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NOTE The Revival of the Austrian School: Mises and Rothbard

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The title of the lecture, The Revival of the Austrian School, Mises and Rothbard, is slightly inaccurate because what I'm really going to do, I'm going to get to that, but I'm going to finish up more or less from yesterday.

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So really, this is going to talk more about the fall and then the revival of the school and the reasons for the decline.

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Let me mention, though, before I start, the similarities between Mises and Rothbard, some very interesting similarities even though they're two generations apart.

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First of all, I consider them the two greatest economists of the 20th century.

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They were born two generations apart, as I said, and they were worlds apart in their cultural background and in personal temperament.

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But, as I said, there were important similarities.

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There were both creative geniuses who constructed a breathtaking system of economic theory.

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Both worked in virtual isolation from mainstream academia during very productive periods of their careers.

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Rothbard for all of his career and Mises for a very productive period of his career beginning in the late 1930s,

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or actually beginning after World War II.

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Thoroughly, despite their extraordinary mental abilities, both men displayed tremendous intellectual humility.

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They didn't seek to reinvent the wheel, to rebuild economics from the ground up.

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Their ambition was to refine and advance and correct the work of their acknowledged masters.

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Mises always acknowledged Boehm-Bawerk as his master, whereas Rothbard always acknowledged Mises as his master.

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So, they worked within an existing paradigm and tremendously advanced that paradigm.

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And both published, importantly for us, both published comprehensive treatises on economics at crucial points in the history of economic thought

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that saved the Austrian School from really disappearing into oblivion.

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Mises' treatise in 1969, and Rothbard's treatise, Man Economy and State, in 1962.

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And finally, both were very passionate and intransigent seekers of truth.

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There was an article written by Mises' friend on Mises, Jacques Rouef, a liberal economist, member of the Montpelerin Society,

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and the article was titled, The Intransigence of Ludwig von Mises.

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They wouldn't take a step back on principle, and Rothbard always talked about compromising on means but never on ends.

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And they really never deviated from Carl Menger's original vision of economic phenomena as rooted in the valuations and choices of human action.

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So that's sort of an introduction to the types of, to the two men who did save Austrian economics and who were responsible for its rebirth.

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Now, let me talk about the decline, the fall and the rebirth of Austrian economics.

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First, I'll give you what has come to be the standard account. It's not written down anywhere in detail.

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It was an account I accepted myself up until the late 1990s when I started rethinking things.

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You can find it in bits and pieces throughout Israel Kirzner's writing and recently Bruce Caldwell's biography on Hayek incorporates this view.

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It's a view that almost everyone who was in Austria in the 1970s and later accepted pretty much by osmosis.

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And so I'll call it the Kirzner-Caldwell account.

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Let me just tell the story according to Kirzner and Caldwell.

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According to this view, Austrian economics was riding high.

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It was developing tremendously during the 1920s and 1930s.

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By the early 1930s, it had offered really the only reasonable explanation for the Great Depression.

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While English-speaking economists were saying that we were going to live through an era of perpetual prosperity

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and that business cycles had effectively been abolished in the 1920s because the Fed and the Bank of England, mainly the Fed, had stabilized prices and that therefore without an inflation of consumer prices you could never have an ensuing depression.

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Irving Fisher, the proto-monitorist and Milton Friedman's inspiration, claimed at the end of the 1920s that this was the era of perpetual prosperity.

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And when the Great Depression did strike, what occurred was a lack of any explanation for why it should happen.

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It took many, many people by surprise, both in academia and in business.

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So the Austrian business cycle theory, which had been developed by Mises and Hayek during the 20s, was ready at hand as an explanation.

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and it quickly spread its influence throughout the continent and to the United States.

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So according to the Kirzner-Caldwell account, the Austrian School was actually flourishing and gaining even more adherence in the 1930s.

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Then 1936 struck and we had, quote, the Keynesian Avalanche and the Austrian School disappeared down the memory hole.

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It was buried by the Keynesian Avalanche.

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Now one problem with this, and I'll talk about it in more detail later, is that's only macro.

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Certainly the quantity theory, which was developing at Chicago by some of Milton Friedman's mentors,

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including Mintz and Henry Simons, that theory was also buried in 1936.

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in 1936. But Chicago microeconomics wasn't buried. In fact, that continued to flourish.

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So we have the Keynesian Avalanche explanation of why the Austrian School fell from its level of influence and popularity.

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It's up here and suddenly, in 1936, it reaches the nadir of its existence, it's barely alive.

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And then, in this account, there's a big bang theory of its rebirth.

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Suddenly, someone has a good idea, hey, let's have an Austrian conference in 1974.

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And if you saw The Natural, the movie The Natural is a great movie with Robert Redford on baseball.

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Oh no, I'm sorry, not The Natural, the movie Field of Dreams with Kevin Costner, who's not such a great actor, but the movie was decent.

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In any case, in that movie, you had the phrase, if you build it, they will come.

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Well, this account can be summed up in the following, if you hold it, they will come.

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will come. That is, where did all the 30 participants come from? There was no Austrian school. If the Austrian school was barely alive, there was only a few people writing who had been Mises' students in the 1950s when he came to America, where did the 30 graduate students, myself included, and young faculty members in economics, where did they come from? Why did they suddenly appear in this small Vermont

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in downtown, just because this conference was being held, no explanation is given.

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So in 1974 in the summer there was the South Royalton Conference and then in October,

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Friedrich Hayek received the Nobel Prize for work that he did in the 1930s and boom,

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there's this big bang and now we have the reborn Austrian School.

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Well, in a way, because I'm making this story brief, I am charactering to some extent what they think.

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But this is basically the story. Now, the problems with this story are many.

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The first is that it really does not give us any idea, or it attributes almost no role to Mises and Hayek in the rebirth,

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particularly to the books Human Action and Man Economy and State.

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Human Action is looked on as a book that Mises wrote at the end of his productive career in 1949,

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and yes it's a very good book, but it sort of summed up what he had said earlier, and it wasn't very influential.

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The Austrian School treats the Austrian School as a monolithic entity whose members all agreed with one another.

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And this wasn't even true at the beginning, as I've shown you.

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Mises and Boehm-Bawerk disagreed very profoundly on basic value and price theory.

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More particularly, it ignores two divergent traditions that grew up right from the beginning of the Austrian School.

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Both Boehm-Bawerk and Wieser were followers of Menger, but they took divergent paths.

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Wieser had a student, Hans Meyer, who tried to develop his thought in a certain direction and didn't do very well.

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And then Hayek followed Wieser.

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So we had a tradition, which I'll call the general equilibrium tradition in Austrian economics, which was Wieser, and also Schumpeter was in this tradition.

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Wieser, Schumpeter, who was in Mises' cohort, he was in the third generation with Mises, and those two from Wieser and Schumpeter to Hayek, who was in the fourth generation.

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On the other hand, we have the Boehm-Bawerk, Mises, Rothbard tradition.

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And Hayek himself, and if you'd read my article on the place of Mises' human action and development of modern economic thought,

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Hayek himself recognizes the difference in tradition and talks about how Mises developed the Boehm-Bawerk line

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and he himself and Hans Meyer tried to develop the Wieser line and that he was very disappointed that the Wieser line didn't develop more

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He admits that in the United States the Boehm-Bawerk-Mises line or tradition has dominated.

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It also does not deal with the crucial importance of what I talked about yesterday,

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an institutional framework based on property and resources.

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That is that a paradigm needs resources to exist and flourish.

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You can have geniuses like Mises and Rothbard working in isolation,

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without interaction, much interaction with other minds, developing systems.

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But most of us are not geniuses.

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Mises and Rothbard come around once a century.

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Also, this leaves out of account Joseph Schumpeter,

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who was treated as, if he was just a Volrasian,

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and wasn't really involved much in Austrian economics.

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In fact, he was very involved in Austrian economics.

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Yes, it's true he followed Walroth, but he also followed Wieser.

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And his books influenced the general equilibrium tradition in Austrian economics.

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Finally, it portrays Murray Rothbard wrongly as leaving economics sometime in the 1970s

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and becoming a social philosopher and libertarian activist.

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And ceasing any contributions to economic theory.

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or the Austrian economics in general, and that's completely wrong.

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So that is a standard account.

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Now what I would call the revisionist account disagrees that the Austrian school suddenly was buried under the Keynesian avalanche in 1936.

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In fact, I argue, and this count argues, that the Austrian School is pretty much dead, at least the Boehm-Bawerk-Menger tradition, by the late 1920s, early 1930s.

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Let me just mention how this happened.

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By the late 1980s, there was a tremendous flourishing of work.

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Boehm-Bawerk, Wieser and then many others in Austria began writing works in the tradition of Menger.

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By the 1890s, the Austrian School had become a worldwide entity.

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It had great international influence in the US.

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A separate American school grew up. They called themselves the American Psychological School.

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J.B. Clarke, Frank Fetter, Herbert J. Davenport, and let me just show you a few pictures of these men.

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This is Clarke, who was working along the lines of Menger, but wrote that, in fact, one of his main influences was Menger.

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And he's known as the father of sort of scientific American economics or marginal utility economics.

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Here he is with Frank Feder, who taught at Princeton and was a follower of Boehm-Bawerk and developed Boehm-Bawerk's time preference theory of interest into a pure time preference theory and rooted out some errors that Boehm-Bawerk had in his theory.

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Theory, also was a great rent theorist and wrote a good principles text, which summed

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up Austrian principles right on the eve of World War I. His text came out in 1915.

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And there he is with an older Clark, who we considered to be the leader of the American

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Psychological School, which was an unfortunate choice. It was really a praxeological school,

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This is Herbert J. Davenport, who wrote a number of important treatises, was a subjective value theorist,

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wrote a great treatise, which came out right around the beginning of World War I,

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called The Economics of Enterprise, in which he stressed the entrepreneur,

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and was an American-Austrian, part of the American Psychological School.

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Unfortunately, as we'll see, this school collapsed because of tremendous personal animosity between Davenport and Fedder.

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They continually attacked one another in the journals, not just intellectually, but personally.

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And they were very close in their thought.

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So that was unfortunate. So they left no students. They left no followers.

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And then in England, the school, as I mentioned, Jevons, lone follower, Philip Henry Wickstede, also became a Boehm-Bawerkian, a Mengerian, and brought Austrian economics to Great Britain, and there were a few others, Edwin Cannon and William Smart, and well, that's the evil Alfred Marshall, which we'll talk about, or who we'll talk about.

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So, also in the Romance countries, in Italy and France, as we saw, we had the liberal school transforming itself into a marginalist liberal school following Boehm-Bawerk.

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So, the Austrian school became globalized, or became international in the 1890s.

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It really reached the peak of its influence by 1914.

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There were three great treatises just in England, just in English, one by Wickstede, one by Davenport, and one by Federer.

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And they were thorough treatises setting out or presenting Austrian thought up to that point in the Menger-Boehm-Bawerk tradition.

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What caused the decline of the Austrian School? First, let's look at, very briefly, at events in Austria.

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in Austria. As I mentioned yesterday, Boehm-Bawerk went into government service in 1889, after he had finished his three volume treatise on capital and interest, and stayed there until 1904.

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He returned to academia in 1905, and they created a chair for him at the University of Vienna, but he was in ill health, and his creative powers had been withered.

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In other words, he ceased to become really a player in Austrian economics at that point when he came back.

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He couldn't do any innovative or creative work.

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For example, one person described him as to have seemed older than his years suggested. He was only 54 years old when he came back.

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He himself, two years after he returned to academia, described himself as an old man.

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This is what all those years in government bureaucracy can do to you.

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He had a tremendous workload and he also tried to keep up his economics at the same time.

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Also, Mises had an interesting comment. He attended Boehm-Bawerk's famous seminar when Boehm-Bawerk returned, and he observed,

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quote, Boehm-Bawerk could have produced much more if conditions had permitted it, but his physical constitution would no longer stand,

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could no longer stand the hard work necessary to embark upon great works. His nerves were failing him. The two-hour seminar per week already taxed his strength.

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So, Boehm-Bawerk was more or less out of the picture when he returned in 1905, and then he died prematurely in 1914.

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In the meantime, Menger retired. Menger really stopped writing theoretical articles in the 1890s.

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His book went out of print, he refused to revise it, despite the tremendous demand for his book, he refused to revise it and refused to allow it to be reprinted.

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It was commanding tremendously high prices in used bookstores. It had disappeared from the libraries and yet it wasn't reprinted until after his death by his son.

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So that book wasn't around. They created a chair or they gave the chair to Wieser.

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Menger's chair was given to Wieser as the main professor at the University of Vienna, the person who would teach all incoming students economics.

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and Economics, because as I said, Boehm-Bawerk was in government service at the time.

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As I pointed out yesterday, or not in too much detail, but Wieser did not follow Menger's causal realistic approach to economic theory,

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trying to find out the causes of real economic phenomena, of real prices that we observe every day.

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That was not what Wieser did.

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He gave us a huge general equilibrium system, describing how prices would be if everything was pretty much adjusted.

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That is, how prices would be in a never-never land where there's no changes in the data and so on.

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He didn't use math and he tried to make it more realistic than the Volrasian mathematical system, but it was still a general equilibrium system.

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He also published the first complete treatise on economics in Austria in 1914 called Social Economics.

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Economics. Then in 1903 or 1904, Schumpeter enrolled in the University of Vienna, Joseph Schumpeter, who was a brilliant man, a famous economist.

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He became a student, but he was also a follower of Walras, though he didn't know much math. He thought Walras was the greatest economist who had ever lived.

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He wrote two books at a very young age. In 1908 he wrote a book on the nature and essence of economic theory, and then in 1911 he wrote a book on business cycles, the theory of economic development, and that established an international reputation.

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So, in the third generation, it was Schumpeter who was seen as a star.

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Mises, who was Boehm-Bawerk's student also, had only published a book in 1912 on the theory of money.

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A great book on the theory of money, but he was seen as much narrower than Schumpeter.

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Schumpeter had produced a book pretty much on methodology, the first book, and the second work on business cycles.

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So Schumpeter was seen as a system builder and the star of the third generation.

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Now when the fourth generation enrolled after World War I, that included Hayek, Fritz Machlup, Gottfried Habler, Oscar Morgenstern, and so on.

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All of these men either went to Great Britain in the 1930s or the United States, Fritz Machlup taught at Princeton and NYU for many years.

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Gottfried Habler taught at Harvard for many years,

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Morgan Stern also taught at Princeton, and so on.

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Anyway, those people entered the University of Vienna

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between 1918 and 1921.

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They studied under Wieser.

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So their first exposure to economic theory

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was through this other tradition.

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Hayek says many great things about Wieser.

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He calls him my revered teacher.

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You can tell that Wieser was the main influence on the early Hayek.

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There's no doubt about that.

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You can read Hayek on Hayek.

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No matter how much the other side argues that that's not true,

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Bruce Caldwell, Israel Kirzner, it is true.

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In fact, you were not allowed to join Mises' private seminar

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until after you had had your degree, which

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means after you had had your economics courses

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at the University of Vienna.

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Now, it's true that Mises did teach a course

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He works at the University of Vienna, as a private dozant, which is someone who is an unpaid lecturer, who the students just give nominal fees to.

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But Hayek himself says he sat in one day and didn't like Mises' attitude, and so he never completed the course.

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But even if he had, Mises did not lecture on general economic theory, that was Viser's job.

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Mises lectured on things that were interesting to him, things that he was researching on, such as monetary theory, business cycle theory, and so on.

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So basically, they also, this generation, because Schumpeter had gained an international reputation, they read his books, and it had a lot of influence on them.

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And he was very, very pro-Volrasian, very pro-general equilibrium.

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Finally, they did attend Mises' private seminar after they graduated, through the 1920s up to 1934 when Mises left.

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But by that time, as I mentioned, they had already become economists.

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Their views had already been formed by Wieser and by reading Schumpeter's books.

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And in the seminar, what they discussed were applied topics and advanced topics, okay?

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Now, that's not to say that Mises didn't have an effect on them. Mises did have an influence on these people.

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When they read his Socialism, which was published in 1922, most of them were social democrats.

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and almost all of them became much more liberal in the European classical sense because of that book

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and Hayek points out how influential that book was.

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But again, that was a book on one aspect of economics, socialism.

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So they were very influenced by Mises' monetary theory and Mises' theory of economic calculations, socialism and so on.

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But they were looking at these works through the lens of equilibrium theorists because of their early training.

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Okay, now, that's one reason for the Austrian School, or at least the Mangerian von Boehm-Bawerkian part of the school, dying out.

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Second reason is, in the rest of the world, there were various factors operating, which I'll go through pretty quickly.

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Alfred Marshall wrote a very famous, one of the most famous treatises of the 19th century on economics, Principles of Economics, in 1890.

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By 1910 or so, that book had swept all of England.

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So the few Austrians that were in England were pretty much marginalized or pushed to the side.

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Wickstede didn't have an academic position. He also was a preacher and wrote on religion and so on.

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and so his treatise was swept aside, the treatise which he wrote in 1911 was more or less forgotten about.

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By 1920 everybody in England was a Marshallian economist except for one school, the London School of Economics,

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where Lord Robbins, Lionel Robbins later became Lord Robbins, had read a lot of, knew German and read a lot of the Austrian literature,

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was very influenced by the Austrians, was also very influenced by Wicksteed's book.

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There's one outpost that remained in Great Britain after the Marshallian dominance.

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And I'll talk about what happened there in a minute.

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But in the U.S. we had the fight between the Fed and Davenport.

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They never really went on to found the school.

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By the 1920s, they were old men. They ceased to contribute to economic theory, and there was a big gap in economic theory, so what happened?

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Marshalian economics was imported, and the vacuum in economic theory was filled by Frank Taussig, who was sort of a Ricardian mill and a marshalian.

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They called the talisman the American Marshall because his brand of sort of neoclassical combination of some marginal utility and the old classical school, his brand really dominated American economics.

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In France and Italy I mentioned yesterday that the Austrian marginalist school was eventually replaced by a combination of martial with some German historicism.

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Okay, so Austrian economics died out in the 1920s throughout the world, okay?

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Then you had the emigration of Hayek from Austria to the London School of Economics.

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He was invited there by Lord Robbins, who was the chairman of the department,

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and he gave lectures in 1930, lectures which later became published as his great book,

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Prices and Production, which was an advance in Mises' business cycle theory.

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But what happened was that when he arrived at the London School of Economics,

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he met a brilliant student of Robin's, John Hicks, who was one of the fathers of sort of modern neoclassical economics.

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And for whatever reason, he influenced Hicks to re-read Vilfredo Pareto,

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who was a follower of Vol Ross and who was a mathematical general equilibrium theorist.

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In the English-speaking world, there was no mathematical general equilibrium theory.

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There was some in Italy and France and so on.

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But now in the 1930s, for the first time, this new theoretical system was introduced.

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And it was introduced through Hayek's influence.

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So, Hicks read the book and wrote a book called Value and Capital, which came out in 1939.

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But he was working on it throughout the 30s. It was a very influential book.

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And what it did was to introduce general equilibrium analysis into the English-speaking world.

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Now, Robbins, who was an Austrian and who had read Mises and who had read Striegel,

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who was also a follower of Boehm-Bawerk and others in German,

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happened to have a personality flaw.

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In the beginning, he was under the influence of Hayek very strongly in macroeconomics.

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After Keynes' book came out, The General Theory, 1936,

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he quickly changed his mind and became sort of a quasi-Keynesian.

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And he had written a great book explaining the Great Depression using the Austrian Business Cycle Theory,

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simply called The Great Depression.

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In his autobiography written in the 1970s, he apologizes for writing that book and says that he couldn't even stand to read it through again in preparing for his autobiography.

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So Hayek once, I heard Hayek speak once, and Hayek said that Robbins was very, very influenced by the strong opinions held by those around him.

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So many, since everyone in England was becoming a Keynesian, he became a Keynesian.

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Well, the same thing was true, though, which people don't realize, of his price theory, his microeconomic theory.

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He was initially a Mangerian. If you look at his great book on the nature and significance of economic science,

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it's really straight Menger and early Mises and so on. The methodology is very praxeological.

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But because Hicks began to write this book, and Hicks was a brilliant man,

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I also was thinking in terms of general equilibrium.

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Robbins began to forget about his Mangerian, Boehm-Bawerkian roots

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and to move to that side of the tradition.

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And if you look at his reading list for his course in general economic theory,

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you see this occurring very clearly between 1934 or so and 1938.

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So in his 1934-1935 session, his syllabus included, under the heading Modern Works and General Theory,

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he had listed treatises by Boehm-Bawerk, Wichstead, Federer, Clarke and Davenport, all Austrians, all hardcore Austrians.

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And he did have, alongside that, he had a few works of Kassel, Pareto, who were general equilibrium theorists.

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But the main works were Austrian-Boehm-Bawerkian works.

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However, he did write in a note, it's already 1934, 1935, Hayek's been there for a while, Hicks is thinking in terms of general equilibrium.

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He appends a note to a syllabus in which he says,

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The treatment will be non-mathematical in character.

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Students who wish to witness the same problems treated mathematically should attend course number 66, Introduction to Mathematical Economics.

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So evidently, by that time, he really saw the two theories as being really just different ways of expressing the same concepts.

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Then things got even worse in his syllabus for 1938-39. He moved further away from the Mengerian tradition.

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He got rid of the general theory heading and he put statics and comparative statics, statics meaning, you know, general equilibrium theory.

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And no longer were there listed the great treatises by Clark, Federer, and Davenport, or Boehm-Bawerk.

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He kept Pareto's treatise, mathematical treatise, and then he added Hicks and Allen's article on a reconsideration of the theory of value,

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which was a precursor of Hicks' book introducing general equilibrium theory into the English-speaking world.

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He also included another English economist's book called Mathematical Psychics and also books by Edward Chamberlain, The Theory of Monopolistic Competition that was also added

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and instead of Wicksteed's treatise as being the main book that entering students should read, he listed Knight's Risk, Uncertainty and Profit which was hardly Austrian

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The London School of Economics lost its Hungarian character in the early 1930s.

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Finally, if you look at the socialist calculation debate that occurred during the mid-1930s,

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Hayek and Robbins emphasized, and we'll talk about this two days from now,

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Now, they emphasize the difficulty in central planning of collecting all this dispersed knowledge and getting it to the planner.

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They did not emphasize or stress what Mises had stressed, which was the problem of monetary calculation or economic calculation,

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trying to determine from market prices what goods are most demanded by consumers and what methods of producing them are the most economic.

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This is what Mises stressed. It was not stressed by Hayek and Robbins.

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Theirs was more of a general equilibrium view,

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that there's a lot of information out there that the price system automatically communicates to the producers,

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and things are fairly mechanical.

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Though I don't want to say that they are straightforward Volrasian general equilibrium theories.

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So, the final problem leading to the Austrian, final fact leading to the decline of the Austrian School, the death of the Austrian School was that there was some problems in the actual Austrian theory itself, which had been developed up to 1914, okay?

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First of all, it really did not clarify the proper use of equilibrium.

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There is a use for equilibrium in economics and it was not clarified even by the most sophisticated treatises of Wickstede and Davenport.

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Sometimes they talk about a moving equilibrium that the market was moving, that we weren't in a fixed equilibrium,

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but that equilibrium was moving and the market somehow was chasing it, but they didn't make it clear.

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Let's make it clear. They also didn't integrate money and price theory.

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As Mises says, economics is all about explaining money prices.

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Where do these money prices that we observe every day come from?

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From Menger forward, the theory was really a barter theory.

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It was a theory of relative prices.

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Money really wasn't integrated into economics.

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Wickstede tried in his treatise and partially succeeded, I think, but Mises did succeed in 1912, in his book.

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But he wanted to write a full treatment of economics but was not able to.

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He didn't do that until he did Human Action.

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And he says himself that my theory was not complete until I wrote National Economy, which was the German forerunner of Human Action.

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And the third problem was that the Austrians really didn't, before Mises wrote Human Action,

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didn't stress the important role of the entrepreneur in forecasting the future and acting as someone who demands present capital goods.

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In other words, the entrepreneur is the one who's responsible for the appraisement or for the pricing of factors of production.

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based on his or her forecast of what future prices will be.

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So, given these defects, in the 1930s, when general equilibrium theory was introduced in the English-speaking world,

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economists looked around and said, wait a minute, the Austrian theory is simply an unsophisticated, less rigorous version of general equilibrium theory.

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It's basically general equilibrium theory but it's not elegant.

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It's wordy, we can say the same things in equations, much more simply, much more clearly.

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So, because of certain errors in the Austrian theory, which undermined or obscured the fact that it was focused on a dynamic, changing, uncertain world,

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it was just pushed aside because it was inelegant.

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We can say the same things the Austrians are saying, we can integrate marginal utility by a system of simultaneous equations.

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Okay, so that's the way things stood in the 1930s.

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Now, Mises was extremely productive, continued to write articles, books and so on through the early 1930s.

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Back in 1933, he came out with a collection of his papers that went from 1928 to 1933 on methodology in which he began to develop a system that came to fruition in human action.

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And it was at that point, that was already too late for the fourth generation, Hayek's generation, to absorb.

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They thought that Mises was saying the same thing in some sense as Wieser was saying.

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Mises was saying, they never really realized that Mises had a whole different system in the back of his mind,

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a much more dynamic development of Menger and Boehm-Bawerk's price theory.

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So, Mises now leaves Austria in 1934, remember he was working for the Chamber of Commerce,

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which was an advisory body to the Austrian legislature.

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He was working full-time in writing all these books, and it was a full-time job and still writing books and articles and still teaching at the university and holding a private seminar, so he was extremely productive.

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But then when he goes to Switzerland, to the Institute of International Relations, I believe, the Graduate Institute of International Relations, something like that, he's invited there.

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He remains there for six years, and he doesn't write very much there, okay? You're wondering, you know, what's going on.

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He writes a few book reviews, I think only one academic article, but what he's doing is sitting there realizing that Austrian economics has died,

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that Mangerian, the dynamic Mangerian-Boehm-Bawerkian approach to price theory is completely gone.

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And so he decides to reconstruct this theory, solve the problems, and put forth to the world a general treatise.

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So he sits there for five years, and he does this.

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And in 1940, we know timing is everything, in 1940, out comes his book, National Economy.

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And unfortunately, because of the outbreak of the war, World War II,

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it can't be distributed in the German-speaking market, and the Swiss publisher goes bankrupt.

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So the book just disappears.

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So it doesn't appear until after World War II,

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when Marchalian economics has completely taken over throughout the world with a little bit of Eurasian economics.

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So if you looked at textbooks after World War II in the 1950s,

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You have 90% of basically Marshall's partial equilibrium analysis and the other 10% at the end you tell the students,

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well, all of these markets are really connected and we can connect them mathematically.

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And that's what you have.

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And then Human Action comes out and no one's going to pay attention to Human Action, given that view of things.

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So, but the book is there.

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It's important that the book is there, that this whole system now has been integrated.

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Mises has solved the problems so what happens in the 1950s then Austrian

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economics is almost completely dead oh let me mention before before I get to

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that it's interesting to see Hayek's reaction both to Mises's both first to

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the decline of the Austrian school in 1930s okay the decline of its price

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and then to Mises' book on national economy.

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First, in my article, I give a quote on page 57 if you're interested,

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because it really does show how Hayek's thinking is so much different from Mises.

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Where Mises was in 1934 sitting around attempting to reconstruct Austrian economics,

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here's what Hayek said about the fact that Austrian economics as an independent tradition disappeared in the 1930s.

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He's writing this in 1968, looking back. He says,

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But if this fourth generation, meaning his generation of Austrians,

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in style of thinking and in interests, still shows the Vienna tradition clearly,

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nonetheless it can hardly any longer be seen as a separate school

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in the sense of representing particular doctrines.

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A school has its greatest success when it ceases as such to exist

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because its leading ideals have become a part of the general dominant thinking.

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The Vienna School has to a great extent come to enjoy such a success, its development has indeed led to a fusion of the thought stemming from Menger with that of Jevins, quasi-mathematical, by way of Philip Wigstead, and of course, of course, of course, of course, of course, of course, of course, of course, of course, of course, of course, of course, of course, of course, of course, of course,

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of Leon Walras by way of Alfredo Pareto and especially of the leading ideas of Marshall, of Alfred Marshall.

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So what is he saying?

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He's saying that the Austrian School has made its mark and it's been combined in this great neoclassical synthesis of Marshall and Walras and all of these guys, okay?

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Now tell me that that's, read Human Action and then see if that's Mises' attitude, okay, where he's continually attacking all of these divergent trends, okay?

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Now, what does he say about... He's shocked when National Economy comes out,

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because I don't think he realized how differently Mises was thinking.

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So it comes out in 1940, he reviews it.

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Overall, he likes the book, but here's some interesting things he sees, perplexed by it.

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He says...

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He's perplexed by the fact that Mises had been unaffected by, and I'm quoting Hayek,

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the general evolution of our subject during the period over which his work extends.

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In other words, Mises doesn't incorporate Imperfect Competition Theory, doesn't incorporate, you know, Walras, doesn't incorporate Marshall, so he's perplexed by this, okay.

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He needs a good whack upside the head.

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And as he goes on to say, and that the development of Mises' thought during this period, quote, appears to be decidedly autonomous, unquote, meaning,

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it's a terrible way of saying that Mises hasn't read anything, and that just wrote this, you know, on his own without reading the latest literature.

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And then he says, oh, why is he confused? He's confused because he can't understand, he fails to realize that this book represented Mises' attempt to autonomously reconstruct a paradigm that could not be reconciled with the general evolution, to use Hayek's term, of economics in the direction of Eurasian-Marshallian combination of which Hayek himself approved.

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Now, particularly revealing is Hayek's prediction that the central part of the book,

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okay, now, those are the central chapters of human action, those are the sections on monetary calculation and on prices, okay,

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which is, you know, a development of Menger.

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He says that the central part of the book would not be its main interest to most readers, okay?

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But of course, these are precisely the sections that contain the reconstructed system.

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So he likes the praxeology, he likes the subjectivism, but he doesn't like the actual price theory, which is the central part of the book.

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So this is my revisionist view of why Austrian economics died.

378
00:45:07.380 --> 00:45:18.380
Sure, the Keynesian Revolution had some effect, but it destroyed one aspect, or made people forget one aspect of Austrian economics, and that was the business cycle theory.

379
00:45:18.380 --> 00:45:26.380
But one of the reasons for that was that that business cycle theory was based on sort of not very solid foundations.

380
00:45:26.380 --> 00:45:35.380
It moved away from a dynamic sort of system of pricing and it was based, Hayek himself with his books on business cycle theory,

381
00:45:35.380 --> 00:45:41.380
even though they were very good, based it on Volrasian general equilibrium theory.

382
00:45:41.380 --> 00:45:48.380
In one of the books he says that the highest form that economic theory takes is that of the Lausanne School.

383
00:45:48.380 --> 00:45:51.380
Lausanne School is the school of Volras and Pareto.

384
00:45:51.380 --> 00:45:57.380
So what happens then in the 1950s?

385
00:45:57.380 --> 00:46:00.380
Well, there's not much being published in the 1950s.

386
00:46:00.380 --> 00:46:07.380
What's going on is that Mises does have a seminar at NYU.

387
00:46:07.380 --> 00:46:11.380
We can't get a regular position, though there's some debate about this.

388
00:46:11.380 --> 00:46:24.380
Pete Becky has seen letters in the archives at the Hoover Institute, in which Hayek and Machlop are exchanging letters.

389
00:46:24.380 --> 00:46:29.380
And Machlop is saying, what are we going to do with our problem child, meaning Mises?

390
00:46:29.380 --> 00:46:31.380
He keeps turning down all these positions.

391
00:46:31.380 --> 00:46:38.380
Machel tried to get him a position at Johns Hopkins, but he would have to teach undergraduates, and evidently Mises didn't want to teach undergraduates.

392
00:46:38.380 --> 00:46:47.380
Mises wanted a position, there was something called the Institute for Advanced Studies, it's at Princeton University, it still exists, it's where Einstein worked,

393
00:46:47.380 --> 00:46:59.380
it's where Morgenstern and I think Nash worked out game theory, in any case, he would have liked that, it was a research position, Mises would have liked that position.

394
00:46:59.380 --> 00:47:29.380
position, he reveals that in his memoirs, or no, his wife actually reveals that in her memoirs of my life at Ludwig von Mises, so whether or not he could get, he certainly wasn't flooded with offers, because he was perceived as right wing, free market, anti-socialist, so what happens is that a right wing foundation begins to pay his salary and gets him a visiting professorship at NYU, basically NYU,

395
00:47:29.380 --> 00:47:58.380
So what happens is that there's a period in the 1950s in which there is a seminar going on, it's going on at NYU,

396
00:47:58.380 --> 00:48:09.380
from NYU, Henry Hazlitt attends it, Murray Rothbard attends it, Israel Kirzner, very bright men, Hans Sennholz, but not much is published during this period.

397
00:48:09.380 --> 00:48:15.380
Hayek has moved out of economics and is writing in social theory on the one hand.

398
00:48:15.380 --> 00:48:24.380
What we get published are a few books. Hazlitt writes a great book, Smashing Keynesianism, The Failure of the New Economics.

399
00:48:24.380 --> 00:48:29.280
Rothbard writes a great article reconstructing utility and welfare theory.

400
00:48:30.280 --> 00:48:35.680
Kirzner writes his dissertation under Mises, a very good book on the economic point of view,

401
00:48:36.280 --> 00:48:41.780
which shows, which deals with the history of methodology up to Mises' praxeology.

402
00:48:44.180 --> 00:48:49.680
Not much else is written. Mises does write a great treatise on theory and history. It comes out in 1956.

403
00:48:49.680 --> 00:48:56.680
The books are very few and far between. The school is almost dead. Now, what happens?

404
00:48:56.680 --> 00:49:03.680
In 1962, Rothbard comes out with Man Economy and State.

405
00:49:03.680 --> 00:49:11.680
He had been funded to publish this book by a foundation, the Volcker Fund.

406
00:49:11.680 --> 00:49:17.680
He lived on these grants and he began writing the book in the early 1950s, after he had read Human Action.

407
00:49:17.680 --> 00:49:27.680
and his initial objective is to fill in the blanks in Human Action, but really to make it a shorter, more accessible book.

408
00:49:27.680 --> 00:49:36.680
He winds up really reconstructing economics once again, or let me put it differently, he synthesizes economics.

409
00:49:36.680 --> 00:49:45.680
He takes not just Mises, but he takes Federer, Wicksteed, the good things that were written by Robbins,

410
00:49:45.680 --> 00:49:51.680
and a tremendous number of some of Clark's stuff,

411
00:49:51.680 --> 00:49:56.680
and he synthesizes all of these American and British economists that were influenced by the Austrians.

412
00:49:56.680 --> 00:50:05.680
And in particular, he constructs a tremendous theory of production, I take five chapters of the book,

413
00:50:05.680 --> 00:50:10.280
And that theory of production was very, very skimpy in Mises.

414
00:50:10.280 --> 00:50:15.880
If you look at the Rothbard letters that he's writing to the people that give him the grants,

415
00:50:15.880 --> 00:50:20.680
he mentions that he has to write the production theory himself,

416
00:50:20.680 --> 00:50:23.480
because there's very little in Mises to guide him.

417
00:50:23.480 --> 00:50:28.080
So he comes up with a new synthesis of economic theory,

418
00:50:28.080 --> 00:50:34.280
squarely within the Menger, Boehm-Bawerk, Mises tradition.

419
00:50:34.280 --> 00:50:45.780
In fact, Mises himself, for some reason, didn't like the structural production analysis that Hayek had introduced, which came from Boehm-Bawerk.

420
00:50:45.780 --> 00:50:57.780
And Rothbard reintroduces that, so he combines the pure time preference theory of Federer with the structural production theory of Vicksel and Hayek.

421
00:50:57.780 --> 00:51:02.280
So it's a tremendous work, but he's not done.

422
00:51:02.280 --> 00:51:13.280
In 1963, he comes out with America's Great Depression, a book which applies Austrian theory to the causes of the Great Depression.

423
00:51:14.280 --> 00:51:23.280
He also comes out in 1963 with a short primer, people think it's simply an introductory book,

424
00:51:23.280 --> 00:51:28.280
a short primer on monetary theory, what has government done for our money,

425
00:51:28.280 --> 00:51:38.280
And in it though, he gives us really for the first time, this is really even missing in Mises, a theory of how fiat money comes into existence.

426
00:51:38.280 --> 00:51:47.280
How is it that we have this transformation from a gold standard through to a pure fiat money?

427
00:51:47.280 --> 00:51:55.280
Even in Human Action, Mises says it's not clear whether paper money, the previous episodes of paper money were true fiat money.

428
00:51:55.280 --> 00:52:02.280
In other words, Mises believed that they could have been credit money, meaning that people were always expecting at some point to go back to the gold standard, because that always happened.

429
00:52:02.280 --> 00:52:08.280
You went off, had paper money during a war or during some sort of crisis, but then a few years later you went back.

430
00:52:08.280 --> 00:52:12.280
That's what happened in Great Britain from 1797 to 1821.

431
00:52:12.280 --> 00:52:20.280
That's what happened in the United States during the Civil War and elsewhere during World War I.

432
00:52:20.280 --> 00:52:27.280
in World War I. So the value of money was not purely based on the supply and demand for fiat money.

433
00:52:27.280 --> 00:52:34.280
It was also based on the expectation that, whether it was greater or lesser, that you would go back to gold.

434
00:52:34.280 --> 00:52:38.280
So that tended to maintain the value of paper money.

435
00:52:38.280 --> 00:52:46.280
But Rothbard shows that, in fact, we have a system of fiat money, and he shows how it develops in this very short book, clearly written book.

436
00:52:46.280 --> 00:52:52.280
Okay, so it's a great contribution there.

437
00:52:52.280 --> 00:52:56.280
All right, now, he's not done.

438
00:52:56.280 --> 00:53:00.280
He's written actually a third volume of Man Economy and State, which is too radical,

439
00:53:00.280 --> 00:53:08.280
so the company that is funding him, the foundation, refuses to publish that third volume.

440
00:53:08.280 --> 00:53:14.280
They make him cut it down tremendously, take out the anarcho-capitalist analysis in power and market,

441
00:53:14.280 --> 00:53:21.280
What Became Power and Market, and he cuts it down, so it was only a two volume Man Economy and State.

442
00:53:21.280 --> 00:53:26.280
But he comes out with the full power and market, which was to be the third volume in 1970.

443
00:53:26.280 --> 00:53:34.280
And he gives us an exhaustive typology and analysis of the different types of government interventions, including taxing and spending.

444
00:53:34.280 --> 00:53:42.280
If you see that as an intervention, then you see the free market naturally as being a market with competing defense agencies.

445
00:53:42.280 --> 00:53:57.280
In 1973, he publishes Four New Liberty, a work in libertarian political economy, which presented the first full argument in defense of a purely anarcho-capitalist society, which was grounded on natural rights.

446
00:53:57.280 --> 00:54:02.280
Even though Molinari talked about it, he didn't ground it on natural rights like Rothbard did.

447
00:54:02.280 --> 00:54:09.440
and finally in 1974 he publishes a collection of previously published essays called

448
00:54:09.440 --> 00:54:15.720
egalitarianism as a revolt against nature. What else has been done?

449
00:54:15.720 --> 00:54:20.640
Not much else has been done during this period. Israel Kirzner finally publishes

450
00:54:20.640 --> 00:54:25.280
in 1973 his influential competition on entrepreneurship. The only other

451
00:54:25.280 --> 00:54:29.340
notable work in the Austrian tradition published during this period was the

452
00:54:29.340 --> 00:54:35.340
The Mists of Antitrust, which was published in 1972 by a very young economist, Dominic Armentano,

453
00:54:35.340 --> 00:54:40.340
which was a great Austrian critique of antitrust theory.

454
00:54:40.340 --> 00:54:46.340
Hans Sennholtz publishes a number of great pamphlets and articles and booklets

455
00:54:46.340 --> 00:54:49.340
criticizing contemporary monetary theory and policy.

456
00:54:49.340 --> 00:54:51.340
But it was mainly Rothbard.

457
00:54:51.340 --> 00:54:55.340
Now, the rebirth then did not occur in 1974.

458
00:54:55.340 --> 00:54:58.340
Why did 30 people come to South Royalton?

459
00:54:58.340 --> 00:55:03.340
30 people came to South Royalton because we were all, to the last man and woman,

460
00:55:03.340 --> 00:55:07.340
and I think there was one woman there, maybe two, we were all Rothbardians.

461
00:55:07.340 --> 00:55:15.340
We had read all of these works that had been the fruit of this enormous period of creativity

462
00:55:15.340 --> 00:55:22.340
that Rothbard had between 1962 and 1974. Everyone was a Rothbardian.

463
00:55:22.340 --> 00:55:24.340
by the Austrian Guardian.

464
00:55:24.340 --> 00:55:29.340
Kirzner's book, yes, was very influential and it was a topic of discussion at the South Wharton Conference,

465
00:55:29.340 --> 00:55:31.340
but it had just come out.

466
00:55:31.340 --> 00:55:35.340
It was out for a year and everyone looked on it as, well, being consistent with Rothbard,

467
00:55:35.340 --> 00:55:42.340
just being a critique of the neoclassical microeconomic theory.

468
00:55:42.340 --> 00:55:51.340
So, it was 1962, I mark as the revival of Austrian economics, okay?

469
00:55:52.740 --> 00:56:01.740
Now, Rothbard's work inspired many graduate students and young members of, you know, young faculty members, right?

470
00:56:02.640 --> 00:56:10.340
I was telling some people at lunch yesterday, I was in college and discovered, you know,

471
00:56:10.340 --> 00:56:24.340
The Austrian School, I think, in 1970 or so, 1971, the junior college, and a great article in New York Times had come out about the radical alternative, libertarianism and the radical alternative.

472
00:56:24.340 --> 00:56:30.340
It was on the front page, this would never happen today, the front page of New York Times Sunday Magazine.

473
00:56:30.340 --> 00:56:42.340
And there were two Columbia pre-law students standing there, on the front page they had their fists raised, and they had a black flag behind them.

474
00:56:42.340 --> 00:56:49.340
And in it, they mentioned, I had read Rand, and that was really about it, I knew Rand.

475
00:56:49.340 --> 00:56:55.340
And I knew when I arrived at college my freshman year, I realized that there was a difference between conservatives and libertarians.

476
00:56:55.340 --> 00:57:07.340
and it was a sort of a magazine called, I forget the name of it, but it was a magazine in which you had the division talked about.

477
00:57:07.340 --> 00:57:11.340
So I consider myself a libertarian, but I didn't know much about Austrian economics.

478
00:57:11.340 --> 00:57:18.340
And I was taking all these lousy, you know, I took principles of macro, micro and then intermediate, macro, micro.

479
00:57:18.340 --> 00:57:25.340
And then, I happen to mention to someone, I read this article in the New York Times Sunday Magazine,

480
00:57:25.340 --> 00:57:32.340
and they mentioned this Austrian economist, who I had heard about the Austrian School in my history of thought class,

481
00:57:32.340 --> 00:57:37.340
as being von Bawerk, Menger and Wieser, and the teacher was actually a very good professor,

482
00:57:37.340 --> 00:57:40.340
and he was very, very excited about it, he wasn't an Austrian himself,

483
00:57:40.340 --> 00:57:47.340
but he says one of the first times in the history of thought that three such brilliant men had gotten together

484
00:57:47.340 --> 00:57:52.700
and work together on developing, you know, the same paradigm.

485
00:57:52.700 --> 00:57:58.700
So when I read that there's a guy who was in Austria, I said, what is he, 200 years old?

486
00:57:58.700 --> 00:58:02.860
So I had heard, so I mentioned to one of the conservatives in the Young Americans for Freedom,

487
00:58:02.860 --> 00:58:11.900
there were libertarians and conservatives in this chapter at Boston College that I attended,

488
00:58:11.900 --> 00:58:16.220
and we got along pretty well when we argued. He said, well, he's here, he says, I have a pam,

489
00:58:16.220 --> 00:58:18.220
and the next day, a pamphlet was called,

490
00:58:18.220 --> 00:58:20.220
Depressions, Causes and Cures.

491
00:58:20.220 --> 00:58:22.220
So I went home and it was 30 pages

492
00:58:22.220 --> 00:58:24.220
with a small little mini book.

493
00:58:24.220 --> 00:58:26.220
And I read it and it was by Rothbard

494
00:58:26.220 --> 00:58:28.220
and I just saw the light.

495
00:58:28.220 --> 00:58:30.220
I just realized that I learned more

496
00:58:30.220 --> 00:58:32.220
in reading that in 45 minutes

497
00:58:32.220 --> 00:58:34.220
than I did sitting through

498
00:58:34.220 --> 00:58:36.220
all the principles of macro

499
00:58:36.220 --> 00:58:38.220
and intermediate macro.

500
00:58:38.220 --> 00:58:40.220
And so I just became

501
00:58:40.220 --> 00:58:42.220
an Austrian.

502
00:58:42.220 --> 00:58:44.220
And so then when I went home that summer

503
00:58:44.220 --> 00:58:57.220
and Senior Year, I remember as I was mentioning I was a janitor, it was a depression, it was a recession during that, it was a stagflation, so I had to take a job as a manager, as a janitor.

504
00:58:57.220 --> 00:59:05.220
So I'd do my work real fast and I'd sit in this broom closet with this little light and I was reading through America's Great Depression.

505
00:59:05.220 --> 00:59:10.220
So I mean, my experience isn't, I'm not alone in that.

506
00:59:10.220 --> 00:59:20.220
All of these people throughout the country who were libertarians and who had discovered the Austrian School were reading Rothbard on their own or in very small groups.

507
00:59:20.220 --> 00:59:22.220
No one knew the other existed.

508
00:59:22.220 --> 00:59:36.220
So when you did have this South Wharleton conference announced, you had people who were already completely grounded in Austrian economics to a greater or lesser extent.

509
00:59:36.220 --> 00:59:42.220
By 1974 I had read Human Action, Price and Production, and so on.

510
00:59:42.220 --> 00:59:45.220
Most of Mises and Rothbard and Hayek.

511
00:59:45.220 --> 00:59:51.220
And once again, that's not peculiar.

512
00:59:51.220 --> 00:59:54.220
That occurred throughout the country.

513
00:59:54.220 --> 01:00:07.220
So that's why you had these people coming together, coalescing into a self-conscious movement in 1974.

514
01:00:07.220 --> 01:00:14.220
The rebirth started in 1962. Maybe the movement itself, as a self-conscious movement, began in 1974.

515
01:00:14.220 --> 01:00:19.220
And then, of course, it was reinforced when Hayek won the Nobel Prize in October of 1974.

516
01:00:19.220 --> 01:00:25.220
But without Man Economy and State, without Human Action, you would not have had the Austrian Revival.

517
01:00:25.220 --> 01:00:33.220
We can do it counterfactual, or even just with Human Action, one without the other wouldn't have...

518
01:00:33.220 --> 01:00:36.220
Well, there would have been no Man Economy and State without Human Action.

519
01:00:36.220 --> 01:00:42.220
In fact, I asked Rothbard once, I said, well, before you read Human Action in 1949, he was in graduate school, right?

520
01:00:42.220 --> 01:00:47.220
I said, I knew you were a libertarian, but what kind of economics did you hold?

521
01:00:47.220 --> 01:00:55.220
He says, basically, I read Alfred Marshall, I knew about supply and demand, I knew price controls were bad, but really, not much else.

522
01:00:55.220 --> 01:01:04.220
He says, I was really dissatisfied with economics. He says, I liked when the institutionalists attacked the neoclassicals and when the neoclassicals attacked the institutionalists,

523
01:01:04.220 --> 01:01:09.220
but there was no positive theory that attracted me.

524
01:01:09.220 --> 01:01:18.220
So Rothbard would have been some sort of a quasi-Marshallian or something without human action, even though he would have still been a libertarian, of course he was.

525
01:01:18.220 --> 01:01:34.220
All right, so now the other point I wanted to make, we have a little time here, is what happens is that after this coalition or this coalescing of a new Austrian movement in 1974,

526
01:01:34.220 --> 01:01:41.220
In 1974, there were two more conferences run by the Institute for Your Main Studies, which sponsored the first conference.

527
01:01:41.220 --> 01:01:46.220
In 1975, there's a conference in which young graduate students such as myself give papers,

528
01:01:46.220 --> 01:01:56.220
and senior Austrians such as Rothbard, Kirzner, Haslett, Hutt, Hayek was even there, Leland Jaeger and Ludwig Lachmann,

529
01:01:56.220 --> 01:02:03.220
they commented on our papers, and I actually had Hayek comment on my paper, which was really thrilling.

530
01:02:03.220 --> 01:02:15.220
And my paper was sort of on international monetary economics and Hayek wrote a great book on this in 1937 and the small book is called Monetary Nationalism and International Order.

531
01:02:15.220 --> 01:02:25.220
In any case, so I had cited that quite a bit in there and one of the first things he says was I had forgotten that I made a contribution in this area when he got up.

532
01:02:25.220 --> 01:02:54.220
But in any case, what happens then is, then in 1976 there's another conference at Windsor Castle in Great Britain and so a couple of books come out, a book comes out of the first conference in 1974, that book comes out, I think it came out in 1975, it's called The Foundations of Austrian Economics,

533
01:02:54.220 --> 01:03:00.220
Then a book comes out of the Windsor Castle Conference, I think it's called New Trends in Austrian Economics.

534
01:03:00.220 --> 01:03:02.320
So things look like they're going great.

535
01:03:02.320 --> 01:03:10.020
But then in 1977, there's a change in what we might call the property base.

536
01:03:10.020 --> 01:03:20.620
A billionaire, Charles Koch, begins to donate money to the Institute for Humane Studies.

537
01:03:20.620 --> 01:03:28.620
It comes under his influence and he helps create the Cato Institute, a think tank in Washington, a libertarian think tank.

538
01:03:29.620 --> 01:03:35.620
Initially he's very, very friendly to Austrian economics. He and the people that are working for him.

539
01:03:36.620 --> 01:03:43.620
But they begin to develop a different strategy about how to go about disseminating the ideas of Austrians.

540
01:03:43.620 --> 01:03:56.620
And one of those ideas, strategic ideas, is to downplay the radicalism of Mises, and to play up Hayek's contribution.

541
01:03:56.620 --> 01:04:02.620
Because Hayek is much more amenable to modern trends in thought.

542
01:04:02.620 --> 01:04:06.620
Hayek isn't a rigid praxeologist like Mises is.

543
01:04:06.620 --> 01:04:21.220
He's not as, I don't want to say rabidly, but he's not as opposed to mathematical economics as Hayek and so on.

544
01:04:21.220 --> 01:04:28.720
So there's a number of conferences now in which we begin to pass the message on to college students.

545
01:04:28.720 --> 01:04:35.220
In the early 1980s, I teach some of these, and they have names like spontaneous order conference.

546
01:04:35.220 --> 01:04:39.220
and you don't see a lot of Hayekian topics.

547
01:04:39.220 --> 01:04:43.220
Now we were told, we can certainly talk about Mises and Rothbard, there's a lot of readings from Mises and Rothbard,

548
01:04:43.220 --> 01:04:48.220
but the form changes, and when the form changes, when you try to moderate your message,

549
01:04:48.220 --> 01:04:52.220
eventually what you believe begins to change.

550
01:04:52.220 --> 01:05:02.220
So Mises, what I call in my paper, the period from 1977 to 1986, Austrian economics without you know who.

551
01:05:02.220 --> 01:05:06.220
Okay, and you know who was Mises, we weren't allowed really to mention his name.

552
01:05:06.220 --> 01:05:14.220
They all, IHS also begins to promote the work of Lachman.

553
01:05:14.220 --> 01:05:20.220
Lachman considers himself a radical subjectivist, and almost to the point of nihilism,

554
01:05:20.220 --> 01:05:25.220
okay, where he believes that economics can't really say anything about the real world, right.

555
01:05:25.220 --> 01:05:31.220
He wrote a very good book on capital theory in 1956, but he became more and more radically subjectivist.

556
01:05:31.220 --> 01:06:01.220
and so he's brought over, funding is given for a program in Austrian Economics in the late 1970s at NYU and then Lachman is brought over as a visiting professor every other semester he comes from South Africa and teaches there and I point out that now what begins to happen is that you have resources being poured into Kirzner's work and Lachman's work, Rothbard breaks

557
01:06:01.220 --> 01:06:08.220
Catallactics has an ideological break, not so much ideological, a strategic break with the Cato Institute.

558
01:06:08.220 --> 01:06:19.220
By 1983, the Cato Institute is beginning to hire Chicago economists because they're more amenable to the mainstream, more acceptable to the mainstream.

559
01:06:19.220 --> 01:06:30.220
So he breaks over that. I get involved, I'm a young faculty member by then, I get involved in an Austrian program for undergraduates at Rutgers University for two years.

560
01:06:30.220 --> 01:06:35.220
University for two years, I think we're given $20,000 a year to run programs.

561
01:06:35.220 --> 01:06:43.220
We run a massive conference on inflation in 1978, I believe it was, and the main speakers

562
01:06:43.220 --> 01:06:44.220
are not Austrians.

563
01:06:44.220 --> 01:06:48.500
I mean there are some young Austrians such as myself, John Egger, I don't know if Roger

564
01:06:48.500 --> 01:06:54.060
Garrison came, but the main speakers are people like Martin Feldstein, basically sort of right-wing

565
01:06:54.060 --> 01:07:06.060
And then Keynesians are invited. Axel Lehenhoeffer, who is sort of sympathetic to the Austrians, but is himself not Austrian, has a very big name, and a number of others.

566
01:07:06.060 --> 01:07:11.060
In other words, Austrian economics and its radicalism is beginning to be downplayed now.

567
01:07:11.060 --> 01:07:17.060
I don't know what's going on. It's great. These people seem to be free market.

568
01:07:17.060 --> 01:07:23.060
You also see the divergence between the three main speakers at the South Orphan Conference.

569
01:07:23.060 --> 01:07:27.560
When the book comes out, if you look at it, you'll notice that on the one hand,

570
01:07:27.560 --> 01:07:34.060
Kirzner is emphasizing the distinction between what he calls a Rubizian economizer,

571
01:07:34.060 --> 01:07:41.560
who purposefully allocates resources to given ends, ends that he knows, given his knowledge,

572
01:07:41.560 --> 01:07:48.060
and what he calls a Misesian actor, who is supposedly continually alert and seeking new ends,

573
01:07:48.060 --> 01:07:51.560
always seeking for new ends and means to pursue these new ends.

574
01:07:51.560 --> 01:08:01.320
But if that were true, if human beings were homo querens, meaning a seeking man, rather than homo agens, which is Mises' acting man,

575
01:08:01.320 --> 01:08:07.960
Mises talked about homo agens being the acting man, if it's really someone who is continually seeking, they never act.

576
01:08:07.960 --> 01:08:14.760
At some point when people act, you must act on the basis of what you know right now and how you rank those values.

577
01:08:14.760 --> 01:08:20.360
You're not continually seeking. At the moment of action, all seeking stops.

578
01:08:20.360 --> 01:08:29.360
So right now, let's say, at the point where I started to give this lecture, I had been seeking for different ways to present this material.

579
01:08:29.360 --> 01:08:37.360
But whether or not this is the best way to present it, it's the way that I believe is at the top of my value scale.

580
01:08:37.360 --> 01:08:46.360
So Kirzner is moving away from Misesian praxeology. You can see that in that book.

581
01:08:46.360 --> 01:08:59.360
And what's interesting is that Robbins, who Kirzner criticizes quite a bit at the South Wharleton conference, based his concept of choice specifically on Menger's economizing man.

582
01:08:59.360 --> 01:09:18.360
Mises, I found out from Guido Hulsman that Mises' German treatise, precursor of human action, had a subtitle, The Theory of Action and Economizing.

583
01:09:18.360 --> 01:09:25.360
So Mises believed in the Mangerian economizing, which is, given your state of knowledge at this point in time, you rank your ends,

584
01:09:25.360 --> 01:09:32.360
You rank your ends and you choose those ends, which your resources will allow you to choose, which are highest.

585
01:09:32.360 --> 01:09:35.360
Then if you look at Lachman's papers, you can't figure out really what he's saying.

586
01:09:35.360 --> 01:09:40.360
He's basically saying the market process is ruled by autonomous expectations.

587
01:09:40.360 --> 01:09:46.360
People expect different things continually. These expectations have nothing to do with the real world.

588
01:09:46.360 --> 01:09:49.360
They're detached from human purpose, judgment and property.

589
01:09:49.360 --> 01:09:54.360
The free market is incapable of systematically weeding out bad entrepreneurs over time.

590
01:09:54.360 --> 01:10:05.360
I asked him, I went up to Lockman, I said, don't entrepreneurs have the ability to forecast what the revenue will be on certain decisions?

591
01:10:05.360 --> 01:10:08.360
They make, he says, absolutely not.

592
01:10:08.360 --> 01:10:15.360
So, you know, Mises in Human Action says it's a datum of human action that people have better or worse judgement of the future.

593
01:10:15.360 --> 01:10:17.360
We have to take that, we have to accept that.

594
01:10:17.360 --> 01:10:34.360
So, you know, once again, you know, Lockman was a very dignified and formidable European professor so, you know, initially I accepted what he was saying, as many of us did, okay.

595
01:10:34.360 --> 01:10:46.360
Anyway, by 1978 there's really a headlong retreat for Mises and a praxeological paradigm and the split in Austrian economics is pretty open by that point.

596
01:10:46.360 --> 01:10:55.360
by that point. We had something called the Austrian Economics Newsletter, which I was a member of the Board of Editors on, and the late Don Lavoie.

597
01:10:55.360 --> 01:11:01.360
He wrote a review of the monthly Austrian Economic Seminar, which was held at NYU, where Israel Kirzner taught.

598
01:11:01.360 --> 01:11:12.360
And in one of the issues of that newsletter, he correctly identified two contrasting intellectual tendencies among Austrians, nihilism and Ricardianism.

599
01:11:12.360 --> 01:11:22.360
In other words, if you didn't follow Lachman and become a nihilist, you were a Ricardian, you were an objectivist, which was worse.

600
01:11:22.360 --> 01:11:27.360
It's better to mean you don't know things than to be an objectivist.

601
01:11:27.360 --> 01:11:36.360
He went on to declare, the modern Austrian School can be usefully analyzed as a theoretical tool of this nihilist Ricardian spectrum.

602
01:11:36.360 --> 01:11:48.360
So the other side, I mean he's on the Kirzner-Lachmann side, the other side recognizes that these two traditions are still with us, or now there's a different sort of tradition.

603
01:11:48.360 --> 01:12:04.360
Then they interview Shackle, who was sort of Lachmann's mentor in this nihilism, and he wrote this book, Epistemics and Economics, which was very influential among young Austrians in the late 1970s.

604
01:12:04.360 --> 01:12:14.360
He admits his approach to economics, quote, is a very nihilistic position, and I realize that.

605
01:12:14.360 --> 01:12:22.360
He also says, I've been saying for almost 40 years that economics isn't a science, and we ought not to call it a science, unquote.

606
01:12:22.360 --> 01:12:29.360
Finally, he says, my idea of welfare economics is that you choose an administrator, a man with a conscience himself and broad sympathy,

607
01:12:29.360 --> 01:12:37.360
You choose an administrator, a man with a conscience himself and broad sympathy, with a generous mind, and then you say, leave it to him.

608
01:12:37.360 --> 01:12:39.360
Well, it's a dictator.

609
01:12:39.360 --> 01:12:43.360
So this is his welfare theory.

610
01:12:43.360 --> 01:12:48.360
So let me just sum this up so I can get some questions in here.

611
01:12:48.360 --> 01:12:55.360
By late 1970, Rothbard is really deprived of an institutional base.

612
01:12:55.360 --> 01:12:58.360
He's teaching at a small college in Brooklyn.

613
01:12:58.360 --> 01:13:05.360
Many resources at his disposal. In the early 1980s, after he breaks with the Cato Institute, he's really alone.

614
01:13:05.360 --> 01:13:18.360
There's no one there to give him material sustenance. His resource base has shrunk.

615
01:13:18.360 --> 01:13:28.360
A second PhD program, which initially, not now, but initially was anti-Misesian and pro-Lokmanian, is opened up at George Mason University in Northern Virginia.

616
01:13:28.360 --> 01:13:33.360
It's not an Austrian program, it's a market process economics program.

617
01:13:33.360 --> 01:13:40.360
So again, they're following a strategic vision of soft peddling Austrian economics.

618
01:13:40.360 --> 01:13:49.360
But regardless, because Rothbard is a genius like Mises, he continues to write on his own, comes out with a tremendous number of papers,

619
01:13:49.360 --> 01:13:59.360
contrary to what many Austrians believe in the accepted version of the rebirth of Austrian economics.

620
01:13:59.360 --> 01:14:06.360
Rothbard did not leave economics in the late 1970s. He wrote papers like The Myth of Neutral Taxation, 1981,

621
01:14:06.360 --> 01:14:21.360
Law, Property Rights and Air Pollution in 1982, the Federal Reserve is a cartelization device in 1984, the case of the genuine gold dollar in 1985, the ethics of liberty comes out in 1982, and the mystery of banking comes out in 1983.

622
01:14:22.360 --> 01:14:29.360
So he's continuing to write despite his deprivation of any sort of institutional infrastructure.

623
01:14:29.360 --> 01:14:31.360
and Superstructure.

624
01:14:31.360 --> 01:14:35.360
Now, this is where the Mises Institute comes in.

625
01:14:35.360 --> 01:14:43.360
In 1983, Lew Rockwell founds, or in 1982, he founds the Mises Institute.

626
01:14:43.360 --> 01:14:49.360
And it's unabashedly inspired by the scientific vision of Ludwig von Mises.

627
01:14:49.360 --> 01:14:51.360
He gets together with Rothbard.

628
01:14:51.360 --> 01:14:55.360
Rothbard becomes the head of the academic programs.

629
01:14:55.360 --> 01:15:00.200
They talk about starting a journal, which they begin the journal in 1985, I believe.

630
01:15:00.200 --> 01:15:03.040
The review of Austrian economics has begun.

631
01:15:04.440 --> 01:15:08.440
There is a boycott, Rothbard asked many of the younger Austrians that he knew,

632
01:15:08.440 --> 01:15:13.360
such as Don LeVoy and Larry White and myself and others,

633
01:15:13.760 --> 01:15:15.920
to be on the board of editors.

634
01:15:17.440 --> 01:15:19.640
And they're going to name it the review of Austrian economics.

635
01:15:19.640 --> 01:15:23.320
Well, he gets, many of them boycott it and say,

636
01:15:23.320 --> 01:15:26.680
know that they don't want to do it because they want it to be run like a real journal,

637
01:15:26.680 --> 01:15:34.440
meaning that it has to, you know, in effect, they don't trust Rothbard to have the articles refereed, okay?

638
01:15:34.440 --> 01:15:41.640
So, and it's sort of a, and I have some of the letters that they wrote, because they copied me,

639
01:15:41.640 --> 01:15:44.440
thinking that I would join the boycott, but I did not.

640
01:15:44.440 --> 01:15:49.960
By then I realized that there was a split in Austrian economics, that I wasn't Misesian,

641
01:15:49.960 --> 01:15:57.260
and that Rothbard was the most important Austrian, I always thought that, the most important living Austrian economist at the time.

642
01:15:58.260 --> 01:16:14.660
So, Lew Rockwell then starts the Institute and it's really in 1986 when the review of Austrian economics begins that you get a real flowering of Austrian economics.

643
01:16:14.660 --> 01:16:28.940
Okay, you have Hans Hoppe coming over in 1985, and David Gordon being discovered, and many others, Mark Thornton coming to Auburn, to the PhD program.

644
01:16:28.940 --> 01:16:36.820
Now, the Mises Institute being at Auburn draws people here, unfortunately the PhD program was abolished a few years ago,

645
01:16:36.820 --> 01:16:45.820
But the Austrian movement now is in full bloom and it continues to grow,

646
01:16:45.820 --> 01:16:57.820
and it grows because of the resources and the institutional infrastructure that Lew Rockwell and the Mises Institute has made available to us.

647
01:16:57.820 --> 01:17:04.820
We would be nowhere as advanced as we are had it not been for the Mises Institute.

648
01:17:04.820 --> 01:17:09.820
really rescued Rothbard in the sense of giving him an institutional base

649
01:17:09.820 --> 01:17:14.820
and giving him an audience for his work.

650
01:17:14.820 --> 01:17:20.820
Very interestingly, there was a big fight over what the name of the journal would be

651
01:17:20.820 --> 01:17:24.820
and Rothbard stuck to his guns to call it the review of Austrian economics,

652
01:17:24.820 --> 01:17:27.820
instead of something like market process or something.

653
01:17:27.820 --> 01:17:32.820
Let me close with the following. In 1982, Rothbard closed his remarks on the controversy

654
01:17:32.820 --> 01:17:36.260
The Journal's name with the following statement. He wrote,

655
01:17:36.260 --> 01:17:41.480
At any rate, we have a tough road to hoe in Austrianism in general to rescue it from

656
01:17:41.480 --> 01:17:47.060
Lachmann-Schackel nihilism, Stanford probabil,

657
01:17:47.060 --> 01:17:52.060
because some Stanford so-called Austrian economists are talking about probability theory,

658
01:17:52.060 --> 01:17:57.560
modern philosophy, fuzzy Hayekianism. All this makes a hardcore institute all the more necessary.

659
01:17:57.560 --> 01:18:02.080
And we have that hardcore institute here at the Mises Institute.

660
01:18:02.080 --> 01:18:04.080
I'll stop, it's about ten minutes for questions.

661
01:18:05.080 --> 01:18:05.580
Yes?

662
01:18:05.580 --> 01:18:09.080
Do you have any comments on Fee and Leonard Reed and Anderson Holt?

663
01:18:09.080 --> 01:18:11.080
Yeah, I think...

664
01:18:11.080 --> 01:18:14.080
How they contributed to...

665
01:18:14.080 --> 01:18:18.080
Fee gave Mises an institutional base in the 1950s.

666
01:18:18.080 --> 01:18:20.080
I think it was very, very important.

667
01:18:20.080 --> 01:18:23.080
Leonard Reed brought people in.

668
01:18:23.080 --> 01:18:28.080
See, one of Mises' points that he makes is that it's important for the academics,

669
01:18:28.080 --> 01:18:30.080
not just to talk to one another,

670
01:18:30.080 --> 01:18:34.880
or to government policy makers, but to reach out to the people, okay?

671
01:18:34.880 --> 01:18:43.080
And Rothbard once told me that he was in a meeting when they were talking about starting a graduate school at Fee in Austrian economics.

672
01:18:43.080 --> 01:18:44.480
That never panned out.

673
01:18:44.480 --> 01:18:52.680
But Mises kept saying that we must, as professors in this graduate school, give talks to businessmen, give talks to laypersons.

674
01:18:52.680 --> 01:18:56.080
That is, communicate to them Austrian economics.

675
01:18:56.080 --> 01:19:03.080
Why? Because Mises strongly believed that the whole political system and economic system was driven by ideology,

676
01:19:03.080 --> 01:19:11.080
driven by the values that people adopted, and that this had to be widespread.

677
01:19:11.080 --> 01:19:18.080
So I think Fee was essential in keeping alive in the 1950s the Austrian tradition.

678
01:19:18.080 --> 01:19:22.080
And I think the same thing is true with Hans Sennholz. I wrote a little article on him.

679
01:19:22.080 --> 01:19:26.080
I think he was an extremely underrated but very important economist.

680
01:19:26.080 --> 01:19:30.080
He is a vocational economist who has taught many, many students

681
01:19:30.080 --> 01:19:35.080
who have gone on to become active in academia

682
01:19:35.080 --> 01:19:38.080
or in the writing of Austrian economics.

683
01:19:38.080 --> 01:19:39.080
Yes?

684
01:19:39.080 --> 01:19:42.080
I would also add that he just published six months ago

685
01:19:42.080 --> 01:19:48.080
that series of lectures for Professor von Mises from 1951.

686
01:19:48.080 --> 01:19:50.080
Did I get a hold of that?

687
01:19:50.080 --> 01:19:59.080
Did it just come out now, you're saying? I have to look and see what...

688
01:19:59.080 --> 01:20:02.080
No, I didn't see that.

689
01:20:02.080 --> 01:20:04.080
Well, it's never been in print before.

690
01:20:04.080 --> 01:20:07.080
Okay, yeah, I have to take... Oh, yeah, I'm definitely going to read it.

691
01:20:07.080 --> 01:20:13.080
Thank you. Under Richard Ebling, they're still doing a good job. Richard Ebling is a good Misesian.

692
01:20:13.080 --> 01:20:18.080
A little more tolerant than I am, but a very good Misesian.

693
01:20:18.080 --> 01:20:41.080
You touched on it briefly, but I was wondering if you could elaborate more on Kirzner's Seeking Man, the framework within which he can act, that is a new framework of means and ends.

694
01:20:41.080 --> 01:20:52.080
Whereas, if you follow that through logically, and I'm sure he would say that I'm going beyond what he's saying, you would never act.

695
01:20:52.080 --> 01:21:02.080
You're always looking for better ends to pursue and better means to achieve the ends you're pursuing.

696
01:21:02.080 --> 01:21:08.080
Whereas Mises' acting men are Homo Agens, we're acting at every point in time.

697
01:21:08.080 --> 01:21:12.080
I mean, time is scarce. We're acting at every point in time.

698
01:21:12.080 --> 01:21:17.080
Right now, I am choosing the words that I'm speaking to you.

699
01:21:17.080 --> 01:21:20.080
I'm doing it very rapidly and maybe not very well.

700
01:21:20.080 --> 01:21:26.080
But if I sat down and thought more about it, well, maybe I could have presented this in a different way.

701
01:21:26.080 --> 01:21:31.080
Maybe I could have written something down and put it here and put it up on the wall.

702
01:21:31.080 --> 01:21:37.080
But in order to act, you must suspend all seeking.

703
01:21:37.080 --> 01:21:43.080
Now, that's not to say that you can't learn from your actions. If that's all that Kirzner means, that's okay.

704
01:21:43.080 --> 01:21:50.080
In other words, ex post, you can make a mistake. You can say, aha, it didn't turn out like I thought it would.

705
01:21:50.080 --> 01:21:57.080
In similar conditions, next time I would do it differently. I would aim at maybe different ends next time.

706
01:21:57.080 --> 01:22:05.080
Let's say I buy a motorcycle and I drive the motorcycle around, and after a few near-brushes, in New Jersey you don't want to drive a motorcycle.

707
01:22:05.080 --> 01:22:08.440
A few near-brushes with bad drivers and driving in the rain.

708
01:22:08.440 --> 01:22:11.720
I say, geez, I shouldn't have spent that $10,000 on that motorcycle.

709
01:22:11.720 --> 01:22:12.440
All right.

710
01:22:12.440 --> 01:22:15.920
Well, if I'm in that situation again, I'll seek to do something else,

711
01:22:15.920 --> 01:22:17.160
to find a better use of my money.

712
01:22:17.160 --> 01:22:20.520
But as Hans Hoppe points out, it's not a controlled experiment.

713
01:22:20.520 --> 01:22:24.600
We're never in that situation again, in the exact same situation.

714
01:22:24.600 --> 01:22:26.360
So I don't understand.

715
01:22:26.360 --> 01:22:32.000
Now, I have given, Kirzner would not call him seeking man, OK?

716
01:22:32.000 --> 01:22:44.000
He would call, you know, he would say, this is the act of discovery, okay? Entrepreneurial discovery.

717
01:22:44.000 --> 01:22:51.700
See, in his economics, he has the entrepreneur as a person who discovers, okay, discovers opportunities for profit,

718
01:22:51.700 --> 01:22:57.100
and then he has these Rabinzian automatons, the consumers and the resource sellers,

719
01:22:57.100 --> 01:23:02.100
that simply react to the prices that are offered by the entrepreneurs

720
01:23:02.100 --> 01:23:04.100
on output markets and input markets.

721
01:23:08.100 --> 01:23:10.100
And so the entrepreneur becomes the seeking man.

722
01:23:10.100 --> 01:23:11.100
Now think about it.

723
01:23:11.100 --> 01:23:14.100
The entrepreneur never loses any money in Kirzner's world.

724
01:23:14.100 --> 01:23:19.100
The entrepreneur just reaches out, he sees things that other people don't see.

725
01:23:19.100 --> 01:23:23.100
So he reaches out and grabs $10 bills that are floating down that people don't see.

726
01:23:23.100 --> 01:23:26.100
Those $10 bills represent the difference between the input prices and the output prices.

727
01:23:27.100 --> 01:23:30.100
I don't like that way of looking at entrepreneurship.

728
01:23:30.100 --> 01:23:36.100
The revenue lies in the future.

729
01:23:36.100 --> 01:23:39.100
You have to estimate what that revenue will be.

730
01:23:39.100 --> 01:23:42.100
Ludwig Lachmann to the contrary.

731
01:23:42.100 --> 01:23:44.100
Make some forecast about it.

732
01:23:44.100 --> 01:23:48.100
You have to rank the best uses of your investment capital now.

733
01:23:48.100 --> 01:23:50.100
You have to stop seeking at some point.

734
01:23:50.100 --> 01:23:51.100
Make a commitment.

735
01:23:51.100 --> 01:23:53.100
When you make that commitment,

736
01:23:53.100 --> 01:23:56.100
you make it based on your best forecast of the future,

737
01:23:56.100 --> 01:24:02.100
And then you use your investment capital to bid for resources today and then hope for the best.

738
01:24:02.100 --> 01:24:08.100
And the better entrepreneurs will find that they earn a profit in the future, others will learn that they lost money.

739
01:24:08.100 --> 01:24:12.100
But those circumstances will never reproduce themselves.

740
01:24:12.100 --> 01:24:22.100
So I'm opposed to this whole idea of action being really tied up with discovery in some sense.

741
01:24:22.100 --> 01:24:25.100
It's tied up with choice. It's choosing.

742
01:24:25.100 --> 01:24:33.100
And if that's what Rabindia Maximizer is, then that's what I think is the core of Austrian economics.

743
01:24:33.100 --> 01:24:38.100
I don't like the word maximizer. I think we're just choosers.

744
01:24:38.100 --> 01:24:39.100
Yes?

745
01:24:39.100 --> 01:24:43.100
Do you have any idea why Menger currently dropped off the base of the earth?

746
01:24:43.100 --> 01:24:51.100
You know, he got involved in arguing with the German historical school.

747
01:24:51.100 --> 01:24:54.100
He got off the track. He was going to write a three-volume treatise.

748
01:24:54.100 --> 01:24:58.100
His principles was an introduction to a three-volume treatise on economics. That would have been great.

749
01:24:58.100 --> 01:25:07.100
He wrote two very good theoretical articles in the 1890s, after the debate with the historical school ended, in the early 90s.

750
01:25:07.100 --> 01:25:17.100
Then after that, he didn't write much. He retires in 1903, still fairly young, lives until 1921, but Hayek went through his papers

751
01:25:17.100 --> 01:25:26.100
Hayek said that he just kept writing and rewriting his economics, and as he got older and older, it just became worse and worse.

752
01:25:26.100 --> 01:25:32.100
And so it's almost incomprehensible, the stacks of papers that he kept rewriting.

753
01:25:32.100 --> 01:25:49.100
I don't know. Mises somewhere says that Menger and Boehm-Bawerk were both very depressed because they saw the end of Western civilization coming with the interventionism and socialism and wars and so on.

754
01:25:49.100 --> 01:25:55.100
That may have sapped his productivity. Menger is a very interesting case and I'd like to know more about that.

755
01:25:55.100 --> 01:26:05.100
There's also, by the way, hints, or Mises hinted, I've heard this a couple of times, that Boehm-Bawerk could have committed suicide in 1914.

756
01:26:05.100 --> 01:26:14.100
There are hints, I mean, I don't think it's necessarily true, but he was depressed.

757
01:26:14.100 --> 01:26:17.100
Yes, I think this might be the last question, yes.

758
01:26:17.100 --> 01:26:40.100
I'm curious, is Schumpeter's capitalism, socialism, and democracy, instead of that capitalism can't last, socialism will come and will last, he's got the instances of our population problems, the Gaelians, I like that. To what extent is Schumpeter really an Austrian in practice rather than an Austrian?

759
01:26:47.100 --> 01:26:57.700
and Eurasian, that's why he believes that prices, if you know the prices of the outputs and you know the available inputs,

760
01:26:57.700 --> 01:27:01.900
well then you can have these imputed back without an entrepreneur, okay?

761
01:27:01.900 --> 01:27:10.200
So he believes that you can directly impute prices back to the inputs, which means that you solve the problem of socialism.

762
01:27:10.200 --> 01:27:16.100
There doesn't have to be markets for inputs, there doesn't have to be markets for capital goods, they can be collectively owned, right?

763
01:27:16.100 --> 01:27:21.080
Now, Hayek criticizes him, but it's not on a Misesian basis.

764
01:27:21.080 --> 01:27:26.780
Hayek criticizes him because of the dispersed knowledge problem,

765
01:27:26.780 --> 01:27:30.420
not because there's no entrepreneur who's trying to appraise future prices

766
01:27:30.420 --> 01:27:35.180
and use his forecast to bid on the markets for inputs.

767
01:27:35.180 --> 01:27:38.460
That's where the prices of inputs come from, that's where your cost of production comes from,

768
01:27:38.460 --> 01:27:41.180
and that allows you to calculate economically.

769
01:27:41.180 --> 01:27:48.620
So, he's an Austrian by birth, but there is strains of Austrianism in Schumpeter, there's no doubt about that.

770
01:27:48.620 --> 01:27:51.820
Mises and Schumpeter didn't like each other.

771
01:27:51.820 --> 01:27:57.260
When Mises came to the United States, they met once for tea, and his wife said it was very, very frigid.

772
01:27:57.260 --> 01:28:02.620
But they didn't get along.

773
01:28:02.620 --> 01:28:07.420
I think they were rivals in Boehm-Bawerk's seminar.

774
01:28:07.420 --> 01:28:14.420
Okay, I think we can stop here. Okay, thank you.