WEBVTT NOTE It Didn’t Have to Be This Way: Why Boom and Bust Is Unnecessary—and How the Austrian School of Economics Breaks the Cycle 1 00:00:00.000 --> 00:00:05.720 I have to tell you that I had the time of my life writing this book, and if you notice, 2 00:00:05.720 --> 00:00:10.300 you'll see some of the jokes in the book. I'll tell you the story of the book. I was 3 00:00:10.300 --> 00:00:17.720 asked by ISI, one of my former students, who now is their second-in-command and very libertarian, 4 00:00:17.720 --> 00:00:23.120 to write a book on Austrian economics. So I said, okay, we just need something in six 5 00:00:23.120 --> 00:00:28.440 months because none of the students that we're meeting understand anything about it. So I 6 00:00:28.440 --> 00:00:40.440 Okay, so I got my old bachelor's thesis out, which was published, or not published, but written back in 66, and I started, you know, going through, you know, Ben Bawerk and Menger, et cetera. 7 00:00:40.440 --> 00:00:51.440 And then, it was about 2006, and 2007 started to happen, and of course it looked like it was going to be a tremendous mess. 8 00:00:51.440 --> 00:01:02.440 The Austrian School, most of us knew that this thing was coming and it provided a wonderful opportunity because it gave us what's called a target rich environment. 9 00:01:02.440 --> 00:01:13.440 We knew that the economy was going to turn down and I knew it would follow the Austrian thing so I told the other, let's wait because it's not ready yet. 10 00:01:13.440 --> 00:01:18.440 I said this thing is going to go through a tremendous mess and we can follow the whole thing step by step. 11 00:01:18.440 --> 00:01:28.440 So if you'll notice when we did the book, what I tried to do when I had a strategy, I tried to use non-Austrian sources to support the Austrian case. 12 00:01:28.440 --> 00:01:38.440 And if you go through, there's all kind of irony in the book. In fact, I would come down with my two roommates and I would tell them in the morning, guess what I found last night. 13 00:01:38.440 --> 00:01:46.000 and of course 2007-2008 the establishment turned on itself and of all 14 00:01:46.000 --> 00:01:51.520 people George Soros said and I would quote him well mainstream economics 15 00:01:51.520 --> 00:01:55.720 didn't predict this they can't explain it and they don't have any cures 16 00:01:55.720 --> 00:02:00.160 beautiful that's exactly what I needed from George Soros and if you'll notice 17 00:02:00.160 --> 00:02:03.840 when people ask me they say well you know one of the nice things about it is 18 00:02:03.840 --> 00:02:14.640 Because I came from Detroit, or where Detroit used to be, and Detroit is a wonderful laboratory 19 00:02:14.640 --> 00:02:17.200 for government intervention, okay? 20 00:02:17.200 --> 00:02:21.960 The picture on the book is from Detroit, and of course the debate was whether we're going 21 00:02:21.960 --> 00:02:25.920 to use the old railway station or whether we're going to use one of the plants that the windows 22 00:02:25.920 --> 00:02:28.280 have been knocked out and whatever else. 23 00:02:28.280 --> 00:02:36.560 So it was easy in a lot of ways to get examples of what was going on and of course the first 24 00:02:36.560 --> 00:02:43.320 thing I took in the first chapter was on positivism and it is surprising how many of these guys 25 00:02:43.320 --> 00:02:48.720 are attacking mathematical economics and if you'll notice I go through the irony, I'm 26 00:02:48.720 --> 00:02:52.760 doing a seminar at my house, a discussion group on the book and I said why did you put 27 00:02:52.760 --> 00:02:57.240 this paragraph here? I said don't you see the irony in it that you have John Kenneth 28 00:02:57.240 --> 00:03:03.160 Galbraith saying that economics prediction looks like, makes astrology look respectable. 29 00:03:03.160 --> 00:03:04.160 You see? 30 00:03:04.160 --> 00:03:08.080 And the whole thing is to use them on the other side. 31 00:03:08.080 --> 00:03:13.280 And of course, one of the things I found out is they don't read their own sources. 32 00:03:13.280 --> 00:03:16.360 They have no concept of what their people are saying. 33 00:03:16.360 --> 00:03:19.840 So it was easy to go through Financial Times in the morning of the Wall Street Journal 34 00:03:19.840 --> 00:03:24.520 and to find out they were criticizing their own operation. 35 00:03:24.520 --> 00:03:25.520 And it was fun. 36 00:03:25.520 --> 00:03:29.680 I have to tell you, I'm thinking of writing a new book on the common good, in which I 37 00:03:29.680 --> 00:03:35.120 want to take the, because I've heard this from the leftist and the Christian movement 38 00:03:35.120 --> 00:03:38.920 about common good, common good, and the next thing I want to do is turn it around on them 39 00:03:38.920 --> 00:03:40.840 and the common good is the free market. 40 00:03:40.840 --> 00:03:46.120 But in any event, I have to thank the Mises Institute because of the works that they made 41 00:03:46.120 --> 00:03:47.120 available, okay? 42 00:03:47.120 --> 00:03:51.820 And I will tell you this in my, I think there's three or four pages of acknowledgments. 43 00:03:51.820 --> 00:03:53.240 It was a real division of labor. 44 00:03:53.240 --> 00:03:58.920 I mean I had help from Paul Swick, I had enormous help from Professor Weglars, enormous help 45 00:03:58.920 --> 00:04:05.160 from my students, from my roommates, we had, it was a ball writing this, and it was a ball 46 00:04:05.160 --> 00:04:08.880 finding out how the other side is just twisting and turning and they're trying, they don't 47 00:04:08.880 --> 00:04:09.880 know what to do. 48 00:04:09.880 --> 00:04:12.560 I mean they're really stalled. 49 00:04:12.560 --> 00:04:18.680 Interesting, Nixon said he was a Keynesian, yet he did everything he could to destroy 50 00:04:18.680 --> 00:04:20.840 the system Keynes set up. 51 00:04:20.840 --> 00:04:24.000 I mean the irony, there's all these ironies out there. 52 00:04:24.000 --> 00:04:29.840 And I often make the statement there isn't any capitalist or free market system. 53 00:04:29.840 --> 00:04:32.520 It's what you get when you do the right things. 54 00:04:32.520 --> 00:04:36.840 And of course one of the chapters in the book is the prerequisites for prosperity, 55 00:04:36.840 --> 00:04:39.240 in which I go through private property, 56 00:04:39.240 --> 00:04:41.480 rule of law, etc. 57 00:04:41.480 --> 00:04:44.820 And of course we have a wonderful example in the rule of law 58 00:04:44.820 --> 00:04:48.200 when they stole all the, excuse me, bankrupt the General Motors 59 00:04:48.200 --> 00:04:50.920 and left the bondholders out to lunch. 60 00:04:50.920 --> 00:04:55.320 Okay, so it was very easy to come up with this stuff, the opposite. 61 00:04:55.320 --> 00:05:00.240 So the question was, and I often speak to tea parties, because the book is not 62 00:05:00.240 --> 00:05:02.040 full of mathematical equations. 63 00:05:02.040 --> 00:05:05.880 Okay, I can tell you, forty percent of the book, and most, a lot of the jokes, 64 00:05:05.880 --> 00:05:09.040 were left on the cutting room floor by my editor. 65 00:05:09.040 --> 00:05:13.400 But I often speak to tea parties, and what should we do? I said, it's in the chapter of my book, 66 00:05:13.400 --> 00:05:43.400 So what I did is, the first part of the book, I went through the history. I have to say, I have to thank, again, the Mises Institute for the marvelous seminars that I got, Ralph Reiko and a number of others, who really opened my eyes. I think Thule was another fellow. I did his course. And on World War I, I started to discover, as a research, what exactly that thing did. So it was very, very interesting. 67 00:05:43.400 --> 00:05:51.400 It was a lot of fun doing it, and so the first part of the book is the attack on positivism, 68 00:05:51.400 --> 00:05:58.400 which I'm now discovering more and more, and just had to do a seminar on Mises Socialism at CPAC, 69 00:05:58.400 --> 00:06:03.400 in which I discover that he not only attacks the positivism of the mathematics, 70 00:06:03.400 --> 00:06:09.400 which are absolutely worthless, but he's also attacking the positivism of Social Darwinism 71 00:06:09.400 --> 00:06:13.880 Darwinism, and how that led to World War I, and it's opening up entirely new chapters 72 00:06:13.880 --> 00:06:14.880 for me. 73 00:06:14.880 --> 00:06:18.240 So as I say, I can't wait for the next one. 74 00:06:18.240 --> 00:06:23.320 So anyway, I did the attack on Positivum, the next thing was of course setting out the 75 00:06:23.320 --> 00:06:32.060 history of how we got here, and then getting into the whole concept of the Reconstruction 76 00:06:32.060 --> 00:06:37.280 of Economics, which is a statement of the importance of the division of labor. 77 00:06:37.280 --> 00:06:43.480 It's very interesting how Menger added a number of things. In fact, Menger could be considered 78 00:06:43.480 --> 00:06:48.520 to be the father of the information revolution. He really came out and said, look, technology 79 00:06:48.520 --> 00:06:54.840 is there. Then I did an analysis of human action. And fortunately, I was trained in 80 00:06:54.840 --> 00:06:59.640 Aristotelian and Thomistic philosophy, so I could talk about the virtue of prudence, 81 00:06:59.640 --> 00:07:04.740 and that would bring in a number of the people on what might be called traditional conservatives, 82 00:07:04.740 --> 00:07:10.180 Because the prudential thing to do is to follow the free market and I analyze human action. 83 00:07:10.180 --> 00:07:15.540 There's a number of corollaries there that I picked up from many of the Thomistic sources 84 00:07:15.540 --> 00:07:21.540 that you'll see, the corollaries of human action and then of course the inflation and 85 00:07:21.540 --> 00:07:22.540 then the trade cycle. 86 00:07:22.540 --> 00:07:26.860 Then the trade cycle, you'd be surprised, I mean the nice thing about Keynes is you 87 00:07:26.860 --> 00:07:30.340 can get Keynes to say anything, okay? 88 00:07:30.340 --> 00:07:35.340 I mean, my students asked me, well, what about John Maynard Keynes? I said, which one? 89 00:07:35.340 --> 00:07:39.060 Okay, which one? He was for the gold standard, he was against the gold standard. 90 00:07:39.060 --> 00:07:41.320 He said, 91 00:07:41.320 --> 00:07:44.180 if you expand the money supply, guess what's going to happen? 92 00:07:44.180 --> 00:07:46.300 You're going to create a boom or a bust. 93 00:07:46.300 --> 00:07:48.400 There, it's right there. Some people 94 00:07:48.400 --> 00:07:51.120 challenged me, I said, well, wait a minute, your guy said that. 95 00:07:51.120 --> 00:07:55.200 Ipsy Dixit, your guy said that. And that's the nice thing about doing it. 96 00:07:55.200 --> 00:07:59.320 I had, it's interesting, I have run into, the only objection I've gotten is not from 97 00:07:59.320 --> 00:08:04.680 and Mainstreamers. But there's this kind of an offbeat Catholic group called distributivism. 98 00:08:04.680 --> 00:08:09.600 And so they asked me a question, and they're generally pretty angry. And I said, your guy's 99 00:08:09.600 --> 00:08:14.240 for the gold standard. Belloc says it in Economics for Helen on this page, because they don't 100 00:08:14.240 --> 00:08:19.780 read their own literature. Okay? So truth, well, I found out, is solitary. And it doesn't 101 00:08:19.780 --> 00:08:25.160 matter who says it. It matters what's said. Remember, authority is the weakest of the 102 00:08:25.160 --> 00:08:30.380 arguments, reasoning is the strongest. So a lot of times, guys who are working who might 103 00:08:30.380 --> 00:08:35.860 be, we might consider opposed to us, are actually discovering and saying things that bolster 104 00:08:35.860 --> 00:08:41.720 our case. Okay? And this meltdown, and I have to say that I have to thank Professor Weglars 105 00:08:41.720 --> 00:08:47.680 for putting me in touch with a number of books by what we call mainstreamers who attack the 106 00:08:47.680 --> 00:08:53.060 whole concept of positivism and economics and show how that was one of the enablers 107 00:08:53.060 --> 00:08:59.260 of the Meltdown. So it was a lot of fun to read, a lot of fun to write, and if you read 108 00:08:59.260 --> 00:09:04.740 the book, you'll see all kind of irony in there, okay, because I love the use of irony. 109 00:09:04.740 --> 00:09:11.860 Milton Friedman, great proponent of mathematics and economics, Chicago School, you can't, 110 00:09:11.860 --> 00:09:17.660 science is prediction, etc. with all the equations, and then at the end of his life, I have his 111 00:09:17.660 --> 00:09:21.660 biographer, one of his people say, Milton really doubted the whole thing. 112 00:09:21.660 --> 00:09:51.660 Yeah, it's an Osterfeld's book, a Chicago school. He doubted the whole thing. The interesting thing, Schumpeter, Schumpeter was, I found out he was a great influence on Samuelson and wanted mathematical economics. And at the end of his biography reports, at the end of it all, he said, well, sorry guys, it doesn't work. So I mean, this is the wonderful thing about it. And so I would, I would advise all of you, 113 00:09:51.660 --> 00:09:59.420 News, irony, I tried to write it, and my editor, I have to say, my editor Jed Donoghue at ISI 114 00:09:59.420 --> 00:10:03.420 was great because he cut out a lot of the can't and he would get me back to it and he'd 115 00:10:03.420 --> 00:10:07.020 say, Harry, look, the public does not understand this, okay? 116 00:10:07.020 --> 00:10:08.020 And I had two editors. 117 00:10:08.020 --> 00:10:15.180 I had Jed who was an academic editor and he edited a number of books, but I think the 118 00:10:15.180 --> 00:10:17.740 last one was on Coolidge for Regnery. 119 00:10:17.740 --> 00:10:21.300 And then I had a newspaper fellow who would help me. 120 00:10:21.300 --> 00:10:26.300 James McNally, who told me, he says, you've got to pull the reader into this thing. You've got to pull him into it. 121 00:10:26.300 --> 00:10:31.300 And so he would help me write the others. So I would say it was a joint effort. 122 00:10:31.300 --> 00:10:37.300 If you read the acknowledgments, you'll see it actually goes back to the seventh grade. 123 00:10:37.300 --> 00:10:42.300 And my instructor in the Constitution, Mr. Schnabel, who took us through. 124 00:10:42.300 --> 00:10:48.300 At that time, we got the Constitution three times. We got a seventh grade, we got a twelfth grade, and we got it in college. 125 00:10:48.300 --> 00:10:54.460 College, that was the pre-Vatican Catholic educational system. 126 00:10:54.460 --> 00:10:57.580 So in any event, but I could go back and I had a good memory. 127 00:10:57.580 --> 00:11:01.880 I could remember what these guys said and I could remember Ed Schnabel in class talking 128 00:11:01.880 --> 00:11:08.420 about the division of powers in the seventh grade and the tyranny of unified government. 129 00:11:08.420 --> 00:11:11.140 I could remember what my professors said. 130 00:11:11.140 --> 00:11:12.660 And so it was a joint effort. 131 00:11:12.660 --> 00:11:20.100 And I would say, it took me about 60 years to write the thing, and it's the product of 132 00:11:20.100 --> 00:11:21.100 all of that. 133 00:11:21.100 --> 00:11:27.780 It's the product of so many different influences and so many different things coming together. 134 00:11:27.780 --> 00:11:32.640 I think one of the things was being, as a young person, and I will tell you, young folks 135 00:11:32.640 --> 00:11:37.420 who are here, it was a product of getting to know a lot of the really star lights of 136 00:11:37.420 --> 00:11:39.120 the conservative movement. 137 00:11:39.120 --> 00:11:41.660 When I was your age, I had lunch with Ludwig von Mises. 138 00:11:41.660 --> 00:11:46.540 I had met Hayek. I knew Russell Kirk personally. In fact, he and I were roommates for a while. 139 00:11:46.540 --> 00:11:51.220 I knew Lew. I knew Skousen. I knew a lot of these folks. 140 00:11:51.220 --> 00:11:55.980 So I would say for the young folks here, you'll write your book, okay? 141 00:11:55.980 --> 00:12:01.940 And you'll remember the people who are here, and you'll reach back in your memory, 142 00:12:01.940 --> 00:12:06.300 and you'll find them, and you'll say, hey, that person helped me here, and that person helped me there. 143 00:12:06.300 --> 00:12:08.300 But I would say this. Read the other side. 144 00:12:08.300 --> 00:12:12.860 Now, I mean, the mathematics stuff, just to throw it out, it's about as worthless as, you know, 145 00:12:12.860 --> 00:12:19.380 I mean, they're all living in some kind of a wonder wonderland, and I think Tom DiLorenzo referred to it, 146 00:12:19.380 --> 00:12:23.220 it's this utopian vision that is completely worthless. 147 00:12:23.220 --> 00:12:27.580 And I'll finish with this, I often start an economics class, kids come in there, 148 00:12:27.580 --> 00:12:29.660 so how many of you guys hated economics? 149 00:12:29.660 --> 00:12:31.660 Most of the hands, how many of you had economics before? 150 00:12:31.660 --> 00:12:32.780 Most of the hands go up. 151 00:12:32.780 --> 00:12:34.340 How many of you hated it? 152 00:12:34.340 --> 00:12:35.700 The same hands go up. 153 00:12:35.700 --> 00:12:38.100 And I say, well, why do you hate it? 154 00:12:38.100 --> 00:12:42.340 Oh, it's just a bunch of graphs and charts and I never understood a thing. 155 00:12:42.340 --> 00:12:49.140 One of the most ironic things in Marshall's book is he says go through this mathematics and then what? 156 00:12:49.140 --> 00:12:51.060 Burn the mathematics. 157 00:12:51.060 --> 00:12:53.060 This is Marshall saying it. 158 00:12:53.060 --> 00:12:58.940 So what you have to do, my advice to you is get to know the other side because they don't read it. 159 00:12:58.940 --> 00:13:03.940 And I'll finish in this, I had in a radio interview, I've had about 30 of those. 160 00:13:03.940 --> 00:13:07.220 ISI, by the way, was very good about getting on the radio. 161 00:13:07.220 --> 00:13:15.220 And some lady called up, I think she had one of these kind of offbeat PhDs, I could tell by the voice, in some kind of studies or something. 162 00:13:15.220 --> 00:13:23.220 And she says, sir, she says, you know, Paul Krugman disagrees with you. 163 00:13:23.220 --> 00:13:35.220 And I said, well madam, that's very interesting, because Paul Krugman just had a conference in London, sponsored by George Soros, and he criticized mainstream economics. 164 00:13:35.220 --> 00:13:39.220 She said, you're quoting them out of context. I said, for the whole weekend? 165 00:13:39.220 --> 00:13:43.220 And then she said, well, Jeffrey Sachs disagrees with you. 166 00:13:43.220 --> 00:13:48.220 I said, really? I said, two weeks ago he had an article in the Financial Times praising Hayek. 167 00:13:48.220 --> 00:13:52.220 And Hayek was an Austrian. She said, well, we need more regulation. 168 00:13:52.220 --> 00:13:56.220 I said, ma'am, I absolutely agree with you. We absolutely need more regulation that works. 169 00:13:56.220 --> 00:14:01.220 We need to regulate the dollar to gold. But that was the end of the conversation. 170 00:14:01.220 --> 00:14:07.220 It's fun dealing with these people because they don't have any conception of their own sources. 171 00:14:07.220 --> 00:14:13.220 Most of them, it's a template that they picked up and sometimes you can't break through the template. 172 00:14:13.220 --> 00:14:18.220 But sometimes you can do it with humor and irony and I will say that if you read the book, 173 00:14:18.220 --> 00:14:22.220 every sentence, there's a reason for every sentence. 174 00:14:22.220 --> 00:14:26.220 There's a little irony or a little poke that I'm trying to give the other side. 175 00:14:26.220 --> 00:14:32.220 Hopefully I'll be here, I'll have my fountain pen tomorrow if you want me to sign the books, otherwise it's with ballpoint today. 176 00:14:32.220 --> 00:14:37.220 But I have to tell you this, I really appreciate everything that the Mises Institute did. 177 00:14:37.220 --> 00:14:45.220 Their publications of works by Reb and Key that were unavailable, some of the things in the banking that were unavailable, 178 00:14:45.220 --> 00:14:50.220 has made the scholarship so much easier, really has made it so much easier. 179 00:14:50.220 --> 00:14:54.420 So I want to thank the Mises Institute for having me and for doing all the work 180 00:14:54.420 --> 00:14:58.420 and hopefully you'll enjoy the book 181 00:14:58.420 --> 00:15:01.620 and it has a lot of things in there in Detroit. 182 00:15:01.620 --> 00:15:05.220 I suggested to the Philadelphia Society that we have a 183 00:15:05.220 --> 00:15:08.540 conference on the failure of government intervention 184 00:15:08.540 --> 00:15:11.540 and we hold it in what was Detroit.