Okay, I'm here with Jeffrey Herbiner now for our podcast. He's a professor of economics
at Grove City College and very glad to have you. You're concentrating this week on microeconomics
and what other issues. Right, a little bit on Keynes and some work on time and uncertainty
in the Human Action, and then I got one lecture on the American Austrians, so a little bit
of history.
Yeah, so you're dealing with all the difficult technical topics that require extraordinary
procedures, right?
They all do, they all do.
But these aren't the topics that normally drive people to Austrian economics, unless
...
This is true.
Really, you agree with that?
Yeah, I think that's right.
Yeah, people don't become Austrian in the first place.
Because they want to know about time preference, a minutia of uncertainty.
You know, the whole question of time preference, we are not going to have an interview on time
preference, but as much as everybody might like that, you know, I find, anyway, the subject
is so difficult and you have to throw yourself into the literature completely and just really
think about it constantly and then you can sort of get it and engage in the controversies
and you become obsessed with it.
If you're away from it for too long, is it just me or do you forget everything?
It isn't a memorable subject. It is a highly technical subject. A lot has been written about it.
A lot of it is confused and difficult to untangle the fallacies and to see the kernel of truth.
Written about it, meaning interest rates or time preference?
Well, even both, I would say. Even the conceptions of time preference of some writers are not really quite right.
Or within the Austrian tradition?
Even in the broader literature, but yeah, I would say even within the Austrian tradition.
I think the central idea that Mises had of time preference being bound up in temporal
finitude of our animal nature, you know, he said that time preference, even animals have
time preference.
Yeah.
There's something like categorical time preference that exists as a fundamental concept of acting.
How do you show that?
And not many people agree with this or incorporate this insight into their work.
What's the quick reputation of the claim that that's not true?
Well, Mises says that if this weren't true, a person would have, or could have, an infinite time horizon, and temporal beings cannot have infinite time horizons.
Right.
And that's his claim.
So you, now, the Rothbardian perspective doesn't differ substantially, or in any respect, from the Misesian view.
Not that I know of. Rothbard doesn't stress this categorical nature of time preference, but from the beginning of the definition of the operative notion of time preference to interest is all the same.
Well, now Rothbard relied a lot on the writings of Frank Feder.
Right.
Mises did as well?
in Human Action. Feder was the great purifier of the doctrine from Boehm-Bawerk.
And Boehm-Bawerk needed some assistance in this regard.
This is Mises' view. It's a controversial question.
Among who was this person?
We won't name names.
Money issues are just still deeply controversial, you know, find yourself stepping into dangerous
territory.
Yeah, and as you said before, not exactly earth-shattering, but obvious appeal to everyone.
So do we need a fetter shirt, do you think, at some point?
We do need it, well, yeah, we would have something like a fellow traveler's, you know, list.
Well, we've got a knock shirt, I mean, it's unclear.
Well, there you go.
So, I don't know.
No, a fetter shirt would be great.
Yeah, a fetter shirt would be great, yeah.
There's a marketability issue, but who would have thought that they...
That's true.
It was with all of it.
Yeah, yeah.
Well, actually, one of the most popular selling t-shirts, I'm not t-shirt obsessed, just to
tell you that.
I don't think only about t-shirts, but one of the most popular...
Shaving cream.
Other issues.
Things like that, yeah.
But the Boehm-Bawerk shirt really does sell very well.
It really does.
It's the slogan.
Yeah, Structure of Production.
That really attracts people, I think.
Structure of Production.
Yeah.
That's a real draw.
That's great.
Okay, let me ask you about Keynes. Controversy recently on the blog, I don't know if it's
even worth noting, but some people were claiming that Hazlitt's commentary on the general theory
is not really to be taken seriously. What's your sense?
Well I would say off the top of my head that almost everything that Hazlitt wrote is to
to be taken seriously, it has to be grappled with. It is a rather pedestrian exercise to
go through his book because it delves, it's line by line refutation, so it's very tedious.
For the reader.
Yes, so it isn't a grand critique, something like what I think is the best article written
on Keynes that Joseph Salerno did a number of years ago.
and that was kind of Keynes' development of his thought in this sort of progressive utopian millennialism from Marshall.
He makes a lot out of the fact that Keynes hoped that you could have a world without interest.
Yes, exactly. The idea that he fixated on was the elimination of the scarcity of capital.
And so to do this, of course, interest had to be eliminated.
Keynes didn't necessarily believe that, say, central banking could drive it to zero.
And so we'd have to have socialization of the financial markets to eliminate all sources of interest.
And to elaborate on your point about what Mises said concerning time preferences would imply
immortality, wouldn't it?
Yeah, among other strange things.
That's right.
Did Hazlitt pick up on this point about interest?
That interest, I don't, it's not fresh in my mind, this book, I've read it years ago,
I don't recall now.
It's not in print.
Oh, it isn't?
No, it's not in print.
But you know it's interesting that he sort of took up the job of taking on such details.
In 1959 and then in 1960 of course he came out with the edited book, The Critics of Keynesian Economics.
Right. But it's so interesting that all these critics, these Austrian critics of Keynes sort of emerged much later.
Doesn't it seem as if Keynes came along in a window, he had a sort of, I mean he sort of slipped into the history of ideas in a strange way
I think that's true. There was an odd constellation of elements that brought about Keynes's prominence,
not the least of which had nothing to do with his economics. It had to do with his cosmic
vision of things and his sort of utopianism and the circles that he ran in as sort of
the leadest British groups and so on.
They were strange times in the 1930s.
There's a lot of sort of apocalyptic political thinkers running around.
As far as, I mean, I'm always impressed when I read any of the newspapers of the time or
the magazine or the political editorials and the journals.
I mean, the idea of liberal democracy was completely dismissed by all sides.
It's a strange time. It was indeed. It gave rise to a lot of peculiar ideologies, and Keynes was one of them. Now, somebody might say, look, you Austrians are just forever obsessing about Keynes, nobody cares about Keynes anymore. What do you think about that?
This is not true. He spawned a thousand devils. Keynesian ideas are everywhere. In every generation, these battles have to be re-fought.
That ground has to be retaken. After all, we're still writing articles against the minimum wage. These fallacies just don't go away.
The New People and they constantly have to learn these things and they've already been indoctrinated into these fallacies.
It is peculiar about Keynesianism. What do you think gives rise to the suggestion?
I've heard it many times that Austrians just should shut up about Keynes. It's really over worth.
Is it because people have a limited perception about the influence of Keynes?
I mean, it's true that the dumbed-down version of Keynesianism doesn't persist in the journals.
That's a good point. Yeah, I'd say that's right. That's right.
It's just the bits and pieces that survive and are grasped by the mainstream.
But the vision isn't. The vision's long gone.
What's an example of that, would you say? What's a bit and piece?
Macroaggregation
The Federal Reserve, fiat money, fractional reserve banking, Human Action, Man Economy and State, The Theory of Money and Credit
Right, and nor is fiscal policy usually invoked.
No, like a stabilizer of the economy.
Yeah, it's not.
No, no, no, it's not.
No, it's all fed.
It's all the fed.
It's all fed.
Yeah, I mean, it's interesting that the spending policy, I mean, it's just, the Congress should
just spend as much as possible, you know, as long as the debtors don't cause an immediate
calamity, then everybody's happy, and that's the whole...
There are the good things that have to be done, so more money to spend.
Another war that has to be fought.
No such thing as fiscal policy anymore.
Was this the most naive view that Keynes held that somehow fiscal policy could be used for
macroeconomic planning?
Well, he wasn't really too intrigued with that view.
It came from his followers.
He was really dedicated to this notion of eliminating interest, as you talked about
before, through the socialization of the financial markets.
That was really his main policy position. Fiscal policy was a minor thing. He liked the idea,
for example, of, say, having a progressive income tax because he thought the MPC, the
propensity to consume of the poor people was larger than rich. So this would give us greater
aggregate demand. But again, this wasn't like a solution to the fundamental problems of
So this passage in The General Theory, where Keynes calls for the socialization of investment,
is sometimes written off as just a slip, but you're arguing that it's the conclusion.
Exactly. I think Joe Salerno made this abundantly clear in his article.
It's the policy solution that Keynes would like to invoke,
but practical politics permit only, let's say, expansionary monetary policy
or some other makeshift, in his view, to push interest rates down.
I think if he could have held the levers of power and pulled them, I think he would have pulled that lever, and not the others.
Now you teach undergraduates. Smart kids?
Very good kids. Our students at Grove City are very good. Very smart. We get a nice handful that are very interested in ideas.
We've had a couple lately going to grad school, so we're real happy with the students that we get.
When you teach, do you teach with an eye to preparing people for graduate school?
It depends on what you mean by preparing. Our view is to ground them as solidly as we can in correct economics.
So we don't prepare them in sort of a practical sense to do the math and so on.
We require the standard kinds of math and statistics, but our push really is to ground them in real economics because when we get to grad school they don't do economics.
They just do model building. That's right. We have to teach them. And then we hope that the PhD work is just an interlude.
And they come out on the other side, they remember their economics, and they get back to it. They go back to what drew them, attracted them to economics to begin with.
And you've built something of a program there, right?
Right, I think so, and we're right now this summer putting together the final proposal for our master's program.
Wow.
So in two, maybe three years we should have the master's program.
And will that be the first graduate program at Grove City?
It will be. In the past they've had masters of accounting programs, but these were just makeshifts that they needed to meet
The support of the administration is very strong. Bill Anderson is a provost. He's a big backer of the Austrian School.
and the board, many board members who were students of Hans Senholtz, and they support this.
Hans Senholtz taught for so many years there.
36 years.
Yeah, extraordinary.
So many ways he built the program.
And was he responsible for the fact that the Mises papers are there?
Right, right.
We acquired them from Marget in 1978, so it was five years after Mises died.
Have you had an archivist?
You have.
An archivist came in in 1992 and organized the collection, put it in acid-free boxes
and so on.
That's hard work.
It's so essential.
Absolutely essential.
We actually want to have it done again.
Archival work is so hard to make an institutional priority. There are always other ways to use
the resources that seem to meet more immediate needs and serve a larger community of people.
There's every reason not to do this archival work, and yet...
But it's a treasure, and it has to be protected. And people recognize that in the administration.
It's tough. So you're looking at an electronic index, at least, and maybe even the real thing.
That would be the goal at the end of the process.
Are you involved in this process?
Sure.
So you spent some time in the papers.
Oh my.
Do you really?
Oh yes.
What do you get out of that?
Oh, it's wonderful. It's amazing.
Really?
It's astounding.
Do you have a different impression of him having gone through his correspondence than a person might have of having read his books?
I'm not sure it's different, it's deeper.
You sort of appreciate his other facets of Mises that
you may not see if you're
if you're just reading his scholarly work, like his love letters to Margit.
Oh! Wow!
I suddenly, I wonder, you know,
if Mises
had imagined that someday...
Yeah, someone would sit down and read these things, yeah.
It's kind of creepy in a way, but...
in the 1970s. Things weren't going so well for the Austrian School, but they always said
that things can change, that trends can change, so maybe they knew.
They have.
Yeah, they have. Now, what's this I hear about some course that you're teaching with Guido
Holzmer, what's that about?
Oh, right, yes. So, Guido put together this international economics course, and we had
I invited him to come to Gros City and teach our students, we called the course Globalization,
we already have an Econ, an international Econ course in our curriculum,
and so he came for two weeks and taught, and then Sean Rittenour and I taught the rest of the course,
and the students of course are just thrilled to have Guido, he's great, he's wonderful, and then he invited me this fall to go to Angers,
and Return the Favor so I'll be there for for about two weeks and teach it you
know this is a small segment of the course yeah but now I don't understand
how this works does this mean that his students are enrolled in your class your
students no no it's all a gross city was all my students and in Auger it's all
his now maybe in the future we could do that in the future be better if I took my
students and we cross enroll in the course yeah you know and then we'd have
to stay longer, and so on. Or maybe just everybody get on Skype and, you know, have some big internet meeting.
And Guido wants to actually write about, turn out some articles about this, because I think he's correct that international economics is not a field where the Austrians have swept the whole horizon.
We sort of write about particular issues, but there isn't a full-blown Austrian theory of international trade.
You know, it's funny, I somehow have some memory now of asking somebody, what do the Austrians have to contribute to the international trade discussion beyond what the neoclassical school has contributed?
And the answer is, well, essentially nothing. It's the same thing.
No.
No?
And just to see his syllabus and you would know, it is not the same thing.
What thinkers would you say from the Austrian tradition have most broadly explored the trade
issue and applied a unique kind of Austrian point of view?
I mean, that's a good question.
Hobbler?
Yeah, yeah.
Hobbler?
Joseph Salerno has done work in this area.
But the masters, right, really didn't.
Let's have a big argument about who is and isn't an Austrian.
You end up looking like George Reisman.
There's a wonderful, he wrote two great books on the subject, but maybe you would consider them more political.
Well, I don't, you know, as good as he was, I don't think he was Austrian in the Misesian
sense. He was certainly sympathetic and a fellow traveler. But he's not exactly a praxeologist.
Right. So. So my definition is narrow. Yeah. I remember Rothbard used to come to this conference
and he always gave a talk at the end, you know, and of course Rothbard was not one to
to Avoid Controversy
Some people refer to globalism, for example, if you oppose a war, they call you an isolationist,
you say, no, I'm a favor of international trade, for everybody, completely against sanctions, for example.
I mean, how is it, so I guess that's among the confusions you hope to straighten out,
the relationship between international military power and economic exchange.
Oh, and even broader cultural questions might come into play, right?
The cultural context of the development of the market and the diversity, we might say,
of expressions of the market through the international economy.
So this is something, too, that isn't well thought out.
Most people, when they think of globalization, they think of economic imperialism.
It's true. You Americanize the Bangladesh or whatever. Right. Or the French, I would say, to be a better example.
So if we're going to trade with the country, it's got to be like a carbon copy of the U.S. and so it's got to have a constitution.
Whereas it seems just... The SEC and what not.
Oh my, and the Marines. Yeah.
Whereas it's just the deepening of the division of labor.
One would think that these local distinctive features of economic activity would actually
be brought out more deeply by globalization and not taken away.
So people tend to focus just on the superficial things, like, oh, we have a Walmart, or we
have a McDonald's.
Okay.
So, yeah, your point is that globalization is often confused with homogenization, or
...
Yeah, yeah.
That's right.
Yeah.
That's right.
This idea that somehow trade is making everybody put a Chuck E. Cheese on every corner. You're
also giving a seminar, a small group seminar this week, right?
Right, I actually got moved into the corporatist state, and so it's going to be Tom Woods and I on it, right? That's what you're referring to, yeah.
And this brings up another confusion that I suppose is somewhat related to the globalization point, that people confuse capitalism.
Yes.
Is that the kind of thing you're going to be abolishing?
Well, that'll be one thing, right, sure, but I think we'll just throw out a laundry list of
topics that would come under this heading and explore them with the students. So we have fascism
and, you know, programs of regulation and antitrust and mercantilism and so on and so forth. So it'll
have international as well as domestic dimensions. Well, speaking of, you know, this actually is
Mises has some comments in, I forget now which book, but where he seems to indicate some greater degree of tolerance than you might expect towards the idea of forcing open markets abroad. Do you know what I'm talking about?
No, I'm not familiar with that.
I saw the post, maybe it came up in the post that Ebeling had on the Mises list, where he was talking about Mises' change of view as kind of uncharacteristically variable, or maybe perhaps that isn't what he was saying, maybe he was saying that it depended on circumstances.
It was kind of historically contingent as to what the proper way to interrelate with other cultures happened to be.
Well, I mean, Guido often emphasizes the fact that to understand Mises, it's a mistake to read Mises through Rothbardian lens.
I mean, he wasn't a, for lack of a better term, a doctrinaire libertarian.
That's right.
I mean, he was a utilitarian, ultimately. Right?
Well, not to start another controversy, but I'll accept that.
He's a very strange utilitarian.
But he tended to look at every...
Well, it's difficult because...
Of course, after reading Rothbard,
we all tend to look back at predecessors
and say, well, how come he was inconsistent on this point or that point?
This is true.
It's also true of reading Menger, actually, in light of Boehm-Bawerk, Boehm-Bawerk in light of Mises.
Perennial problem.
That's true.
Who are some more American-Austrians that you're going to discuss besides Frank Fetter?
It'll be Hazlitt.
We'll go through Hazlitt's works and Benjamin Anderson.
The point of that lecture is to show the students that these ideas were alive,
embodied in real scholars and public intellectuals, practitioners and so on,
but they weren't institutionalized. They had no institutional support and because
of that we didn't see the blossoming of the Austrian School in that pre-war period.
What were the books, the Austrian books, that were responsible for the
creation of the American Austrian School in the interwar period?
The first edition was 1904 and then the later edition of 1915, the more well-known edition that's still available, Davenport's work.
Davenport.
Unfortunately, I can't squeeze Davenport into that lecture.
I kind of wanted to give the students the fuller view of,
not just the scholars, but the public intellectuals and so on.
So you think we should wait on the Davenport shirt for a while?
Well, it should come out with Fedder.
That's shirt number 20 or 21, something like that.
Fedder first, because they didn't get along either.
What's your next project, aside from teaching, which I assume absorbs you completely?
It keeps me pretty busy. Yeah, I think the next project is a publication of Mises's correspondence.
So I think through the archive we're going to pull out his important correspondence, try to publish at least one volume from that.
What a wonderful thought. And this would be post-war, I mean, after 1940.
There would be a mixture, but, right.
You won't do any translating, just as English?
No, we'll have to have a translator.
Okay.
Yeah. So Guido actually has been in and read the German correspondence.
And so he's able to identify what, you know, would need to be translated.
Well, it would not be something, and you think it's revealing enough to deserve...
Oh, yes. It's very interesting material.
Do you have an example of somebody you corresponded with, like an economist, right?
Oh, yeah, more than that. It's pretty broad. The correspondence is fairly broad.
Yeah.
But some things of just historical interest, like his correspondence with Hayek.
So Hayek would write about being bombed out in London, and then Mises would write back to him to keep a stiff upper lip and all that.
So it's that kind of personal interest that exists in the archive, as well as, as I mentioned before, just insightful remarks on world events and various correspondence.
So that's major other areas that you're researching right now?
Well, let's see. I've done some work. I have a few papers out for publication, one on statistical analysis and what its role is in economics.
Going back to your early background, right?
Yeah, well, the background we all go through. I get a PhD. So there's a piece on that. And I'm finishing up revisions on an article on Japan.
Okay. That has been one of your interests. I think you wrote for Mises work on that topic.
at the conference we had in Toronto in 99, so that's when I did the first analysis of Japan.
And so I think now I've got an article length treatment of it. It's pretty good, I hope.
How much time do you spend in the office?
In my office at work?
Yeah. That's all day, isn't it?
Oh yeah, it's all day.
All day, every day. These aren't professor hours, right?
of Money and Credit, The Theory of Money and Credit, The Theory of Money and Credit, The
at Mises University after so many years, how many years have you been teaching here?
At Mises, let's see, 1988 was my first year.
Isn't that great?
Yeah.
So, a staple.
Well, thank you for sharing your gifts with all the students here and for sharing your
time with us on this podcast.
Well, thank you, Jeffrey, and thanks to the Institute.