This morning I'm sitting with Mark Thornton, Professor of Economics.
Actually you're teaching at Auburn a little bit now, right?
That's right. Just finished up a stint at Auburn, teaching the economic history of the U.S.
It was a last-minute fill-in position, but it was a really great time.
I got a chance to use Murray Rothbard's history of money and banking
and Bob Higgs's book Crisis and Leviathan.
You may be the first person to have used this Rothbard history of money banking in the U.S. in a classroom setting. It's a fairly new book.
It's fairly new, but actually I only had four days to pick my textbooks. So I was planning on using something from the Institute's collection.
but I went online and there's actually a handful of professors who teach the same
course around the country who are already using Rothbard's history of money
and banking as a supplemental text you know not as the main text but as a
supplemental text so I was happy to see that. It's interesting how that book came
together because you know people wonder well let's see Rothbard died 12 years
The Theory of Money and Credit The Theory of Money and Credit
The History of Money and Banking
It's remarkable when you look back at that election of 1800 and how critically everything
sort of turned on on which party would ultimately control the central state. What a tragedy, huh?
Yeah. It was a wonderful thing that Jefferson won, but how close did it come to having the inflationist
mercantilists just completely drive the country into the ground much sooner than they did later?
Well, yeah. I mean, Murray always pointed out how the whiskey rebellion was so important and so
The Federalists were sort of in control of things, putting the alcohol tax on, organizing this giant army, and so on and so forth, and the American people were very ticked off at all of that, of course, and the election of 1800 was an absolute rout of the Federalists and the Nationalists in favor of the Anti-Federalists, and the major indication of that is that their candidates came in first,
Well, he had a theory of, you know, that we had all this wilderness out there and that,
you know, what we needed is the government to go in there and, you know, post some soldiers
and then sell the land so that the land ended up in the hands of individual people, individual
colonists rather than in the hands of a government or a foreign government, which he was most
worried about.
And you know that's not a perfect system but it beats what happened later on when the federal
government just sort of took massive areas of the western United States and controls
it to this day.
You can kind of make a case for his thinking at the time, well it doesn't seem like he
later regretted it.
I mean those late letters where he says, you know this country should really be broken
up into lots of different smaller countries.
It should.
It still should.
You know, I think it would be great if we had, you know, an east coast, Louisiana, Great
Lake states, California, the mountain states, whatever, Microsoft in the northwest, you know,
and if the French hadn't been such lousy colonizers and such, you know, stupid inflationists,
They might have ended up with North America, although we might be speaking French right
here.
It's also alarming to Americans who take for granted free speech to look back at the alien
sedition acts of the late 18th century and just see how quickly the government wants
to control what we think and what we say and what we do, especially when it's critical
of them.
Oh, absolutely. They were just protecting themselves. They weren't actually protecting other citizens
against other citizens, which is supposedly what their job is about. But that was one
of the fun things about teaching this course, is that my mind was so open, having never
taught it, actually having never taken the course before in the economic history of the
US, is that my mind was receptive, I think, to connections, especially connections with
I had just gone there for a visit and come back and I was lecturing the next day and I realized, you know, the Katrina thing was so much similar to the Great Flood of 1927, so I went in there and started lecturing about the Great Flood of 1927 where basically everything, the same thing happened. I mean, a natural disaster was in the works. The Army Corps of Engineers basically blew it and their system of protection failed.
and ended up flooding tons of people, basically poor people, mostly black people, in both cases, of course, and promised that they would receive help and that compensation never materialized.
Hoover actually was the secretary of commerce at the time promising the black people of the Mississippi Delta that he would help them if he was elected president of course he broke that promise and that's one of the main reasons why the African-American community moved over from the Republican party to the Democratic party and of course this is all things that students have never heard of before yeah it's almost like you're reading about another planet or something right well and this is this is real
economic history and I wouldn't have been exposed to it if I hadn't been
exposed to the Austrian School and Bob Higgs and Murray Rothbard and a lot of
the others and I was and I was fortunate to read a book about the flood of 1927 a
few years ago when I did that article in the free market newsletter about the
Great Flood. Yeah, long before Katrina. Oh yeah, many years. Sometimes you know that
That whole Katrina thing was just such a catastrophe. It was just amazing. And yet it was clear
to anybody who knew the history or the circumstances behind it that it wasn't Mother Nature really
at work there. I mean, except as a precipitating event, but that it was a failure of the infrastructure
and the failure that's so deeply rooted in the history of policy as managed by the Army
Corps of Engineers.
The Army Corps of Engineers is really just one disaster after another.
They fix the situation afterwards, fixing the previous disaster, but never preparing
for the next one.
All of their infrastructure is just fine as long as nothing happens.
The problem is that it's supposed to be there because something might happen.
Everything unusual happens.
All of our backup systems failed simultaneously.
Who knew that in a storm the power might go out and so therefore the pumps might not work
and therefore it's going to undermine the dikes and they're going to break.
I was down in New Orleans, 17th and 18th century New Orleans is just fine.
It's all there.
It's all clean and perfect and rebuilt, but the closer you go to the present, particularly
In the 20th century, in the post World War II period, where government was building lots
of housing for the poor people and stuff like that, all of that is a total disaster, completely
unfixable.
Isn't that so revealing, isn't it?
Just by looking at where the damage is, you can actually trace out a chronology of the
policy.
Yeah, the original city, the original commercial city is basically just fine, but all of the
I went into all that about how the government insurance has basically lured people into dangerous zones and I showed pictures to some of my students about houses in Louisiana before government programs and they're all built up on stilts, they're all 12 feet off the ground and then you see houses after the insurance programs go into effect and they're built on slabs right on the ground
You could make a general point, can't you, about observing some of these issues among
a thousand more, that the market has a way of training people to make responsible decisions.
Absolutely.
There's no doubt about it.
The Bank is not going to lend money on an asset that's in harm's way.
So it's not going to give you the loan.
Insurance companies aren't going to back up projects like that, whether they're commercial
or residential or whatever, unless they're in a reasonably safe environment.
So, it doesn't matter how dumb you are, if you're in the market economy you're going
to get feedback of a nature which is going to help protect you whether you like it or
not.
Yeah, you know, it's interesting how often market signals cause us to do things that
otherwise we wouldn't think to do or might not even want to do really.
For example, I know many people who have quit smoking just so they could drive down their
insurance premiums, their life insurance premiums, for example, and that's a very interesting
case.
All the government programs in the world can't seem to get people to stop smoking them, not
even high taxes on cigarettes, but insurers come along and say, look, if we detect some
nicotine in your blood, you're going to have to pay an extra $250 a month for insurance
You've got to maintain your health to a certain level so that you can show up for work in
order that you get promotions.
People who don't maintain their health and don't show up for work on time and aren't
productive, they don't go anywhere.
There's always these feedback mechanisms, most of which are not really articulated for
us.
They're just unarticulated feedback mechanisms and we need to point these out.
I also did an article a little while back about the effect of the business cycle.
The government's, the Federal Reserve's business cycle and how it affects our behavior.
It basically showed that when the Fed creates an inflationary boom in the economy, people
become more irresponsible.
They learn bad lessons.
They Take Up Bad Habits, and so during those inflationary booms where everything is great
and wonderful and everybody's making money and has a job, people pick up smoking, they
gain weight, they dress poorer, you know, all these negative things, and so...
Save less.
Save less, of course, yeah.
I mean, that's the one thing we do know, but there's all these other socially undesirable
things.
Let's stop buying Renaissance polyphony and start buying rock and roll CDs, or...
was, things are much worse because we don't really know all of the negative things that
the government does, all the ramifications and likewise as we pointed out, we don't know
all the positive ramifications of what the market is doing for us.
This is really, I mean you really speak to what I always think of as a kind of a mark
of your lifetime contribution to economics.
You have this particular kind of turn of mind where you're very curious about odd sectors of society and you seek out explanations of them in a very creative way.
Well, thank you.
Well, having worked with you for so many years, you're always surprising me and everybody else with some new insight.
Well, you know, Austrian economics provides you with a framework that you know that there's
an answer there, right?
And so the whole thing is just to be able to sit still long enough and to think about
something long enough and dig around, you know, looking at various forms of evidence
until the story makes sense.
And then you run with it and start digging for the details and building the case and
Building the Story and because you know that's that's that's the great thing
about Austrian economics is that it gives you that framework where you you
know where to look basically and you know and eventually you'll find the
answer if you look long enough and hard enough you'll you'll you'll be able to
make the case for something that makes sense to solve those little puzzles
The Theory of Money and Credit
And your work on Kantian is at what stage?
Well the research into his economics is pretty complete and most of these of course are hints
that were in Rothbard's history of economics but one of them, the first one is besides
The first economic theories are very similar to Cantillon's.
Basically I showed that even though Cantillon was killed long before Hume wrote economics
and his book wasn't published until after Hume published his theories, I basically showed
that they basically knew the same people and that in all likelihood Hume had access to
The Mystery of Adam Smith's Invisible Hand
And basically there's been about a dozen articles published in the last ten years in all the mainstream journals
that have come up with new interpretations of Adam Smith's Invisible Hand
painting him as some kind of modern general welfare theorist
and that didn't make any sense to me
and it doesn't make any sense to other historians of thought that I've talked to
and what I did was I started looking back at Smith's invisible hand he's got two
different uses of the invisible hand and what I was what I've been able to show is
that both of those uses of the invisible hand come from a chapter in Cantillon's
essay one talks about the the landlord and how you know the landlord so well
which is, it's not really, Hume wrote some essays, influenced his friend Smith, and Smith went on to create classical economics. It was Cantillon wrote an essay that influenced David Hume, Adam Smith, the physiocrats, Turgot, Kondiak, and so on and so forth, right down to the modern Austrian School, Menger, Mises, Hayek.
Does Cantillon provide a link between the classical school and the late scholastics?
In his essay, he uses them in defense of his attack on usury, but he says, you know, these guys really didn't know what it was like to be a banker, like he was a banker.
Yeah, he was a banker. Have you found a picture of him yet?
No, no picture. We're still looking for that picture. We have portraits of his wife and
the daughter, and we're trying to find somebody to do some kind of computer graphics where
they extract his genetics.
Yeah, and how long were they married? Some people say that the people that were married
long enough, they start to look similar, so you could kind of...
They actually weren't married that long, and one of the theories I'm working on, of course,
Cantillon was said to have been murdered in 1734, and then Anton Murphy, in his great
biography of Cantillon, puts forward the theory that he wasn't murdered, but he faked his
own death, which is intriguing and possible.
If you put it in a historical context, England was in a crisis, a political crisis, Cantillon
You know, it's very hard to get people to sit still long enough to make it interesting.
But in fact, in truth, it's very important.
You have to know your history, whether it's the history of economic thought or the history
of your country, whatever it is, correctly in order to know what the problems are, what
the solutions are to what we face in the present.
And so that's why I think going back and correcting the origins of economic theory is so important.
Yeah.
It seems like there could be endless numbers of essays that could be done just working
off some of the seeds planted in the Rothbard history of economic thought, which is now...
Of course, it was a famous book when it was after it was published, and it was published,
I think, just about...
It was published maybe a couple of months after his death, yeah.
And it was a big deal even for the last 10 years, but then when we came out with a new
edition which was just a fraction of the price, but there's so much in there.
I've had the sense that there's, I mean just on the British banking debates alone, there's
so much information.
It's overwhelming.
It is and you really, everyone needs to read the whole thing, but then there's the case
to be made for reading small sections of it maybe a chapter or maybe even a
section and thinking of you know contemplating what's what's going on
there what is Rothbard telling us and what is he leading us to because he's
in reality he's just chuck full of ideas every everywhere everything that he's
wrote is not just informative but it's it's pointing you in the direction for
and Further Research.
The Translation is just a matter of funding and time...
It really is... I had no idea how difficult it would be to retranslate a book that's already been translated.
I thought, well, you know, this would be a no-brainer, but I'm working with a professional translator,
Chantelle Saussier, she's got a Ph.D. in French and all this stuff, but we'll spend days sometimes on trying to do a paragraph or a sentence.
You can't buy in the marketplace this level of care. You've got to be a fanatic.
I think, for example, Guido always says that Menger, no, it wasn't Guido, because I asked Guido about this the other day,
In 1931, Higgs translated Kantian's essay into English, Hayek and his wife translated
in 1931 into German now what's going on there I mean the the book is written in
1730 it's not published until 1755 and then it sits around for a zillion years
and then it's published into two different languages in 1931 and that's
another just curiosity I mean I'm not sure if there's anything to that but I'd
I'd like to know, you know, why is it the case that both of those things were accomplished in the same year, after such a tremendously long period of time, before it originally appeared.
This is when Hayek was still living in... No, had he left for Britain by that time?
He was, well he must have, they must have done the translation in Austria, but I think that they were in England when it came out.
It was that kind of time frame.
Those were remarkable years for the Austrian School, so much productivity, so much, and then it all of course came to an end.
Yeah, you know Mises brought it together, built it up, brought it together and got the ball rolling so to speak and then of course Hitler and World War II just scattered and smashed the whole thing.
We're lucky to be able to save some of it. I suppose that enough of it was saved with
Hayek and Machlip and Mises coming to the United States.
Yeah, and reborn again.
Eventually. It was like a dormant seed almost. Mises was sort of keeping it going. It's miraculous,
I think, that it survived in some sense.
This is remarkable too to be here at this conference and see these just mob scene of students that are just learning so much.
Yeah, it's a great group, just tremendous students and they just wear you out with questions at lunch and breakfast and dinner.
It's, you know, you can listen to all this stuff and hear all the archive stuff for these
conferences but you're getting really a small fraction of the program.
I mean it's great and it's almost like an advertisement but you get so much more when
you come here and you actually, you can just sit there and watch other people talking,
discussing and interacting but it's available and it's wonderful, you know, and they get
so much out of it. And the thing I like now is these students who come, you know, they
say, oh, you know, we're never going to get anywhere with this stuff. You know, we're
such a small group and, you know, we're so marginalized.
Yeah, I have no idea. Marginalized is...
You have no idea. So I just, you know, rewind the tape 25 years when I started and when
The Mises Institute started as a small office with an electric typewriter, no computers,
no mailing machines, no nothing basically.
We had nothing.
There was no books, there was no newsletters, there was no, it was zilcho and there was
like six Austrian economists who were still alive and not retired and actually teaching
and writing in the world.
There were no Austrians at all active in Europe, basically.
I can remember the mid-1980s, people saying to me, Jeff, why don't you just get a real
job?
This tiny group of ideological fanatics, now of course people say, wow, what a great job.
That's another question I get is, how do you get a job like this?
I said, I have no idea. I have no idea how you can get a job like this.
But it is, you know, it's a great,
it's great what has actually happened.
Another thing that
every Mises University,
I always remember this and relate it to some of the students,
you know, in the early years the Mises University was kind of small
and then it started getting going and we were like at Stanford University,
for the Big Time and 100 people would come and we'd have great faculty and by the end
of the week some of us would start thinking, you know, this is really great.
I wonder how many years we could do this before everybody in the world who would like to come
to the Mises University has already been here.
Yeah, you know, we always, this is always our, I don't know if you call it a failing,
but for years we underestimated the extent of the market.
Don't you think?
Well, I think it's just changed.
I think the market continues to grow. We just thought of it as a stagnant set of people out there in the world who would come to the Mises University once, maybe twice, so you get all of the courses that were offered because, of course, you couldn't hear them archived on the internet back then. There wasn't an internet back then.
and so we just assume that there's you know somewhere between 500 and a thousand
people in the world who would want to come to this and then after that we
would have to come up with some kind of new program but the reality is is that
the number of people who want to come new each year expands right and we're
getting you know students of students sons and daughters of members you know
You know, all that stuff is starting to really expand the pie, so to speak.
You know who had a really strong sense of this long before I understood by this, I mean,
how much hope we can put in the fact that there's always a new generation of thinkers,
you know, a new group.
It was Murray.
He always had this kind of real long-term view towards education.
And I remember being on the phone with him and puzzling about some young professor somewhere
having written some crazy thing or whatever and he'd always just say, Jeff, don't worry
about it.
I mean, the next generation, the next generation, the generation after that, we'll get it right.
And I remember thinking at the time, you know, he doesn't, he's not alarmed enough about
the Errors of the current generation, but in fact, he saw something I couldn't have seen at the time, which is that time always marches forward and there's new people and new ideas, and that's a wonderful thing.
He often wrote about the youth and how much hope you can put into this constant, this relentless change that's associated with the fact that there's always a new generation to teach.
Absolutely. Murray always said, and I'll always remember, he said, in the short run, I'm always pessimistic. In the long run, I'm always optimistic.
and once you adopt that and really grind that into your sensibilities life is a lot easier basically and a lot more fun and you know the lesson of youth is so very important you know and it's institutionalized in the Mises University I mean there's a lot of our members and older people who would like to come to the Mises University but we just don't you know
to Convert Your Friend, Your Classmate to Convert Your Grandfather, Your Grandmother
How do you get a job like you have?
is that, well, there are many things I can observe, but one is that you're a very hard worker, a very creative thinker, but also you're a generous scholar. You're always giving of yourself and your ideas for something big and something important, and you've done this relentlessly for a very long time and produced some wonderful work that's going to continue to serve the Austrian School for many generations in the future. So I want to say thank you two for that, and thank you for joining us on the broadcast.
Thank you very much. I enjoyed it.