) or at an
annualized rate of increase equal to about 14%.



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Prices of Consumer Goods Co power of the dollar in goods markets. One component of this

What enabled the Fed to stoke the fires of monetary increased demand can be traced to the enormous expansion
inflation as vigorously and as long as it did was the fact that of the volume of transactions in U.S. financial markets,
the effects of this inflation were obscured in U.S. consumer which, for a variety of reasons, has been under way in the

bokoods markets, especially in 1985 and 1986. For example, in eighties. To finance this growth in transactions, both domes-
the years 1983-1986, consumer prices, as represented by the tic and foreign investors were required to acquire and hold
CPI, increased at annual rates of 3.8%, 4.0%, 3.8%, and 1.1%, larger dollar balances. In addition, capital fleeing from
respectively. In the same four years, the fourth quarter-to- hyperinflationary and collapsing currencies abroad, e.g,
fourth quarter rates of increase for TMS were: 38.8%; 4.62%; Mexico and Argentina, found a “safe haven” in U.S. bank
13.44%; and 12.7% deposits and currency. Indeed, as Murray Rothbard has

The large discrepancy between money inflation and price pointed out, there has occurred a substantial but unmeasur-
inflation is attributable to the simultaneous operation of a able leakage of dollar currency out of the U.S. into foreign
number of adventitious factors. These include the prolonged hoards and to finance transactions in the subterranean
appreciation of the dollar on foreign exchange markets, economies of foreign nations, especially in Latin Americaand

which began in 1980 and propelled the dollar to postwar Asia. There is also evidence that the ever-growing, world-
peaksagainst the German mark and a trade-weighted basket wide drug trade, now estimated at $100 billion per year,
of foreign currencies in February 1985. The downward pres- absorbed substantial quantities of U.S. currency and thereby
sure that this exerted on the dollar prices of internationally contributed to a rise in the global demand for dollars.

traded goods, and thus on the overall U.S. price level, was

reinforced by concurrent developments affecting supplies on Capital Markets
various world commodity markets. Austrian business-cycle theory leads us to expect that
For example, the spread of technological advances in monetary inflation will have an earlier and more intense
food-grain production to developing countries resulted in impact on capital markets than on markets for consumer
increased supplies and reduced prices of food products on the goods for two reasons. First, in the modern economy, most
U.S. market. The collapse of OPEC and ITA cartel agree- newly-created money initially enters the economy via in-
ments led to supply gluts and sharply lower prices for oil and creased commercial bank lending to business firms, which
tin, as well as for substitute fuels and metals. Moreover, the directly tends to lower interest rates. The additional loan
belated and sluggish recovery of Western Europe from reces- funds are used by borrowing firms to increase investment in
sion dampened the world demand for imports of primary productive assets, especially fixed investment in long-lived
|~commodities at the same time that the supply of these capital goods such as producers’ durable equipment and
roducts toworld markets was being stepped up by producing business structures. The increased investment spending, in
nations desperate for foreign exchange, especially dollars, to turn, leads to higher prices for capital goods (relative to
finance debt repayments. consumer goods), and higher earnings and capital values for
These exchange-rate and supply factors heavily influ- firms producing these goods. Furthermore, the lowered
enced domestic input prices, as exemplified in annual rates of interest rates, produced by the flow of new money through
change of the U.S. producer price index for crude materials the credit markets, tends to increase the capital values and
for the four years 1983-1986. After a 4.7% increase in 1983, market prices of existing capital goods and of productive land
changes in the index for the next three years were: -1.6%; factors, and thisis reflected in increased market values for the
-5.6%; and -9% (Federal Reserve Bank of Cleveland 1988). To firms which own these productive assets. Stock, credit (bond,
use Mises’s terminology, the tendency to higher consumer commercial paper, commercial bank loan), and real estate
pricesemanating fromthe “money-side” of theeconomywas markets, therefore, react most sensitively to monetary ex-
partially offset by temporary price-reducing factors operating pansion, because these are the markets in which ownership

concurrently on the “goods-side” of the economy. We may titles to capital goods are exchanged.

gain some perspective on the moderating effect of goods-side The second reason why price inflation in consumer goods
factors on the overall rate of U.S. price inflation by comparing markets is generally presaged by boom conditions in capital
the GNP deflator for service-producing industries with the markets involves the nature and formation of inflationary ex-
GNP deflator for manufacturing industries, whose product pectations. As Mises points out, during a progressing mone-

costs and prices tend to be directly affected by developments tary inflation, inflationary expectations do not abruptly take
on world currency and commodity markets. In 1982-85, the hold of all market participants at once, but spread gradually

former index rose at an average annual rate of 5.4%, while through the ranks of those who are most keenly attuned to
the latter was rising at a 1.9% average annual rate. Alterna- developmentsaffecting the future state of market prices, and
tively, we note that, for the years 1983-1986, the average subsequently to the public-at-large. In particular, the pre-
annual rate of increase of the CPI computed for all items mium on interest rates which reflects generally prevailing

except food and energy exceed that of the CPI for all times by expectations of inflation in credit markets “. . . comes into
1id..3 percentage points (4.5% vs. 3.2%) (Federal Reserve Bank existence step by step as soon as first a few and then succes

f Cleveland 1987). sively more and more actors become aware of the fact that the
Another deflationary influence on prices of consumer market is faced with cash-induced changes in the money-
goodswasanincreaseinthe total demandtohold U.S. dollars, relation [i.e., the supply of and demand for money] and

which, ceteris paribus, tends to increase the purchasing consequently with a trend oriented in a definite direction”



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(Mises 1966). months from July 1982 through October 1983, the broad-
Empirically, those who are first to anticipate a decline in based Standard & Poor's Index of 400 Industrial stocks
the purchasing power of the monetary unitand toadjust their increased by about 54%, from 122.49to 189.00. Aftera period

buying and selling decisions accordingly tend to be the of stagnation, decline, and recovery, which lingered through |

“gntrepreneur-promoters,” who regularly and successfully 1084, the bull market resumed in 1985, propelling the ind
upward to 334.65 by March 1987. Over the entire period, the

operate on capital markets and whose livelihood depends on

rapidly and correctly adjusting their current activities to index rose by 173%. Concomitantly, the annual yield on

anticipated changes in future market conditions. stocks (the inverse of the P/E ratio), averaged over the same
Thus the “promoter” concept is central to the theory of 400 stocks, was drivendown from 5.81%in July 1982t02.51%

inflationary expectations, because it in March 1987.
refersto a datum that is a general characteristic of human Foreign Exchange Markets :
nature, that is present in all market transactions and The latest approach to foreign exchange markets, which |
marks them profoundly. This is the fact that various was clearly formulated by Mises as early as 1912, treats them | |
individuals do not react toa change In conditions with the as efficient asset markets, wherein current prices or exchange |
same quickness and in the same Way. The inequality of rates quickly adjust totake account of changesin expectations
men, which is due to differences both in their inborn . . .
qualities, and in the vicissitudes of their lives, manifests regarding the future development of the relative purchasing
itself in this way too. There are in the market pacemakers powers of the various currencies. Mises’s statement of the | |
and others who only imitate the procedures of their more approach, however, is more realistic than the modern ap- | |
agile fellow citizens. . .. The driving force of the market, proach. Whereas the latter assumes “rational expectations,”
the element tending toward unceasing innovation and Mises bases his statement of the approach on the empirical
improvement, is provided by the restlessness of the pro- theory of expectations formation and revision that focuses on
pt and ies 1066, pon profits as large as the entrepreneur-promoter as noted above. An important
pos © oY > P- implication of this asset market approach to exchange rates, ;
Moreover, in the modern economy, the main locus of en- in both its Misesian and rational-expectations variants, is
trepreneurial activities tends to transcend the narrow con- that exchange rates adjust to monetary inflation very rapidly
fines of the organization of the business firm and to center in and certainly before consumer prices and the internal pur-
markets in titles to capital goods, in capital markets. As Mises chasing power of the currency fully adjust.
explains: As Mises explained in 1919:
Price increases, which are called into existence by an a
increase in the quantity of money, do not appear over vy

The entrepreneurs and capitalists . . . perform all those
night. A certain amount of time passes before they

acts the totality of which is called the capital and money

market. It is these financial transactions of promoters appear. The additional quantity of money enters the

and speculators that direct production. . . . These transac- economy at a certain point. It is only from there, step by
that it is dispersed. It goes first to certain individuals

tions constitute the market as such. If one eliminates step,
them, one does not preserve any part of the market... . in the economy only and to certain branches of produc-

The speculators, promoters, investors and moneylen ders tion. As a result, in the beginning it raises the demand for
[determine] the structure of the stock and commodity ex- certain goods and services only, not for all of them. Only

changes and of the money market. . .. (Mises 1966, p.708) later do the prices of other goods and services also rise.
Foreign exchange quotations, however, are speculative

rates of exchange—that is they arise out of the transac-

These theoretical considerations account for the acceler- : : : ;
ated price inflation evidenced in capital markets during the tions of business people, who, in their operations, con-
inflationary boom of 1082-1987. sider not only the present but also potential future devel-

For example, the bond market rallied and short-term arent wlio opr he Bee exchange
interest rates fell steadily from the inception of the inflation- quotations on the Bourse-long before the prices of other
ary boom in mid-1982 and reached a plateau in 1983. After goods and services are affected. . . . (Mises 1978, p. 51)

trendless fluctuations through the period of slower monetary
growth ending in early 1985, rates tended sharply downward In the first part of the boom, the dollar continued to ap-
during the renewed burst of monetary expansion of the next preciate against foreign currencies generally, including the

two years. The three-month commercial paper rate fell Japanese yen and the German mark, reaching its peak in
February 1985. The dollar appreciation was due to the fact

almost three percentage points, from 8.77% to 5.87%, from
March 15, 1985 to January 23, 1987. Over approximately the that the price inflation rate in the U.S. before 1985 was not
same period, the yield on Corporate Triple Abonds declined significantly higher than in Germany and Japan, while rela-
from 12.64% to 8.31% and the prime rate fell from 10.5% to tively high U.S. interest rates, resulting from heavy govern-
75%. One bond price index, the Dow Jones Index for 10 ment borrowing to finance federal budget deficits, attracted
Industrials, rose from an intrayear low of 57.36 for 1982 to a a substantialinflux of foreign capital. In early 1985, however
yearly high of 93.10 for 1987, an increase of about 62%. symptoms of the ongoing dollar inflation finally began nds
In the case of the stock market, the great bull market(s) appear in world currency markets as inflationary expecta-

of the 80's coincided almost exactly with the accelerated tions were kindled by the ballyhoo and publicity surrounding
monetary inflations of 1982-83 and 1985-1986. In the fifteen the decision of the Fed to cure the yawning U.S. trade gap by



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deliberately driving down the foreign-exchange value of the
dollar.

Asa consequence, the dollar price of a German mark was
| bid steadily upward from approximately $.31 at its all time
iow in February 1985 to around $.55 at the end of the boom
in April-May 1987, representing a price increase equal to
77.42%. Over the same period, the dollar exchange rate for
the yen rose from just under $.004 to just over $.007 per yen,
a price inflation of 75% (Federal Reserve Bank of St. Louis
1988). Against a trade-weighted basket of foreign currencies,
the dollar lost about 40% of its market value for the period.

Monetary Deflation and Crash

The monetary deflation of 1987 was motivated by the
Fed’s desire to arrest the two-year decline in the external
value of the dollar. In late January, the U.S. and Japan
undertook “coordinated intervention” into the foreign
exchange markets to support the dollar. Under the terms
of the Louvre accord, concluded inlate February, monetary
authorities of six industrial countries including the U.S.
agreed “.. . to cooperate closely to foster stability of exchange
rates around current levels” (Federal Reserve Bank of New
York 1987).

The decision to prevent further depreciation of the dollar
on foreign exchange markets and to stabilize its exchange
rates with the mark and yen within “narrow bands” estab-
lished by the Louvre accord brought monetary inflation to a
screeching, if only temporary, haltin February 1987. During

é “, . the bull market(s) of the 80’s
coincided almost exactly with the
accelerated monetary inflations of
1982-83 and 1985-86.”

the six months prior to this date, the annualized growth rates
of adjusted reserves and TMS were 18.27% and 19.59%, re-
spectively. Suddenly, monetary policy was thrown into
reverse asthe Fed sold $8.4 billion of government securities—
disgorging almost 4% of its entire stock in one month-
producing a virtual halt in the growth of bank reserves and a
collapse of TMS, which fell from $1820.4 to 1 873.3 to yield an
annual growth rate of -29.4% for February. The result was
that from late January to early March, dollar exchange rates
held firm.

Despite the fact that the Fed's actions continued to lean
to a policy of monetary tightness in March (open market
operations were slightly expansionary and adj usted reserves
grew negligibly), TMS continued to spiral upward at an
annual rate of 13.8%, fueled by a mammoth 9% expansion of
the nonreservable savings deposit component that swamped
a net decline in other elements of TMS. With the onset of the

.hond market collapse in April, however, the Fed turned
 — with a vengeance, swelling its stock of govern-
ment securities by 4% and driving up adjusted reserves and
TMS at annual rates of 24.6% and 27.7%, respectively. Pre-
dictably, the dollar once again depreciated sharply on foreign

exchange markets from mid-March through April despite
active and strong intervention by the U.S. and foreign central
banks. From its levels in mid-March, the dollar had depreci-
ated 8.38% against the yen and 4.38% against the mark by the
end of April (Federal Reserve Bank of New York 1987).
Alarmed at the accelerating free fall of the dollar, Paul
Volcker announced in late April that the Fed had “snugged
up” monetary policy to counteract exchange rate pressure.
Thus in May, reserve growth virtually ceased and TMS
increased at an annual rate of 2.2%, with the dollar falling to
near a 40-year low against the yen and to a seven-year low
against the mark before beginning to sharply appreciate in
late May. The Fed continued efforts to bolster the external
value of the dollar through the next three months by contrac-
tionary open market operations, which saw it shrink its
government securities portfolio by 4.2%. The result wasa
three-month monetary deflation, with TMS contractingby a
total of about $21 billion or at annual rates of -4.6%, -1.0%,
and -7.0% for June, July, and August, respectively. The
deflationary policy came to an end in September when the
Fed reinstituted expansionary open market operations (al-
though adjusted reserves declined for the month) and TMS
increased at a 6.3% annual rate, fueled mainly by a large
increase in U.S. Government Deposits.

As noted above, the bond market began a steep fall in
early April that persisted through May. The interest rate on
Triple A corporate bondsrose overone percentage point, from
8.36% to 9.49%, between March 27 and May 22. Other credit
markets followed, as the commercial paper and prime rates
increased, respectively, from 6.29% to 6.96% and from 7.5%
to over 8%. After relative stability through June, July and
most of August, credit markets became firmly convinced that
the monetary inflation was at an end and interest rates
resumed their steep ascent, which continued until the Octo-
ber crash, By October 18, the corporate bond rate had
reached 10.73%, over one percentage point higher than its
rate on August 28. Likewise, short-term interest rates rose
rapidly between these two dates, with the commercial paper
rate jumping from 6.64% to 7.86% and the prime rising from
8.25% to 9.25%.

Equities markets followed a different pattern than credit
markets in 1987. During the steep run-up in interest rates
that occurred during March-May, the stock market experi-
enced only a temporary pause, with the S & P 400 Industrials
averaging 334.65 in March and 336.10 in May. While condi-
tionsstabilized in credit markets during thesummer months,
thestock market resumed itsboom, the S& Pindex averaging
14.58% higher in August than in May. The deflationary
monetary policy of the summer months finally brought the
stock market boom to an end in August. However, it took
another month and one-half and a series of further events to
fully break the back of inflationary expectations in the stock
market. The renewed depreciation of the dollar ontheforeign
exchange markets, which had begun in early August, pro-
voked a discount rate hike in early September, which failed to
mote than momentarily strengthen the dollar. Against the
background of further weakening of the dollar in early Octo-
ber, Treasury Secretary James Baker's desperate bashing of
and threats against the West Germans for raising the



===== PAGE 6 =====

. International Economic Conditions (January 1988):2-3
_ —. “A Revision in the Monetary Base,” Federal Reserve

Bank of St. Louis Review 69 (August/September 1987): 24-27.
Hafer, R. W., “The FOMC in 1983-84: Setting Policy in an | }

discount rate in the week before the crash at long last
galvanized investors into the realization that tight monetary
policy was here to stay and that the Fed was not about to

reignite boom conditions. : Uncertain World”, Review 68 (April 1985): 27-28, 36. Ni
The result of the divergent movements in credit and Mises, Ludwig von, Human Action (Chicago: Henry Regnery 4
equities markets during April-September 1987 was to create 1966), pp. 255, 544, 708.
a growing differential between bond and stock yields. Thus, . “Balance of Payments and Foreign Exchange Rates, in
between 1981 and Spring 1987 stock and bond prices and On the Manipulation of Money and Credit, trans. Bettina Bien
yields tracked one another quite closely (Federal Reserve Greaves (Dobbs Ferry, N.Y.: Free Market Books, 1378), p. 51.
Bank of Cleveland 1987). However, from April to September Note
1987, the average yield for S & P’s 400 Industrial stocks fell . 8 i
: . 1. (a) I focus on adjusted reserves to gauge the intended thrust :
from 2.52% to 2.33%, while they ield on Triple A bonds rose of Fed policy, because variations in adjusted reserves are dircctly \
from 8.85% to 10.18%. With inflationary expectations no related to variations in the aggregate money stock and becausc the
longer operative in the stock market, this unprecedented Fed possesses the means for controlling the rate of growth of total
reserves if not in the short run then certainly in the intermediate
run (quarter to quarter). In addition, since 1978, the Fed's poli-
cymaking arm has been using reserve targets to guide its actions
“raising the discount rate in the toward policy objectives. (b) To ascertain short-run changes in
_ monetary policy, I resort to month-to-month changes in the Fed's
week before the crash... galvanized stock of A securities, which are determined solely by Fed
investors into the realization that open market operations, although changes in Federal Reserve

tight monetary policy was here to credit or even in the adjusted monetary base could also have been
9 used for this purpose.
stay. 2. All statistics relating to adjusted reserves and the Fed stock
of government securities are drawn from Monetary Trends, pub- | §¥
lished monthly by the Federal Reserve Bank of St. Louis. 1
3. Much of this enormous increase in TMS coincided with an |

yield differential became unsustainable. During the boom-- anomalous one-shot increase in the overall demand to hold money | §-
but especially from early 1985 onward-stock P/E ratios were by a public eager to add high interest-earning and federally-insured |
driven to dizzying heights by investors’ expectations of a dollars in checkable MMDA’s to its cash balances. Since (personal} | §

MMDA’s require no legal reserve backing, their expansion did not

continuation of low interest rates and of the imminent arrival 3
absorb the existing bank reserves, and it was therefore possiblefor | i :

of price inflation and inflated corporate earnings. The Fed’s

: the banking system to meet this demand without a net contraction
volte-fac © on monetary policy eventually compelled awrench- of other Ea of TMS. Yet, it is still the case that TMS, net of 3
ing revision of expectations among bull-market Investors, MMDA'’s and saving deposits (a close substitute at the margin for
who now were convinced that interest rates would remain MMDA’s) suffered a large decline when the latter were introduced, | F
high for the foreseeable future and began to use these higher expanded over the period at the dramatically inflationary rate of
rates to discount their lowered estimates of future corpo- 14.17% per year. In the same period, the reserve-absorbing aggre-

gate of demand plus other checkable deposits expanded at a

rate earnings. ;
The precipitous fall of stock prices on Meltdown Monday combined annual rate of 14.45%.

thus represented a fundamentally rational, if belated, adjust-

ment of the market to the termination of the Fed-induced Joseph T. Salerno is associate professor of economics at the
inflationary boom. The remedy for stock-market volatility Lubin Graduate School of Business at Pace University in
therefore does not lie in the proposals offered by the new New York and adjunct scholar of the Mises Institute. n

Luddities on the Brady commission, who seek to seriously
impede, if not destroy, the new productive machinery of stock
index trading, portfolio insurance, and computer program
trading. No, the aim of preventing stock-market crashes can
be attained only by successfully preventing monetary infla-
tion. And this can be achieved only by restoring the ultra-
hard money of a genuine gold standard and putting a defini-
tive end to political manipulation of the supply of dollars.

References

Federal Reserve Bank of Cleveland, Economic Trends (Febru-
ary 1987): 12.

—. Economic Trends (December 1987): 17.
. Economic Trends (January 1988): 11, 16.

Federal Reserve Bank of New York, “Treasury and Federal
Rescrve Foreign Exchange Operations: February-April 1987,”
Quarterly Review 12 (Spring 1987}: 58, 62.

rd and a student fake time out

Federal Reserve Bank of St. Louis, National Economic Trends from the busy schedule at the Advanced Instructional Conference |}
(December 1987): 12. in Austrian Economics at Stanford.

Roger Garrison, Murray



===== PAGE 7 =====

A “New” World Currency? Dr. Robert W. McGee, associate professor at Seton Hall Uni-
versity, has been gathering information and research in the

preparation of compiling an updated bibliography of the
works of Ludwig von Mises.! While working on the project
Dr. McGee came across several long forgotten newspaper
articlesby Mises.2 Thisarticleisfrom that collection,® written
for the New York Times, March 3, 1943, and is as timely as

by Ludwig von Mises

4 John Maynard Lord Keynes has acquired world-wide
reputation as an antagonist of stability of foreign exchange
rates and as a champion of currency devaluation and credit

expansion. His doctrines triumphed when England went off ever.

the gold standard in 1931 and embarked upon increased

protectionism, and when all other nations very soon followed Notes ~~

the British example. The disintegration of the international 1. The author is working with Bettina Bien Greaves, of the

division of labor and the excesses of economic nationalism Foundation for Economic Education, on thisproject. The biblio-
. . . graphy will be a much expanded edition of her earlier book The

were corollaries of some of the teachings of this eminent Works of Ludwig von Mises (Irvington-on-Hudson, N.Y.:

advisor of the British Government. Foundation for Economic Education, 1969).

Lord Keynes, however, seems ready to learn from expe- 9. Thanks go to Bettina for pointing these articles out to me.
rence. He realizes now that one of the main prerequisites of She found the articles in Mises’s personal papers located at Grove
a better post-war order is the return to monetary stability. City College. An invoice attached to each article in the file shows
He haselaborated a sophisticated schemeforan international that Mises was paid $10 per article.
clearing bank and a new international currency unit, the - 3. McGee, Robert W., “Ludwig von Mises and the New York

mes” (unpublished manuscript). [|

«“Bancor.” This ratherawkward neologismisapparently only
a name for a weight of gold to be defined by an international
agreement. On the Issue of Causality in
Lord Keynes's new plan obviously cannot work, how- . . A
ever, without a radical change in current economic ideolo- Modern Empirical Economics
gies. If governments cling to the belief (which owes much of
its popularity to Lord Keynes himself) that stabilizing foreign
exchange rates and abstaining from currency devaluation
mean sacrificing vital national interests to the benefit of
foreign nations, they will discover some means to elude the
i of the monetary covenant that Lord Keynes now
urges. The vicissitudes of the Austro-German monetary
union of 1857, of the Latin Monetary Union and of other
similar conventions demonstrate clearly that treaties are no
serions check for governments eager to devalue their curren-

by Roger W. Garrison

Considerations of technique prevent the modern econo-
mist from addressing the full range of economic questions.
As a mathematician, he can shed no light on issues of
causality, but as an economist, he is continually confronted
with such issues. The melding of classical statistics with
formal mathematical modeling, which establishes a link
between theoretical abstractions and historical experience,
does not close the gap between issues and answers. All

cies.

If, on the other hand, each nation were fully convinced respectable texts on statistics and econometrics acknowledge
that it would best serve its own interest by maintaining the that statistical inference can never identify cause and effect;
integrity of its currency unit, no elaborate international they warn against interpreting correlation as causation.
agreements or clearing houses would be needed. Every In recent years it has become acceptable within the eco-

nation, rich or poor, is free to stabilize its own currency nomics profession to ignore all such acknowledgments and
system with respect to gold, and to maintain permanently the warnings and to make claims about cause and effect on the
gold parity of its monetary unit, provided that it abstains from basis of empirical tests. Fora hypothetical example, the claim
domestic credit expansion and inflation. The gold standard thata rising interest rate causes the wage rate to fall may be
4 was, without any international agreements, the most satis- supported by time-series analysis in which an inverse rela-
factory international standard that has ever been devised. It tionship between wage rates and lagged interest rates is
stabilized foreign exchange rates within very narrow mar- demonstrated. Thelong-respected strictures against reading
4 gins. Itis often said thatthe gold standard “failed.” Thetruth causality into statistical patterns are flouted. Empirical
is that governments sabotaged it deliberately, because it causality tests are increasingly common in the professional
interfered with the nationalistic “planning” that govern- literature,
ments preferred to stability of exchange rates. Only in the early phase of this empirical innovation was
It is not necessary toinvent elaborate technical devices to it made clear that such testsarebased upona newly stipulated
securemonetary stability. Thenineteenth centurydeveloped definition of the word “cause.” Stripped of all its subtle and
them through the gold standard. What hasbeenlackingisthe difficult philosophical content and of its etymological link
conviction that it is harmful, from the viewpoint of every with reason, the word “cause” is used to describe observed
tion’s own ultimate interests, to devalue its national cur- temporal patterns in time-series data. In the judgment of
rency system in order to stimulate exports, to bar imports or Clive Granger and Paul Newbold (1977, p. 225], “A better
to hurt the interests of foreign creditors. The only way to term might be temporally related, but since cause is such a

financial “disarmament” lies through the recognition of this simple term we shall continue to use it.” It isinteresting to
truth. note that, though this usage is defended on the basis of



===== PAGE 8 =====

simplicity of expression, economists who employ empirical Barry Smith: On the Genesis of

techniques developed by Granger use the decidedly unsimple Austrian Economics -
and unaesthetic term “Granger-cause,” as in: Falling inter- |
est rates Granger-cause wage rates to rise.
Christopher Sims, most widely known for his develop- by Parth Shah
ment and use of techniques suggested by Granger, is explicit Barry Smith, Lecturer in Philosophy at the University
about the nature of his enterprise. “The method of identify- of Manchester, England, visited the Mises Institute and
ing causal direction employed here does rest on a sophisti- Auburn University on February 4-5. Fluency in German,
cated version of the post hoc ergo propter hoc principle” frequent visits to Austria and Germany, and numerous
(1972, p. 543]. “After this, therefore because of this,” of scholarly publications has established Smith as an authority
course, is not a principle at all, but a fallacy. And sophistica- on the history of the development of Austrian philosophy and
tion cannot convert fallacy into principle. economics. Hislatestbook is edited with Wolfgang Grassland
The linguistic technique introduced by Granger is noth- entitled Austrian Economics: Historical and Philosophical
ing short of a scandal. (A better term might be profession- Background.
ally motivated innovation, but since scandal is such a simple In his first talk, “The Austrian-ness of Austrian Econom-
term [ shall continue to use it.) Publishers and editors are ics,” presented at the Mises Institute, Smith outlined the
not likely to be interested in research that yields limp unique and rich background of Austrian philosophy, the
conclusions about the temporal relationships in the move- foundation in which Austrian economics is embedded. The
ments of economic variables; they are interested in research Papal prohibition on the books of Kant and Hegel sheltered
that demonstrates that one thing causes another. Austrians, albeit temporarily, from the grand philosophemes
Granger-inspired research is often reported guardedlyin of the German type (e.g., Reason, Transcendental Ego, Na-
the section on the testing procedure and then unguardedly in tion-State), and thus facilitated continuing development of
the summary section. Gerald P. Dwyer, Jr. [1982], for in- the Aristotelian and scholastic traditions. There emerged,
stance, conducts Granger-causality tests to determine under the Aristotelian influence, a distinct “Austrian” ap-
whether or not federal budget deficits Granger-cause infla- proach to economics and psychology—Carl Menger’s subj ec-
tion. Failing to find any statistically significant post-hoc tivism and marginalism in economics and Franz Brentano's
relationship, he tentatively reports in his summary that Gestalt psychology. On the other hand, Kant’s Germany was
“.. there is no reason to predict that a reduction of deficits mired in nihilistic historicism and destructive collectivism.
has a causal role in any policy to reduce inflation.” Smith’s second talk, “Philosophical Foundations of
The economist’s audience is interested in the issue of Austrian Economics,” was given at the Department of Eco- ~N
causality; his mathematical and econometric techniques are nomics. He began by pointing out how the Aristotelian roots
not up to the task. The result-for those who confine distinguished Austrian philosophy from German-Kantian
themselves to mathematical and statistical methods—is a philosophyin two crucial aspects: inits relation torealism and
scandalous abuse of the English language. its distinct emphasis on a priori. In Austrian philosophy,

realism was understood both in an ontological sense (the

References : :
Dwyer, Gerald P., Jr., “Inflation and Government Deficits,” world exists, more or less as we find it) and in an epistemo-
Economic Inquiry, vol. 20, no. 3 (July) 1983, pp. 315-29. logical sense (knowledge and science are possible). Thusthe
Granger, C. W. J., and P. Newbold, Forecasting Economic Austrian metaphysics was not dichotomized into “phenome-
Time Series. New York: Academic Press, 1977. nal” and ‘“noumenal’” worlds.
Sims, Christopher A., “Money, Income, and Causality,” The Kantian epistemology divided knowledge predomi-

American Economic Review, vol. 62, no. 4 (September) 1972, pp.

540-52 nately into analytic/synthetic categories but left little room

for synthetic a priori propositions. The analytic-synthetic
dichotomy implies that scientific propositions are either
analytical (tautological), that is, true by definition or syn-
thetic (contingent), dependent on continual empirical verifi-
cation for their validity. For Kant the domain of synthetic a
priori (experience-dependent true) propositions, though
important, was restricted primarily toarithmetic. In contrast
the Austrian philosophers inspired by Menger and Brentano
developed entire disciplines of synthetica priori propositions
which include, in addition to economics and psychology, the
disciplines of phenomenology, geometry, phonology, legal
theory, universal grammar, and speech-act theory, to name
Ly a few. |
Co For Austrians, therefore, a priori propositions—such a
Cy “human action is purposeful,” “a promise involves mutual
LY BN ; obligations and duties,” “nothing can be red and green all
Hans Hoppe, Roger Garrison, and Richard Ebeling discuss topics over’—underlie all spheres of human experience. These
of interest at a recent Mises Institute Conference. propositions express pre-theoretical or proto-scientific

Roger W. Garrison is an associate professor of economics at
Auburn University and an adjunct scholar of the Mises
Institute.



===== PAGE 9 =====

knowledge and are intrinsically intelligible, that is, they are were no doubt ill-advised, but that is another matter.

capable of being grasped as evident by anyone who has (2) Professor Hoppe argues that “aslongasthereisargu-
familiarity with the domain in question. The complex phe- mentation, there is mutual recognition of each other’s prop-
nomena of money, rents, profits, and such are intelligible only erty right in his own body.” I have no disagreement with this
through a priori propositions. as stated. But what is left unstated here is the source of that
Works of later Austrians like Edmund Husserl, Alfred right. Hoppe believes that it is a natural right embedded in
Schutz, Adolf Reinach, and Felix Kaufman have not only pro- the very nature of argumentation. But could it not be derived
vided philosophical grounding for a priori true propositions, from a contract negotiated behind a Rawlsian “veil of igno-
but it is without the limitations and dichotomies of the rance”’? Could it not haveemerged, ala Hume or Burke, from
Kantian epistemology. tradition, or experience, or custom? Or could it not have been
One would conclude, from these talks, that Austrians the result of a Benthamite utilitarian calculus? I don’t see
were (are) not only good economists but also pioneers in the how Hoppe can simply dismiss these other possibilities, a
philosophy of social sciences. Austrian economics is but one priori,
fruit, though well developed, of the Austrian philosophy. Our (3) Hoppe argues that socialism is “argumentatively in-
understanding and extension of Austrian economics, Smith defensible” becauseif private propertyis not recognized, then
argues, must begin with the recognition of the influence of one would have to come to an agreement with the “entire
Aristotle as its genesis. n world population” prior to committing oneself to any course

of action, a requirement that would paralyze all human
action, and thusalllife. It is not clear that the only alternative
to individual ownership is ownership by the “world commu-

“Comment on Hoppe” nity.” (Infact, I don’t see how the alternative can be owner-
ship by a “world community” since that community, like all
by David Osterfeld communities, is composed of individuals. If ownership hy
individuals is denied, then ownership by a community com-
Professor Hans-Hermann Hoppe's essay, “The Justice posed of individuals must also be ruled out. Thus, the
of Economic Efficiency,” is pathbreaking. By the use of what alternative to individual ownership is not ownership by the
is, in fact, praxeological reasoning, i.e., reasoning grounded community but total non-ownership, leaving property in an
in the logically necessary implications of the principle of ethical limbo. Nevertheless, Hoppe implicitly grants the ar-
human action, he attempts to lead the reader to the conclu- gument that the alternative to individual ownership is some
sion that private property is a natural, inalienable, right. type of community ownership.) For there isthe possibility of
J Being the utilitarian that he was, Ludwig von Mises would no intermediate communities, Isn't it possible for members of
doubt have been astounded by the exercise. But the question community A to agree on their own set of rules regarding
is: does it succeed? In large part it does; but not totally. property, for members of community B to establish their own
Since I find myself in agreement with most of Professor setofrules, ete.? And then isn’tit possible for representatives
Hoppe’s position, Iwill confine my remarks to those points at of communities A, B.... N'to agree, bilaterially or collectively,
which I either disagree or feel need for further amplification. on the principles governing interactions between their com-
(1) Hoppe states that the starting point of both political munities? [don’t see how Hoppe’s argument, as it is pre-
economy and political philosophy is the recognition of scar- sented, rules out these possible alternatives between the
city. The goal of economic theory is to maximize wealth poles of the individual and the world.
production; that of political philosophy is to avoid conflicts by (4) Finally, Hoppe’s argument is an example of ethical
“assigning a set of rules for the exclusive control over scarce naturalism. From the factual claims regarding the nature of
goods,” These two goals complement each other. Together, man and the nature of argumentation, Hoppe derives an
they “lead to the greatest possible production of wealth.” ethical justification from private property. His claim is not
I have no disagreement with the statement regarding merely that private property is just but that “any deviation
economics, but I do think it is questionable in regard to from it is... unethical.” This is a large claim and one that
political philosophy. Political philosophers have written for risks falling afoul of the naturalistic fallacy. Wouldn't it be
amultitude of reasons, It seemstostretch the point tosay that possible for someone, say Rawls, to say that, (a) what Profes-
all have been concerned with assigning a set of rules to deal sor Hoppe says about the factual aspect of property is quite
with scarcity. For example, philosophers and government true, (b) however, it is neither necessary nor desirable that
rulers have long wrestled with such issues as freedom of this remains the case? And isn't it also quite possible for
religion and freedom of speech. Since there was great fear of Rawls to then proceed to use his de facto private property to

the consequences of permitting people to worship and to try to get the rules regarding property changed? I don’t see
speak as they wished, political philosophers, e.g, Hobbes, any contradictionin this. Afterall, libertariansdo run for gov-
and Rousseau to name but two, felt that the state had the ernment office with the intention of dismantling the govern-
\ ight, in fact the duty, to limit these activities. To putitin the ment. And totalitarians have commonly used free speech in

terminology of economics, the perceived problem was not order to acquire the power to eliminate free speech. Why is
scarcity but surplus, and the proposals, and the government it impossible to move from one set of (de facto) norms, say the
policies, were designed to limit both religion and speech, Hoppe-norms, toanother, allegedly superior set of norms, say
thereby making them more, not less, scarce. These policies the x-norms? I don’t see how Hoppe has ruled out this



===== PAGE 10 =====

possibility. than it would be were the overall amount higher.
Iam afraid that my paper is mostly negative. I don’t want The Lafferites, of course, have challenged this strategy,

to give the wrong impression. I find Professor Hoppe’s claiming that the state would garner more wealth if the
argument to be both pathbreaking and compelling. I agree people were freer to produce. But they have been theoreti-
with the thrust of his analysis. Because of that] have focused cally weak. After all, though people may work fewer hours if
my attention on four possible objections to his paper. I believe marginal tax rates are raised, it is also possible that they will
that these objections can be successfully surmounted. work more hours in order to maintain their standard of
A common failing of commentators is that they call the living.

author to task either for not doing everything in the space of But regardless of the validity of supply-side economics, it
a single paper or for not doing something he had no intention seems undeniable that the state’s activities, and the political
of doing in the first place. In reviewing my comments it is philosophers who apologized for them, fall well within the
clear that I have managed the unenviable feat of committing framework set out by Dr. Hoppe.

both mistakes in the remarkably short space of a single
comment. Again, I think that Hoppe’s use of praxeology is a Sheldon Richman is director of public affairs for the Institute

challenging and unique approach to demonstrating the right for Humane Studies at George Mason University, Fairfax,
of private property and I look forward to further work along Virginia, and an adjunct scholar of the Ludwig von Mises
these lines by him and others. Institute. [|

David Osterfeld is associate professor of political science at
St. Joseph’s College in Rensselaer, Indiana, and an adjunct
scholar of the Ludwig von Mises Institute. |

“Comment on Osterfeld”’

by Sheldon L. Richman

Dr. Osterfeld’s interesting response to Dr. Hoppe is mis-
taken on at least one count. He writes, “It seems to stretch
the point to say that all [political philosophers] have been
concerned with assigning a set of rules to deal with scarcity.”
He asserts that important political philosophers were actu-
ally concerned with the surplus of such things as religion and
expression. But] think this is the wrong way to look at state
interference with these activities.

What motivated the state was nota surplus but a scarcity.
The scarce “commodity” was the allegiance of the state's
subjects. The state could never get enough and so it was

Sheldon Richman discussed the history of the income tax at the
Mises Institute Conference on Taxation.

fearful of the competition for that allegiance: Church and Demonstrated Preference
Truth. The people’s allegiance to either of these would and Private Property:
diminish, if not eliminate, allegiance to the state, a situation Reply to Professor Osterfeld

that the state could not tolerate. Thus, in the tradition of all
who fear free competition, the state tried to limit or destroy
its competitors: freedom of religion and freedom of expres-
sion.

by Hans-Hermann Hoppe

The state’s interference with church and truth can also Professor Osterfeld, after generously acknowledging the
beshown tobea concern with the maximization of production “pathbreaking” nature of my a priori defense of the ethics of
and wealth. As noted, the state has clearly been concerned private property, concentrates on four objections to my argu-
with producing the maximum “amount” of allegiance to it. ments.

Second, this “production” was calculated to be the easiest I will comment on all four objections that Professor
route to the maximum amount of wealth for the state aswell. Osterfeld addresses. However, sincethey depend on a correct
Economics, of course, can show that state intervention understanding of my central argument and its logical force,
dimishes the amount of wealth produced. But in this context I'will first restate my case in the briefest possible way. |
we must look at things from the ruler’s point of view. He has As Osterfeld correctly notices, l want to give a praxeologi-

historically not been interested in the absolute amount of cal proof for the validity of the—essentially Lockean—private
wealth produced, but in the amount he can get kis hands on property ethic. More precisely, to demonstrate that only this
easily. The state can be expected to opt for a lower overall ethic can be argumentatively justified, because it is the
amount, provided, other things equal, that its share islarger praxeological presupposition of argumentation, and that any

10


===== PAGE 11 =====

&
2

deviating ethical proposal can hence be shown to be in
violation of demonstrated preference. Sucha proposal can be
raised, but its propositional content would contradict the
ethic for which one would demonstrate a preference by virtue

of one’s own act of proposition-making, i.e., by the act of

engaging in argumentation. In the same way as one can say
“lam, and always shall be, indifferent towards doing things,”
this proposition contradicts the act of proposition-making,
which reveals demonstrated subjective preferences (saying
this rather than saying something else or not saying anything
at all). Deviationist ethical proposals are falsified by the
reality of actually proposing them.

Toreach this conclusion and properly understand itsim-
portance, two insights are essential.

First, the question of what is just or unjust-or, even
more general, what is valid or not—only arises insofaras Iam,
and others are, capable of propositional exchanges, i.e., of ar-
gumentation. The question doesn’t arise for a stone or fish,
because they are incapable of producing validity- claiming
propositions. Yet if this is so-and one cannot deny that it is
without contradicting oneself, as one cannot argue the case
thatone cannotargue—then any ethical proposal, orany other
proposition, must be assumed to claim it is capable of being
validated by propositional or argumentative means. In pro-
ducing any proposition, overtly orasan inter nal thought, one
demonstrates one’s preference for the willingness to rely on
argumentative means in convincing oneself or others of
something; and there is, then, no way of justifying anything,
unlessitis a justificationby means of propositional exchanges
| and arguments. Jt must be considered the ultimate defeat for

“an ethical proposal if one can demonstrate that its content is

A incompatible with the proponent’s claim that its
- validity be ascertainable by argumentative means. To dem-
onstrate such incompatibility would amount to an impossi-
bility proof; and such proof is deadly in the realm of intellec-
tual inquiry.

Secondly, the means with which a person demonstrates
preference by engaging in argumentation are those of private
property. Obviously, no one could propose anything or
become convinced of any proposition by argumentative
means if a person’s right to exclusive use of his physical body
were not already presupposed. Furthermore, it would be
equally impossible to sustain argumentation and rely on the
propositional force of one’s argumentsif onewere not allowed
to appropriate other scarce goods through homesteading
action, i.e., by putting them to use before somebody else does,
or if such goods, and the right of exclusive control regarding
them, were not defined in objective, physical terms. Because
if such a right were not presupposed, or if latecomers were
supposed to have legitimate claims to things, or things owned
were defined in subjective, evaluative terms, no one could
survive as a physically independent decision-making unit,
and hence no one could ever raise any validity-claiming
proposition,

By being alive and formulating propositions, then, one
demonstrates that any ethic except that of private property is
invalid.

Osterfeld’s fourth objection to my article states that my
argument is an instance of ethical naturalism, but thatIthen

seem to fall afoul of the naturalistic fallacy of deriving an
“ought” from an “is.” I am willing to accept the first part of
this proposition but not the second. WhatIofferisan entirely
value-free system of ethics. [remain exclusively in the realm
of is-statements and nowhere try to derive an “ought” from
an “is.” The structure of my argument isthis: (a)justification
is propositional or argumentative (a priori true is-state-
ment); (b) argumentation presupposes the recognition of the
private property ethic (a priori true is-statement); (¢) no
deviation from a private property ethic can be justified argu-
mentatively (a priori trueis-statement). Thus, my refutation
of all socialist ethicsis a purely cognitive one. AndthatRawls
or other socialists may still advocate such ethics is completely
beside the point. That one plus one equals two does not rule
out the possibility that someone says it is three, or that one
ought not attempt to make one plus one equal threethe arith-
metic law of the land, But all this does not affect the fact that
one plus one still is two. In strict analogy to this,I “only” claim
to prove that whatever Rawls or other socialists say is false,
and can be understood as such by all intellectually competent
and honest men. It does not change the fact that incompe-
tence or dishonesty and evil still may exist and may even
prevail over truth and justice.

The second objection suffers from the same misunder-
standing of the value-free nature of my defense of private
property. Osterfeld agrees that argumentation presupposes
the recognition of private property. But then he wonders
about the source of this right. Yet how can he raise such a
question? Only because he, too, is capable of argumentation.
Without argumentation there would be nothing but silence
or meaningless noise. Theanswer is thatthesource of human
rights is, and must be, argumentation as the manifestation of
our rationality. It is impossible to claim anything else to be
the starting point for the derivation of an ethical system,
because claiming so would once again have to presuppose
one’s argumentative capability. Could rights not be derived
from a contract behind a “veil of ignorance,” asks Osterfeld?
Yes and no. Of course, there can be rights derived from
contracts. But in order for a contract to be possible, there
must already be private owners and private property, other-
wise there would be no physically independent contractors,
and nothing to contractually agree upon. And “no”: norights
can be derived “from behind a veil of ignorance,” because no
one lives behind such a thing, except epistemological zom-
bies, and only a Rawlsian zombie ethic can be derived from
behind it. Can rights emerge from tradition a la Hume or
Burke? Of course, they always do. But the question of the
factual emergence of rights has nothing to do with the
question of whether or not what exists can be justified.

In histhird objection, Osterfeld claims that! constructan
alternative between either individual ownership or world
community ownership but that such an alternative is not
exhaustive. This isa misrepresentation. Nowhere do I say

“anything like this. In the section to which Osterfeld refers, I
am concerned with explaining the entirely different alterna-
tive between property as defined in physical terms and as
originating at definite points in time for definite individuals,
and, onthe otherhand, property asdefined in valuetermsand
unspecificwith respect to itstime of origin, and the refutation

11


===== PAGE 12 =====

political philosophers have invariably been concerned with
the assignment of rights of exclusive control over scarce
goods. Such isthe casewhen a Lockean proposestoaccept the |
private property ethic, and no less when a Hobbesian sug- A
gests, instead, to make some person the supreme Fuehrer, W 2
whose commands everyone else must follow.

Hans-Hermann Hoppe is an associate professor of economics
at the University of Nevada at Las Vegas, and a senior fellow
of the Mises Institute. : [|

New Palgrave:
A Dictionary of Economics
Edited by John Eatwell,
Murray Milgate, and Peter Newman

Professor Hoppe lectured on the Foundations of Austrian Analysis by Mark Thornton

at The Second Annual Conference in Advanced Austrian Econom-
ics, held at Stanford University in June. The New Palgrave is the long-awaited update of

Palgrave’s Dictionary of Political Economy (edited by Henry
of the latter as absurd and self-contradictory. I do not at all Higgs, 1923-1926) which was itself an update of Robert

rule out the possibility of ownership of “intermediate com- Palgrave’s Dictionaryof Political Economy (1894-1899). The
munities.” However, to repeat, such ownership presupposes original dictionary was compiled to provide economists—who
individual, private ownership. Collective ownership requires were becoming increasingly specialized—with a ready source
contracts, and contracts are only possible if there are already of information that encompassed all the diverse areas within
prior non-contractually acquired ownership claims: con- economics and included theleading figures, pastand present,
tracts are agreements between physically independent units, in those fields. i
which are based on the mutual recognition of each The four-volume update contains 1916 entries, 655 of §
contractor’s private ownership claim to things acquired prior which are biographical. The editors chose 927 contributors Wo
to the agreement, and which concern the transfer of these tocompose theentries, most of whom are expertsintheirarea
property titles from a specific prior to a specific later owner or or leading historians of thought. The four-volume set is 4,194
OWNers, pages, leather-bound in half-calf, with gold leaf stamped on
Regarding Osterfeld’s first objection, I did not write that greenand maroon, It isa truly impressive setfor your library
the fundamental goals of political economy and political that weighs in at over 20 pounds! While both the production
philosophy are “complementary” ones. What I said is that and content are of high quality, the quality of the contribu-
they are different. No one trying to answer “What is just?” tions is uneven and the allocation of space presents some
is logically committed to insisting that his answer must also problems,
contribute to the greatest possible production of wealth (at Although many leading Austrian economists are con-
least I don’t contend anywhere that there is any such logical tributors it is certainly not flush or complete on “Austrian”
commitment). Hence, itis no valid objection to my remarks topics. For example, praxeology is omitted and only discussed
on the relationship between political philosophy and econ- in Rothbard’s spirited entry on “Ludwig von Mises.”
omy that Hobbes, Rousseau and others suggest that political An insight into the contributor selection process and the
systems do not increase wealth but rather scarcity. Their topics considered can be found in the contributions by the
claim that such systems are just cannot he made good, and as editors themselves. Among their contributions we find:
it turns out, the ethic which alone can be justified indeed “Keynesianism,” “socially necessary technique,” “Keynes’s
helps ‘maximize wealth production. This is a—fortunate— General Theory,” “convexity,” “duality,” and “gauge func-
matter of fact. It does not change in the least the fact that tions.” Two of the editors are card-carrying Keynesians
political philosophy and political economy are concerned with whilethethird isan econometrician, so itis not difficult to see
completely separate issues. why Austrian economics did not fare better. The only
This and only this has been my thesis: While political mention of Austrian economics in the editors’ 67 entries are
philosophers as such need not be concerned with the problem in Milgate’s short entries on William Smart and James
of alleviation of scarcity, political philosophy and economy Bonar. John Eatwell, formerly of Cambridge University, is
have in common the fact that without scarcity neither disci- now an economic advisor to the British Labour Party. ay
pline would make any sense; there would be no interpersonal Some of the Austrian economists contrib utingto the New
conflict over anything, and hence no question as to what Palgrave are Israel Kirzner on “the Austrian school of eco-
norms should be accepted as just in order to avoid such nomics” and “economic harmony” and “F. A. Hayek” (writ-

possible clashes! It is no stretching of the point to say that ten with Roger Garrison). Inaddition to the entry on Ludwig
12



===== PAGE 13 =====

von Mises, Murray Rothbard contributed entries on “catal- Probably Selgin’s most “provocative” analytical point (to

lactics,” “Frank Fetter,” “imputation,” and “time prefer- adopt White’s word) is that the economic limits to note and
ence.” Other contributions of interest are: Bruce Caldwell deposit issue expand when the public’s demand for bank
on “positivism,” Steve Hanke on “privatization,” James money grows. Even if the total stock of outside or reserve
‘Buchanan on “opportunity cost,” and Paul J. McNulty on money were constant, banks could accommodate growth in
| “competition: Austrian conceptions,” while Marcello de the public's demand for notes and deposits, thereby main-
| Cecco wrote the contribution on the “gold standard.” taining equilibrium between the demand for and supply of
1 The New Palgrave is any economist’s friend, because it money, since the reserve ratio required by prudence would
& contains alisting of entries alphabetically, complete cross-ref- sink appropriately (and since no reserves would be required
153 erences, a subject index (with a biographical list), a general by law).
index, a list of entries by author, a list of biographies and It is marvelous indeed if Selgin really has discovered a
entries that were in the original but omitted from the New system that automatically maintains monetary equilibrium,
Palgrave. thereby avoiding episodes not only of too much money and
Overall, the New Palgrave (Stockton Press, New York, consequent inflation and of too little money and consequent
1987) is a handsome achievement and despite some minor recession but also of alternating monetary imbalances and
flaws, a valuable research tool. If $650.00 is too high a price consequent stagflation. Just how does his analysis go?
you can find it in the library near the old Palgrave (HB 61 To explain an accommodating decline in prudential re-

P17, 1923) listed under HB 61 .N49, 1987h. [| serve ratios, Selgin invokes economies of scale in reserve-
: holding, hinging in turn on the law of large numbers. Now,

economies of scaleare fairly crediblein the sense that pruden-

tial reserve ratios decline somewhat as the scale of the money

The Theory of Free Banking and banking system and of monetary transactions grows. It
is downright counterintuitive, though, to suppose that
by George Selgin prudential reserve ratios adjust downward fully in inverse
Reviewed by Leland B. Yeager proportion to the quantity of bank money against which
reserves are to. be held, so that a reserve stock of constant
George Selgin wrote his doctoral dissertation at New absolute size remains adequate. Can the reserve stock
York University underthesupervision of Lawrence H. White, comfortably remain constant in an otherwise growing mone-
who is well known for his research into the Scottish experi- tary system?

A encewith free banking and British controversies over related Unfortunately, the analysis becomes loose at just the
3 | gd topics. White now provides a foreword to a revised version of crucial point, Selginisvagueaboutthe nature ofthe supposed
Selgin’s dissertation. As he says, this book bears out John growth in the demand for bank money. Is it due to general

Hick’s observation that the best work in monetary theory is economic growth? Or is it due, as he seems to suggest, to -
topical, aimed at understanding a current monetary problem, people’s desire to hold more money than before in relation to
and also is attuned to the evolution of institutions. The their incomes and transactions (in other words, a fall in the
{ outstanding monetary problem of our time, White continues, desired velocity of money)? Selgin’s analysis relies heavily on
is the failure of central banking to deliver macroeconomic the dynamics of disequilibrium, even though the genuine
stability as promised. The most noteworthy institutional issue is one of comparative statics, of what amounts of
developments of the recent past and foreseeable future are reserves are necessary to support monetary systems of alter-
the partial deregulation and increasing competitiveness of native sizes. Putting the question into a growth context
banking and finance. Existing trends could conceivably would not relax the necessary distinction between compara-
culminate in the sort of free banking that Selgin analyzes. tive staticsand disequilibrium dynamics. Another ambiguity

§ American textbooks typically assume that a central bank concerns whether Selgin envisions a decline in the price level
1 monopolizes the issue of currency and that its liabilities to permit growth in the real quantity of money even given a
: constitute the reserves of the commercial banks, which must fixed nominal stock of reserves. Appealing to that process
hold them in required minimum ratios against their own would be neither new nor “provocative”; but to judge from a

deposit liabilities. Selgin examines how private banks would remark on page 79, that is not what heis doing. (However, -
operate if free from legal restrictions on their issues of a subsequent article, not yet published, does seem toleave an
banknotes and demand deposits but compelled by competi- appeal to the price-level process open after all. In this book

tive forces to keep these liabilities redeemable in outside and other writings, furthermore, Selgin is skeptical of the
money (which might be gold or might be fiat money issued by criterion of price-level stability, especially in the face of
a defunct central bank and now frozen in amount). He finds productivity changes.)

that economic forces would limit monetary expansion either Selgin could have reached the conclusion he wants—that

by a single bank or by banks in the aggregate. He argues that reserve considerations need not inhibit accommodation of

aa market feedback mechanism appropriately guides competi- the supply of bank money to the demand for it—by a different
@. banks but not a central bank in supplying money. ‘A route. Instead of arguing, dubiously, about a fully accommo-
suitable mix of deposits and currency is also more readily dating downward adjustment of reserve ratios, he could have
attainable under free banking than under asystem confining argued that the question of reserves is a red herring in the
currency issue to a central bank. IE first place. That would be true of the fully developed free-

13



===== PAGE 14 =====

banking system he sketches out in parts of the book. The lines. (Selgin acknowledges drawing inspiration from one

public uses bank-issued money exclusively; gold coins (the reformer, Nobel laureate F. A. Hayek, who already gave up
former outside and reserve money) have entirely disappeared advocating return to a gold standard of the historical type
from circulation. Gold no longer serves any monetary func- several decades ago.) .
{ tion beyond defining the unit of account (banknotes and For fellowships and other assistance, Selgin thanks vari- Bl
| depositsare denominated and prices expressed in grams, say, ous persons and organizations, including the Institute for
of gold.) Under such circumstances, the banks need take no Humane Studies and the Ludwig von Mises Institute of
precautions against any rise in the public’s desired holdings Auburn University. It must gratify them to have helped
of gold money as distinct from banknotes and deposits; those create thisimportantadvance in understandingwhat the free
desired holdings are and remain zero. All the banks need to market can offer.
do, both individually and in the aggregate, is to keep the
quantity of their outstanding notes and deposits no greater Leland Yeager is Ludwig von Mises Professor of Economics
than the quantity the public desires to hold at the defined gold at Auburn University and a member of the Editorial Board of
size of the money unit. The banks merely need to keep their the Review of Austrian Economics. | |
money scarce enough (and sufficiently backed by sound
assets, including liquid assets) so that a one-gram note is The Theory of Free Banking by George
always worth one gram of gold. Clearinghouse balances Selgin is available from the Mises Institute
among banks would probably be settled not in gold itself but for $26.00 including postage and handling.
1 ingold-gram-worths of liquid securities. An individual bank
would probably redeem its notes and deposits over the
counter in the notes of rival banks. Even if an occasional NOTES & TRANSITIONS
customer did demand redemption in actual gold (bullion,
since gold coins would have become obsolete), appreciable Dr. Robert McGee, associate professor at Seton Hall Uni-

reserves of actual gold would still not be necessary (keeping
some of its assets in liquid form would suffice). The bank

could always send a clerk to the bullion market to buy the is interested in incorporating the Austrian approach to eco-
necessary gold, which would beno problem, since a prudently nomic analysis in both articles and book reviews. For more
managed bank would always have kept its money scarce information write: Robert McGee, Editor, Mid-Atlantic Jour-

enough to be fully worth the amounts of gold denominating nal of Business, Seton Hall University, South Orange, New
it. In effect the bank would simply be sparing its customerthe Jersey 07079,

trouble of going to the market and buying the gold himself

versity hasbeen named editor of the Mid-Atlantic Journal of
Business. This is a general business journal but Dr. McGee

Professor Lawrence White will be joining the economies by

I reached this interpretation of Selgin’s fully developed faculty as an assistant professor of economics at the Univer-
free-banking system on realizing that itis the same, with one sity of Georgia in the fall.
exception, as the “BFH system” that Robert Greenfield and Professor George A. Selgin will join the economics de-
I described in the Journal of Money, Credit, and Banking, partment of Hong Kong University as an assistant professor
August 1983. Under the BFH system the unit of account is of economics in the fall. During the recent spring term
defined as the value of a comprehensive bundle of goods and Professor Selgin conducted a series of three lectures at the
services. Under Selgin’s system, that bundle contains only Mises Institute's Fertig Center in Fairfax, Virginia. The
one commodity, gold (or, which is another possibility he lectures were as follows: Free Banking in Foochow, China; L.
mentions, aformerly issued fiat money whose quantityis now Albert Hahn: Precursor of Keynesianism and Monetarism;
frozen). Whether his system would have the durability and and The Price Level, Productivity, and Macroeconomic Sta-
the desirable macroeconomic properties of the BFH system is bility.
a separate question, left aside here. Professor Randall Holcombe, professor of economics at
Correspondence with him suggests that Selgin does not Auburn University and adjunct scholar of the Mises Institute
accept my interpretation, and perhaps I am mistaken in has accepted a position at Florida State University where he
seeing flaws in his analysis of reserves. In any case, I have will help develop a political science center.
enjoyed grappling with his ideas. And he does deal in ideas, Richard Ebeling has been appointed the Ludwig von

in refreshing contrast with being bogged down in models or Mises Assistant Professor of Economics at Hillsdale College.
statistical calculations that either ignore institutions or take Professor Ebeling is currently at the University of Dallas and

no thought of alternatives to existing ones. will begin his new position in the fall of 1988,

Selgin has written an ambitious work. It surveys a wide A session entitled “Austrian Monetary Theory” was or-
range of literature. It mentions many historical episodes that ganized by Roger Garrison at the annual meeting of the
suggest further research projects (for example, Australia’s Southwestern Social Science Association, held in Houston,
shift from competitive banknote issue to government domi- Texas. Papers were presented by Peter Lewin (‘“Hayek’s

nation shortly before World War I). It not only employs Monetary Theory: Then and Now”), Richard Ebeling (“Th

theory to explore alternative institutions but also enriches Monetary Theory of Ludwig von Mises”), and Mark
the theory itself. As Lawrence White says in his foreword, ‘Thornton (“Monetary Factors and the Redistribution of
Selgin’s ideas hold out hope of uniting economists who Incomeinthe 1920s”). Discussantsincluded Robert Formani
propose different monetary reforms along private-enterprise (University of Dallas), Larry Sechrest (University of Texasat

14



===== PAGE 15 =====

ww

Arlington), and Parth Shah (Ludwig von Mises Institute and
Auburn University).
Professor Richard Wagner of Florida State University

oo | 7 accepted a new position at the Public Choice Center at

George Mason University in Fairfax, Virginia. Dr. Wagner
will begin his new assignment in the fall of 1988.

The first issue of the Loyola Journal of Economics was
published in February of this year. The LJE is a student
publication devoted to publishing Austrian and free market
economics at Loyola University in New Orleans. The staff
includes Mari Bari, David Ingel, Eric Eckholdt, Bill Bethea.

"The faculty advisor is Deborah Walker. Correspondence can
be addressed to: Mari Bari, Editor, Loyola Journal of Eco-
nomics, Loyola University/College of Business, 6363 St.
Charles Ave., Box 15, New Orleans, Louisiana 70118, (504)
865-3544.

Jeffrey Herbener, assistant professor of economics at
Washington-Jefferson College, organized a session on Aus-

trian methodology and teaching at the annual meeting of the

Association for Private Enterprise Education in Cleveland;
Mises fellow Jeff Tucker was one of the discussants.

Professor Leland Yeager, Ludwig von Mises Professor of
Economics at Auburn University, gave the second biannual
lecture at the Public Choice Center at George Mason Univer-
sity. The lecture was given April 4th on the topic of the
Virginia School.

In April the Mises Institutes’s Lawrence Fertig Center
held a reception and open-house to officially open the student
center. The reception was held in connection with the

A¢ Institute’s conference on taxation.

‘The Bureau of Business Research at the University of
Nebraska-Lincoln has published a translation of Friedrich
von Wieser’s Das Gesetz der Macht (The Law of Power) from
1926. The translation was done by W, E. Kuhn, with an
introduction by Warren J. Samuels. Wieser, the “black
sheep” of the Austrian family, wrote The Law of Power at the
end of his career. It represents the culmination of Wieser’s
interest in sociology, power, and the great man thesis of
history. It also represents a somewhatradical departure from
his early work in the Austrian school.

The Pacific Institute has just published Advertising and
the Market Process: AModern Economic View. Thebook was
written by Robert Ekelund of Auburn University and David
Saurman of San Jose State University. The book eritiques
mainstream theories of advertising, develops Neo-Austrian
and “new neoclassical view” theories of the role of advertising
inthe market process, and providesillustrations of the results
of advertising and advertising restrictions. The introduction
was written by Israel Kirzner of New York University.

Gower Publishers has just published Eamonn Butler's
book entitled Ludwig von Mises: Fountainhead of the Modern
Microeconomic Revolution. The book examines Miges’s
theory of microeconomics, the foundations of Austrian
economics and demonstrates why the work of von Mises is

isttracting growing numbers of economists.

Note: With thisissuethe “Notes & Transitions” column
will become a regular feature of the Austrian Economics
Newsletter. The function of this column is to gather together

- news that is of interest to Austrian economists and other

interested persons, i.e., personnel changes, conferences, new
publications, significant research, special lectures, transla-

. tions, ete. If you have information or an item that would be

of interest to readers of the AEN, please send it to: Mark
Thornton, Editor, Mises Institute, Auburn University,
Auburn, Alabama, 36849,

Upcoming Institute Events

August 13-19, 1988: “Introductory Instructional
Conference in Austrian Economics” at Dartmouth
College, Hanover, New Hampshire.

October 15-16, 1988: “Marxism vs. Austrian Eco-
nomics: Yesterday and Today” in New York City.

For more information, please write or call: Pat Heck-
man, Mises Institute, Auburn University, Auburn,
Alabama 36849, (205) 826-2500.

(Continued from page 1)
output and diminish inequality generally—no longer wander
as intellectual outcasts, beyond consideration in civilized
quarters.

W. H. Hutt was a classical political economist who bril-
liantly applied and extended economic theory in a variety of
contexts. True, Hutt’s pen was not always facile, he had a
penchant for peculiar terminology, and his contributions
were not error-free. Yet each work displays his fearless
courage, unswerving dedication to the pursuit of truth and
the power of simple economic theory in the hands of a master.
Bill Hutt, a man of courage and scholarly integrity, isgonebut
his ideas live on.

Morgan Reynolds is professor of economics at Texas A & M
University and an editorial board member of the Review of
Austrian Economics. He is also the editor of W, H. Hutt: An
Economist for the Long Run (1986), which is available from
Regnery Gateway, 950 North Shore Drive, Lake Bluff, Illinois
60044 ($7.95, plus $3.25 postage and handling). |

Selected Contributions of
Professor W. H. Hutt

Books

The Theory of Collective Bargaining (London: Staples, 1930;
2nd edition, 1977, Institute of Economic Affairs; 2nd edition, 1977,
Cato Institute, Translated into Spanish by Cesar A. Gomez, La
Contraticion Collectiva (Madrid: Union Editorial, 1976).

Economists and the Public (London: Kegan Paul, 1936).

The Theory of Idle Resources (London: Jonathan Cape, 1939;
2nd edition, 1977, Liberty Press).

Plan for Reconstruction (London: Kegan Paul, 1943).

Keynesianism —Refrospect and Prospect (Chicago: Regnery,

+ 1983).

15


===== PAGE 16 =====

The Economics of the Colour Bar (London: Deutsch, 1964). “Plan for Economic Research in the Union,” S.A.J.E. (June
; Neo-Keynesian and Academic Freedom (Tokyo: Toyo Keizai, 1944); reprinted as a pamphlet by the South African Association of
: 1966). Scientific Workers. E
| Politically Impossible. . ? (London: Institute of Economic “Two Studies in the Statistics of Russia,” S.A.J.E. (March |. 4
1 Affairs, 1971). Translated into Spanish by Juan Rincon Jurado, 1945). +
; El Economista y la Politica (Madrid: Union Editorial, 1975). “Full Employment and the Future of Industry,” S.A.J.E,
: The Strike-Threat System (New Rochelle, N.Y.: Arlington (September 1945).
. House, 1973). “Further Aspects of Russian Statistics,” S.AJE. (December
E A Rehabilitation of Say’ s Law (Athens, Ohio: Ohio University 1945).
i Press, 1975). = “The Development of the Soviet Economic System,” S.AJE.
tf Individual Freedom, a collection of works edited by Svetozar (September 1946).
E Pejovich and David Klingaman, (Westport, Conn.: Greenwood “The Nature of Money,” S.A. J E. (March 1952),
i | Press, 1975), “The Notion of the Volume of Money,” S.A.J.E. (September
] ~The Keynesian Episode: A Reassessment (Indianapolis, Ind. 1952).
Liberty Press, 1979). “The Notion of Money and Constant Value,” S.A.J.E. (Sep-
. : tember 1953); and (December 1953),
Articles “The Significance of Price Flexibility,” S.A.J.E. (March 1954);
“The Factory System of the Early Nineteenth Century,” Econ- reprinted in The Critics of Keynesian Economics, ed. Henry Hazlitt,
~ omica (March 1926); reprinted in Capitalism and the Historians, 1960.
cd. F. A. Hayek, 1954. “The Yield on Money Held,” in On Freedom and Free Enter-
“The Effects of Immigration on Earnings,” The Journal of the prise, ed. Mary Sennholz (Princeton; Van Nostrand, 1956).
i | Economic Society of South Africa Vol. III part 2: No. 6 (Fall 1930); “New Light on Wicksell,” S.A.J.E. (March 1959),
“i | originally read to the Cape Town Branch of the Economics Society “The Critics of the Classical Tradition,” 8.A.J.E. (June 1964).
i} of South Africa. “Keynesian Revisions,” S.A.J.E. (June 1965); reprinted in
: “The Significance of State Interference with Interest Rates,” Rampart Journal (Winter 1965).
S.A.J.E. (December 1933). : “South Africa’s Salvation in Classical Liberalism,” I! Politico
“Economic Method and. the Concept of Competition,” (No. 4, 1965); revised for Studies in Economics and Economic
S.AJ.E, (March 1934). History, ed. Marcelle Kooy (London: Macmillan, 1972; Durham,
“Co-ordination and the Size of the Firm,” S. A.J. E. (December N.C.: Duke University Press, 1972).
1934). “Unanimity versus Non-Discrimination (as Criterion for
“Logistical Issues in the Study of Industrial Legislation,” Constitutional Validity),” S.A.J.E. (June 1968).
S.AJE. (March 1935). : -“Misgivings and Casuistry on Strike,” Modern Age (Fall 1968).
“The Nature of Aggressive Selling,” Economica (August 1935). + “Economics of Immigration,” in Economic Issues in Immi-
“Natural and Contrived Scarcities,” S.A.J.E. (September gration, ed. Sir Arnold Plant (London: Institute of Economic Pe:
1935). Affairs, 1970).
“Are Trade Unions Obstructive?” Economica (November “Reflections on the Keynesian Episode,” in Toward Lib-
1935). erty, vol. II (Menlo Park, Calif.: Institute for Humane Studies,
“Discriminating Monopoly and the Consumer, " Economic 1971).
Journal (March 1936). “Poverty in Mexico,” a review of Labor Legislation from an
“The Price Mechanism and Fconomic Immobility,” S.A.J.E, Economic Point of View, by Gustavo R. Velasco, Modern Age (Fall
(September 1936). 1974).
“Pressure Groups and Laissez-Faire,” S.A.J. E. (March 1938). “Stability or Strikes?” a review of Economic Growth and
“Privacy and Private Enterprise,” S.A.J E. (December 1939). Stability: An Analysis of Economic Change and Policy, by Gottfried
“Economic Lessons of the Allied War Effort,” S.A.J E. (Sep- Haberler, Modern Age (Summer 1975).
tember 1940). “Definition of Poverty,” areview of The Economics of Property
“The Concept of Consumers’ Sovereignty,” Economic Journal Rights, eds. Eirik Furobotn and Svetozar Pejovich, Modern Age
(March 1940). (Winter 1976).
“Economic Institutions and the New Socialism,” Economica “Shared Entrepreneurship,” The Journal of Economic Affairs
(November 1940). {January 1981).
“Distributive Justice,” S.A.J.E. (September 1941). “TheFace and Mask of Unionism,” Journal of Labor Research
A review of “The Economics of Democratic Socialism,” (Summer 1983).
Economica (1941). “The Power of Labor Unions,” in The Unfinished Agenda:
“War Demand, Entrepreneurship and the Distributive Essays on the Political Economy of Governmental Policy in Honour.
Problem," Economica (November 1941). of Arthur Seldon, ed. Martin J. Anderson (London: Institute of
“The Price Factor and Reconstruction,” with R. Leslie, Economics Affairs, 1985).
S.AJ.E. (December 1941). “The Principle of Social Justice,” in W. H. Hutt: An Economist
“The Sanctions for Privacy Under Private Enterprise,” for the Long Run, ed. Morgan O. Reynolds (Chicago: Regnery
Economica (August 1942). Gateway, 1986).
“The Concept of Waste,” S.A.J.E. (March 1943). “Apartheid in the Republic of South Africa~A Proposal,” in
“The Minimum Wage: A Major Cause of Poverty,” Austrian Apartheid—Capitalism or Socialism (London: Institute of Eco-
Economics Newsletter (Fall 1987). nomic Affairs, 19886).

“Public Works and Reoensiruction,” S.AJE. (September “Trade Unions: The Private Use of Coercive Power,” Review
1943). of Austrian Economics vol. HI (Fall, 1988). ¥