WEBVTT NOTE XXXVIII. The Place of Economics in Learning 1 00:00:00.000 --> 00:00:05.000 Chapter 38. The Place of Economics in Learning 2 00:00:05.000 --> 00:00:09.000 1. The Study of Economics 3 00:00:09.000 --> 00:00:16.000 The natural sciences are ultimately based on the facts as established by laboratory experiment. 4 00:00:16.000 --> 00:00:24.000 Physical and biological theories are confronted with these facts and are rejected when in conflict with them. 5 00:00:24.000 --> 00:00:29.600 The perfection of these theories, no less than the improvement of technological and 6 00:00:29.600 --> 00:00:36.040 therapeutical procedures, requires more and better laboratory research. These 7 00:00:36.040 --> 00:00:41.360 experimental ventures absorb time, painstaking effort of specialists and 8 00:00:41.360 --> 00:00:48.160 costly expenditure of material. Research can no longer be conducted by isolated 9 00:00:48.160 --> 00:00:52.100 and penniless scientists, however ingenious. 10 00:00:52.100 --> 00:00:57.940 The seat of experimentation today is in the huge laboratories supported by governments, 11 00:00:57.940 --> 00:01:01.920 universities, endowments and big business. 12 00:01:01.920 --> 00:01:06.740 Work in these institutions has developed into professional routine. 13 00:01:06.740 --> 00:01:13.100 The majority of those employed in it are technicians recording those facts which the pioneers, 14 00:01:13.100 --> 00:01:20.100 of whom some are themselves experimenters, will one day use as building stones for their theories. 15 00:01:20.860 --> 00:01:26.500 As far as the progress of scientific theories is concerned, the achievements of the rank-and-file 16 00:01:26.500 --> 00:01:33.580 researcher are only ancillary, but very often his discoveries have immediate practical results 17 00:01:33.580 --> 00:01:38.620 in improving the methods of therapeutics and of business. 18 00:01:38.620 --> 00:01:44.180 Ignoring the radical epistemological difference between the natural sciences and the sciences 19 00:01:44.180 --> 00:01:50.260 of human action, people believe that what is needed to further economic knowledge is 20 00:01:50.260 --> 00:01:56.340 to organize economic research according to the well-tried methods of the institutes for 21 00:01:56.340 --> 00:02:00.740 medical, physical and chemical research. 22 00:02:00.740 --> 00:02:06.200 Considerable sums of money have been spent for what is labeled economic research. 23 00:02:06.200 --> 00:02:13.520 In fact, the subject matter of the work of all these institutes is recent economic history. 24 00:02:13.520 --> 00:02:19.000 It is certainly a laudable thing to encourage the study of economic history. 25 00:02:19.000 --> 00:02:25.200 However instructive the result of such studies may be, one must not confuse them with the 26 00:02:25.200 --> 00:02:27.640 study of economics. 27 00:02:27.640 --> 00:02:32.740 They do not produce facts in the sense in which this term is applied with regard to 28 00:02:32.740 --> 00:02:39.560 to the events tested in laboratory experiments. They do not deliver bricks for the construction 29 00:02:39.560 --> 00:02:47.020 of a posteriori hypotheses and theorems. On the contrary, they are without meaning, if 30 00:02:47.020 --> 00:02:53.680 not interpreted in the light of theories developed without reference to them. There is no need 31 00:02:53.680 --> 00:03:00.660 to add anything to what has been said in this respect in the preceding chapters. No controversy 32 00:03:00.660 --> 00:03:06.820 Concerning the Causes of a Historical Event can be solved on the ground of an examination 33 00:03:06.820 --> 00:03:13.260 of the facts which is not guided by definite praxeological theories. 34 00:03:13.260 --> 00:03:19.180 The foundation of institutes for cancer research can possibly contribute to the discovery of 35 00:03:19.180 --> 00:03:24.140 methods for fighting and preventing this pernicious disease. 36 00:03:24.140 --> 00:03:30.180 But a business cycle research institute is of no help in endeavors to avoid the recurrence 37 00:03:30.180 --> 00:03:32.140 of Depressions. 38 00:03:32.140 --> 00:03:38.060 The most exact and reliable assemblage of all the data concerning economic depressions 39 00:03:38.060 --> 00:03:43.520 of the past is of little use for our knowledge in this field. 40 00:03:43.520 --> 00:03:46.820 Scholars do not disagree with regard to these data. 41 00:03:46.820 --> 00:03:54.160 They disagree with regard to the theorems to be resorted to in their interpretation. 42 00:03:54.160 --> 00:03:59.040 Still more important is the fact that it is impossible to collect the data concerning 43 00:03:59.040 --> 00:04:05.000 a concrete event without reference to the theories held by the historian at the very 44 00:04:05.000 --> 00:04:07.280 outset of his work. 45 00:04:07.280 --> 00:04:13.580 The historian does not report all facts, but only those which he considers as relevant 46 00:04:13.580 --> 00:04:16.240 on the ground of his theories. 47 00:04:16.240 --> 00:04:21.760 He omits data considered irrelevant for the interpretation of the events. 48 00:04:21.760 --> 00:04:28.080 If he is misled by faulty theories, his report becomes clumsy and may be almost worthless. 49 00:04:29.040 --> 00:04:41.040 Even the most faithful examination of a chapter of economic history, though it be the history of the most recent period of the past, is no substitute for economic thinking. 50 00:04:41.040 --> 00:04:52.040 Economics, like logic and mathematics, is a display of abstract reasoning. Economics can never be experimental and empirical. 51 00:04:52.040 --> 00:04:58.040 The economist does not need an expensive apparatus for the conduct of his studies. 52 00:04:58.040 --> 00:05:08.040 What he needs is the power to think clearly and to discern in the wilderness of events what is essential from what is merely accidental. 53 00:05:08.040 --> 00:05:13.040 There is no conflict between economic history and economics. 54 00:05:13.040 --> 00:05:18.040 Every branch of knowledge has its own merits and its own rights. 55 00:05:18.040 --> 00:05:24.040 Economists have never tried to belittle or deny the significance of economic history. 56 00:05:24.040 --> 00:05:29.040 Neither do real historians object to the study of economics. 57 00:05:29.040 --> 00:05:35.040 The antagonism was intentionally called into being by the socialists and interventionists, 58 00:05:35.040 --> 00:05:41.040 who could not refute the objections raised against their doctrines by the economists. 59 00:05:41.040 --> 00:05:47.040 The historical school and the institutionalists tried to displace economics 60 00:05:47.040 --> 00:05:54.000 and to substitute empirical studies for it precisely because they wanted to silence the economists. 61 00:05:55.040 --> 00:06:01.280 Economic history, as they planned it, was a means of destroying the prestige of economics 62 00:06:01.280 --> 00:06:04.080 and of propagandizing for interventionism. 63 00:06:06.320 --> 00:06:09.200 2. Economics as a Profession 64 00:06:10.880 --> 00:06:15.840 The early economists devoted themselves to the study of the problems of economics. 65 00:06:15.840 --> 00:06:16.840 Economics. 66 00:06:16.840 --> 00:06:21.400 In lecturing and writing books, they were eager to communicate to their fellow citizens 67 00:06:21.400 --> 00:06:23.680 the results of their thinking. 68 00:06:23.680 --> 00:06:28.920 They tried to influence public opinion in order to make sound policies prevail in the 69 00:06:28.920 --> 00:06:31.460 conduct of civic affairs. 70 00:06:31.460 --> 00:06:36.000 They never conceived of economics as a profession. 71 00:06:36.000 --> 00:06:41.740 The development of a profession of economics is an offshoot of interventionism. 72 00:06:41.740 --> 00:06:47.160 The professional economist is the specialist who is instrumental in designing various measures 73 00:06:47.160 --> 00:06:50.380 of government interference with business. 74 00:06:50.380 --> 00:06:57.200 He is an expert in the field of economic legislation, which today invariably aims at hindering the 75 00:06:57.200 --> 00:07:01.520 operation of the unhampered market economy. 76 00:07:01.520 --> 00:07:06.560 There are thousands and thousands of such professional experts busy in the bureaus of 77 00:07:06.560 --> 00:07:12.280 of the Governments and of the various political parties and pressure groups, and in the editorial 78 00:07:12.280 --> 00:07:17.640 offices of party newspapers and pressure group periodicals. 79 00:07:17.640 --> 00:07:23.600 Others are employed as advisors by business or run independent agencies. 80 00:07:23.600 --> 00:07:28.280 Some of them have nationwide or even worldwide reputations. 81 00:07:28.280 --> 00:07:32.120 Many are among the most influential men of their country. 82 00:07:32.120 --> 00:07:38.620 It often happens that such experts are called to direct the affairs of big banks and corporations, 83 00:07:38.620 --> 00:07:43.740 are elected into the legislature, and are appointed as cabinet ministers. 84 00:07:43.740 --> 00:07:49.260 They rival the legal profession in the supreme conduct of political affairs. 85 00:07:49.260 --> 00:07:56.720 The eminent role they play is one of the most characteristic features of our age of interventionism. 86 00:07:56.720 --> 00:08:02.340 There can be no doubt that a class of men who are so preponderant includes extremely 87 00:08:02.340 --> 00:08:07.380 talented individuals, even the most eminent men of our age. 88 00:08:07.380 --> 00:08:12.780 But the philosophy that guides their activities narrows their horizon. 89 00:08:12.780 --> 00:08:17.980 By virtue of their connection with definite parties and pressure groups eager to acquire 90 00:08:17.980 --> 00:08:22.000 special privileges, they become one-sided. 91 00:08:22.000 --> 00:08:27.840 They shut their eyes to the remoter consequences of the policies they are advocating. 92 00:08:27.840 --> 00:08:33.940 With them, nothing counts but the short-run concerns of the group they are serving. 93 00:08:33.940 --> 00:08:38.800 The ultimate aim of their efforts is to make their clients prosper at the expense of other 94 00:08:38.800 --> 00:08:40.280 people. 95 00:08:40.280 --> 00:08:46.080 They are intent upon convincing themselves that the fate of mankind coincides with the 96 00:08:46.080 --> 00:08:49.320 short-run interests of their group. 97 00:08:49.320 --> 00:08:52.960 They try to sell this idea to the public. 98 00:08:52.960 --> 00:08:58.920 In fighting for a higher price of silver, of wheat, or of sugar, for higher wages for 99 00:08:58.920 --> 00:09:04.400 the members of their union, or for a tariff on cheaper foreign products, they claim to 100 00:09:04.400 --> 00:09:11.040 be fighting for the supreme good, for liberty and justice, for their nation's flowering, 101 00:09:11.040 --> 00:09:13.800 and for civilization. 102 00:09:13.800 --> 00:09:19.320 The public looks askance upon the lobbyists and blames them for the dismal features of 103 00:09:19.320 --> 00:09:21.480 interventionist legislation. 104 00:09:21.480 --> 00:09:25.600 However, the seat of the evil is much deeper. 105 00:09:25.600 --> 00:09:31.460 The philosophy of the various pressure groups has penetrated the legislative bodies. 106 00:09:31.460 --> 00:09:37.960 There are in the present-day parliaments representatives of wheat growers, of cattle breeders, of farmers 107 00:09:37.960 --> 00:09:44.240 There's cooperatives of silver, of the various labor unions, of industries which cannot stand 108 00:09:44.240 --> 00:09:50.020 foreign competition without tariffs, and of many other pressure groups. 109 00:09:50.020 --> 00:09:55.180 There are few for whom the nation counts more than their pressure group. 110 00:09:55.180 --> 00:09:59.300 The same holds true for the departments of the administration. 111 00:09:59.300 --> 00:10:05.380 The cabinet minister of agriculture considers himself the champion of the interests of farming. 112 00:10:05.380 --> 00:10:09.500 His main objective is to make food prices soar. 113 00:10:09.500 --> 00:10:14.140 The Minister of Labor considers himself the advocate of labor unions. 114 00:10:14.140 --> 00:10:19.260 His foremost aim is to make the unions as formidable as possible. 115 00:10:19.260 --> 00:10:26.620 Each department follows its own course and works against the endeavors of the other departments. 116 00:10:26.620 --> 00:10:31.380 Many people complain today about the lack of creative statesmanship. 117 00:10:31.380 --> 00:10:37.940 However, under the predominance of interventionist ideas, a political career is open only to 118 00:10:37.940 --> 00:10:42.940 men who identify themselves with the interests of a pressure group. 119 00:10:42.940 --> 00:10:49.940 The mentality of a union leader or of a secretary of farmers' associations is not what is required 120 00:10:49.940 --> 00:10:53.220 for a far-sighted statesman. 121 00:10:53.220 --> 00:10:58.360 Service to the short-run interests of a pressure group is not conducive to the development 122 00:10:58.360 --> 00:11:07.000 of those qualities which make a great statesman. Statesmanship is invariably long-run policy. 123 00:11:07.000 --> 00:11:12.760 But pressure groups do not bother about the long run. The lamentable failure of the German 124 00:11:12.760 --> 00:11:18.680 Weimar system and of the Third Republic in France was primarily due to the fact that 125 00:11:18.680 --> 00:11:24.360 their politicians were merely experts in pressure group interests. 126 00:11:24.360 --> 00:11:30.320 3. Forecasting as a Profession 127 00:11:30.320 --> 00:11:35.720 When the businessmen finally learned that the boom created by credit expansion cannot 128 00:11:35.720 --> 00:11:42.040 last and must necessarily lead to a slump, they realized that it was important for them 129 00:11:42.040 --> 00:11:50.400 to know in time the date of the break. They turned to the economists for advice. The economist 130 00:11:50.400 --> 00:11:57.780 knows that the boom must result in a depression, but he does not and cannot know when the crisis 131 00:11:57.780 --> 00:11:59.580 will appear. 132 00:11:59.580 --> 00:12:03.640 This depends on the special conditions of each case. 133 00:12:03.640 --> 00:12:07.200 Many political events can influence the outcome. 134 00:12:07.200 --> 00:12:12.960 There are no rules according to which the duration of the boom or of the following depression 135 00:12:12.960 --> 00:12:15.200 can be computed. 136 00:12:15.200 --> 00:12:21.160 And even if such rules were available, they would be of no use to businessmen. 137 00:12:21.160 --> 00:12:26.960 What the individual businessman needs in order to avoid losses is knowledge about the date 138 00:12:26.960 --> 00:12:32.480 of the turning point, at a time when other businessmen still believe that the crash is 139 00:12:32.480 --> 00:12:35.800 farther away than is really the case. 140 00:12:35.800 --> 00:12:42.140 Then, his superior knowledge will give him the opportunity to arrange his own operations 141 00:12:42.140 --> 00:12:45.860 in such a way as to come out unharmed. 142 00:12:45.860 --> 00:12:51.640 But if the end of the boom could be calculated according to a formula, all businessmen would 143 00:12:51.640 --> 00:12:54.480 learn the date at the same time. 144 00:12:54.480 --> 00:12:59.380 Their endeavors to adjust their conduct of affairs to this information would immediately 145 00:12:59.380 --> 00:13:03.980 result in the appearance of all the phenomena of the Depression. 146 00:13:03.980 --> 00:13:09.500 It would be too late for any of them to avoid being victimized. 147 00:13:09.500 --> 00:13:14.400 If it were possible to calculate the future structure of the market, the future would 148 00:13:14.400 --> 00:13:16.280 not be uncertain. 149 00:13:16.280 --> 00:13:20.600 There would be neither entrepreneurial loss nor profit. 150 00:13:20.600 --> 00:13:27.200 What people expect from the economists is beyond the power of any mortal man. 151 00:13:27.200 --> 00:13:33.080 The very idea that the future is predictable, that some formulas could be substituted for 152 00:13:33.080 --> 00:13:39.160 for the specific understanding, which is the essence of entrepreneurial activity, and that 153 00:13:39.160 --> 00:13:44.800 familiarity with these formulas could make it possible for anybody to take over the conduct 154 00:13:44.800 --> 00:13:52.400 of business, is, of course, an outgrowth of the whole complex of fallacies and misconceptions 155 00:13:52.400 --> 00:13:57.960 which are at the bottom of present-day anti-capitalistic policies. 156 00:13:57.960 --> 00:14:04.040 There is in the whole body of what is called the Marxian philosophy not the slightest reference 157 00:14:04.040 --> 00:14:10.200 to the fact that the main task of action is to provide for the events of an uncertain 158 00:14:10.200 --> 00:14:12.120 future. 159 00:14:12.120 --> 00:14:20.040 The fact that the terms promoter and speculator are today used only with an appropriate connotation 160 00:14:20.040 --> 00:14:25.800 clearly shows that our contemporaries do not even suspect in what the fundamental problem 161 00:14:25.800 --> 00:14:32.320 The system of action consists. Entrepreneurial judgment is one of those things that cannot 162 00:14:32.320 --> 00:14:39.460 be bought on the market. The entrepreneurial idea that carries on and brings profit is 163 00:14:39.460 --> 00:14:47.100 precisely that idea which did not occur to the majority. It is not correct foresight as 164 00:14:47.100 --> 00:14:54.680 such that yields profits, but foresight better than that of the rest. The prize goes only 165 00:14:54.680 --> 00:15:02.680 to those dissenters who do not let themselves be misled by the errors accepted by the multitude. 166 00:15:02.680 --> 00:15:08.780 What makes profits emerge is the provision for future needs for which others have neglected 167 00:15:08.780 --> 00:15:12.600 to make adequate provision. 168 00:15:12.600 --> 00:15:17.880 Entrepreneurs and capitalists expose their own material well-being if they are fully 169 00:15:17.880 --> 00:15:21.400 convinced of the soundness of their plans. 170 00:15:21.400 --> 00:15:27.680 They would never venture to take their economic life into their hands because an expert advised 171 00:15:27.680 --> 00:15:29.760 them to do so. 172 00:15:29.760 --> 00:15:35.760 Those ignorant people who operate on the stock and commodity exchanges, according to TIPS, 173 00:15:35.760 --> 00:15:41.160 are destined to lose their money, from whatever source they may have got their inspiration 174 00:15:41.160 --> 00:15:44.320 and inside information. 175 00:15:44.320 --> 00:15:50.320 In fact, both the economists and the businessmen are fully aware of the uncertainty of the 176 00:15:50.320 --> 00:15:51.760 and the Future. 177 00:15:51.760 --> 00:15:58.280 The businessmen realize that the economists do not dispense any reliable information about 178 00:15:58.280 --> 00:16:05.160 things to come, and that all that they provide is interpretation of statistical data referring 179 00:16:05.160 --> 00:16:07.240 to the past. 180 00:16:07.240 --> 00:16:12.880 For the capitalists and entrepreneurs, the economists' opinions about the future count 181 00:16:12.880 --> 00:16:16.320 only as questionable conjectures. 182 00:16:16.320 --> 00:16:22.240 They are skeptical and not easily fooled, but as they quite correctly believe that it is 183 00:16:22.240 --> 00:16:28.620 useful to know all the data which could possibly have any relevance for their affairs, they 184 00:16:28.620 --> 00:16:34.200 subscribe to the newspapers and periodicals publishing the forecasts. 185 00:16:34.200 --> 00:16:40.260 Anxious not to neglect any source of information available, big business employs staffs of 186 00:16:40.260 --> 00:16:44.300 economists and statisticians. 187 00:16:44.300 --> 00:16:50.660 This forecasting fails in the vain attempts to make the uncertainty of the future disappear 188 00:16:50.660 --> 00:16:55.900 and to deprive entrepreneurship of its inherent speculative character. 189 00:16:55.900 --> 00:17:02.300 But, it renders very valuable services in assembling and interpreting the available 190 00:17:02.300 --> 00:17:08.500 data about economic trends and developments of the recent past. 191 00:17:08.500 --> 00:17:10.960 4. 192 00:17:10.960 --> 00:17:14.440 Tax and the Universities 193 00:17:14.440 --> 00:17:19.120 Tax-supported universities are under the sway of the party in power. 194 00:17:19.120 --> 00:17:24.760 The authorities try to appoint only professors who are ready to advance ideas of which they 195 00:17:24.760 --> 00:17:27.080 themselves approve. 196 00:17:27.080 --> 00:17:32.520 As all non-socialist governments are today firmly committed to interventionism, they 197 00:17:32.520 --> 00:17:35.520 appoint only interventionists. 198 00:17:35.520 --> 00:17:41.520 In their opinion, the first duty of the university is to sell the official social philosophy 199 00:17:41.520 --> 00:17:43.800 to the rising generation. 200 00:17:43.800 --> 00:17:46.600 They have no use for economists. 201 00:17:46.600 --> 00:17:52.840 However, interventionism prevails also at many of the independent universities. 202 00:17:52.840 --> 00:17:58.800 According to an age-old tradition, the objective of the universities is not only teaching, 203 00:17:58.800 --> 00:18:02.600 but also the promotion of knowledge and science. 204 00:18:02.600 --> 00:18:08.480 The duty of the university teacher is not merely to hand down to the students the complex 205 00:18:08.480 --> 00:18:11.600 of knowledge developed by other men. 206 00:18:11.600 --> 00:18:17.280 He is supposed to contribute to the enlargement of this treasure by his own work. 207 00:18:17.280 --> 00:18:23.360 It is assumed that he is a full-fledged member of the world-embracing Republic of Scholarship, 208 00:18:23.360 --> 00:18:29.040 an innovator and a pioneer on the road toward more and better knowledge. 209 00:18:29.040 --> 00:18:34.360 Although university would admit that the members of its faculty are inferior to anybody in 210 00:18:34.360 --> 00:18:40.560 their respective fields, every university professor considers himself equal to all other 211 00:18:40.560 --> 00:18:43.000 masters of his science. 212 00:18:43.000 --> 00:18:49.640 Like the greatest of them, he too contributes his share to the advancement of learning. 213 00:18:49.640 --> 00:18:55.240 This idea of the equality of all professors is of course fictitious. 214 00:18:55.240 --> 00:19:00.360 There is an enormous difference between the creative work of the genius and the monograph 215 00:19:00.360 --> 00:19:07.800 of a specialist. Yet in the field of empirical research it is possible to cling to this fiction. 216 00:19:07.800 --> 00:19:13.260 The great innovator and the simple routinist resort in their investigations to the same 217 00:19:13.260 --> 00:19:19.480 technical methods of research. They arrange laboratory experiments or collect historical 218 00:19:19.480 --> 00:19:25.560 and Social Documents. The outward appearance of their work is the same. Their publications 219 00:19:25.560 --> 00:19:31.240 refer to the same subjects and problems. They are commensurable. 220 00:19:31.240 --> 00:19:37.480 It is quite otherwise in theoretical sciences like philosophy and economics. Here there 221 00:19:37.480 --> 00:19:44.300 is nothing that the routinist can achieve according to a more or less stereotyped pattern. 222 00:19:44.300 --> 00:19:52.060 There are no tasks which require the conscientious and painstaking effort of sedulous monographers. 223 00:19:52.060 --> 00:19:54.980 There is no empirical research. 224 00:19:54.980 --> 00:20:01.240 All must be achieved by the power to reflect, to meditate and to reason. 225 00:20:01.240 --> 00:20:06.840 There is no specialization, as all problems are linked with one another. 226 00:20:06.840 --> 00:20:13.300 In dealing with any part of the body of knowledge, one deals actually with the whole. 227 00:20:13.300 --> 00:20:19.220 An eminent historian once described the psychological and educational significance of the doctoral 228 00:20:19.220 --> 00:20:24.860 thesis by declaring that it gives the author the proud assurance that there is a little 229 00:20:24.860 --> 00:20:31.220 corner, although small, in the field of learning in the knowledge of which he is second to 230 00:20:31.220 --> 00:20:32.720 none. 231 00:20:32.720 --> 00:20:40.000 It is obvious that this effect cannot be realized by a thesis on a subject of economic analysis. 232 00:20:40.000 --> 00:20:45.780 There are no such isolated corners in the complex of economic thought. 233 00:20:45.780 --> 00:20:52.240 There never lived at the same time more than a score of men whose work contributed anything 234 00:20:52.240 --> 00:20:54.820 essential to economics. 235 00:20:54.820 --> 00:21:01.040 The number of creative men is as small in economics as it is in other fields of learning. 236 00:21:01.040 --> 00:21:07.200 Besides, many of the creative economists do not belong to the teaching profession. 237 00:21:07.200 --> 00:21:13.240 But there is a demand for thousands of university and college teachers of economics. 238 00:21:13.240 --> 00:21:18.880 Scholastic tradition requires that each of them should attest his worth by the publication 239 00:21:18.880 --> 00:21:25.520 of original contributions, not merely by compiling textbooks and manuals. 240 00:21:25.520 --> 00:21:31.760 An academic teacher's reputation and salary depend more on his literary work than on his 241 00:21:31.760 --> 00:21:33.920 didactic abilities. 242 00:21:33.920 --> 00:21:40.160 A professor cannot help publishing books. If he does not feel the vocation to write 243 00:21:40.160 --> 00:21:47.120 on economics, he turns to economic history, or descriptive economics. But then, in order 244 00:21:47.120 --> 00:21:53.400 not to lose face, he must insist on the claim that the problems he treats are economics 245 00:21:53.400 --> 00:22:00.680 proper, not economic history. He must even pretend that his writings cover the only legitimate 246 00:22:00.680 --> 00:22:08.020 Field of Economic Studies, that they alone are empirical, inductive and scientific, while 247 00:22:08.020 --> 00:22:14.820 the merely deductive outpourings of the armchair theorists are idle speculations. 248 00:22:14.820 --> 00:22:20.440 If he were to neglect this, he would admit that there are, among the teachers of economics, 249 00:22:20.440 --> 00:22:27.100 two classes, those who themselves have contributed to the advancement of economic thought and 250 00:22:27.100 --> 00:22:32.340 and those who have not, although they may have done a fine job in other disciplines 251 00:22:32.340 --> 00:22:35.740 such as recent economic history. 252 00:22:35.740 --> 00:22:41.860 Thus the academic atmosphere becomes un-propitious for the teaching of economics. 253 00:22:41.860 --> 00:22:48.560 Many professors, happily not all of them, are intent upon disparaging, mere theory. 254 00:22:48.560 --> 00:22:54.380 They try to substitute an unsystematically assembled collection of historical and statistical 255 00:22:54.380 --> 00:23:02.380 and Social Information for Economic Analysis. They dissolve economics into a number of integrated branches. 256 00:23:02.380 --> 00:23:11.380 They specialize in agriculture, in labor, in Latin American conditions and in many other similar subdivisions. 257 00:23:11.380 --> 00:23:19.380 It is certainly one of the tasks of university training to make students familiar with economic history in general 258 00:23:19.380 --> 00:23:26.500 and no less with recent economic developments, but all such endeavors are doomed to failure 259 00:23:26.500 --> 00:23:32.940 if not firmly grounded upon a thorough acquaintance with economics. 260 00:23:32.940 --> 00:23:37.480 Economics does not allow of any breaking up into special branches. 261 00:23:37.480 --> 00:23:43.900 It invariably deals with the interconnectedness of all the phenomena of action. 262 00:23:43.900 --> 00:23:50.380 The catalactic problems cannot become visible if one deals with each branch of production 263 00:23:50.380 --> 00:23:51.860 separately. 264 00:23:51.860 --> 00:23:59.180 It is impossible to study labor and wages without studying, implicitly, commodity prices, 265 00:23:59.180 --> 00:24:05.940 interest rates, profit and loss, money and credit, and all the other major problems. 266 00:24:05.940 --> 00:24:11.420 The real problems of the determination of wage rates cannot even be touched in a course 267 00:24:11.420 --> 00:24:13.140 on labor. 268 00:24:13.140 --> 00:24:19.040 There are no such things as economics of labor or economics of agriculture. 269 00:24:19.040 --> 00:24:24.060 There is only one coherent body of economics. 270 00:24:24.060 --> 00:24:30.160 What these specialists deal with in their lectures and publications is not economics, 271 00:24:30.160 --> 00:24:33.620 but the doctrines of the various pressure groups. 272 00:24:33.620 --> 00:24:39.940 Ignoring economics, they cannot help falling prey to the ideologies of those aiming at 273 00:24:39.940 --> 00:24:46.780 Special Privileges for their group. Even those specialists who do not openly side with a 274 00:24:46.780 --> 00:24:53.620 definite pressure group and who claim to maintain a lofty neutrality unwittingly endorse the 275 00:24:53.620 --> 00:25:00.700 essential creeds of the interventionist doctrine. Dealing exclusively with the innumerable varieties 276 00:25:00.700 --> 00:25:06.220 of government interference with business, they do not want to cling to what they call 277 00:25:06.220 --> 00:25:08.500 mere negativism. 278 00:25:08.500 --> 00:25:13.880 If they criticize the measures resorted to, they do it only in order to recommend their 279 00:25:13.880 --> 00:25:20.380 own brand of interventionism as a substitute for other people's interventionism. 280 00:25:20.380 --> 00:25:26.780 Without a qualm, they endorse the fundamental thesis of both interventionism and socialism, 281 00:25:26.780 --> 00:25:33.540 that the unhampered market economy unfairly harms the vital interests of the immense majority 282 00:25:33.540 --> 00:25:37.700 for the sole benefit of callous exploiters. 283 00:25:37.700 --> 00:25:43.940 As they see it, an economist who demonstrates the futility of interventionism is a bribed 284 00:25:43.940 --> 00:25:48.300 champion of the unjust claims of big business. 285 00:25:48.300 --> 00:25:54.340 It is imperative to bar such scoundrels from access to the universities and their articles 286 00:25:54.340 --> 00:26:00.780 from being printed in the periodicals of the associations of university teachers. 287 00:26:00.780 --> 00:26:03.260 The students are bewildered. 288 00:26:03.260 --> 00:26:08.900 In the courses of the mathematical economists, they are fed formulas describing hypothetical 289 00:26:08.900 --> 00:26:13.980 states of equilibrium in which there is no longer any action. 290 00:26:13.980 --> 00:26:19.140 They easily conclude that these equations are of no use whatever for the comprehension 291 00:26:19.140 --> 00:26:21.940 of economic activities. 292 00:26:21.940 --> 00:26:27.420 In the lectures of the specialists, they hear a mass of detail concerning interventionist 293 00:26:27.420 --> 00:26:28.700 measures. 294 00:26:28.700 --> 00:26:35.100 They must infer that conditions are paradoxical indeed because there is never equilibrium 295 00:26:35.100 --> 00:26:41.340 and wage rates and the prices of farm products are not so high as the unions or the farmers 296 00:26:41.340 --> 00:26:43.140 want them to be. 297 00:26:43.140 --> 00:26:50.480 It is obvious that a radical reform is indispensable, but what kind of reform? 298 00:26:50.480 --> 00:26:56.260 The majority of the students espouse without any inhibitions the interventionist panaceas 299 00:26:56.260 --> 00:26:59.380 as recommended by their professors. 300 00:26:59.380 --> 00:27:04.780 Social conditions will be perfectly satisfactory when the government enforces minimum wage 301 00:27:04.780 --> 00:27:11.420 rates and provides everybody with adequate food and housing, or when the sale of margarine 302 00:27:11.420 --> 00:27:15.780 and the importation of foreign sugar are prohibited. 303 00:27:15.780 --> 00:27:21.180 They do not see the contradictions in the words of their teachers, who one day lament 304 00:27:21.180 --> 00:27:27.740 the madness of competition and the next day the evils of monopoly, who one day complain 305 00:27:27.740 --> 00:27:33.000 about falling prices and the next day about rising living costs. 306 00:27:33.000 --> 00:27:38.340 They take their degrees and try as soon as possible to get a job with the government 307 00:27:38.340 --> 00:27:41.880 or a powerful pressure group. 308 00:27:41.880 --> 00:27:48.060 But there are many young men who are keen enough to see through the fallacies of interventionism. 309 00:27:48.060 --> 00:27:53.140 They accept their teachers' rejection of the unhampered market economy, but they do 310 00:27:53.140 --> 00:27:58.760 not believe that the isolated measures of interventionism could succeed in attaining 311 00:27:58.760 --> 00:28:00.900 the ends sought. 312 00:28:00.900 --> 00:28:07.480 They consistently carry their preceptors' thoughts to their ultimate logical consequences. 313 00:28:07.480 --> 00:28:09.720 They turn toward socialism. 314 00:28:09.720 --> 00:28:15.060 They hail the Soviet system as the dawn of a new and better civilization. 315 00:28:15.060 --> 00:28:30.060 However, what has made many of the present-day universities by and large nurseries of socialism is not so much the conditions prevailing in the Departments of Economics as the teachings handed down in other departments. 316 00:28:30.060 --> 00:28:43.060 In the Departments of Economics there can still be found eminent economists, and even the other teachers are familiar with some of the objections raised against the practicability of socialism. 317 00:28:43.060 --> 00:28:51.060 The case is different with many of the teachers of philosophy, history, literature, sociology and political science. 318 00:28:51.060 --> 00:28:58.060 They interpret history on the ground of a garbled vulgarization of dialectical materialism. 319 00:28:58.060 --> 00:29:05.060 Even many of those who passionately attack Marxism on account of its materialism and atheism 320 00:29:05.060 --> 00:29:13.060 are under the sway of the ideas developed in the Communist Manifesto and in the program of the Communist International. 321 00:29:13.060 --> 00:29:23.060 They explain depressions, mass unemployment, inflation, war and poverty as evils necessarily inherent in capitalism 322 00:29:23.060 --> 00:29:30.060 and intimate that these phenomena can disappear only with the passing of capitalism. 323 00:29:30.060 --> 00:29:36.740 5. General Education and Economics 324 00:29:36.740 --> 00:29:42.500 In countries which are not harassed by struggles between various linguistic groups, public 325 00:29:42.500 --> 00:29:49.740 education can work very well if it is limited to reading, writing and arithmetic. With bright 326 00:29:49.740 --> 00:29:55.860 children it is even possible to add elementary notions of geometry, the natural sciences 327 00:29:55.860 --> 00:29:58.760 and the Valid Laws of the Country. 328 00:29:58.760 --> 00:30:04.220 But as soon as one wants to go farther, serious difficulties appear. 329 00:30:04.220 --> 00:30:09.160 Teaching at the elementary level necessarily turns into indoctrination. 330 00:30:09.160 --> 00:30:15.640 It is not feasible to represent to adolescents all the aspects of a problem and to let them 331 00:30:15.640 --> 00:30:18.760 choose between dissenting views. 332 00:30:18.760 --> 00:30:23.920 It is no less impossible to find teachers who could hand down opinions of which they 333 00:30:23.920 --> 00:30:30.820 They themselves disapprove in such a way as to satisfy those who hold these opinions. 334 00:30:30.820 --> 00:30:36.720 The party that operates the schools is in a position to propagandize its tenets and 335 00:30:36.720 --> 00:30:40.340 to disparage those of other parties. 336 00:30:40.340 --> 00:30:46.160 In the field of religious education, the liberals solve this problem by the separation of state 337 00:30:46.160 --> 00:30:47.800 and church. 338 00:30:47.800 --> 00:30:52.680 In liberal countries, religion is no longer taught in public schools. 339 00:30:52.680 --> 00:30:58.600 But the parents are free to send their children into denominational schools supported by religious 340 00:30:58.600 --> 00:30:59.800 communities. 341 00:30:59.800 --> 00:31:06.560 However, the problem does not refer only to the teaching of religion and of certain theories 342 00:31:06.560 --> 00:31:10.680 of the natural sciences at variance with the Bible. 343 00:31:10.680 --> 00:31:16.360 It concerns even more the teaching of history and economics. 344 00:31:16.360 --> 00:31:21.760 The public is aware of the matter only with regard to the international aspects of the 345 00:31:21.760 --> 00:31:23.760 Teaching of History. 346 00:31:23.760 --> 00:31:29.200 There is some talk today about the necessity of freeing the teaching of history from the 347 00:31:29.200 --> 00:31:32.720 impact of nationalism and chauvinism. 348 00:31:32.720 --> 00:31:39.380 But few people realize that the problem of impartiality and objectivity is no less present 349 00:31:39.380 --> 00:31:43.240 in dealing with the domestic aspects of history. 350 00:31:43.240 --> 00:31:49.540 The teacher's or the textbook author's own social philosophy colors the narrative. 351 00:31:49.540 --> 00:31:54.900 The more the treatment must be simplified and condensed in order to be comprehensible to 352 00:31:54.900 --> 00:32:01.420 the immature minds of children and adolescents, the worse are the effects. 353 00:32:01.420 --> 00:32:06.400 As the Marxians and the interventionists see it, the teaching of history in the schools 354 00:32:06.400 --> 00:32:11.640 is tainted by the endorsement of the ideas of old liberalism. 355 00:32:11.640 --> 00:32:18.740 They want to substitute their own interpretation of history for the bourgeois interpretation. 356 00:32:18.740 --> 00:32:25.100 In Marxian opinion, the English Revolution of 1688, the American Revolution, the Great 357 00:32:25.100 --> 00:32:31.620 French Revolution and the 19th century revolutionary movements in continental Europe were bourgeois 358 00:32:31.620 --> 00:32:33.340 movements. 359 00:32:33.340 --> 00:32:40.020 They resulted in the defeat of feudalism and in the establishment of bourgeois supremacy. 360 00:32:40.020 --> 00:32:43.580 The proletarian masses were not emancipated. 361 00:32:43.580 --> 00:32:49.240 They merely passed from the class rule of the aristocracy to the class rule of the capitalist 362 00:32:49.240 --> 00:32:51.200 exploiters. 363 00:32:51.200 --> 00:32:58.840 To free the working man, the abolition of the capitalist mode of production is required. 364 00:32:58.840 --> 00:33:04.680 This, contend the interventionists, should be brought about by socialpolitik or the New 365 00:33:04.680 --> 00:33:06.380 Deal. 366 00:33:06.380 --> 00:33:11.720 The orthodox Marxians, on the other hand, assert that only the violent overthrow of 367 00:33:11.720 --> 00:33:18.620 and the bourgeois system of government could effectively emancipate the proletarians. 368 00:33:18.620 --> 00:33:24.380 It is impossible to deal with any chapter of history without taking a definite stand 369 00:33:24.380 --> 00:33:30.140 on these controversial issues and the implied economic doctrines. 370 00:33:30.140 --> 00:33:36.620 The textbooks and the teachers cannot adopt a lofty neutrality with regard to the postulate 371 00:33:36.620 --> 00:33:43.380 that the Unfinished Revolution needs to be completed by the Communist Revolution. 372 00:33:43.380 --> 00:33:49.500 Every statement concerning events of the last 300 years involves a definite judgment on 373 00:33:49.500 --> 00:33:51.780 these controversies. 374 00:33:51.780 --> 00:33:57.220 One cannot avoid choosing between the philosophy of the Declaration of Independence and the 375 00:33:57.220 --> 00:34:01.820 Gettysburg Address and that of the Communist Manifesto. 376 00:34:01.820 --> 00:34:07.860 The challenge is there, and it is useless to bury one's head in the sand. 377 00:34:07.860 --> 00:34:12.900 On the high school level, and even on the college level, the handing down of historical 378 00:34:12.900 --> 00:34:17.320 and economic knowledge is virtually indoctrination. 379 00:34:17.320 --> 00:34:22.500 The greater part of the students are certainly not mature enough to form their own opinion 380 00:34:22.500 --> 00:34:28.780 on the ground of a critical examination of their teacher's representation of the subject. 381 00:34:28.780 --> 00:34:34.360 If public education were more efficient than it really is, the political parties would 382 00:34:34.360 --> 00:34:39.920 urgently aim at the domination of the school system in order to determine the mode in which 383 00:34:39.920 --> 00:34:42.620 these subjects are to be taught. 384 00:34:42.620 --> 00:34:49.440 However, general education plays only a minor role in the formation of the political, social 385 00:34:49.440 --> 00:34:53.700 and economic ideas of the rising generation. 386 00:34:53.700 --> 00:35:00.300 The impact of the press, the radio and environmental conditions is much more powerful than that 387 00:35:00.300 --> 00:35:02.780 of teachers and textbooks. 388 00:35:02.780 --> 00:35:08.100 The propaganda of the churches, the political parties and the pressure groups outstrips 389 00:35:08.100 --> 00:35:12.660 the influence of the schools, whatever they may teach. 390 00:35:12.660 --> 00:35:18.100 What is learned in school is often very soon forgotten and cannot carry on against the 391 00:35:18.100 --> 00:35:22.380 The Continuous Hammering of the Social Milieu in Which a Man Moves 392 00:35:22.380 --> 00:35:26.260 6. 393 00:35:26.260 --> 00:35:29.680 Economics and the Citizen 394 00:35:29.680 --> 00:35:35.860 Economics must not be relegated to classrooms and statistical offices, and must not be left 395 00:35:35.860 --> 00:35:38.140 to esoteric circles. 396 00:35:38.140 --> 00:35:44.660 It is the philosophy of human life and action, and concerns everybody and everything. 397 00:35:44.660 --> 00:35:50.060 It is the pith of civilization and of man's human existence. 398 00:35:50.060 --> 00:35:55.540 To mention this fact is not to indulge in the often derided weakness of specialists 399 00:35:55.540 --> 00:35:59.940 who overrate the importance of their own branch of knowledge. 400 00:35:59.940 --> 00:36:07.300 Not the economists, but all the people today assign this eminent place to economics. 401 00:36:07.300 --> 00:36:13.580 All present-day political issues concern problems commonly called economic. 402 00:36:13.580 --> 00:36:20.100 All arguments advanced in contemporary discussion of social and public affairs deal with fundamental 403 00:36:20.100 --> 00:36:24.500 matters of praxeology and economics. 404 00:36:24.500 --> 00:36:29.300 Everybody's mind is preoccupied with economic doctrines. 405 00:36:29.300 --> 00:36:33.980 Philosophers and theologians seem to be more interested in economic problems than in those 406 00:36:33.980 --> 00:36:41.340 problems which earlier generations considered the subject matter of philosophy and theology. 407 00:36:41.340 --> 00:36:47.540 Articles and plays today treat all things human, including sex relations, from the angle 408 00:36:47.540 --> 00:36:50.260 of economic doctrines. 409 00:36:50.260 --> 00:36:54.820 Everybody thinks of economics whether he is aware of it or not. 410 00:36:54.820 --> 00:37:00.540 In joining a political party and in casting his ballot, the citizen implicitly takes a 411 00:37:00.540 --> 00:37:04.960 stand upon essential economic theories. 412 00:37:04.960 --> 00:37:12.320 In the 16th and 17th centuries, religion was the main issue in European political controversies. 413 00:37:12.320 --> 00:37:18.120 In the 18th and 19th centuries in Europe as well as in America, the paramount question 414 00:37:18.120 --> 00:37:23.480 was representative government versus royal absolutism. 415 00:37:23.480 --> 00:37:28.080 Today it is the market economy versus socialism. 416 00:37:28.080 --> 00:37:35.420 This is, of course, a problem the solution of which depends entirely on economic analysis. 417 00:37:35.420 --> 00:37:42.880 Recourse to empty slogans or to the mysticism of dialectical materialism is of no avail. 418 00:37:42.880 --> 00:37:48.960 There is no means by which anyone can evade his personal responsibility. 419 00:37:48.960 --> 00:37:55.720 Whoever neglects to examine to the best of his abilities all the problems involved voluntarily 420 00:37:55.720 --> 00:38:01.560 Surrenders His Birthright to a Self-Appointed Elite of Superman. 421 00:38:01.560 --> 00:38:08.000 In such vital matters, blind reliance upon experts and uncritical acceptance of popular 422 00:38:08.000 --> 00:38:13.880 catchwords and prejudices is tantamount to the abandonment of self-determination and 423 00:38:13.880 --> 00:38:17.520 to yielding to other people's domination. 424 00:38:17.520 --> 00:38:25.120 As conditions are today, nothing can be more important to every intelligent man than economics. 425 00:38:25.120 --> 00:38:29.920 His own fate and that of his progeny is at stake. 426 00:38:29.920 --> 00:38:36.320 Very few are capable of contributing any consequential idea to the body of economic thought, but 427 00:38:36.320 --> 00:38:43.080 all reasonable men are called upon to familiarize themselves with the teachings of economics. 428 00:38:43.080 --> 00:38:47.800 This is, in our age, the primary civic duty. 429 00:38:47.800 --> 00:38:53.720 Whether we like it or not, it is a fact that economics cannot remain an esoteric branch 430 00:38:53.720 --> 00:39:00.640 Research of Knowledge, accessible only to small groups of scholars and specialists. 431 00:39:00.640 --> 00:39:04.260 Economics deals with society's fundamental problems. 432 00:39:04.260 --> 00:39:08.080 It concerns everyone and belongs to all. 433 00:39:08.080 --> 00:39:13.120 It is the main and proper study of every citizen. 434 00:39:13.120 --> 00:39:15.280 7. 435 00:39:15.280 --> 00:39:17.980 Economics and Freedom 436 00:39:17.980 --> 00:39:24.300 The paramount role that economic ideas play in the determination of civic affairs explains 437 00:39:24.300 --> 00:39:30.220 why governments, political parties and pressure groups are intent upon restricting the freedom 438 00:39:30.220 --> 00:39:32.480 of economic thought. 439 00:39:32.480 --> 00:39:38.660 They are anxious to propagandize the good doctrine and to silence the voice of the bad 440 00:39:38.660 --> 00:39:40.440 doctrines. 441 00:39:40.440 --> 00:39:46.800 As they see it, truth has no inherent power which could make it ultimately prevail solely 442 00:39:46.800 --> 00:39:49.800 by virtue of its being true. 443 00:39:49.800 --> 00:39:56.000 In order to carry on, truth needs to be backed by violent action on the part of the police 444 00:39:56.000 --> 00:39:58.800 or other armed troops. 445 00:39:58.800 --> 00:40:04.440 In this view, the criterion of a doctrine's truth is the fact that its supporters succeeded 446 00:40:04.440 --> 00:40:09.960 in defeating by force of arms the champions of dissenting views. 447 00:40:09.960 --> 00:40:16.680 It is implied that God or some mythical agency directing the course of human affairs always 448 00:40:16.680 --> 00:40:21.960 is bestows victory upon those fighting for the good cause. 449 00:40:21.960 --> 00:40:28.480 Government is from God and has the sacred duty of exterminating the heretic. 450 00:40:28.480 --> 00:40:34.760 It is useless to dwell upon the contradictions and inconsistencies of this doctrine of intolerance 451 00:40:34.760 --> 00:40:37.800 and persecution of dissenters. 452 00:40:37.800 --> 00:40:44.240 Never before has the world known such a cleverly contrived system of propaganda and oppression 453 00:40:44.240 --> 00:40:49.740 as that instituted by contemporary governments, parties and pressure groups. 454 00:40:49.740 --> 00:40:58.740 However, all these edifices will crumble like houses of cards as soon as a great ideology attacks them. 455 00:40:58.740 --> 00:41:04.740 Not only in the countries ruled by barbarian and neo-barbarian despots, 456 00:41:04.740 --> 00:41:12.740 but no less in the so-called Western democracies, the study of economics is practically outlawed today. 457 00:41:12.740 --> 00:41:18.820 The public discussion of economic problems ignores almost entirely all that has been 458 00:41:18.820 --> 00:41:22.540 said by economists in the last two hundred years. 459 00:41:22.540 --> 00:41:29.060 Prices, wage rates, interest rates and profits are dealt with as if their determination were 460 00:41:29.060 --> 00:41:32.580 not subject to any law. 461 00:41:32.580 --> 00:41:40.140 Governments try to decree and to enforce maximum commodity prices and minimum wage rates. 462 00:41:40.140 --> 00:41:46.500 Some exhort businessmen to cut down profits, to lower prices, and to raise wage rates 463 00:41:46.500 --> 00:41:52.020 as if these were dependent on the laudable intentions of individuals. 464 00:41:52.020 --> 00:41:57.240 In the treatment of international economic relations, people blithely resort to the most 465 00:41:57.240 --> 00:42:00.620 naive fallacies of mercantilism. 466 00:42:00.620 --> 00:42:06.640 Few are aware of the shortcomings of all these popular doctrines, or realize why the policies 467 00:42:06.640 --> 00:42:13.640 These are sad facts. However, there is only one way in which a man can respond to them, by never relaxing in the search for truth.