===== PAGE 1 ===== QO ustrian ewsletter have had a tremendons impact on mainstream economists, and in particular a beneficial impact on the Chicago school. As one observer noted: “It is one of the few times the Prize has been given to an counuinl at for advancing cconomic theory!” a Coase’s Nobel Prize by Roy E. Cordato S hould Austrian economists celebrate on the oc- casion of Ronald Coase’s Nobel Prize? Yes we should, but cautiously. First some background. In 1960 Ronald Coase published an article that revolutionized the way a large segment of the eco- nomics profession has come to think about external- Ronald Coase Awarded Nobel Prize ity problems. In “The Problem of Social Cost,” Coase argued that the Pigouvian approach to assessing such onald H. Coase was awarded the 1991 issues was wrong and that it implied policy prescrip- . . tions that could lead to less than optimal results. Nobel Prize in economics for his role as one | | Coase took issue with Pigou’s focus on the divergence between private and social costs that externalities gen- erate. Ultimately, Coase argued. from the perspective of the principal founders of the modern study of law and economics. He is best known for the "Coase Theorem” —the proposition that resources will be efficienctly allocated through voluntary agreement evernin the presence of externalities such as pollution, if property rights are defined — and for pioneering the economic analysis of the in- ternal working of the firm. An Austrian economics weekend, March 27- 29 at the University of Nevada, Las Vegas. BULLETIN BOARD Coase has made pathbreaking contributions to the theory of organizations, the theory of cost, A conference on the Federal Reserve at property rights, public goods, externalities, eco- : Jeykll Island, Georgia, May 8-10. nomic method, as well as important works on the 1992 Mises University, July 4-11, at Stanford origins of monopoly. His work promotes the expan- sion of our understanding uf (hie warkee process while eschewing mathematical techniques. A propo- nent of the importance of ideas, Coase showed that University, Mises Institute 10th anniversary celebration October 9-11 in New York City. personal freedoms (speech, religion, press) were $1,000 Ludwig von Mises Paper Awards (see parallel wath economic freedoms. back page). The British-born economist was educated at the For more information contact the Mises In- London School of Economics where he was heavily in- stitute, Auburn University, Auburn, Ala- fluenced by Arnold Plant and F.A. Hayek. The works - : bama 36849-5301; (205) 844-2500; fax (205) of this fellow traveler of the Austrian school, while few, 1 844-2583. r - ‘+ ===== PAGE 2 ===== of social welfare, private costs are unimportant and to be decided is whether the gain from prevent- that the issuc of exteinalitics is cudirely a problem of ing the harm 1s greater than the loss which would social cost. be suffered elsewhere as a result of the harm” This led Coase to ask different kinds of questions (p- 27). The ultimate social welfare goal, in than had typically been asked when assessing prob- Coase’s framework, is to maximize the social lems associated with negative externalities. value of output (p. 16). From this perspective, Pigouvians had focussed on trying to transform then, itis clear that internalizing the harm may social costs into private costs. This led to the con- or may not result in optimality. clusion that the costs of externalities should be in- Coase’s emphasis un winimizing social costs led ternalized by those who are generating them, him, and those who have adopted his method, to con- specifically through excise taxes or, with respect sider how alternative institutional arrangements, that to legal remedies, by holding the generator of the is, property rights, affect the efficiency of market out- externality liable for all damagcs. Coasc’s strict emphasis on social cost led him to recast the na- ture of the problem. He argued that “what has comes. Viewing negative externalities as primarily a . problem of conflicting property rights, Coase argued that what must be determined is “the arrangement of right [that] may bring about a greater value of pro- ~ duction than any other” (p. 16). The first case considered resulted in what has Cll Austrian come to be called the “Coase theorem.” Here Coase VIBES Economics Newsletter assesses the property rights conflict in a world of zero transaction costs. In this case, the optimal ar- Volume 13, Number 2 rangement of property rights comes about strictly .- . . as’ resu a volunta €SS. CONTRIBUTORS TO THIS ISSUE : Be the ult of ol ry bargaining proce : In | Roy E. Gordato is an cvwnumist with the Insure for Ke- 1 N= the secon, case, 15 transaction costs ok the efl- | search on the Economics of Taxation in Washington, D.C. A ficient outcome and it is suggested that a third Roger W. Garrison is an associate professor of economics | party, most likely a judge, should intercede to im- at Auburn University. . pose the optimal solution. - Une re re professor of ceunumiva au thio ST Co Certainly, . from an Austrian perspective, there niversity of Nevada, cas oo 1s ‘much to criticize in Coase’s analysis.’ In both the Peter G. Klein is a Mises fellow and graduate student in zero and positive transaction costs cases, Coase as- economics at the University of California, Berkeley. . sumes that all prices are general equilibrium prices Frank Mixon is 2 Ph.D. candidate in economics at Auburn : University. : (pp- 6, 32), which allows him to ignore the prob- STAFF | lems that are posed by subjective value theory. For i Austrians, the entire concept of “social cost” is vacu- Editor: Mark Thornton/Auburn University : . Associate Editor: Jeffrey A. Tucker/George Mason ininerci- schools located in the Northeast (aves glug $22,000 vices” rendered on a full- or part-time basis, The per year). federal government itself employs 3.1 million full- For those interested in a quality education at an time bureaucrats. institution known to have some interest in the free enterprise system these surveys provide some infor- . Professor Murray N. Rothbard of the Univer- mation. However, a few words of caution are in sity of Nevada, Las Vegas spoke on the se of the order. Surveys and statistical ranking models are bureaucratic state wn his paper, rs Political E con merely formalized guesses based on specific criteria pA son TL clarifier thos ¢ . done) Tron Too and limited information. The college decision can in- of OL P hy it is inevi table that elites rule in both fhe volve as much as $150,000 in direct expenses. Evalua- Hed 4 bli While th et ) tion of specific departments (i.e., economics), campus pit an Aly © re , © b foe sures visits, family traditions, and financial aid packages 5 at cdics rena un the ma et. the public sector " can all play major rolls in your decision. a O¢s not, especially since only a tiny minority are sub- Ject to expulsion during elections. The elites adminis- ter government “services” in a way that benefits only the government and its connected interests. While the Institution Templeton MoneyGuide watchword in private business is profit, in government _ Honor Roll Top 100 it is untrammeled growth. And while business advertis- Hillsdale College 1 96 ing benefits consumers, there is no check on govern- University of Chicago 2 69 ment propaganda which cover up the truth to bolster George Mason University 3 — its own legitimacy. In showing how we came to this CIA, 4 . 37 situation, he covered the history of government em- Auburn University 6 12 ployment, hitting Lincoln, Wilson, Roosevelt, and Harding University 7 Not Surveyed Johnsen particularly hard. Ile argued for a return Rice University Top 87 1 to the “spoils” system where bureaucrats are tossed Spelman Cuties a o ed Is out each time the party in power changes. Rutgers University Top 87 33 Echoing similar themes in his paper “The Poli- University of Georgia Top 87 35 tics ot the Managerial State,” Dr. Samuel Francis of reste! Tor od ph the Washington Times defined bureaucracy as a sys- Washington and Lee Top 87 56 tem of power that stands outside society’s voluntary University institutions and is inherently in conflict with them. Virginia Polytechnic Inotitute Tep 87 oo He argued on behalf of James Burnham’s thesis ay Top 87 67 that a managerial revolution occurred this century Los Angeles which transformed this bureaucracy into a tech- Clemson University Top 87 73 nocratic elite intent on micromanaging all aspects Furman University Top 87 75 of economy, education, church, family, and cul- Saison College ty or 4 a ture. The paper engendered debate for his empha- Stanford University Top 87 88 sis on the role private corporations have played in University of Dallas Top 87 - 90 causing the revolution ta come about EEE —————————————— ===== PAGE 7 ===== The interaction between interest group lobby- emphasis on the effects the growth of the state has ing and bureaucracy was explored by Professor In bureaucratizing private business. The massive Thomas DiLorenzo of the University of Chatta- regulatory apparatus of the modern state forces 9 nooga, Tennessee. Not only does the present sys- companies to employ more and more people whose © tem of government not discourage faction, but it job is not to enhance consumer welfare and profits, encourages it. Environmental groups, protectionist but rather to keep the rules and dictates issued arbi- groups, civil rights organizations, and many more, trarily by third parties. In this way, the mixed-econ- receive government money in indirect ways, which omy of America has becomes less and less 1s funneled back through to reelect candidates sym- pathetic to their interests. This creates a cartel of — politicians and non-profit group lobbyists which ex- ercise an enormous degree of control over regula- tory agencies. In turn this creates a special interest/bureaucratic nexus which hurts individual taxpayers and the economy at large. respousive to changes In consumer preferences and more vulnerable during recessions and depressions. Dr. Allan Carlson of the Rockford Institute pre- sented his paper “Sweden and Mixed-Economy Welfarism,” on Sweden's decline into bureaucratic barbarism and how America is taking the same path. During the 19th century in Sweden, the fam- Professor Joseph Salerno of Pace University ily was replaced by the State. Beginning with man- dipped nto the story of economic thought to datory school attendance laws and anti-child labor find that few economists have had sensible ideas on laws, Sweden had, by the 1980s, constructed a com- the subject of bureaucracy. He criticized the Vir- plete client state. They are now trying to find their ginia School of Public Choice, because it does not way out of the miasma of welfarism and its effects, provide a fundamental theoretical framework for but no proposal goes far enough to take care of understanding bureaucracy from the standpoint of the problem. Although the U.S. is following a sim- price theory. In Mises’s 1926 book Liberalism and ilar path—constructing the welfare state to “solve” his 1944 book, Bureaucracy, he argues that there the problems welfarism has created the only real can never be bureaucracy im the free-market pri- solution, he argued, will be total dissolution of its vate sector because the profit and loss system pun- central tenant that the state, not the family, should ishes it. The government sector has no profit and be the primary caregiver. loss system. and therefore rannat ralculate the best use of resources, as socialism cannot. It doesn’t matter how well-intentioned bureaucrats are, they Protessor Yuri N. Maltsev of Carthage College directed his discussion to the problems of former So- Hon viet bureaucracy. In that country (or those countries), lack the tools to do their job. 18.3 million people work directly as administrators of Dr. Roy Cordato of the Institute for Research state policy, and 97% of the population works in on the Economics of Taxation presented a paper ar- some capacity as bureaucrats, the result of which is to guing that the so-called public goods justification redistribute 83% of the national income. Bureaucrati- for bureaucratic intervention is totally fallacious. zation became much worse under the rule of Mikhail The conditions of perfect competition assure that Gorbachev, contrary to public perception. It will re- no real-world market can meet the test, but the en- quire a radical decentralization. Maltsev also worries durance of the model causes a pro-bureaucracy about the creation of what he called a Bureaucratic bias. He pointed out, for example, that 83% of International, a means by which Russian and Amexi- economists favor anti-trust legislation. The Aus- trian school theory, in contrast, argues that much of what is objectified and static under conventional economic theory is actually subjective and dynamic in real-world markets. His theory argued that state administrators have neither the will nor the way to can counterparts conspire to preserve their posi- tions of power. They have more in common with Yurt Maltsev, do what they claim to do, that is, improve the oper- Richard Hite, ation nf the free_market economy. and Hans Hoppe Applying theory to American history, Professor enjoy an outdoor Jeffrey Herbener of Washington and Jefferson Col- luncheon at the lege argued that bureaucratic growth occurred dur- bureaucracy con- ing critical episodes, from the civil war to the ference. “/ present administration. The government's strategy for growth is to create a crisis which has to be solved by more intervention. He placed a special wr EE EEE ———————————————— ===== PAGE 8 ===== each other than with the taxpayers of their respec- holders. Moreover, under democracy, politicians have an incendve to loot as much as they can re- gardless of how that affects the economy at large. —~ Concentrating on domestic bureaucrats, Dr. jane : David Fand of George Mason University demon- He contrasted this with monarchism, under which ) strated the faulty bureaucratic thinking that led 10 the ruler has incentive to protect the common- the S&L erisis. Non-bank banks, since their inception wealth from mass looting in order that his children in the 1930s, were treated with special privilege. Reg- and dynasty continue as a wealthy country. The ular banks were thought to support big business, but monarchy creates a consumption state—the famaly S&1.s were thought to serve the poor. Moreover, reg- itself lives off the taxpayer—hut that is hetter than ulators thought it was important to give special privi- democracy, which collapses into a redistributive leges to those investing in the real estate market, state in which the distinction between the ruler and since they thought active land markets were some- the ruled is obscure how critical to preventing recession. Bad investments Some papers will appear in a book on bureau- were overlooked and possible only because of the de- cracy and others will be reprinted in the series “Is- posit insurance provided by government, which pri- sues in Political Economy.” 4 vatized gaine and «ncialized losses. These conditions created opportunities for political graft and as a re- sult the taxpayer is paying for the S&L debacle. The Book Reviews result will be even more bureaucracy in the banking and financial industries. tive countries. The American education bureaucracy was the Money, Method, and the Market Process: Essays by subject of an attack by Dr. Thomas Fleming of Ludwig von Mises Chronicles. American education, he said, is in a de- Richard M. Ebeling, editor plorable state because the autonomy of local school Boston: Kluwer Academic Publishers, 1990 boards has been drastically diminished, and the role of consuming parents has been all but totally . . Lol Reviewed by Hans-Hermann Hoppe — removed from the formation of curriculum, disci- T y pp wo decades after his death, all of Ludwig von LL pline, and administration. He predicted failure for Mises’s major works are still in print. This any reform programs. For example, school voucher programs would end the autonomy of any private success is remarkable given that except for a few schoal that received them. and the same would be years during the late 1930s in Switzerland, Mises true of tax credits. School reform programs have never occupied a regular university post. He was been proposed and implemented every generation barred from all positions of academic power in his since the mid-19th century with no substantial ef- native Austria as well as in the United States, his focct. What is needed is radical decentralization and second home, primarily because of his principled a total dismantling of the state education apparatus. opposition to a rising tide of intellectual relativism, represented in particular by historicism and positiv- ism, and its political outgrowth: statist nationalism, interventionism, social engineering. and socialism. Professor Hans-Hermann Hoppe of the Univer- sity of Nevada, Las Vegas, gave the most controver- sial paper, “Bureaucracy and Time Preference.” He argued that increased bureaucratization lowers the time horizons of the public; property and wealth becomes less secure and people are less will- ing to save and plan long-term. This occurs with welfarism, which encourages short-term thinking and redistribution away from wealth holders, which redurcac the amnint of maney invested 1n long-run projects. Bureaucratic interventionism leads to shorter production projects, fewer techno- logical advancements, and reduced prosperity. Majoritarian democracy itself, argued Hoppe, tends to have a corrupting influence on the secu- rity of property. Once the right to vote 1s given, or even conceded, the political arena becomes the area for advancement at the expense Bf property Irrlight of the dramatic vindication of Mises by Throughout his life, Mises relied exclusively on the power of his words—and his unwavering convic- tion that even the most rampant forms of statism, and the most relentless statist propaganda of a steadily growing class of “public educators” in schools and universities, could not stamp out the human desire for independent thinking, logic, and truth. Each of Mises’s books is exemplary in its dis- play of lucidity and argumentative rigor (there are few dissertations being written on “What did Mises. really mean?” because Mises says what he means, clearly, and with little room for confusion). The lasting success of his books attests to the endurance of human rationality. ===== PAGE 9 ===== the collapse of full- Historical data may provide an illustration of eco- blown socialism across nomic laws, but it “can neither prove nor disprove the globe (which he the teachings of economic theory” (p. 12). Indeed, predicted as early as it would involve a categorical mistake to consider 1919), Mises and his economic theory as verifiable or falsifiable by histor- work may at last re- ical experience. Economic theory logically precedes ceive ther proper rec- history and constrains historical interpretations. It ognition within the restricts the range of possibly correct interpreta- academy, as one of the tions of sequences of historical events much in the great intellectual he- same way as the laws of logic restrict and constrain roes of our time and the range of possibly correct observations. the paradigm of a new age defined by a renaissance ~The essays in the section on “Money” explains ol economic reason. the function of money as a medium of exchange, The publication of Money, Method, and the Mar- and uncertainty as the necessary condition for its ket Process is particularly fortunate. The volume, ed- emergence. Mises demonstrates why the demand ited and with a knowledgeable introduction by fora medium of exchange “presupposes an already Richard Ebeling, contains 21 articles written by existing objective exchange value” (p. 58), why Mises between 1930 and 1969, many of which are money can only originate as a commodily money, previously unpublished. For the Misesian expert, and why once a directly useful barter commodity there is nothing fundamentally new in these es- “has become money, then the specific demand for says—because there is no such thing as Mises I, II, money can tie into an already existing exchange re- or III because Mises remained consistent. Yet this lationship between money and goods in the mar- volume is undoubtedly the best introduction to ket, even if the demand for the money-good, as Misesian thought, and it rewards even the experi- motivated by the other use, disappears.” (ibid). enced Mises reader with fresh perspectives. His That is, money, once established, can also be sev- magnum opus, the monumental Human Action, which ered from its commodity origins. ~~ contains Mises’s system of economic theory and so- Mises clarifies the categorical difference be- i! cial philosophy in its most fully developed form, is ween deposit banking and loan banking; why the extremely demanding of its reader and largely inac- banking system becomes inherently bankrupt; and cessible to the first-time reader of Mises. His other the cause of recurring boom-bust cycles, as soon as major books—Theory of Money and Credit, Socialism, these two functions are no longer strictly separated. and Theory and History—and his many smaller ones, ‘That 1s, as soon as deposit banks deviate trom a pol- only deal with parts of his system. The present icy of 100% reserves (as he plainly called for in his work fills an important gap by offering an mtroduc- 1952 addendum to The Theory of Money and Credit) tion to all major aspects of the Misesian system, 1n- and loan out their deposits while retaining their cluding those in which Mises made his most contractual obligation of instant redeemability. In original contributions. conclusion, writes Mises, “it 1s not the old classical ] ) . gold standard, with effective gold circulation, The book accomplishes this task with a bal- which has failed; what kas failed is the gold anced selection of pieces, organized under five headings. In the essays assembled under “Method,” Mises explains the nature of economic theory as the logic of action, or as he terms 1t: praxeology. Eco- nomic theorems are propositions that are logically deduced, or deducible, from the universal, incon- testably true action axiom: “that man is in a posi- tion to choose among different states of affairs with regard to which he is not neutral and which are in- compatible with each other, 1.e., which he cannot enjoy together” (p. 20), and a few empirical, and empirically testable, propositions (such as that lei- sure 1s a consumption good). As the conclusions ‘«’ of deductive arguments ultimately derived from an incontestable axiom, economic laws are shown The essays on “Comparative Economic Sys- to be apodicic, true a priori synthetic propositions tems” demonstrate Mises’s vigor as a defender of ‘economizing’ system and the credit policy of the central banks of issue.” In the section on “Trade” Mises demonstrates vnce again the wud uf the Ricardian insighc “day free trade only ensures the highest productivity of the economic efforts and that every kind of protec- tionism must necessarily result in a reduction of the output of capital and labor” (p. 114). He shows that “division of labor and war are incompatible” (p. 117) and, mutatis mutandis, why governmental restrictions on the freedom of migration, imports and exports create nationalism and international conflicts as well as lower living standards at home and abroad. Lo ______________________________________________________________________________________________ | 9 ===== PAGE 10 ===== laissez-faire capitalism and private property, and Indeed, if the sweeping vision of the essays col- saving and capital accumulation as indispensable to lected here were absorbed by a new generation of prosperity and progress. Socialism, the collective intellectuals, there is no reason for despair, but ~ ownership of factors of production, by outlawing a rather reason for hope. a capital goods market, and hence capital goods prices, makes cost accounting impossible and thus leads to permanent misallocations, capital consumption, and impoverishment. Nor is a mixed economy—a “social” Reflections on a Keynesian Concordance market economy or welfare state system—a viable so- cial order. For any interference with the operation of Keynes's The General Theory of Employment, Interest, free markets invariably produces more of the same and Money: A Concordance problems it was designed to cure, and hence either | Fred R. Glahe, editor leads to tull-blown socialisin or else requires a return Rowman and Littlefield, 1991 "to free-market policies and capitalism as the only gen- uinely “stable” social order. In the final section on “Ideas” Mises restates Reviewed by Roger W. Garrison the Humean insight, which has only recently re- A concordance 1s more at home in Literary crit- ceived another dramatic confirmaton with the sud- cism and theology than in economics. So for- den collapse of the seemingly impregnable power eign is this particular research technique to of the communist rulers of the Soviet Union. that economists that many will reach for ther dictionary no government can last without majority support, before they get past the ttle page. My Webster's be it active or passive. Once this support is gone, Ninth defines concordance as “an alphabetical even the most ruthless tyrant will be toppled. In index of the principal words in a book. . . .” The the last resort, then, the course of history and the word “principal,” though, must be understood to outcome of man’s ceaseless struggle for liberty will exclude only articles, conjunctions, prepositions be decided in the realm of ideas. and pronouns and all forms of the verb “to be.” All Reading Mises and reflecting on his life-long other words used by Keynes in his General Theory fight against the prevailing trends ot social and eco- [2] dic listed in alphabetical vider together with J nomic thought I was reminded of a passage from the total number of times each is used and the 1den- Staniskav Andreski’s scathing attack on the sociol- tification by page and paragraph of each use. We ogy profession in his Sociology as Sorcery: can note, for instance that Keynes used the word “same” 209 times and the word “different” 120 Despite the advanced stage of cretinization times. He used the word “optimistic” three times which our civilization has reached under the im- and the word “pessimistic” only twice. Even the ifs pact of the mass media, there are still some peo- (566), ands (2,123), and buts (496) and other “ex- ple about who like to use their brains without the cluded” words are listed with their total word counts. lure of material gan; . . . people interested in This 280-page index plus a two-page preface by the ideas, and prepared to think them through and editor and a two-page introduction by Kenneth E. express them regardless of personal disadvan- Boulding make up th q tage, have always been few; and if knowledge 8 Pp the concordance. could not advance without a majority on the right Why a concordance of the General Theory?—or of side, there would never have been any progress at any book, for that matter? A concordance is offered all—because it has always been easier to get into as a research tool, as a means to an end. A compre- the limelight, as wall ac ta make maney, hy charla- hensive listing of the words Keynes used may help us tanry, doctrmarisim, sycophancy and soothing or to understand how Keynes thought, why he believed srring oratory than by logical and fearless think- what he did, and what his message really was. Of ing. No, the reason why human understanding these di ) Iv if the al. has been able to advance in the past, and may do course, we need help mn these Irections only €a so in the future, is that true insights are cumula- Lernauye 11CATLS uit cadiug the words in dic seyuciee tive and retain their value regardless of what hap- in which Keynes himself arranged them proves un- pens to their discoverers; while fads and stunts suitable for achieving these ends. Let's give Keynes a may bring an immediate profit to the impresa- chance to answer a few simple questions and possibly rios, but lead nowhere in the long run, they can- render this concordance superfluous. cel each other out, and are dropped as soon as Q: Please, Professor Keynes, what do you mean by _ their promoters are no longer there (or have lost their power) to direct the show. Anyway, let us faut despals. {p- 17) - hl As My definition 15 ...as follows: Merm'are “muoluntary unemployment”? 12 — 10 ===== PAGE 11 ===== involuntarily unemployed if, in the event of a small that market adjustments in circumstances of rise in the price of wage-goods relative to the moucy- cconomywide disequilibrium may need to be wage, both the aggregate supply of labour willing to augmented with or supplanted by policy pre- work for the current money-wage and the aggregate scription? Is the assumption of fixed or sticky demand for it at that wage would be greater than the prices and wages critical to Keynes’s argu- ments, or is it merely a convenient means of making those arguments? Is the standard text- book rendition of Keynesianism, which largely abstracts from problems of economic uncer- existing volume of employment (p. 15}. Q: Please, Professor Keynes, what governs private in- vestment in a market economy? A: Our conclusions can be stated in the most gen- tainty, faithful to Keynes's theory, or is the no- eral form... as follows: No further increase in the tion that capital markets are debilitated by rate of investment is possible when the greatest pervasive uncertainty an important part of his amongst the own-rates of own-interest of all available central message? assets is equal to the greatest amongst the margial ef- ficiencies of all assets, measured in terms of the asset whose own-rate of own-interest is greatest (p. 236). If a reading of the text-as-is doesn’t resolve these questions, maybe a concordance can help. We can now be sure, for instance, that the word “trap,” as in } Q: Dlowse, Drofessar Koymoas, dooce’ monstary expon- “liquidily wap,” dues nol appeas in dic buvk. (The sion trigger an artificial boom? term was actually introduced by Dennis Robertson in A: [A]t this point we are in deep water. The a critique of Keynes's theory of interest.) However, if wild duck has dived down to the bottom—as deep we cross-check the word “absolute” (16) with the as she can get—and bitten fast hold of the weed word “liquidity” (44) or “liquidity-preference” (47), and tangle and all the rubbish that is down there, we find two overlaps—on pages 191 and 207. The and it would need an extraordinarily clever dog to first overlap reference leads us to a discussion con- dive down and fish her up again (p. 183). cerning “the rate of interest at which liquidity-prefer- ence becomes absolute”; the second to a similar Please, Professor Glahe, provide us with a con- ! ) Whe 5 passage in which “liquidity-preference may become cordance. ) . Lite 1 ded a virtual virtually absolute. . ..” We haven't exactly identified In 1959, Henry Hazlitt { ] provided a virtua the true significance of absolute liquidity preference page-by-page critique ot the Lreneral I heory, EXpos- in the General Theory, but at least, the concordance ing many contradictions, fallacies, and confusions helped us find the relevant passages in Keynes's arguments. But The Failure of the “New Economics” was largely dismissed by the economics profession partly on the grounds that Hazlitt was not a (degreed) economist and partly on the grounds that his focus was too narrow. The journal- ist-turned-Keynesian-critic, it was claimed, never perceived the underlying theme nor understood the central message of Keynes's book. Was Keynes an equilibrium theorist or a dis- equilibrium theorist? Here, the concordance pro- vides information that would otherwise be difficult to come by. The word equilibrium 1s used 77 times; the words disequilibrium and disequilibria are used once apiece. A quick check of the two instances in which Keynes appended the prefix “dis-” provides no support for the claim that Keynes was interested ~ For several decades, now, Ry osien iIprs t- in disequilibrium. Of course, there is still room for on TH. ” ave ie woke Ee Teo cms Ni 1e the claim that Keynes used the tools of Marshallian y Hazlitt in order to get the bag picture have got- partial equilibrium analysis, which were the only ten many different and conflicting big pictures. tools he knew about, to analyze an economy in mac- Well-credentialed Keynesian scholars can be found Cg aay . roeconomic disequilibrium. on both sides of key issues: Is the General Theory a continuation of the work begun in Keynes's Trea- tise on Money, or is it a revolutionary break from his earlier book? Does the so-called liquidity trap, which prevents a falling wage rate trom reducing unemployment and renders monetary policy im- potent, figure importantly in Keynes’s case for fis- cal activism, or is it only a curious extreme with no historical or practical importance? Does All in all, it is probably true that the very exis- tence of this concordance tells us more about Keynes's book than even the most competent and inspired woo of the concordance can tell ue. The fact that there is (presumably) a demand for the concor- dance implies that researchers are now stopping just short of tea leaves and dream analysis in their cflur ts 10 decode Keynes's message. Keynes actually contend that the economy can be Further, the fact that this concordance is being suffering from widespread unemployment and supplied carries its own message. Time-saving and nonetheless be in equilibrium, or is he saying - cost-saving developments in computer technology ts 11 ===== PAGE 12 ===== have shifted the efforts of at least one economist away from more conventional research to the pro- duction of a concordance. A digital scanner and word processor have accomplished 2 task that would otherwise have occupied an army of monks for many a fortnight. The computer sorts and counts words mindlessly. Boulding notes in his introduction that the word “in- terest” is the second most used non-trivial word in the The General (103) Theory (225) of Employment (615), in- terest (712), and Money (505). But two of the first ten ref- erences to the use of the word “interest,” we discover, are instances where the word means “aroused atten- tion.” “Ricardo expressly repudiated any interest In the amount of the national dividend . . .” (p. 4, em- phasis altered). And “Queen Victoria was a better queen but not a happier woman than Queen Eliza- beth—a proposition not without meaning and not with- out interest” (p. 40, emphasis added). The concordance includes entries that may puz- zlc idle browsers. For instance: “san (1} 355:1.” Thais means that the word “san” is used only once in Keynes's book and that it appears in the first para- graph of page 355. Few users of the concordance will link this enuy with a much carlier one: “Antonio (1) 355:1.” According to Keynes, literature touting the ideas of Silvio Gesell, whose inflationist schemes Keynes endorsed, were distributed in San Antonio. Other, less obvious but more serious, 1stances of splitting a two-word name or term make the con- cordance less than useful that it might otherwise be. Keynes's concept of “user costs,” for example, 15 sometimes identified as a key subjectivist insight and a link between the thinking of Keynes and the thinking of the more thoroughgoing subjectivists of the Austrian school. But “user cost” does not ap- pear as a single entry. “User” appears 97 times; “cost” and “costs” appear 294 and 45 times, respec- tively. The cross-checking required to identify every instance of “user cost{s)” would be tedious. All such problems aside, it can be said that among major twentieth-century contributions to economics, the Conoral Thonvy—and prohahly nn ly the (Coneral Theory—remains enough of an enigma to justify a con- cordance at all. Two cheers for Glahe for bestowing upon Keynes this unique honor. References Hazlitt, Henry, The Failure of the “New Economics.” Princeton, N.J.: D. van Nostrand, 1959. Keynes, John Maynard, The General Theory of Employment, Inler- est, and Money. New York: Harcourt, Brace, 1936. A Economics Newsletter Auburn University, AL 36849-5301 LING Austrian VR INSTITUTE Non-Profit Org. U.S. POSTAGE PAID Auburn University, AL 36849-5301 PERMIT NO. & CL