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NOTE An Interview with Walter Block and Bill Barnett

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Welcome to the Mises Institute Podcast, and we have a very special show that's been called today.

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We have two refugees from New Orleans.

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The Bopsy twins.

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They've been with us now for several months.

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Ever since that horrible time.

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Walter Block, who's a well-known Austrian economist and a libertarian theorist.

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But not as good-looking as...

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And then I'm glad that we don't have a video here, because you can see the glorious face of William Barnett, who is a specialist in macroeconomics, and also Mises, and they both are leaders of the Virginian movement there at Loyola University, where the Austrians are gathering increasingly, mostly undergraduates, yes, entirely undergraduates, they're wonderful colleagues and family, and we'll be able to talk just a little bit about that, but all students, all faculty were chased off,

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So, but New Orleans' loss is our gain. You've been here since... When did you get here, Ludwig?

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About a couple of days after... No, no. It was... The flood was September 28th?

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No.

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When was it? August 28th.

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Wasn't it?

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When was it?

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About then.

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August 28th.

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It was the end of August.

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I went to three or four days to Little Rock. I drove up there, because I thought I'd be

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because I thought I'd be coming back, and then when it looked as if I couldn't go back right away,

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I went to Vancouver for a month of September, and I've been here pretty much since the beginning of October,

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and now it's November 20th, so all of October and three-quarters of November.

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Well, actually, it's Bill, and I'm not really sure because I don't really think my mind doesn't work that way,

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I've spent a little bit over four weeks here, but gone home one weekend, and one time there

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was a two-week gap.

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So I'm talking about actual time here.

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One weekend.

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Was it?

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One week, whatever.

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Anyway, the actual time here amounts to, say, four-and-a-half working weeks.

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Working both of them, working from early mornings to very late at night, every day.

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No, no, that's not quite true.

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I work from early mornings.

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Walter shows up much later in the day. I'm always here before 7, sometimes before 6. Walter straggles in much later in the day.

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You work through the Auburn Alabama game. It's unprecedented. That is dedication.

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Yeah, well I straggle in at around 8 or 8.30 or 9 o'clock sometimes. We've been working pretty much 14-hour days because we've got no students,

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We've got no classes, no wives here, no family here, so we just have each other to work with.

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For years we've talked about the Mises Institute kind of serving the role of the Institute Geneva that took Mises under crisis.

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Yeah, and I tell you, the people here, I mean you of course, but you know, Lou and everybody, the whole staff, have just been marvelous to us.

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really, really has made us just feel so at home, provided for all our needs in terms

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of, you know, what we need for research, but also living facilities, and then of course

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the wonderful library here. So it really has been very, very productive. And I would say

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Walter says 14-hour days. The truth of the matter is we have been leaving here usually

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between 10.30 and 11 or 11.30 at night. Occasionally, you know, maybe a little bit after 10. But,

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And so we've been putting in good long days, more like 15-hour days, 16-hour days, whatever.

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But it's been very enjoyable, you know, because Walter and I get along very well, and interested

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in the same things.

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If I could talk about what you've been working on, it's not just crosswords or something

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like that.

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Mises' macro-crossword.

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I think I wrote three or four. It's strange. I've only been in New Orleans for four and

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a half years, or four years, depending on how you count it. Bill has been born there

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and worked there. Well, he'll tell you about that. So I have a different perspective. But

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In my experience, whenever there was a hurricane, it was sort of a pain in the neck, a minor disturbance,

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because you'd have to get into a big traffic jam and go ten hours for a two-hour trip,

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and then you come back a day later. So I was almost thinking, you know, I'll stay,

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and toward the last minute I chickened out again and I went and I had two days' worth of underwear,

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And I figured I'd come right back. And then when the things burst, the levees burst and the flooding, and I knew I couldn't come back. So it was very different this time.

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The view, of course, is it's not so much the storm as it was government incompetence with the levees and all sorts of other incompetences with the Army Corps of Engineers.

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And perhaps the best picture that I remember is all those buses, those school buses, tons of school buses halfway up to their hubcaps in water, and then there were people in the, it used to be called the Superdome, but now it's called the Sewer Dome.

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And so here you have people and here you have buses and never the train shall meet and that's sort of like, if you had to take one picture of government at work, you could do worse than pick that one.

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I remember very well these days, when everybody was concerned about the hurricane, and I think it was in Sunday, everybody was very worried, then Monday came, and all the reports said that it was fine.

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I seem to remember reading that the FEMA, even the FEMA bureaucrats were saying, well, it looks like we're going to dodge the bullet.

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Well, that's when the levees broke.

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Well, actually that's not true. The levees didn't break, although they may call them.

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We have levees at the river and the lake, and they are very broad at the base, and they

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rise.

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So there's a huge, you know, rise, the slope is very gradual, so that there's a huge amount

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of mud between the water of the lake or the river, because, you know, we're in between

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the lake and the river, and the land in between.

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But the canals, which is where they broke, these are, you know, flood walls, in effect,

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What about people who say that even if it were private that nothing could have stopped that storm, or at least that private markets would have never been willing to undertake the expense necessary to have stopped that storm? This is just a fluke.

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Well, I think if they asked the whole question, if it was private, would New Orleans exist

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like it did then, like, you know, at the time of the flood?

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I mean, you know, government subsidized flood insurance, government built levees, things

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like that.

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Without that, New Orleans, as we knew it before the flood, couldn't have existed.

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The land wouldn't have supported that kind of population, and it wouldn't, I don't think,

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The New Orleans is glorious, and if it wouldn't exist in the market, isn't that a market failure?

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The question is, you know, to what extent New Orleans should be rebuilt.

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Now, you have to understand, of course, that I come from a little bit different perspective.

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I live, you know, if you have this visual picture of New Orleans in that big bend in

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the river, the Crescent City, to the west there's the next downward loop of the river.

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It's like an inverted triangle with the apex at the base, you know, standing on that.

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And I live way down in that point, you see.

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So I am on very high land.

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I've been there through all kinds of floods in the last roughly 30 years. Never had a

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drop of rising water in my house. Don't even have to have flood insurance, but I do. And

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you know, I didn't evacuate. I slept through the hurricane and everything was fine and

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my wife stayed with me and she didn't leave until the next day when the rising water started

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and they said, well, you're not going to have electricity for six years and all that kind

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and Money and Credit, The Theory of Money and Credit, The Theory of Money and Credit,

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Let me talk about this market failure idea.

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I guess it's possible if we collected half the GDP, which, by the way, the government

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now does, but let's say half of what's remaining and put it all into Auburn.

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We could make palaces here, we could make Versailles or something like that, but it's

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not true.

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I mean, Auburn is just a small town of 20-30,000 and Opelika is an ordinary town, but we could

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have palaces of gold if we took, say, one quarter of the GEP and put it all into Auburn-Opelika.

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Does the fact that we didn't do that show that there's a market failure?

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You know, because in the view of the owners of this money and wealth and resources, they

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have decided in their infinite wisdom not to pour it all into Auburn.

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So it's hardly a market failure just because something magnificent and palatial could be

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existing here and isn't.

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You have seen the football stadium, though.

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Talk about palaces.

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But you know, there's another thing that I don't think most people realize with respect

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The Mississippi River comes down from the north, and it's got all kinds of loops and bends, but then it comes over and it makes a dogleg coming down from the north, it makes a dogleg to the east before it gets to the gulf.

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And the Mississippi River doesn't like that dogleg.

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The Mississippi River, forces of gravity and all that, would like to head due south through the Atch-Flyer Basin, the Atch-Flyer River, the Atch-Flyer Basin.

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You can see on the map where Morgan City is, that's where the Mississippi River wants to go.

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And the Corps of Engineers spends, I don't know, how many millions and millions and millions of dollars a year trying to keep it from going that way,

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to keep the water flowing past the city of New Orleans.

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And if that, what they call the old river control structure, if that thing ever breaks,

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the Mississippi River is heading south and New Orleans is going to be pretty high and dry, you know.

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going on since the interwar years, hasn't it?

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Actually, I think that the real, the levy system in getting all that started, started with the Great Flood of 27,

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which, you know, flooded out the whole Midwest and all that, and that's when the government really said,

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we're going to, you know, put this thing, you know, we're going to teach the Mississippi River a lesson, you know, about what it should do.

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We'll build up these levies.

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The more you ask these questions, the more questions there are. This levies-only strategy of the Army Corps of Engineers is probably just wrong-headed, or at least, since there's no innovation, there's no market test.

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Yeah, well, we really can't tell what the market would do. It's sort of as if shoes

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were socialized all the time and now some maniac was saying, well, we should privatize

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shoes and, you know, immediately the questions would come up. Well, how would we get brown

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shoes? Would we have black ones, pink ones, whatever? How about shoelaces? Where would

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they sell shoes? How would the poor get shoes? Whatever. One of my interests that I have

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been slacking off since I've been working with Bill on macroeconomics, which we'll talk

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The first thing I want to talk about has been privatization of bodies of water, puddles, oceans, lakes, rivers, seas, whatever.

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My view is that if it moves, privatize it, and if it doesn't move, privatize it.

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I'm not sure whether bodies of water are moving or not, but we've got it covered. They should all be privatized.

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Now, if the Mississippi River Company owned the Mississippi River and someone owned the Gulf of Mexico or the Atlantic Ocean or what have you,

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All we can say for sure is that things would probably be very different. They wouldn't be doing what the government is doing.

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And there would be some sort of market tests in terms of entrepreneurship and management, such that the people who treated their resources rationally would make money and others wouldn't.

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So my view would be that ultimately, if you're talking about privatization, you're not just talking about streets or whatever.

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We're talking about the river and the lake and the oceans to the full extent.

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And that would be the ideal, to have everything private.

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And if everything were private, you'd have entrepreneurs doing things, not FEMA type

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people who...

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It's not so much that FEMA didn't help.

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It's rather that FEMA prevented other people from helping.

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Somebody like Walmart would bring in bottles of water and FEMA would say, you can't do

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it.

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And then there were rescuers that were told to go to Atlanta to take lessons in sexual

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You know, when people say, well, you know, private charity won't work or anything, you know, look, here's, you know, those people, and they weren't the only ones. I mean, everybody was pitching in from the top to the bottom. Everybody was in there doing whatever they could to try and help their fellow man. People say that, you know, oh, without government taking care of the needy, you know, nothing, you know, they'll all die on them. It's just pure nonsense. People overwhelmingly are basically good.

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Overwhelmingly, people are basically decent, honest, hardworking, and that kind of stuff.

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And when you don't see the right characteristics in people, you can usually go back, almost

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always go back, and find that it's a result of something that government has done to change

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their mentality to a welfare mentality or something like that.

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But you leave people with their own devices, and they're basically decent, hardworking,

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nice people.

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This might be a peculiar question, but some decades ago there was a debate in the literature about the business and charity, whether business should be coughing up money for private donations for this and that,

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and Friedman wrote a famous article saying that really business shouldn't be, that the business of businesses maximizes value for the stockholders and that's it, so they shouldn't be giving donations and charity.

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Well, yeah, but there's more to maximizing value for stockholders than looking at the

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short-run profit and loss statement.

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In other words, the stockholders also, to use the terms of neoclassical analysis, are

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interested in utility welfare maximization, in the sense that, again, that's neoclassical

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language.

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But in other words, whether you are an individual, whether you're an individual owning stock,

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The Theory of Money and Credit

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for Employees.

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So, I mean, this idea that Friedman has that all the managers of the business should be

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doing is looking at what would maximize the short-run profits, you know, and it's just

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to my way of thinking, the way we're looking at it.

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Well, I think you have to divide the question into two.

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One, what would happen under pure free enterprise, and two, what would happen nowadays or what

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does happen nowadays.

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I agree.

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One of the big impetuses of the lawsuit against Microsoft ostensibly on antitrust was the fact that Microsoft wasn't giving charity, and not just charity, but payoffs to Washington, D.C., which I don't know if you want to call it charity or not.

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and so this sort of defensive charity, in other words, if a company knows that the bureaucrats

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are going to get after them, if they don't give to the Boy Scouts or the Girl Scouts,

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whatever, then you can justify it on the grounds, well, you know, they've got to protect themselves.

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Now let's forget about that. Let's suppose we're in pure laissez-faire society, so there

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was none of this motivation to give to the Boy Scouts or the Girl Scouts because if you

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didn't then they would raise your taxes.

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An example of that would be the price gouging, right?

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I mean, they're threatening Walmart with price gouging.

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First they would have an incentive to give things away to demonstrate that they're not gouging.

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Well, yeah, shoot them for part price gouging.

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But in a purely free society where there'd be no problems with price gouging,

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then the question would be, I guess, laissez-faire.

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Should a company have blue tablecloths or green ones or pink ones?

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Well, let the market decide.

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In other words, some companies would then say, okay, look, we adopt the Friedman rule.

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We give not one penny to anyone, and if you don't want to buy shares in our company, don't buy shares in our company.

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You don't want to buy our products because you don't want to work for us because of that.

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That would be one way of going. Another way of going would be, look, you know, we're members of the community,

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we've got to give to the symphony orchestra, we've got to give to the Girl Scouts and the Boy Scouts.

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The Boy Scouts, even though they don't want to have Gay Scout Masters, etc., which is another subject.

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And then there'd be third, so, you know, like Ben and Jerry's ice cream company would give money up the kazoo to everybody and then you'd have a moderate view.

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And it might be that all sorts of firms could survive, you know, like large, medium and small firms survive.

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Well, big, small and medium and no charity companies might all survive.

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In other words, the market would sort itself out and there is no right answer or wrong answer.

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Exactly.

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So Friedman has only sort of got part of the answer, but I don't think he grasps the full

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panoply or beauty of the marketplace, where many different strategies, it's very similar

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with tenure.

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Should you have tenure or not?

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Well, in a purely free society, some companies or universities would have lots of tenure,

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others would have no tenure, others would have intermediate, sort of like do you have

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long contracts or not?

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It's a management technique and we, Austro-libertarians, don't specialize, unlike the coctopus types,

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in dictating management strategies.

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We would say any non-invasive management strategy is legitimate and let the market have, Mao

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said many flowers bloom or let a hundred flowers bloom, or let a hundred techniques of charitable

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giving bloom and we'll see and maybe they'll all survive.

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This is a funny article that came out that soon after.

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Are you in favor of freedom?

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Sometimes it's difficult to figure out all the information about what that means, right?

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Yeah, well, it's a many-splendored thing.

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But there's an article that came out heralding Wal-Mart's role in after the flood,

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and the article concluded something like,

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well, making Wal-Mart should be in charge of FEMA.

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Which, of course, would be the worst thing, right?

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Yeah, then they'd have government bureaucrats in there telling them, well, you're bringing

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the wrong colored toilet paper to these poor people who've been flooded out, you know?

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So you'll have to change that.

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Putting Walmart in charge of the relief efforts instead of FEMA is very similar to what George

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Bush is trying to do, is give charitable groups welfare money and let it be filtered through

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them.

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Yeah, our private charity works better than the private charity.

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The reason it works is because it's private.

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Exactly.

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I mean, you know, there's this expression, shirt sleeves to shirt sleeves in three generations.

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It means that just because you're a successful businessman doesn't mean that you have any

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sort of guarantee.

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You're only successful today.

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Who knows about tomorrow?

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So what this philosophy is saying, ah-ha, you're a successful businessman, we'll put

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you in charge, we'll take you out of the market which made you successful in the first place,

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and we'll assume that you'll be successful forevermore.

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The Market is only a day by day, or you're only as good as your last sale.

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Well, it's even worse than that, Walter, because it's, to me, it's saying, look, here's a

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guy or a group of people who are wonderfully successful in the market as entrepeneurs,

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and now, because they were great as entrepeneurs, we're going to make socialists out of them,

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and, you know, socialist managers, and we expect them to be great at being socialist

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managers.

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And it seems to me that the very kind of people who are great as entrepeneurs and private

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Sector Managers would absolutely be at their worst in that socialist environment and be

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the very ones who after about a week would get me the hell out of here, man, let me go

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back to the market.

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And yet there is a certain coherence in it.

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In other words, when George Bush does that with, say, religious groups giving out charity

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because they do it so well, or when he says, let's let Walmart be in charge of relief efforts,

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there's a certain coherence about that.

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I mean, it's not totally crazy.

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The coherence is here there are people who've proven themselves successful, so let's get

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the government behind them.

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But the cloven hoof is that the market has its own logic and you're just short-circuiting

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that.

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And it's so sad too when you see, for example, a successful businessman being taken out of

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the market.

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What a loss to society that is.

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Yeah, absolutely.

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It's sort of like we say to our colleagues who become deans, you're going over to the

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dark side.

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Well, being a, what do you call it, a bureaucrat, an administrator, we're only kidding, but

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here it's really true, they are going over to the dark side.

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Well, in fact, if you think about it, probably the best thing you could do would be to get

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the worst businessman and put him in charge of the bureaucracy, because they might, you

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know, so bollocks up the thing and all that they could do less evil than they do now,

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you know what I mean?

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Well, you know, the agriculture department couldn't get the subsidies out to the farmers,

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The agricultural subsidy is a whole other issue, I mean at one time there were a lot of farmers

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and very few farm bureaucrats and as the years went on there were fewer farmers and more

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bureaucrats and now I think the bureaucrats outnumber the farmers, it's just...

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Supposedly that's true, that they have more people working for the ag department than they have foremen in this country, which makes eminently good sense to anybody who...

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It is interesting that there seems to be an impulse, and it's widely shared, that if you really want something to be institutionalized and become a permanent part of the structure of our life as a society or something,

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We should codify it with a government informator and say that was really great what Walmart did with this, but let's make sure they do it again and appoint them as the official...

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Yeah, absolutely.

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Precisely.

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I think there are a lot of people out there who really are of very, very good will, good

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intention and all, and they look at it and they just say, gee, Wal-Mart really helped

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The Theory of Money and Credit

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Motorcycles, and apparently had the right connections and got a contract to deliver over

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a hundred million dollars worth of, you know, campus, what do you call them, those motorhomes

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or whatever, not motorhomes, but you know, manufactured housing. I mean, if government's

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going to get involved, it's going to be corrupt.

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Let me answer your question in a slightly different way and more generalize it. Your

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question was, well, you know, why are people so open to this and why, when they hold hearings

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on price gouging, do the senators think they can get away with this? Why do they think

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they'll have public support? And I think they're correct. They'll have public support despite

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the fact that a lot of people have taken economics 101 and know just what price gouging means.

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And one of the answers that makes sense to me is this whole socio-biological thing. Another

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Another experience I have is every time I get a freshman student, they're filled with

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this milk of socialism or human kindness, socialism, they're just predicated on that.

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I remember I had this class, you know, they were really hopped up on the minimum wage,

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by the way, which Walmart has now shown itself to be a little weak on.

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And I wasn't planning on doing anything on the minimum wage, but somehow the class was

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so interested in this, so we did like six weeks of minimum wage, and at the end of that

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There was this bright girl, I think she was the valedictorian of the whole school, and

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what she said is, I see your point, but I don't like it.

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There's sort of this visceral hatred and suspicion of the market, and the sociobiological

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analysis of this is that we've only been civilized for, I don't know, 5, 10,000 years, but for

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millions of years before that we lived in caves or in the trees or wherever we were,

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And in those times you lived in groups of 10, 20, 30, 50 people tops.

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And then the only kind of cooperation that you could have would be explicit cooperation.

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You know, I'll scratch your back, you scratch my back, here help me carry this buffalo or

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whatever it is.

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There could only be explicit cooperation.

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But now we live in groups of millions and billions of people.

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Now there's such a thing called implicit cooperation markets.

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I mean the way to get people to help the New Orleansians is to allow prices in New Orleans

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to Rise, so that brings incentives for people from Tennessee or Auburn to come help us.

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In addition to the ordinary benevolence, you now have selfishness as a motive, but people

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are not biologically attuned to this yet because it's too short a time biologically.

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They're hardwired the other way?

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Hardwired the other way, precisely.

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Thank you, Professor Hayek, I believe.

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Is that your name?

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Hayek was, this was one of the Hayek insights. And look, Hayek wasn't all bad. When Drift

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came into the room, Bill and I were having this furious debate over Hayek, is he a pinko,

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is he really an Austrian, you know, this, that and the other. But I don't think...

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Well, actually, we talked about Kirzner about it.

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Well, Kirzner on Hayek, it was, but now it's relevant to the Hayek. And Hayek certainly

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I believe in this, yes, and I think there's a lot of sense to that, that people are hardwired

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towards socialism, which is why we have this sort of Rock of Sisyphus, we, the Mises Institute,

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the Loyola Group, all people who are favoring free enterprise, Austro-libertarians, you just

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keep having to keep pushing and pushing and pushing, it's such a struggle because biologically

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people are hardwired to have the opposite of you.

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When you say hardwired, see, I'm not sure, I mean, I think I agree with some of what

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you're saying.

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I'm not sure really exactly what's involved with that hardwiring, though.

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I think about the stuff about, you know, and we were talking about this very thing the

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other day, about the rationality versus the emotions.

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And much as, you know, in the Misesian sense, that yes, every human action is rational,

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but if you, you know, from a praxeological point of view, but if you go to themology

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The Theory of Money, or how do you pronounce that word. Then we get into psychology. We

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have to admit that there are, from that point of view, there's irrationality. Just like

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from praxeological, there's no indifference, but when you get over to the themology, you

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know, yeah, I'm indifferent to whether I wear the red or blue shirt. My point is that when

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you get over there, people are affected very much by their emotions. And so all kinds of

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from each according to his ability, to each according to his needs.

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Doesn't that sound great? Not if you rationally analyze it.

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My favorite one on that is, what is it, people not profits?

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Yeah, people not profits. And my favorite is, human rights over property.

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The point is, why is the emotion so antithetical to the mortgage?

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I don't know.

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See?

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Well, that's the socio-biology.

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Reverent?

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Oh, I don't think it's education.

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I remember my little daughter, when she was like in the second grade, she'd come home,

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daddy, daddy, you're being environmentally incorrect, you know.

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She's just a little baby and I would try to argue with her and my wife would sort of slap

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What about this insight, that to be aware of economic law as part of the structure of reality, and the way it limits how we can control the world,

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We don't like to think about that because we don't want to believe in it.

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Yeah, of course.

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Whereas the economic law says, no, there are some things you can't do.

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That's a...

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Nobody wants to believe in scarcity.

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Nobody wants to believe in scarcity because as soon as you have to face the reality of

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scarcity, it tells you, guess what, all those dreams that you have, all those longings and

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You better think again, because you're not going to have everything you want, or as they

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say, they don't say, but you can't have it all, and so sure, that's exactly it.

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People really, really want to live in a post-gacity world, and part of the problem with some economics

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as I see it is that it essentially tells people that, hey, if you just put the right people

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This point about you can have it all, I think, rings a chord in me with the feminist thing,

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The idea that young women can have it all, they can get a Nobel Prize in chemistry, they can have five kids, they can have a loving relationship.

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It's sort of post-scarcity or non-scarcity applied to feminism or to male-female relations, and it's been a horror.

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Absolutely.

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A lot of women went that way and didn't have children and greatly regretted it, and then this whole thing with the...

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What's his name from Harvard? The president of Harvard who said that maybe women couldn't...

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Sommers?

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Women couldn't be top mathematicians or something.

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He was practically killed by the academics

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because, you know, even at a supposedly great university

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like Harvard, you're not allowed to talk about these things,

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let alone actually analyze them.

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Well, it's also true with anybody coming out

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of an undergraduate degree these days,

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they believe that they're going to enter the workforce,

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get a high salary because they have a degree,

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and they're going to be in charge of others.

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Why, rightfully so!

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That's when I enter the workforce of the strategy.

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Listen, I just came up with an objection to your point about freedom.

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If what you're saying is right, you would have a hard time accounting for the liberal revolution, for the existence of liberty at all.

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Well, I would say that this, I've heard this argument before, and I would say that freedom is an aberration.

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If you look back at the broad history of civilization of all around the globe for the last, I don't

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know, five, ten thousand years, how much liberty have we ever had?

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Okay, you had the US in 1776 and you had England for a century and you have the Mises Institute.

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But the Libertarian Party gets what, one-tenth of a percent of the vote?

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Well, it's part of the evidence that freedom is an aberration, freedom is a precious flame

383
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I want to explain why the aberration exists.

384
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But no, but you say why they exist. It's something that happens. It's like throwing all the seeds up in the air.

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Most of them fall on fallow ground. But one happens to land in a place and it blooms for a while

386
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until a guy comes along with the sickle and cuts it down.

387
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We have less freedom today in this society than our forebears did 200 years ago.

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They didn't have this overweening federal government intervening in everything in their

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life, sending out every ten years, if not more frequently now, this so-called census

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where what they need to do is count people so they can allocate the representatives to

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the Congress.

392
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No, no, no.

393
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They send this thing out and they want to know how many bathrooms you have in your house

394
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and do you have carpets on you, all this kind of stuff.

395
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We have lost so much of the freedom that the people who went before us fought for and bled

396
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for that it's immoral for us to just acquiesce in this loss of freedom that we have.

397
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And in the United States, I mean, this is much like Rome, if you say, well, the Roman

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Empire ended when Caesar crossed the Rubicon and went down, you're kidding yourself, you

399
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know.

400
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I mean, excuse me, the Roman Republic ended then. You're kidding yourself.

401
00:36:45.880 --> 00:36:51.880
I mean, the Roman Republic, Caesar couldn't have crossed the Rubicon and been successful

402
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if the Roman Republic was alive in any real sense at the time he did that.

403
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Rome continued in its material glory in expanding the empire and all that for a long time after that.

404
00:37:05.880 --> 00:37:13.880
But, in terms of human liberty, Rome was on the decline, okay?

405
00:37:13.880 --> 00:37:18.880
In our society, I believe, it has been on the decline.

406
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I can't set an exact date, but I think it's the date in 1787 when Hamilton's gang hijacked the Articles of Confederation,

407
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went to Philadelphia and wrote a constitution.

408
00:37:34.880 --> 00:37:40.880
I am basically an anti-Federalist, not a Federalist. And so I really think that in terms of human

409
00:37:40.880 --> 00:37:46.440
liberty, we have been on the decline since then, even though materially we're growing.

410
00:37:46.440 --> 00:37:51.640
But now we're going to reach a point, who knows, it could be very soon, given the amount

411
00:37:51.640 --> 00:37:56.520
of debt that we have internationally and the way nobody's saving domestically and the huge

412
00:37:56.520 --> 00:38:02.680
amount of government intervention, where we enter into a long period of economic stagnation

413
00:38:02.680 --> 00:38:07.760
and Decline, and of course with increasing losses of our liberty.

414
00:38:07.760 --> 00:38:13.240
So I think Walter, I mean to go back, I think Walter's right, human liberty is an aberration.

415
00:38:13.240 --> 00:38:17.400
Well, I would give further evidence. Look at the careers of Mises and Rothbard, they

416
00:38:17.400 --> 00:38:24.800
spurned and hated and not given their due. I think at one time, I just read Guido's book,

417
00:38:24.800 --> 00:38:31.040
his forthcoming book on Mises' biography, magnificent book, and at one time Mises and

418
00:38:31.040 --> 00:38:36.760
and Hayek were seriously contemplating the end of Austro-libertarianism.

419
00:38:36.760 --> 00:38:43.200
When I first met Murray in 1966, 1967, thanks to him I think I knew every libertarian in

420
00:38:43.200 --> 00:38:44.200
the whole world.

421
00:38:44.200 --> 00:38:46.520
And there were just a dozen of them.

422
00:38:46.520 --> 00:38:51.600
And this was after the Mises Depression period, I don't mean economic depression, but personal

423
00:38:51.600 --> 00:38:54.380
depression over the fact that liberty was dying.

424
00:38:54.380 --> 00:38:59.200
It's just lucky that there was a Rothbard to carry it on and fan the flames and have

425
00:38:59.200 --> 00:39:07.000
and the presence to create a whole movement. Without him, possibly, you know, liberty would

426
00:39:07.000 --> 00:39:11.880
be something you read about in David Hume or John Stuart Mill or Adam Smith or the Founding

427
00:39:11.880 --> 00:39:16.560
Fathers or something. We're just very lucky we've got some of it. But I think that if

428
00:39:16.560 --> 00:39:21.600
you look at it realistically over all the centuries of all the countries in the world

429
00:39:21.600 --> 00:39:26.760
and ask how much liberty we've had, we've had very, very little of it. It's a very rare,

430
00:39:26.760 --> 00:39:27.760
precious thing.

431
00:39:27.760 --> 00:39:35.760
What are you talking about? We've got a tremendous market revolution taking place in China.

432
00:39:35.760 --> 00:39:38.760
The central planning is unraveling.

433
00:39:38.760 --> 00:39:41.760
Yes, there are some good things.

434
00:39:41.760 --> 00:39:56.760
No, no, no, no, no. Hold the horses here. To say that central planning is unraveling, you know, is, I think, to misunderstand, would you screw the mic up, Walter?

435
00:39:56.760 --> 00:40:14.520
The Socialist of All Nations as Hayek referred to them, and I would say, you know, the old

436
00:40:14.520 --> 00:40:21.640
definition of socialism, you know, ownership of the means of production, is really outmoded.

437
00:40:21.640 --> 00:40:25.640
But the real issue is, who's going to control, you know, things?

438
00:40:25.640 --> 00:40:29.760
Is it people who control their own lives or other people, and particularly, from my point

439
00:40:29.760 --> 00:40:33.240
of view as an economist, with respect to production, et cetera?

440
00:40:33.240 --> 00:40:37.820
Well, what they've realized is that this whole way of controlling things, where the state

441
00:40:37.820 --> 00:40:42.160
owns everything and makes all these decisions of, hey, that doesn't work and we, you know,

442
00:40:42.160 --> 00:40:43.240
we can't do it.

443
00:40:43.240 --> 00:40:47.040
So now they give up and say, okay, everybody can own property and you can do this and you

444
00:40:47.040 --> 00:40:53.760
You can do that and all, but guess what? Here's 400 pages of regulations if you want to open

445
00:40:53.760 --> 00:40:59.000
a snowball stand. Well, you say a plan market, I don't even know if I like the term. I like

446
00:40:59.000 --> 00:41:04.720
the idea of an interventionist. It's an interventionist economy. So the idea that we... Yeah, sure,

447
00:41:04.720 --> 00:41:11.320
the Chinese are having more economic liberty now than they did on the heyday of Mao, and

448
00:41:11.320 --> 00:41:15.560
that may go on increasing for a while, but they haven't given up politically. And even

449
00:41:15.560 --> 00:41:19.400
And even if the Communist Party loses power there, they're still going to have some sort

450
00:41:19.400 --> 00:41:20.400
of government.

451
00:41:20.400 --> 00:41:24.600
And that government and the people who constitute that government are going to find it in their

452
00:41:24.600 --> 00:41:28.520
own self-interest to increase regulation.

453
00:41:28.520 --> 00:41:29.520
And that's what's going to happen.

454
00:41:29.520 --> 00:41:33.520
And this gets us back to the point we were talking about earlier.

455
00:41:33.520 --> 00:41:40.520
There's this impulse to impose markets or to control them or to kind of make them public

456
00:41:40.520 --> 00:41:41.520
property.

457
00:41:41.520 --> 00:41:45.160
Well, as with the Iraq war, you know, part of the idea here is that we're going to go

458
00:41:45.160 --> 00:41:49.600
into this country, we're going to establish a sort of democratic market society, you know,

459
00:41:49.600 --> 00:41:50.600
to force.

460
00:41:50.600 --> 00:41:58.920
And it's the same thing with school reform, you know, in the U.S., we're going to impose

461
00:41:58.920 --> 00:42:05.400
a kind of market setting on education, you know, and social security, where we're going

462
00:42:05.400 --> 00:42:10.920
to have a kind of a market, a centrally planned market settings.

463
00:42:10.920 --> 00:42:15.920
We're going to use market forces to benefit of a good in some way.

464
00:42:15.920 --> 00:42:20.920
Yeah, I guess this is called neoliberalism. I'm not sure what it's called. Quasi-Markets.

465
00:42:20.920 --> 00:42:26.920
Milton Friedman is sort of a past master at this, you know, sort of getting quasi-markets

466
00:42:26.920 --> 00:42:35.920
in tradable emissions rights and educational vouchers and all sorts of other weird semi-demi

467
00:42:35.920 --> 00:42:42.200
Quasi-Markets, very similar to the Tito kind of communism, you know, sort of, will have

468
00:42:42.200 --> 00:42:47.320
a socialism, but within the socialism will have some sort of market, and, you know, this

469
00:42:47.320 --> 00:42:49.880
sort of just gives markets a bad name almost.

470
00:42:49.880 --> 00:42:56.720
But what it does, it allows the exploiters, the parasites, who Marx thought of as the

471
00:42:56.720 --> 00:43:05.840
bourgeois, the, what we would call, the anthropologists, but who in point of fact are the people who

472
00:43:05.840 --> 00:43:12.840
who are the governmental class, who are the parasites and the exploiters, what it does

473
00:43:15.560 --> 00:43:22.560
is allow them to maintain the exploitation longer. In other words, if the public schools

474
00:43:23.700 --> 00:43:30.160
are about to collapse like they are in New Orleans, Indiana, who knows what could replace

475
00:43:30.160 --> 00:43:35.160
it? My God, we might actually have free market education. Well, wait, I've got a reform here,

476
00:44:05.160 --> 00:44:12.280
for the oppressors, the exploiters, to extend their control in the face of a system that's

477
00:44:12.280 --> 00:44:16.240
coming to collapse, it's coming to gridlock, and say, well, wait, maybe we can break the

478
00:44:16.240 --> 00:44:19.760
gridlock and extend our control for a longer period of time.

479
00:44:19.760 --> 00:44:25.200
It's really striking. What it points to is the danger that the worst kind of leaders

480
00:44:25.200 --> 00:44:30.320
you could have right now are those who sort of believe in markets, you know, they come,

481
00:44:30.320 --> 00:44:33.800
they exercise enormous power and they believe in the power of markets, and so they're going

482
00:44:33.800 --> 00:44:43.800
to sort of harness those on behalf of the state and its interests, and it's probably what we see largely in something like a Republican administration.

483
00:44:43.800 --> 00:44:44.800
Yeah, and as I said...

484
00:44:44.800 --> 00:44:54.800
Wait, wait, wait. Are you suggesting that this administration, Republican administrations, for example, like Nixon and now like Bush,

485
00:44:54.800 --> 00:44:59.800
how much does the size of the government increase under these guys?

486
00:44:59.800 --> 00:45:03.800
Are you suggesting that they believe in small government other than rhetorically?

487
00:45:03.800 --> 00:45:04.800
Yeah.

488
00:45:04.800 --> 00:45:08.800
Because you and I are going to have to have a talk if you believe that.

489
00:45:08.800 --> 00:45:13.800
Well, but businessmen and staff, all of them, and all over the place, are people who are

490
00:45:13.800 --> 00:45:16.800
good at painting and liberal thought.

491
00:45:16.800 --> 00:45:17.800
Yeah.

492
00:45:17.800 --> 00:45:18.800
Well, it was the same with Reagan.

493
00:45:18.800 --> 00:45:20.800
I mean, Reagan was great on rhetoric.

494
00:45:20.800 --> 00:45:24.800
You listen to some of his speeches and you say, my God, Murray Rothbard was the speechwriter.

495
00:45:24.800 --> 00:45:27.800
But the government in California, when he was a governor, grew.

496
00:45:27.800 --> 00:45:30.800
The Governor Grew, The Government of the United States Grew.

497
00:45:30.800 --> 00:45:32.800
They're the worst in some ways.

498
00:45:32.800 --> 00:45:33.800
Oh, yeah.

499
00:45:33.800 --> 00:45:38.800
But the real question now between Democrats and Republicans is simple.

500
00:45:38.800 --> 00:45:42.800
Under which one will a government grow least rapidly?

501
00:45:42.800 --> 00:45:44.800
Under which one will it become...

502
00:45:44.800 --> 00:45:46.800
They're all becoming more intrusive in our lives.

503
00:45:46.800 --> 00:45:50.800
Under which one will the increase in intrusiveness be less?

504
00:45:50.800 --> 00:45:53.800
I hope that is our answer to that, a priori answer.

505
00:45:53.800 --> 00:46:04.800
Praxeologically, I have it, but I'm not telling anybody. Since it's praxeological, only I could know it, right?

506
00:46:04.800 --> 00:46:08.800
Why don't you all talk a little bit about what you've been working on, besides customers?

507
00:46:08.800 --> 00:46:15.800
We've been working on having a good time. We laugh a lot. We laugh a lot when we work together.

508
00:46:15.800 --> 00:46:21.800
The wing of the building over there used to be almost monastic, but now it's just all this rock is so interesting.

509
00:46:21.800 --> 00:46:27.360
Well, when we first came here, I made a list of Katrina projects, and we only had five

510
00:46:27.360 --> 00:46:35.360
or six of them. One of them was the triangle paper. Bill and I just wrote an article about

511
00:46:35.360 --> 00:46:39.400
the fact that the triangle, which is a big part of the Austrian...

512
00:46:39.400 --> 00:46:40.400
The Hayekian triangle.

513
00:46:40.400 --> 00:46:44.040
The Hayekian triangle, which is a big part of the Austrian analysis of Austrian business

514
00:46:44.040 --> 00:46:46.800
cycle theory, we have some problems with that.

515
00:46:46.800 --> 00:46:48.600
I don't think that's correct.

516
00:46:48.600 --> 00:46:49.600
Oh, no?

517
00:46:49.600 --> 00:46:57.600
I don't think it's correct to say it's a big part of the Austrian analysis. I think it's a big part of the way that Austrians try to explicate their analysis.

518
00:46:57.600 --> 00:46:58.600
Fair enough.

519
00:46:58.600 --> 00:46:59.600
I think there's a big difference there.

520
00:46:59.600 --> 00:47:00.600
We think it's a wrong path.

521
00:47:00.600 --> 00:47:01.600
Yes.

522
00:47:01.600 --> 00:47:06.600
So that was one of our criticisms of the Triangle, and we now have this paper called the Post-Triangle.

523
00:47:06.600 --> 00:47:10.600
You know, given that the Triangle is not the way to go, what is the way to go?

524
00:47:10.600 --> 00:47:16.600
And part of that is interest sensitivity of various goods, regardless of structures of production.

525
00:47:16.600 --> 00:47:46.600
The Theory of Money and Credit

526
00:47:46.600 --> 00:47:50.600
for Austrians. If you look at Mises, he didn't have any graphs.

527
00:47:50.600 --> 00:47:56.400
And there's a simple, what I believe, reason for this, okay? And that is, as soon as you

528
00:47:56.400 --> 00:48:05.880
draw a graph, a graph now, you're implying mathematics. And you can't capture the essence

529
00:48:05.880 --> 00:48:12.680
and the truth of human action in mathematics. And the triangle, as we point out, you don't

530
00:48:12.680 --> 00:48:16.440
need a triangle to do what they're doing. Really, the only thing that's important, quote

531
00:48:16.440 --> 00:48:29.440
The triangle is that hypotenuse, and I can write you an equation for any hypotenuse, because it's just a line. It's one line or curve in a two-dimensional space. So hell, I can write you an equation for that right now.

532
00:48:29.440 --> 00:48:43.440
And then, as soon as you put it in that, and we do in the paper, that's one of the things we do, then you immediately see, well, gee, you know, that equation, the way they wrote that, that doesn't look too different from, say, a neoclassical growth equation. How about that?

533
00:48:43.440 --> 00:49:13.440
The Theory of Money and Credit

534
00:49:13.440 --> 00:49:19.040
We have to write them down so we can remember which papers we're working on.

535
00:49:19.040 --> 00:49:26.680
Some of them, because of the opportunity we've had now, some of them we've actually started

536
00:49:26.680 --> 00:49:29.400
and finished since we've been here.

537
00:49:29.400 --> 00:49:32.840
We did one on rates of time preference.

538
00:49:32.840 --> 00:49:36.840
The ideas were kind of hanging around in the background, wouldn't you say, some place in

539
00:49:36.840 --> 00:49:41.880
a file, in a paragraph or something, but we were able to take that and turn that into

540
00:49:41.880 --> 00:49:53.720
Well, another paper was Laidler who was a mainstream person and every once in a while

541
00:49:53.720 --> 00:49:57.920
some mainstream person will condescend and sort of talk about Austrianism and usually

542
00:49:57.920 --> 00:50:03.680
they get it wrong, but we had this very interesting paper on Laidler and we sent it to a journal

543
00:50:03.680 --> 00:50:09.760
and one of the things that Bill and I keep laughing about is the referee said, what was

544
00:50:09.760 --> 00:50:12.360
I said, make believe Laidler's mother is reading it.

545
00:50:12.360 --> 00:50:14.960
No, we were too nasty in the way we wrote.

546
00:50:14.960 --> 00:50:18.960
Wasn't that there was anything substantively wrong with the criticism, but, you know, it

547
00:50:18.960 --> 00:50:19.960
was just...

548
00:50:19.960 --> 00:50:20.960
And that's Walter.

549
00:50:20.960 --> 00:50:21.960
I'm a nice guy.

550
00:50:21.960 --> 00:50:22.960
Walter's nasty, you know.

551
00:50:22.960 --> 00:50:23.960
But Laidler didn't become the Mises' mother.

552
00:50:23.960 --> 00:50:24.960
Oh, no, no, no, no.

553
00:50:24.960 --> 00:50:25.960
Oh, no.

554
00:50:25.960 --> 00:50:26.960
You don't seem to understand the game.

555
00:50:26.960 --> 00:50:27.960
Right.

556
00:50:27.960 --> 00:50:28.960
Let me explain the rules for you.

557
00:50:28.960 --> 00:50:29.960
It's a one-way street.

558
00:50:29.960 --> 00:50:30.960
So Bill and I now have this joke.

559
00:50:30.960 --> 00:50:31.960
Whenever there's anything that comes up, we go, what would X's mother think about this?

560
00:50:31.960 --> 00:50:37.120
So one-way street. So Bill and I now have this joke whenever there's anything

561
00:50:37.120 --> 00:50:41.320
comes up, well, what would X's mother think about this? But we were able to

562
00:50:41.320 --> 00:50:47.880
finish, you know, the revisions that they wanted, you know, and finish that paper.

563
00:50:47.880 --> 00:50:52.200
Another two mainstream economists who've criticized Austrian business cycle

564
00:50:52.200 --> 00:50:55.200
theory in ways that we haven't criticized that are Eichengreen and

565
00:50:55.200 --> 00:50:59.240
Michener, and we're working on a paper there, and then there's this guy Tyler

566
00:50:59.240 --> 00:51:14.240
Colin, who wrote another critique of Austrian business cycle theory and we're having a book, but there was a chapter in it on the ABCT, so we're criticizing that.

567
00:51:14.240 --> 00:51:15.240
Has that been criticized anywhere?

568
00:51:15.240 --> 00:51:18.240
Oh, I'm sure it has been. You mean his book?

569
00:51:18.240 --> 00:51:28.240
Oh, the book has, but I don't think that this article on business, I'm not sure, I'd have to go back and check and see if we cited anyone else who's criticized it, but to my recollection,

570
00:51:28.240 --> 00:51:31.740
Are there other people that have criticized Cowan's business cycle?

571
00:51:31.740 --> 00:51:34.740
Oh sure, yes, people have criticized, oh yeah, absolutely.

572
00:51:34.740 --> 00:51:37.740
I don't remember it offhand.

573
00:51:37.740 --> 00:51:39.740
Let's see, what else?

574
00:51:39.740 --> 00:51:43.740
Oh, Coase, we just got finished with a Coase paper.

575
00:51:43.740 --> 00:51:45.740
We're jumping on Coase for a change.

576
00:51:45.740 --> 00:51:50.740
That's with one of NYU's law journals, the Journal of Law and Liberty, I think.

577
00:51:50.740 --> 00:51:52.740
A new NYU journal, which is sort of libertarian.

578
00:51:52.740 --> 00:51:55.740
That article is in the proof stage now.

579
00:51:55.740 --> 00:52:00.740
We're talking about collecting all the Austrian writings, and of course the problem is that it's like a 15-volume work.

580
00:52:00.740 --> 00:52:03.740
Yeah, well, we have a little coast industry here.

581
00:52:03.740 --> 00:52:11.740
And then another paper that, again, it was kind of started before we came here with a paragraph stuck away in a file somewhere,

582
00:52:11.740 --> 00:52:21.740
but that we then completed just yesterday, I guess, when Walter set it off, was a paper about, it's about Say's law and Keynes' money,

583
00:52:21.740 --> 00:52:27.660
Money, and it brings in the post-Keynesians. And what it does is very, very interesting.

584
00:52:27.660 --> 00:52:31.740
If you read, you know, I can remember growing up, Walter and I about the same age, I think

585
00:52:31.740 --> 00:52:36.780
a few months older, a year older, and I can remember when they said that money doesn't

586
00:52:36.780 --> 00:52:41.060
matter. And for the Keynesians, money doesn't matter. And it always struck me as strange

587
00:52:41.060 --> 00:52:45.820
because his is magnum opus, it's the general theory of employment interest in money, you

588
00:52:45.820 --> 00:52:51.220
know. If money doesn't matter, why is he putting it in the title of his magnum opus? And then

589
00:52:51.220 --> 00:52:56.220
Just before that, he's got the two-volume treatise on money, and before that, the tract on money and all that.

590
00:52:56.220 --> 00:52:58.220
And then you go in this thing...

591
00:52:58.220 --> 00:53:01.220
Let me just make another point on this.

592
00:53:01.220 --> 00:53:05.220
The question is, are the Chicagoans Keynesians?

593
00:53:05.220 --> 00:53:08.220
And our view is that there are two types of Keynesians.

594
00:53:08.220 --> 00:53:13.220
There are the Keynesians located in Chicago, and then there are the Keynesians located elsewhere.

595
00:53:13.220 --> 00:53:17.220
They're all Keynesians, and Friedman was quoted by Samuelson

596
00:53:17.220 --> 00:53:47.220
I asked Norton about that, and he said, well, you know, Samuelson misquoted me, and here's what I said, and here's my paraphrase of it, and he said, well, when it comes to the public policy recommendations in macro and micro, there's a gigantic gulf and a big difference between us and the Keynesians. However, when it comes to the tools of analysis, we're all Keynesians now. And I thought this was a reasonable summation, because she said, we're all Keynesians now.

597
00:53:47.220 --> 00:53:52.480
Surely the methodological, technical way that you approach a problem is much more important

598
00:53:52.480 --> 00:53:57.700
and is the undergirding of the public policy recommendations which are mixed up with values

599
00:53:57.700 --> 00:53:59.180
and stuff like that.

600
00:53:59.180 --> 00:54:06.280
So we have a part in this paper where we lovingly characterize the Chicagoans as Keynesians.

601
00:54:06.280 --> 00:54:13.480
To me what's interesting about this is that in his 36th work, Keynes says that look, what's

602
00:54:13.480 --> 00:54:20.600
What's critically important is money, and money has these two essential characteristics,

603
00:54:20.600 --> 00:54:25.800
which he refers to as the zero elasticity of production and zero elasticity of substitution.

604
00:54:25.800 --> 00:54:30.480
And yet, if you go out in the literature and look, the first thing I can ever find on that

605
00:54:30.480 --> 00:54:36.960
is a 52 or 53 article by Abba Learnaway mentions it, but kind of gets it wrong.

606
00:54:36.960 --> 00:54:42.120
And the only school of thought that takes this seriously are the post-Cajuns, and they

607
00:54:42.120 --> 00:54:43.120
get it wrong.

608
00:54:43.120 --> 00:54:49.080
I mean, and one of the things we point out there is that Paul Davidson, who is the, you

609
00:54:49.080 --> 00:54:56.160
know, Dean of at least American post-Casians, if not worldwide, in something he was writing

610
00:54:56.160 --> 00:55:01.840
very recently, and I forget the exact site to it, says, man, he says, good God, look

611
00:55:01.840 --> 00:55:08.120
at what's happened to growth rates in OECD countries since, you know, we got off of fixed

612
00:55:08.120 --> 00:55:12.880
Fixed Exchange Rates in 1973, he says, the growth rates have collapsed and the unemployment

613
00:55:12.880 --> 00:55:16.520
rates have gone up and on, and one of the big problems, he's not saying the whole thing,

614
00:55:16.520 --> 00:55:22.800
one of the big problems is the lack of fixed exchange rates, and then you say, well, what

615
00:55:22.800 --> 00:55:27.760
about, oh no, gold, gold isn't money, gold can't be money, ah, anathema, anathema, you

616
00:55:27.760 --> 00:55:35.040
know what I'm saying, wait a minute, you know, the gold standard is the best system of fixed

617
00:55:35.040 --> 00:55:40.280
Fixed exchange rates you can have. Now, to have gold money is even better, because if

618
00:55:40.280 --> 00:55:44.240
you have gold money, you don't have a system of exchange rates. You know, it's just an

619
00:55:44.240 --> 00:55:49.160
ounce of gold for four quarter ounces or whatever. But if you have even a gold standard, it's

620
00:55:49.160 --> 00:55:53.480
the best system of fixed exchange rates you can have. And yet, they're absolutely opposed

621
00:55:53.480 --> 00:55:59.080
to the use of gold as money, Barbara's Relic and all that stuff. And yet, they all in favor

622
00:55:59.080 --> 00:56:03.120
of fixed exchange rates. So what do they want? They want fiat money, fixed exchange rates.

623
00:56:03.120 --> 00:56:09.280
The Chicagoans have been dining out on the notion that money matters, as if only the

624
00:56:09.280 --> 00:56:14.680
Chicagoan monetarists think that money matters, but even the Keynesians think that money matters.

625
00:56:14.680 --> 00:56:17.960
They have different views on it, and one of the things that this paper makes clear is

626
00:56:17.960 --> 00:56:20.800
that money matters for them as well.

627
00:56:20.800 --> 00:56:27.420
The big problem that they have with fiat currency is that when you have changes in liquidity

628
00:56:27.420 --> 00:56:32.240
preference and people want more money, that this doesn't create jobs, because you can

629
00:56:32.240 --> 00:56:34.640
And always add a zero to a dollar bill.

630
00:56:34.640 --> 00:56:38.280
It doesn't take anything to produce more money, you don't need labor to produce more money.

631
00:56:38.280 --> 00:56:40.520
Right, just add a few more zeros.

632
00:56:40.520 --> 00:56:43.740
And they do concede that gold is helpful.

633
00:56:43.740 --> 00:56:48.120
But only if you live in a gold producing country, then they can go into the gold mines and that

634
00:56:48.120 --> 00:56:49.120
creates jobs.

635
00:56:49.120 --> 00:56:51.120
Assuming that the gold was money.

636
00:56:51.120 --> 00:56:54.080
Assuming that you had money, gold as money, right.

637
00:56:54.080 --> 00:56:56.360
But only a few countries.

638
00:56:56.360 --> 00:57:01.720
But our point is, look, you don't have to have a gold mining country, industry in your

639
00:57:01.720 --> 00:57:05.880
All you have to do is produce pianos or something and ship it out for the gold.

640
00:57:05.880 --> 00:57:10.960
So it doesn't matter that you don't have a gold mining apparatus in your country.

641
00:57:10.960 --> 00:57:14.720
Well, and then the other thing too is that's the zero elasticity of production part.

642
00:57:14.720 --> 00:57:17.480
Then there's a zero elasticity of substitution.

643
00:57:17.480 --> 00:57:22.600
But again, it's relevant for a society of fiat money.

644
00:57:22.600 --> 00:57:27.640
But if you had a free society where you would have commodity monies,

645
00:57:27.640 --> 00:57:31.480
well, if everybody said, oh, assuming that in that kind of society,

646
00:57:31.480 --> 00:57:36.880
You could have one of these collapses in confidence and a flight to liquidity and all that.

647
00:57:36.880 --> 00:57:40.080
And everybody says, oh, no, we don't want to invest in goods.

648
00:57:40.080 --> 00:57:41.680
We want money, you know?

649
00:57:41.680 --> 00:57:44.720
And so all of a sudden everybody would be hoarding their gold, right, and the value

650
00:57:44.720 --> 00:57:49.080
of gold would be going up and nobody would be spending it, as Sean Corrigan would say,

651
00:57:49.080 --> 00:57:50.600
yeah, you mean they're not going to eat?

652
00:57:50.600 --> 00:57:58.680
But anyway, so at any rate, what would happen is if the value of gold coins as money went

653
00:57:58.680 --> 00:58:08.800
Let's use silver coins. Let's have some platinum coins. Let's make bronze, zinc, lead, whatever

654
00:58:08.800 --> 00:58:18.160
coins. You don't have a zero elasticity of substitution of other goods for money in a

655
00:58:18.160 --> 00:58:24.080
free economy. In fact, the money might consist of some other goods. You might have gold and

656
00:58:24.080 --> 00:58:49.080
Another point we make in this paper is that even if you have a fiat currency, as long

657
00:58:49.080 --> 00:58:55.160
As long as the government doesn't have controls over wages, you don't need jobs creating dollar

658
00:58:55.160 --> 00:58:58.640
bills or gold or anything.

659
00:58:58.640 --> 00:59:01.800
If ever you have unemployment, that means that the wages are too high.

660
00:59:01.800 --> 00:59:06.160
And if the wages fall, you have no more unemployment.

661
00:59:06.160 --> 00:59:10.000
So even with a fiat currency, I mean, obviously we don't favor a fiat currency, but even with

662
00:59:10.000 --> 00:59:14.280
a fiat currency, there's none of this neo-Keynesian stuff that's justified.

663
00:59:14.280 --> 00:59:20.600
But you still need to, even in that, get away from that super macro-analysis that the monetarists

664
00:59:20.600 --> 00:59:25.040
in the Keynesians use and all and say, well, it's not really that you need wages to fall.

665
00:59:25.040 --> 00:59:31.120
You need some wages to fall relative to prices, say a lot, and others to fall maybe a little

666
00:59:31.120 --> 00:59:32.120
bit.

667
00:59:32.120 --> 00:59:37.520
In other words, you've got to let the real wages adjust in the market to where they do

668
00:59:37.520 --> 00:59:38.520
it.

669
00:59:38.520 --> 00:59:41.920
But, you know, talking about these other things, a couple of other things we've got, which

670
00:59:41.920 --> 01:00:09.240
The point here is, suppose I prefer red sweater to blue sweater, is there a rate in which

671
01:00:09.240 --> 01:00:15.960
Which I prefer it? No, you can't have preference, it doesn't admit of rates. Preference is what

672
01:00:15.960 --> 01:00:21.320
Mises calls singularism, you know, it's either this or that. So you prefer a bow tie to a

673
01:00:21.320 --> 01:00:25.180
regular tie, someone else prefers a regular tie to a bow tie, there's no rate at which

674
01:00:25.180 --> 01:00:26.180
you prefer it.

675
01:00:26.180 --> 01:00:27.680
The same thing with time.

676
01:00:27.680 --> 01:00:28.680
The same thing with time. Preference.

677
01:00:28.680 --> 01:00:29.680
Did you say you finished this paper?

678
01:00:29.680 --> 01:00:30.680
I don't know.

679
01:00:30.680 --> 01:00:31.680
No, no, we finished it.

680
01:00:31.680 --> 01:00:32.680
Finished it, that's amazing, because a lot of times people dip into this area and never

681
01:00:32.680 --> 01:00:33.680
quite get out of it.

682
01:00:33.680 --> 01:00:38.000
Minister, that's amazing, because a lot of times people dip into this area and never

683
01:00:38.000 --> 01:00:39.000
quite get out of it.

684
01:00:39.000 --> 01:00:40.000
Oh, no, no, no, no, no.

685
01:00:40.000 --> 01:00:44.080
And it's a relatively short paper, because what you have to do is distinguish between

686
01:00:44.080 --> 01:00:50.600
interest and interest rates, okay, and get into time preference that way.

687
01:00:50.600 --> 01:00:56.800
And we're not saying that the concept of time preference is a praxeological oxymoron, we're

688
01:00:56.800 --> 01:00:57.800
saying the rate.

689
01:00:57.800 --> 01:00:58.800
The rate.

690
01:00:58.800 --> 01:01:01.480
As long as you talk about time preference, yeah, they're good.

691
01:01:01.480 --> 01:01:06.480
Now we've got Ardinal, you know, and we can do this, and we don't have rape.

692
01:01:06.480 --> 01:01:11.400
As soon as you say rape, wait a minute, rape, now you're talking about objective, and you're

693
01:01:11.400 --> 01:01:16.200
talking about cardinality, and that doesn't exist in economics.

694
01:01:16.200 --> 01:01:18.200
And then, so, you know, we've got that.

695
01:01:18.200 --> 01:01:22.200
You know all these lines, doesn't he, in his paper on interest rates, did you?

696
01:01:22.200 --> 01:01:25.080
Guido's paper on interest rates is an interesting paper.

697
01:01:25.080 --> 01:01:29.000
I've read it about three or four times, and I'm not sure what he says.

698
01:01:29.000 --> 01:01:33.400
I think what he, what I get out of it, and I think there's a lot more in there, the problem

699
01:01:33.400 --> 01:01:38.480
with Guido is you have to read things, I mean, he is brilliant. The problem with this is

700
01:01:38.480 --> 01:01:41.960
he puts so much in there, you really have to study it very carefully. What I get from

701
01:01:41.960 --> 01:01:49.600
him is he's talking about actual versus theoretical, or what would have occurred had it not been.

702
01:01:49.600 --> 01:01:56.600
The natural versus the actual. Right. But this is a very minor paper. In a sense, it's

703
01:01:56.600 --> 01:02:26.600
There's only a terminological dispute, if you wanted a deprecated, you could say it's just terminology, but I think it makes a deeper point, because rates lead to cardinality, and cardinality leads to math, and here we are with the view that math is not a technique applicable to human action, and all of a sudden we're talking about rates? Well, where do you get rates compatible with preferences?

704
01:02:26.600 --> 01:02:31.400
I mean, we get started on a lot and it takes time to do them all, but is the idea of the

705
01:02:31.400 --> 01:02:32.400
value scale, right?

706
01:02:32.400 --> 01:02:33.400
Yeah, yeah, that's right.

707
01:02:33.400 --> 01:02:38.240
The value scale is in fractiological action more on all sides.

708
01:02:38.240 --> 01:02:40.640
This is part of the demand curve math paper.

709
01:02:40.640 --> 01:02:48.600
Yeah, we've got a, one we just finished and sent out last night was one on math, demand

710
01:02:48.600 --> 01:02:52.360
curves as a mathematical.

711
01:02:52.360 --> 01:02:59.160
The idea is that, to me, it's one of those things. It's so obvious that as soon as somebody

712
01:02:59.160 --> 01:03:08.440
says it, you say, of course. If you were to look at the physics of a gas, and they relate

713
01:03:08.440 --> 01:03:14.320
three variables, the pressure, the temperature and the volume, and you say, well, okay, what

714
01:03:14.320 --> 01:03:20.220
we'll do is we'll show a graph of the relationship between the pressure and the temperature holding

715
01:03:20.220 --> 01:03:50.220
And you can do that. You can put the damn thing, the gas in a container where it can't get out. You can measure the pressure, you can measure the temperature, and you can vary one and the other one, and you can plot it, right? And notice, every place along that plot, you've got a different value of temperature and pressure, but the volume is the same. Now you can get a bigger

716
01:04:20.220 --> 01:04:24.060
Curve. You're saying, well, everything that affects the demand is held constant except

717
01:04:24.060 --> 01:04:28.500
the price and the quantity. So as price comes down, quantity increases. That's why the demand

718
01:04:28.500 --> 01:04:32.100
curve slows down. And what are these other things that are held constant when we teach

719
01:04:32.100 --> 01:04:36.820
them in principles? Tastes of preferences, prices of other goods, income, wealth, you

720
01:04:36.820 --> 01:04:44.620
know, that kind of stuff. And then I ask the question, I say, well, why then, if this is

721
01:04:44.620 --> 01:04:47.620
This is human behavior we're talking about, picturing.

722
01:04:47.620 --> 01:04:53.620
Why do you have to lower the price in order to sell more, for the buyer to be willing

723
01:04:53.620 --> 01:04:54.620
to buy more?

724
01:04:54.620 --> 01:05:00.780
And the answer is, because depending on which view of this you look at, and we go at both

725
01:05:00.780 --> 01:05:05.380
of them so we won't antagonize groups, one of them would say, well, look, it's very simple.

726
01:05:05.380 --> 01:05:10.380
The marginal utility of the fourth unit is higher than the marginal utility of the fifth

727
01:05:10.380 --> 01:05:11.380
unit.

728
01:05:11.380 --> 01:05:13.380
Well, then marginal utility has changed.

729
01:05:13.380 --> 01:05:18.560
But wait, that violates the rules. The rules say everything has to be constant along the

730
01:05:18.560 --> 01:05:23.140
curve. And if you say, well, no, I don't believe in that marginal utility stuff, you know,

731
01:05:23.140 --> 01:05:28.660
I believe in the new marginal rate of substitution stuff, well, then guess what? The marginal

732
01:05:28.660 --> 01:05:34.180
rate of substitution of the fifth unit is lower than the marginal rate of substitution

733
01:05:34.180 --> 01:05:40.280
of the fourth unit. In either case, something has changed along the curve. Well, that violates

734
01:05:40.280 --> 01:05:45.280
It violates the laws of mathematics and it violates the laws of economics and say that

735
01:05:45.280 --> 01:05:50.040
we're going to hold, you know, conceptually all the other variables that affect this constant,

736
01:05:50.040 --> 01:05:52.840
so it's part of this.

737
01:05:52.840 --> 01:05:57.200
In both cases it violates the same concept that something's changing.

738
01:05:57.200 --> 01:06:01.680
One is a mathematical looked at from a very, you know, mathematical objective point of

739
01:06:01.680 --> 01:06:06.520
view, the other is from a subjective point of view, but the answer is simple.

740
01:06:06.520 --> 01:06:12.400
You can't have a curve where you're graphing P versus Q and saying everything else is constant

741
01:06:12.400 --> 01:06:20.400
because it's not. So the main curves are A, mathematical. I thought that was interesting.

742
01:06:20.400 --> 01:06:25.040
Yeah, yesterday was the second day that we had what we call a two-paper day where we

743
01:06:25.040 --> 01:06:30.320
actually sent out two papers to journals. We did that once before, maybe two or three

744
01:06:30.320 --> 01:06:39.320
I would say we must have sent out about ten papers in the four or five weeks we've been here.

745
01:06:39.320 --> 01:06:46.320
We also list new ideas for papers that we'll write in the future, and we must have 25 new ideas for new papers.

746
01:06:46.320 --> 01:06:51.320
How many years did Mises have in Geneva? I think he had six years, didn't he?

747
01:06:51.320 --> 01:06:52.320
and Social Sciences.

748
01:06:52.320 --> 01:06:53.320
Mises in Geneva?

749
01:06:53.320 --> 01:06:54.320
Oh, I think, yeah, that's a good one.

750
01:06:54.320 --> 01:06:55.320
Maddox, you took a little bit of that, too.

751
01:06:55.320 --> 01:06:56.320
This is just the...

752
01:06:56.320 --> 01:07:03.320
Well, I think, I mean, look, look, to talk about him and I and Mises in the same breath,

753
01:07:03.320 --> 01:07:07.040
I think, you know, it's a, whoa, whoa, whoa.

754
01:07:07.040 --> 01:07:13.680
I mean, Mises is easily the greatest social scientist of all times, easily, you know?

755
01:07:13.680 --> 01:07:15.680
In my opinion, nobody else is in his class.

756
01:07:15.680 --> 01:07:19.640
You know, one of the things that I, I don't know if this is true, Bill, you speak to this

757
01:08:19.640 --> 01:08:31.880
is more of a Rothbardian, and I am more of a Missassian. Now, Rothbard is a natural rights

758
01:08:31.880 --> 01:08:39.360
person, and I am, too. I'm not a utilitarian like Mises. But Mises is a classical liberal,

759
01:08:39.360 --> 01:08:43.320
and Rothbard's an anarchist, and Walther's an anarchist, and I'm a classical liberal.

760
01:08:43.320 --> 01:08:44.320
Deviationist?

761
01:08:44.320 --> 01:08:52.040
Yes, yes, I'm a deviationist, and there's been more than one time when Walter has called

762
01:08:52.040 --> 01:09:04.360
the party, the Politburo together to get after me. But the other thing is that Walter, if

763
01:09:04.360 --> 01:09:08.240
you were to look and say, well, what is your first love in terms of your study, your research

764
01:09:08.240 --> 01:09:15.120
Research and all that, he would tell you anarchism or, you know, a libertarianism, and of course

765
01:09:15.120 --> 01:09:20.560
a major subset of that, right up there, is the economics. If you go to me and say, what

766
01:09:20.560 --> 01:09:28.560
about you? I'm not a libertarian theorist like Walter is. That's his thing. At the core

767
01:09:28.560 --> 01:09:33.280
of my being, I'm an economist. And that's what's important to me. And as far as writing

768
01:09:33.280 --> 01:09:35.280
The Theory of Money and Credit

769
01:10:03.280 --> 01:10:16.280
I mean, you know, I'm natural rights, not utilitarian, but again, to me, economics is the key, not the key, my true love, as opposed to anarchist theory.

770
01:10:16.280 --> 01:10:28.280
And whereas I think if Walter, if you gave him the choice, he could write the ultimate economics work or the ultimate anarchist libertarian work, he would choose the latter.

771
01:10:28.280 --> 01:10:32.760
No, I think there's a lot of truth to that. I would say the Mises Institute right now

772
01:10:32.760 --> 01:10:38.120
has two journals that are ongoing, scholarly journals, Quarterly Journal of Austrian Economics

773
01:10:38.120 --> 01:10:43.400
and Journal of Libertarian Studies. If Bill and I were to be appointed editors of each

774
01:10:43.400 --> 01:10:50.240
of them, taking over from Joe and Roderick, not that I'm suggesting this, we would reject

775
01:10:50.240 --> 01:10:56.160
it because we want to do writing rather than editing, but I would be clearly more JLS type

776
01:10:56.160 --> 01:11:26.160
and Bill would be more QJAE type. It's interesting before I came to Loyola I looked at my CV for the last five or six or ten years and a lot of my publications were libertarian not economic let alone macro I did very little macro and in the five years since I've been there there's been a reversal it's been much more economics and a little less

777
01:11:26.160 --> 01:11:30.040
It's libertarian, although I've still kept my end up on the libertarian front.

778
01:11:30.040 --> 01:11:36.040
But not only have I veered over, under Bill's tutelage, from libertarian emphasis to more

779
01:11:36.040 --> 01:11:42.360
of an equal emphasis, but within economics, I don't know how many articles I've got in

780
01:11:42.360 --> 01:11:49.080
economics, maybe 50 or 60 out of my 250 articles, but most of them, virtually all of them, were

781
01:11:49.080 --> 01:11:50.240
in micro.

782
01:11:50.240 --> 01:11:53.480
Maybe two or three out of the 50 or 60 were in macro.

783
01:11:53.480 --> 01:11:59.740
But since I've gotten under Bill's bail flow influence, he's convinced me that macro is

784
01:11:59.740 --> 01:12:05.440
to micro as chess is to checkers, and macro is where it's at, and I'm still not a macro

785
01:12:05.440 --> 01:12:10.020
economist, but I'm much more into it because we've co-authored a lot of articles in macro.

786
01:12:10.020 --> 01:12:13.480
So I'm much more heavily macro-ish than I was before.

787
01:12:13.480 --> 01:12:17.480
I'm so pleased that you two had a chance to work together, and you're leaving next week.

788
01:12:17.480 --> 01:12:18.480
Yeah, we're going back.

789
01:12:18.480 --> 01:12:23.320
I'll be leaving bright and early Tuesday morning, probably about 4.30, maybe.

790
01:12:23.320 --> 01:12:28.040
I'm not sure. It depends upon whether the place sinks or not. I might come back with

791
01:12:28.040 --> 01:12:29.840
my tail between my legs.

792
01:12:29.840 --> 01:12:32.400
New Orleans will open again in January.

793
01:12:32.400 --> 01:12:37.000
We've registered our students. I spent a day earlier this week on the computer registering

794
01:12:37.000 --> 01:12:42.360
students and, God willing, you know, the office is about...

795
01:12:42.360 --> 01:12:43.360
And the creek don't rise.

796
01:12:43.360 --> 01:12:48.880
Yeah, and the creek don't rise. But, well, we're all right if the creek rises in Mississippi

797
01:12:48.880 --> 01:12:55.880
Revolta. We're pretty safe from that, at any rate. But, you know, people are back working

798
01:12:55.880 --> 01:13:01.280
on campus. My wife works now at the law school. She's been going to work well every day. And

799
01:13:01.280 --> 01:13:08.360
the staff is expected back the Monday after Thanksgiving. And everybody's expected back

800
01:13:08.360 --> 01:13:14.680
January 2nd, which is a Monday, everybody, and faculty and all. And classes start January

801
01:13:44.680 --> 01:13:46.920
This has been great. Thanks, Joe. Our pleasure.