WEBVTT

NOTE An Interview with Guido Hülsmann

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I have with me Jörg-Ido Holzmann, who teaches at the University of Angers.

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The Americans have a hard time with that word, they tend to say angers or something, right?

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Yes, it came from angers, but not with.

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Right, good.

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You just finished with a lecture now that is one you've given for the second time.

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There's a new lecture introduced into the program on the division of labor.

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So, why don't you explain what it is that you thought the program was lacking in the past

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and what you thought this lecture contributes to it.

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Well, the way I saw it, the way we have all been seeing the Mises Institute was as a basic introductory course into Austrian economics.

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And the problem was that we were jumping in our main lectures

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the basic framework of Austrian economic analysis directly from the analysis of utility and prices to money and banking.

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There's nothing in between.

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And there's nothing in between covers a couple of hundred pages in Rothbard's Man Economy and State and various other books of Austrian economics.

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And so it was necessary to at least cover this ground.

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And why is it necessary?

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Well, if the way we stop after this first lecture, if we explain prices, the formation of prices, we just say prices come into being because you have two different individuals who have inverse valuations of the goods.

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So each one prefers the one thing that he receives more than the one thing that he cedes. And this is all fine and good, but if we just stop there, then we could not really explain the emergence of a civilization, of a structure of production.

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We would just be able to explain why people exchange the fruits that they gather from the bushes and rabbits that they find dead on the street or whatever.

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But we could not explain how they consciously bring about the existence of the commodities that are being exchanged.

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And this conscious bringing about transformation of nature in order to create, make it more valuable from a human point of view, is precisely what production is all about.

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So it's absolutely crucial to talk about this.

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How does the subject of the division of labor relate to what Bastiat called economic harmonies?

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Well, according to Bastiat, as long as you don't violate private property rights, the interests of all members of society are harmonious.

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So there's no real contradiction or no antagonistic relationship between the individuals involved.

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And therefore people do engage in the division of labor. They do cooperate.

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What I've explained in the lecture this morning is that economic analysis enables us to see that irrespective of all other factors that come into play, there is an economic mechanism that prompts people, gives an incentive to people to cooperate.

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So even if they hate one another or they don't like each other's suits or haircut and so on, find that their jokes are bad, whatever, they still have an incentive to cooperate.

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This is something that economists of the classical school have enabled us to see, most notably

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Ricardo, who realized that even in the most difficult of all cases, if you have one superhuman

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being and one underling, it's not that the superman renders a service or is just merciful

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to the other guy if he helps him, but that is in his own interest to do so.

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This is a remarkable point, because the point is too easily passed over, it's a point that

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impacts on the whole of the social sciences.

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Absolutely.

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I mean, sociologists could learn a lot by studying this point about the division of

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labor.

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And it speaks directly to what you mentioned about the capacity for people of unequal talents

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and abilities to cooperate.

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The notion that is commonly portrayed, especially among amateurs, is that inequality is an obstacle to our society.

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So many of our politicians, but also many academics, are very much concerned about inequalities as a problem to be overcome.

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Whereas from an economic point of view, economists are not primarily interested in how the world should be,

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So we of course need to understand how the world works and what economic analysis tells

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us is that inequality is far from being an obstacle to society and one of the greatest

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driving forces for the creation of society.

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So often too we are trained from the earliest ages to think about the operation of society

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in terms of the conflicts that exist between individuals and groups, right?

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I mean, this consumes our political lives, doesn't it?

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Well, and it's an obsession that is brought artificially into the public for, through representatives of the political class,

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because for them it is, of course, the essence of their lives, that they are in antagonistic conflicts with others.

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What they get, the power that they obtain, the others can no longer get.

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There's no really production, politics is not a productive process in which you join forces,

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about these conflicts as the basis of society. Conflicts between race, between sex, between

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ages, between the abled and the disabled, all of these. So you're suggesting that because

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these are state-run institutions, you might have a tendency to...

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Who's ultimately controlling what subjects are being taught? Well, it's the political

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class. And it is only natural, it's not that they're particularly mean in doing so, but

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Everybody, in a way, cannot prevent himself from projecting himself, the way he sees the world, onto the things that he creates and the institutions that he brings into being.

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So it is natural for a political class to think of society and human relations in antagonistic terms.

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And it is therefore natural that they project this on all things that they create, for example, curricula.

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So, if you talk about conflicts, well, it's a way of valuing, emphasizing the importance of the political apparatus as a way of mediating between these antagonistic groups.

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It's a kind of rationalization of their own existence.

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Then it has the perverse effect, these policies do have actually increasing conflicts between people.

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Yes, yes. So we definitely do have a self-feeding mechanism here.

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And it is pretty obvious to anybody who doesn't approach the matter with too many emotions or a priori notions that this is the case.

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And then you begin to look around the world and you say, my goodness, there are tons of it. There are lots of conflict.

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There is a workplace. There was a person who sued just today for sexual discrimination or whatever.

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So the conflict seems invasive. We seem to reinforce the...

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Part of the problem with the conflict view is it doesn't explain how society is created or emerges, right?

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At most it explains side issues or things that lie outside the normal operation of society.

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That is right. That was also one of the arguments that Mises brought into play in his critique of socialism,

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that the socialist worldview was defective in this respect.

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Because they started from class conflict, but before we can meaningfully speak about classes, well, we have to explain how does it come to the formation of a class.

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So I thought through to its very essence, the argument of the social antagonism, various social antagonism theories would have to stipulate that there are conflicts inherently between two individuals.

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As soon as there are two, there must be a conflict. So how can it come to the formation of a group?

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And as soon as you admit that there are reasons for the formation of groups, why shouldn't this be a general mechanism here that could also explain how conflicts could be overcome for much larger groups, not just for the class under consideration?

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Can you apply this logic to a current situation like, for example, Iraq's been in the news.

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This is a society that's overcome with conflict, and it seems to provide some sort of empirical evidence that these conflicts are the animating force of human life today in part.

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How do you address things like that?

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Well, of course, it would be naive to say that there are, and that was never Bastiat's argument, that there are no sources of conflicts between human beings.

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What Bastiat said was that there are also economic harmonies.

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And then, of course, you have a basic choice. Either you prefer to live in peace with your fellow human beings and join forces with them in order to overcome misery and various other things that make human life ugly.

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or you can choose to just impose your visions on other people and create conflicts and unfortunately

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of course that is a process that requires certain intellectual and moral maturity to

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get to this point.

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It has taken humanity several thousand years to get to this point, we weren't there right

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at the beginning.

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There were various forces that came into play, not only intellectual but also spiritual and

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Well, some societies are definitely more advanced in this respect than others, and societies can also fall back, so formally advanced societies can fall back if they let themselves be seduced by the sirens of conflict theories.

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Right. You know, and also it does make you wonder, in the case of Iraq, you have the regime that's occupied the country attempting to create a unitary state, right?

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And this unitary state is going to have one body of law, and this is part of the fear, isn't it, on the part of these so-called warring tribes?

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Yes, absolutely.

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They're going to be ruled over by somebody else.

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Yeah. So irrespective of what one might think about the justification of American entry into this war with Iraq,

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in Iraq, once they were in, they repeated so many errors of the past that you might

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wonder what actually have we learned, for example, of the colonial period.

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We are tracing artificial political borders, imposing a system on people who are not fit

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for the system.

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And Mises has analyzed this 80 years ago already when he confronted to the conflicts that existed

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in Austria-Hungary at the time, conflicts resulting from the political imposition of institutions,

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of ways things ought to be handled. He said, well, the only way to reduce conflict is to

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get coercion out of the picture, is to get the government out of the picture.

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This is nation, state and economy, right?

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That is right.

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Yeah, the book that you said in your studies on this was originally called Imperialism.

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That was the working title.

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Yeah.

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Nice.

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Maybe he had problems, you know publishers can be horrible.

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I'm sure that he proposed this title and then the publisher thought that maybe that was too radical or something.

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I didn't find any evidence on this.

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It's really interesting because he does talk at length about the difficulty of having a unitary state under polyglot territories.

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And also dealing with religious differences under a single body of law, which I'm not sure if you went into this, but most of these religious groups would far prefer to be ruled in a way by members of their own tribe.

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This really does raise a radical question, which I don't know if you want to get into, about the question of law.

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It's always been the liberal tendency to think that there ought to be one source of law and there ought to be equally applied to everybody.

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I wonder, if you look at a case like Iraq, if you might be far better off with many different competing bodies of law.

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Well, of course we have a terminological problem here, because indeed there are different sorts of law.

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We might certainly meaningfully speak about something like natural law.

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That is certainly a universal law.

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But even there, I mean, the champions of natural law always said,

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well, what we do in pieces of legislation or other forms of law giving is we try to,

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to the best of our knowledge, of our present knowledge, define what the natural law is.

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Law is one thing that we do, it's not the only thing that we do in legislation.

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And then there are others, so there is a scope already here for differences, honest differences

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of opinion.

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Why should somebody who comes from an Islamic background have the same opinion or natural

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law than somebody who comes from a Christian background?

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So there are legitimate differences of opinion here.

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And then there are also other types of law where certain things need to be addressed

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concerning administrative handling of procedures and so on.

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From a libertarian point of view, one would argue, well, such laws certainly have to exist, but they should exist competitively.

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And so why should they be imposed? Why should they be imposed on people who do not want to be ruled by these?

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So you subscribe to a law service. I mean, before the advent of the nation-state, Catholics had the canon law, and that was the primary.

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And that's how it is that marriage could have been totally private and yet conflicts resolved.

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Well, you had the lex mercatoria, so the commercial law and so on, which completely merged privately.

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You had special legal regimes for different groups.

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For example, foreigners in a city who benefited from certain stipulations but had to undergo certain obligations,

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and so on.

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These things are not only logically conceivable, they have existed historically

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and they're not necessarily bad, especially if we have

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a situation as we confronted today in Iraq, where precisely you lack

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homogeneity of the population, you lack common purpose,

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the will to confront a common future and so on.

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These are the defining characteristics in modern western political thought about what

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a nation is.

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If there's no will for a common future, well, you don't have a nation.

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And this is increasingly an issue because all nations are becoming more and more heterogeneous

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in terms of religion and ethnicity and all sorts of considerations.

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So this is an important issue for the future to explore this area of private law.

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Absolutely. Well, a common legal way of addressing this was to speak of privilege. Privilege is the private law that concerns only a certain group or certain individuals, like the king, for example.

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Economists tend to think about privileges negatively, but that is of course because we are commonly referring to the framework of the unitary state, not the competitive legal framework.

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and the Legal Framework. So why should a privilege necessarily be a bad thing if it is competitive?

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Right, yeah. And this takes us back to the whole point about division of labor.

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You would say that no matter how heterogeneous a society is in every respect in which you can think of that term,

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provided you have the right kind of competitive legal arrangements, division of labor is still possible.

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Absolutely.

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And conflict can be capitalized in any society.

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Absolutely. Of course, you don't create a paradise. That's not possible. But you completely eliminate one very important source of conflict, which is the political system, which imposes the views of the ruling group, which can be also a large majority, on the minorities.

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and of course then you have problems. I mean all other problems still

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subsist if you bring the government out of the picture but at least I mean that's

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definitely if we look at the empirical record that's definitely the most

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important source of conflict. Isn't it something how Mises' book in the nation

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In this book he anticipates, in fact, many of the arguments that he would develop later

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in greater detail.

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So there are some, for example, he has an entire theory of the relationship between

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linguistic groups, how linguistic groups are formed and how they thrive and how they dissolve

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and so on, the competition between language groups. So this is not taken up in later work.

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But there are other aspects, for example, his analysis of imperialism, how the government

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cannot achieve its ends by imposing, for example, immigration laws or tariffs. All of this is

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already in this 1919 book.

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But it's worth revisiting that book, isn't it?

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Oh, absolutely. It's a fascinating book. And there's a wonderful translation by Leland

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Yeager. It's come out in 1983. Translations are usually often butchered, as we all know.

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But this one is an excellent translation.

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Yeah, it's unfortunately not available, I don't think, but it is online.

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But I remember the first time I read it, I thought, well, it's a hard book to read if you don't know the political context.

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So it's taken many years to kind of get this.

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But it teaches a lot of history, doesn't it?

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But we're getting the context more and more.

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It made no sense in the Cold War, but these days...

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This is what many Austrian intellectuals have always said that the problems they were confronting

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at the end of the 19th century and the early 20th century anticipated the problems that

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the West then experienced 50, 100 years later, the rest of the West, and in fact we are increasing

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moving toward a situation that existed in Austria at the time.

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And Mises also analyzed precisely the reasons for which this was inevitable, because you

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You have capitalism, you have liberty, you have migrations. As soon as you have migrations,

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mainly for economic reasons, you get mixed populations. And then you have the basic set

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up that are there that can create strong conflicts if you have one group, the dominating group

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imposing their cultural views on the others.

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Actually, he had some comments about this in liberalism, doesn't he?

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Also, yes.

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about the problem of education among various language groups, that it's impossible if it's run by the state, for the state to educate in many different languages it only creates, and so it should be completely privatized, he said. A very interesting argument.

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Well, for me, this political culture is mediated through the language, of course. Language is the essential means by which the political process relies.

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According to Aristotle, human beings are the zoon politikon, the political animals, those who live in a community of communication.

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Right.

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And so if you take away this means from one community and impose your language on them,

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well, of course, then you're conditioning their thought in your terms.

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I see.

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Yeah.

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Okay.

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Yeah.

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Therefore, he thought it would be...

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How much prominence did this give this book, this 1919 book, did it give Mises?

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What was the reception of it?

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How was the impact?

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It was followed his money book, right?

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Yeah.

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It was not a great success.

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It had an impact on a small number of discerning readers, for example, Wilhelm Röpke, who

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later confessed that he converted to liberalism as a consequence of reading this book, and

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even more so than of the book on socialism that Mises published three years later. So

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this book had a rather limited impact, but it reached some important people.

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As a matter of fact, Röpke himself went on to write two books that are very important,

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I think these unique points within the Austrian tradition about nations, about unitary nations and the relationship between, what are the names of those books you recall?

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They've been out of print forever, 50 years or something. I can't remember, but great stuff.

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He seemed to understand the relationship between free trade and decentralized government, which is a strong emphasis.

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So he got all those insights from Mises.

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At least the initial inspiration. Yes. We're right now at the Institute, putting the finishing touches on a monograph of yours on money.

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And the title is? The Ethics of Money Production.

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Now, the question to ask, because after I read the draft I thought, my goodness, nothing like this has ever been published.

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And I later thought, well, is that an exaggeration? Really, there are a thousand books available on inflation. But your book isn't really on inflation, is it?

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It's not really on inflation. It's on money, as the title says, on money production, and especially the ethical lessons to be derived from this essentially economic analysis, but also moral analysis.

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And the way I present inflation is probably in original terms in that I define inflation as a perverted way of producing money.

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This is the originality of the definition and so I define inflation as production of money through the violation of private property rights.

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So, of course, the production of money per se is legitimate and useful as the production of any other good, but as well as we would say, well, there is something like a perverse or distorted production of cars, let's say if GM just never paid wages, and now they don't pay the pensions that they promised, but let's say they wouldn't pay any wages at all, we'll say there's something wrong about this way of producing cars.

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What's wrong about it is precisely that they violate the rights of other people.

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So I define inflation then as money production that comes through the violation of property rights.

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And the basic motivation for this is that those who make the inflation stand to profit from it.

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That's why they do it.

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And this definition has various advantages that the reader will discover by perusing the book.

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But it is in perfect harmony what previous Austrian economists had to say about this subject.

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The problem is I don't think people think of money as something that's as good to be produced.

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That's probably what you're overcoming here.

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Yes, probably.

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People think of money as something that just exists, or as something that is managed, but not quite produced.

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Yes, yes. Of course, this way you get all the nasty implications of the presence of the Federal Reserve

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This is inflation. It is producing money through the violation of property rights. That's what it is.

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And to end this discussion, relying on what body of work?

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Well, essentially I'm building on the monetary thought of Mises and Rothbard.

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But I show that their monetary ideas are in a very long, just the last station in a very long tradition

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A long tradition that goes back to the 14th century, most notably to Nicolas Oresme, a

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French scholastic and bishop who wrote the first treatise of economics ever, which dealt

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with money, by the way.

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Was it in his mind, how prevalent was private coinage in the time he was writing?

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The private coinage at the time was generally not private. What was emerging was the private coinage of gold coins.

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Generally, there were legal tender laws and there were monopoly laws.

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So minting was in the hands of the princes, the king very often, but often the king also sold licenses to regional noblemen and so on.

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And the coinage system that existed in those days was created by Charlemagne in the early

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ninth century and was essentially based on a silver coin.

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These coins were not sufficient to allow large scale international commercial transactions

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that were emerging from the tenth century onward.

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And so the merchant class, merchants invented their own coins, so that was a private coinage

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And only many years later did the governments then again bring this coinage under their

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control.

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Well, I suppose that if we had such things as private coinage today, which I suppose

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you favored, by the way, did Mises ever entertain the possibility of private production or money?

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He didn't go into detail, but definitely he thought that there was no need for the existence

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of a central bank.

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There was no need for government meddling with money at all, which entails, of course,

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that you could have something like private coinage, never addressed the issue because

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it was not an issue of his day. So we can only assume that he would have been in favor

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of this too.

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When I first read What Has Government Done To Our Money, I think that's where Rothbard

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makes his comments about private coinage. It took me days to sort of get over it. I remember

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stammering around thinking, that's totally crazy. But I suppose if there were private

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It would be easier for us to think of it in terms of a body of ethics that should govern the production of money.

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Yeah, and it is a pity that this has disappeared in the United States.

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This idea has disappeared in discussions in the United States because you had the longest period of private coinage in modern history.

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So roughly speaking from the revolution until the late 1840s, 1850s,

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In this case, you had a competitive coinage in the U.S.

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Lots of foreign coins circulated and could be freely used by other citizens.

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Silver coins, gold coins, anything.

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I remember this passage from, well, I'll leave that aside, because we're almost out of time

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and I do want to mention your book, your magnum opus, is now under consideration.

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I'm very likely to be accepted by a very prestigious publisher and we'll leave all the details aside.

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But this is the biography of Mises.

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That's right.

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And it is about a thousand pages.

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So far a manuscript.

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And works only from original documents mostly.

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That's right.

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Yeah.

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Yeah.

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And, I mean, I've been involved in this at various stages and I find it inconceivable

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In which Mises plays an important role, so therefore it has turned into, well, more than

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just a biography of an economist, because I tried to give the background of the context

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in which he was writing, and so it was inevitable to speak about various other thinkers, most

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notably of the Austrian School, but also others, in order to understand, to grasp precisely

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what Mises' contribution was.

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Well, it's an incredible achievement, and I hope it'll be up before the end of the year,

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and you're so young, and so what do you have in mind now?

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I have a couple of smaller projects that I'm working on, and then I guess I will turn to

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about writing a book on international economics for various reasons. One is that some of my

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teaching now relates to international economics. I'm teaching, co-teaching a course at the

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University of Angers with Jeff Herbner from Grove City College, a course on international

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economics.

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He's coming to France?

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He's coming to France and I'm going to Grove City College. We're teaching the same course

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both in Angers and in Grove City and so it's an international economics. Yes, there are

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There are various things to be done. It's very long since Austrians have contributed

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anything to this area. So it's exciting times to do this.

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How are you managing the bureaucracy in the French educational system?

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They don't interfere too much with my work. It is a problem if you have ambitions of a

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sort that you want to become dean or president and so on, which are not at all my ambitions.

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But if you just stick to your scholarly work, you don't have too many problems.

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The problem is getting in the door, which you managed and now you're fine.

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Yeah, and then of course I profit from the fact that I've been living for a couple of years in the US

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and I have many wonderful contacts such as you at the Mises Institute

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who offer for me other options to pursue my projects, even if I get into...

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It's like you never left, Guido. It's great to see you.

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Wonderful.

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And I know that the French students are benefiting from your teaching and your knowledge

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and I know that the Mises University students here this week are as well.

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Thank you. Thank you very much.