Welcome to the sixth session of the seminar, Radical Austrianism, Radical Libertarianism, a Steven Berger seminar with little old me.
Looking back on the first five sections, I'm sort of unhappy with myself because I've been too nice.
I haven't said anything controversial. I haven't really criticized anyone or any doctrine.
It's just sort of been smarmy, you know, everything is groovy, everything is nice, well, it's time to take off the kid gloves.
No more Mr. Nice Guy. Now we're going to kick some butt.
There are many enemies of the free society. If you want to be one, you've got to get online.
There are a lot of people ahead of you. There are Marxists, feminists, left-wing environmentalists,
environmentalists, prudonists, black studies, racists, gay studies, queer studies, union members, stateletrists, gun controllers, socialized medicine advocates, welfare rights, liberation theologians, economic regulators, egalitarians, people who favor economic democracy, positive rights, the list goes on and on.
And if I've missed anyone, please, you know, I've got to get a better list for the next time I give this talk.
But say what you will about all these enemies of the free society.
At least they have one good thing in common, and that is honesty.
They march under the banner of statism.
They proudly say that economic freedom is no good, that property rights stink, that we have to have the state control everything.
So at least you have to give them credit for honesty.
There's one group that's far more insidious.
They attack property rights at their core, but worse, they march under the banner of economic freedom.
They have the audacity to say that they're libertarians.
They are not only members of the Mont Pelerin Society, but leaders of it.
They are mainly focused around the University of Chicago, whose economics department is supposedly free enterprise.
People who are the most egregious violators of this are Coase, Ronald Coase, but also Posner, Demsets, Landis, Friedman, David and his father Milton.
There's this guy, Steve Medema, who is the chief Coase apologist.
I've asked, he's written maybe 30 articles about what a great guy Coase is,
and another 15 criticizing anyone who said that Coase wasn't a good guy.
I've written about 10 articles saying that Coase is not a great guy,
and I once spoke to him, I said, well, you know, how about me?
When are you going to criticize me so I can come get you back?
And he said, well, you know, I'm too busy.
I heard on good authority from a usually reliable source, someone asked David Friedman,
well, what about the article where Walter Block criticized you personally for your views on Coase?
And he said, and I paraphrase here, well, I'm not interested in anything that Walter Block has to say.
Well, this sort of gets my dander up.
If I was even slightly motivated in favor of these guys, you know, now it's war.
Now, I don't want you to think that I'm an old, embittered coot or anything,
and my proof of that is, see, I can smile.
So I'm really a friendly guy, and I'm not serious, I don't see this as enmity or anything like that.
The way I see it, the way I've been telling students here,
is that the way to get to truth is, you know, someone puts out a thesis, somebody puts out an anti-thesis,
somebody makes a synthesis, somebody makes another criticism, and we march or lurch upward toward the truth.
We never get there, but we try.
But if people ignore the other side of the debate, it makes it hard to move onward and upward, but we do what we can.
With this latest Kelo thing, I'm accusing Coase of being responsible for the Kelo monstrosity,
so maybe that'll get him to provoke him or something, who knows.
I guess maybe that's why I start getting hysterical and screaming and ranting and raving,
because no one pays attention to me, but that's my own psychological problems.
I'll have to see my shrink on this.
But it would be nice if the other side of the debate would debate,
although there is one exception, and that's Dempsey, who did debate with me three or four times,
and he was very gracious to do that.
Now, my claim against Coase is that he obliterates private property rights.
After Coase is done, there's nothing left of private property rights.
So let's rehearse why private property rights are important.
The free market is predicated on it.
The essence of the free market is I trade you my tie for your pen.
But the assumption is that I own the tie and you own the pen, but if we don't have any ownership, namely property rights, then the whole thing sort of falls to the ground.
If we trade stuff that we don't own, that's called theft, and that's not part of the market.
The entire debate over fractional reserve banking between Hans Hoppe, myself and Guido Holtzman and Murray Rothbard on the one hand,
and Selgen and White and a few others on the other hand,
stemmed on our claim that private property rights
were more important than transcended contract.
Namely, contractors depended on private property rights,
but private property rights are the bedrock.
Hoppe's argument from argument depends totally
and solely on private property rights.
His point is that you can't argue
against private property rights
because in arguing against private property rights,
you're using your own private property rights
in your lungs and in your tongue and in your pharynx and larynx and stuff like that.
The only problem with slavery, mass murder, and the Holocaust was they violated property rights.
If they didn't do that, slavery would be great.
You know, you sing songs, you pick cotton, you get fodder, it's a wonderful system.
And as soon as they bring out the whips, you say, I quit.
But you can't quit because of the lack of private property rights.
Communism too would be okay. Remember I gave you that voluntary socialism thing?
Voluntary communism is fine.
The problem with communism is that there are no property rights.
Well I shouldn't say that because one of the things I've said is that Coase is even
worse than the communists
in this one regard.
And by the way I suppose I should moderate my hysteria here
by saying that I admire Coase on many other things. It's just his
problem of social cost, the 1960 article in the Journal of Law and Economics
which started the law and economics movement, he's very good on many other things, free speech, radio, privatizing radio and this and that and the other, but on this one I think he's very bad, but I think the communists are better than him because at least they have a theory of property rights, their theory is that property rights belong to the proletarian and not to the bourgeoisie, it's not your theory, it's not my theory, but it's our theory of property rights, it's not a total denial of property rights, it's sort of a perversion of it, but at least there's some sort of
If you go to the Soviet Union, during the Soviet Union heyday, and you steal some workers' bicycle, you'll go to jail, because that's his bicycle.
So there were some property rights, it's just that you couldn't own the means of production.
The internalization of externalities, that whole argument about you have to have traffic lights, therefore you have to have the government to do it, and that whole argument is based on private property rights.
Private property rights undergoes everything into personal trade, gifts, theft, what have you.
You can't even sit in this here audience without private property rights.
Because you have private property rights in your own body. If you didn't, why are you sitting here? How can you justify that?
And if Lew didn't have property rights in the Mises Institute facilities, you couldn't, again, without his permission.
So, I hope that I've convinced you, not that you needed convincing, that private property rights are an important part of libertarianism.
What I'd like to do is to defend private property rights against the strongest critics.
Attacking lefties is fun, but it's sort of like shooting fish in a barrel.
It's not really as much fun as criticizing so-called defenders of the free market who really aren't free market people.
That's much more fun.
Okay, now you'll remember that I mentioned Pagu, and Pagu had this idea that the ordinary supply and demand curves don't take into account external costs, such as pollution, and in order, and this is the actual quantity.
And in order to fully take into account these externalities and to get to the optimal allocation of resources that you have to have a tax or something and Coase's reputation is that he did one better than Pagou because Pagou called for taxes and the Coasian system of dealing with this externality pollution problem doesn't require a tax and therefore Coase is better in some way.
Well, my claim is, if I had to pick between Coase and Pagu, I'd pick Pagu, not that I favor taxes,
but that I favor taxes with property rights, vis-a-vis no property rights at all.
Okay, before I get to Coase, let me pull a little Demset's twist on you.
What Demset says is, here is the price of property rights.
Here is the quantity of property rights, and here is a downward sloping demand curve, which says that the lower the price of property rights, the more property rights we have, and the higher the price, the less property rights, or the fewer property rights we have.
Now, this sounds good. I mean, we believe in downward sloping demand curves and all, but there are problems that I have with this.
One of the problems is that you really can't draw a supply and demand curve without property rights being implicit in it,
because the quantity of the thing on the horizontal axis has to be owned.
So when you're putting property rights there, you're sort of getting your cart before the horse.
I think it's sort of equivalent to a performative contradiction or a logical contradiction
to talk about the quantity of property rights and put it on a supply and demand curve
When a supply and demand curve implies property rights in the first place before you can draw anything.
So that's one problem I have with that.
Secondly, property rights are not expensive.
Protection of property rights are expensive.
You have to hire guards and get locksmiths and fences and stuff like that.
But the idea of property rights, say, we now say there are property rights in the ocean.
All that means is that the government or somebody who can charge the forces of law
will now recognize homesteading, but it doesn't have to cost anything much.
There's some sort of registering.
Yes, it'll cost money to adjudicate if there are two people claiming it or to protect it
if one guy steals the other guy's, but the idea of property rights,
I think, is sort of costless. So this whole idea doesn't work for that reason.
But there is a kernel of truth, as there is in most fallacies.
There has to be something sensible about it, otherwise it could hardly endure.
And the kernel of truth, the seductive kernel of truth, is that if there's no scarcity, then you can't have property rights.
And things sometimes, like in Demsens' article, he talks about deer and beaver and stuff like that.
At one time they were running around, there were so many you didn't have to have property rights, and then they got more scarce, and then you had to have property rights.
So there is some coherence to this. It's just that I think it's a problematic way of looking at it.
And in my view, if you don't have scarcity, not only are property rights not needed,
but you can't have property rights with scarce things as shown by the Kinsella analysis of intellectual property
when the idea is already out there, it's not scarce anymore.
E equals MC square, everyone knows it, so it's not a scarce thing.
Okay, let us move on to Coase proper.
Now, what Coase says is that there are two states of the world.
There's a high or infinitely high or very high transactions cost world.
Transactions means you have to bargain and adjudicate and things like that.
I'll give you an exact quote from him in a moment,
but let me just get the idea of it across.
And think of, you know, 10,000 polluters and 100,000 polluties
and think of them trying to get together and make a contract.
It's impossible.
You know, you get five friends and you try to figure out
which restaurant to go to dinner and which movie to see
and it's hard to get five people to agree on those two things.
Imagine trying to get 10,000 and 100,000 people to agree on anything.
So, the real world is one of high transactions costs or infinitely high transactions costs
or at least transactions cost higher than the thing that you're transacting about.
That's the real world.
Then there's this hypothetical world, a never-never make-believe world equivalent to the pure competition model in economics,
which is a zero transactions cost world.
And to give Coase credit and he's been misunderstood on this
And I think Steve Medina is right in criticizing Coase's critics who get this wrong.
Coase never meant that this was realistic in any but a one-to-one kind of a situation.
What Coase is using this is sort of like an equilibrium situation or a perfect gas or a frictionless system in physics.
Just as a model to compare the real world to so that we can see what's going on.
So I have no objection to these two states of the world.
of the World, the High Transactions Cost World and the Low Transactions Cost World,
Zero Transactions Cost World.
Okay, so then what Coase says is that in the High Transactions Cost World,
the judge's determination in any dispute is definitive.
For example, a dispute like, my cows go over and trespass on your corn and eat your corn.
Or airplane noise pollution. You know, I'm polluting noise and you're objecting to it.
Or the case that I illustrate on this handout that I've given you.
The railroad comes along and sets off sparks and the farmer has haystacks.
Only in the high transactions cost world you have to think of 100,000 railroads and a million farmers and they can't get together.
So what he's saying is that in the high transactions cost world, if the court gives the nod to the railroad, then the railroad will not have to install a smoke prevention device.
It'll just be able to run Rothschild over the farmer's hay.
On the other hand, if the farmer wins, then the railroad will have to stop and the farmer's haystacks will be safe.
But whichever way the court decides, that'll be it, because there's no more possibility of any changes.
However, in the zero transactions cost world, and here's the beauty of the COAS system,
and by the way, this article is the most highly quoted article of all articles in economics, the COAS social cost article of 1960,
What he says in the zero transactions cost world, it doesn't matter what the judge says in terms of resource allocation.
It'll matter in terms of whether the farmer or the railroad is rich or poor, but that's a different issue.
But in terms of whether the smoke prevention device gets put in at a certain cost or not, doesn't matter.
Because if the court decides one way, the rational way for costs, it'll stay that way.
And if it decides the other way, someone will bribe someone else and we'll get to the right result in any case.
So what Coase is saying is that in the high transactions cost world, the judge's decision is definitive.
In the low transactions cost world or in the zero transactions cost world, it doesn't matter what the judge says, the market will decide these things.
So you can see why there's some sort of free enterprise ethic involved here, because he is having a role for the market.
Okay, let's get down to Bras-Tax. He defines transactions cost, quote, and this is from his article in the journal,
In the journal, in order to carry out a market transaction, it is necessary to discover who it is that one wishes to deal with,
to inform people that one wishes to deal and on what terms, to conduct negotiations leading up to a bargain,
to draw up the contract, to undertake the inspection needed to make sure the terms of the contract are being observed, and so on.
That's what transactions costs are.
Another quote, the judges view that they were settling how the land was to be used would be true only in the case in which the costs of carrying out the necessary market transactions exceeded the gain which might be achieved by any rearrangement of rights.
So I'm not just quoting what I just said to buttress the point I said.
Third quote, such an agreement would not affect the allocation of resources but would merely alter the distribution of income and wealth as between the cattle raiser and the farmer.
Now, my first article that I think I ever published, or maybe my second or third article, was an attack on Coase.
I've been after him since, I don't know, 1964 or 5, I think that was my first article.
And what I said there is that even in the zero transactions cost, you need one more premise to make the thing go through,
and that is that the values are not just psychic, namely that the guy who lost has money with which to make a bribe.
abroad and Coase didn't say it and Demset said he did say it and we argued
about that among other things but that's a minor point. The major point, well let's
before I get to the major point into the criticisms of it let's now go to the go
to the numbers Roderick was saying hey wait I thought that you know the whole
reason I joined up here is you don't need numbers and what are you doing to
Excuse me. Let's see. Now I've given these out so everybody ought to have one.
Okay, so the numbers that I'm working with, and if you don't have one I've got extra copies here.
I've got two assumptions, Assumption A and Assumption B. Let's forget about Assumption B.
is just a homework assignment with different numbers for my students to see.
In other words, what I do is I go over the first case and I assign the second case as a homework to see if they've got the gist of it.
Okay, so in the first case, the railroad sparks cause damage to the farmers' crops of $100 and the cost of a spark prevention device is only $75.
Now look, suppose you were the owner of the railroad and the farm, and to stop the sparks, it would cost $75, and the damage of the sparks is $100.
Would you install the smoke prevention device?
Of course.
Any rational profit-making person would invest $75,
the cost of the smoke prevention device,
in order to save $100 worth of crops, right?
And I'm abstracting from the future or discounting present discounted value.
I'm trying to keep it very simple.
So for Coase, the right decision is in favor of the farmer.
Because if the farmer wins, $100 will be saved for society, and if the railroad wins, society will lose out because we will then not be investing $75 to get $100.
So Coase is rooting for the farmer.
Okay, so we have two situations, a zero transactions cost world where a bribe could possibly take place,
and then a positive or prohibitive transaction cost world
in which the bribe couldn't take place,
that's situations C and D.
Okay, so let's take C1,
namely we are in a zero transactions cost world
and the farmer wins.
Well, if the farmer wins,
the law forces the railroad
to install a smoke prevention device.
The railroad can't bribe the farmer out of it
for economic reasons, because the railroad only gets 75 bucks and he'd have to pay the farmer more than 100.
So he can't do any broadening. And that's the end of the case. And for Coase, this is good.
And now let's look at, well, let me continue the way I am and then I'll look at the next page.
Let's take case C2.
Now the railroad wins.
The railroad is not forced to install
the smoke prevention device.
However, the farmer can bribe him.
And I picked $90 as a bribe,
because remember, the farmer's got $100 at risk.
If he can bribe the railroad into stopping,
setting off smoke and sparks, at a cost of 90,
he'll get 100 and he'll make $10 profit.
Okay, now let's look at the next page down here and we are now doing a profit analysis of C1 and C2.
So, if the farmer wins and we're in a zero transactions cost world, what's the wealth of the farmer? 100.
What's the wealth of the railroad? Minus 75. What's social wealth or total wealth?
Well, the total wealth is 25 and that's good. Good for Coase plus 25.
Suppose the railroad wins. Well, then the wealth of the farmer will be 100,
because he's going to get those crops to be saved because of the bribe.
He'll have to pay the railroad $90, so he'll get 10, whereas the railroad will get the $90 bribe,
It's a $90 bribe, but it'll lose the $75 that it has to pay to get in the smoke prevention device, everyone with me?
Okay, so it'll have 15 and again the total wealth will be 25.
Now let's go back up to the top page and consider case D1, here the farmer wins again.
And again, the law forces the railroad to install the smoke prevention device.
Now, the railroad can't bribe the farmer, not only for economic reasons, but for total cost reasons.
And that's why I put TC in parentheses, or rather, transactions cost,
because transactions cost are now assumed to be infinite or very high, or much more than $175.
And again, this is good. You can see I put good there for COAS,
Because, again, the wealth analysis is that if the railroad wins and now we're on 1D, the farmer gets 100, the railroad loses 75 and total wealth is 25.
So that's why I put good for coast. And now let's take the one bad case.
Here we are in 2D and the law doesn't force the railroad to install the smoke prevention device and the farmer can't bribe him into doing it even though the farmer loses $100 and would be willing to pay anything less than $100 and the railroad gains $75 and would take more than $75 or somewhere between $7500 to conduct the business but it can't occur because transactions cost it too high
Bad for Coase, and then let's look down here at the wealth analysis in the last case.
If the railroad wins, the farmer is out 100, the railroad is plus 75, and we're minus 25.
So, what is Coase's advice to the judge?
Coase's advice to the judge whenever there's a dispute over property rights is
to pick the guy such that GDP is maximized.
You see there's a certain coherence here because for the Chicagoites
what's good is wealth maximization or GDP maximization. Property rights
mean nothing. There's no property rights here.
Let me read another quote from Coase showing that there's no such thing as
property rights.
What he says,
Maybe I can get this up here, I don't know.
No, gotta go the other way.
Can you see that?
No? Let me read it just in case.
We are dealing with a problem of a reciprocal nature.
To avoid the harm to be would inflict harm on A.
The real question that has to be decided is, should A be allowed to harm B, or should B be allowed to harm A?
There's no such thing as rights. I'm now going to punch Dan in the mouth. He's sitting down, I'm sure he can attack me back, so I punch him in the mouth.
Now, ordinarily, I initiated aggression against him, but not so for Coase.
Because if you stop me from hitting him, I'm hurt.
And anyway, his nose is attacking my fist, right?
You see, it's reciprocal.
See, for most people, this stuff ain't reciprocal.
You know, there's an initiator of regression, and there's a recipient of regression.
But for Coase, it's reciprocal.
So think in terms of my fist hitting his nose and his nose attacking my fist.
So we're dealing with a problem of a reciprocal nature. Who caused the smoke nuisance? The answer seems fairly clear, the smoke nuisance was caused both by the man who, the recipient of the smoke in the context of this, and by the man who lit the fires.
Given the fires, there would have been no smoke nuisance without the man, and given the man,
I'm changing it slightly to make it more comprehensible, and given the man,
there would have been no smoke nuisance without the fires.
Eliminate the man or the fires and the smoke nuisance would disappear.
On the marginal principle, it is clear that both were responsible,
and both should be forced to include the loss of amenity due to the smoke as a cost
and deciding whether to continue the activity which gave rise to the smoke.
Now let's take the case of the cattle and the crops.
Now ordinarily, if my cattle stray onto your cornfields, we know who the aggressor is and it's not the cornfields.
I'll give you one guess. It's the cow.
In the case of the cattle and the crop, it is true that there would be no crop damage without the cattle.
It is equally true that there would be no crop damage without the crops.
You see? In the case of me punching Dan in the nose, it's true there'd be no problem if I didn't punch him,
but there'd be no problem if his nose wasn't there.
Do you see the analogy here?
I won't get into the doctor and the confectioner.
Well, let me do the doctor and the confectioner right now so that this makes sense.
This is the case of Sturgis versus Bridgman, and here's a pen, and here was the case.
I forget who was who, Sturgis or Bridgman.
One of them was a doctor, and one of them was a machinist, and they lived in two houses that had a common wall.
And first, the doctor had his office over there, and he needed quiet because of a stethoscope, and everything was fine.
And then second, the mechanic put in a machine that made noise.
Third, the doctor switched his office from there to there, and then the doctor sued the machinist on the ground that he was noise polluting and he couldn't hear his patient's heartbeat, etc., etc.
Now, the way that Murray Rothbard deals with this and the private property rights way of dealing with this is, well, who homesteaded the noise rights?
And the machinist did. The machinist was the first one to make the noise pollution, or to homestead the pollution rights.
The doctor never complained when he had his office in area one.
It's only when he moved his office to area three that he complained.
And we say that the right is with the machinist. How does Coase answer it?
He answers it in a way that denies private property rights totally.
What he says is, I don't give a care about property rights. Property rights, schmoperty rights, I'm now making like Coase.
The proper answer is, who values it more? The proper answer is, if I give it to the doctor, what will the GDP be?
And if I give it to the machinist, what will the GDP be? And which is higher? Well, I'll give it to that guy.
Do you see what I mean, that there's no property rights here? The Kelo case, do you see what's going on? I mean, this is Kelo, right?
Kelo, it's as if, you know, some, what is it, a Motel 6 versus a Hilton? So there you have a Motel 6 that's sitting there and Hilton says,
I'm taking over, bub. And the Coasean judge says, oh, well, the Hilton will give more taxes or, you know, make GDP better, let's kick them out.
That's no private property rights theory. That's the absence of private property rights theory.
I don't think that the Soviets would sink that low if they allowed private hotels in the first place.
They had some theory of property rights. Coase has none. Zero. Zip. Nada.
Okay, now let me read the rest of the quote with the Sturges versus Bridgman thing.
The doctor's work would not have been disturbed if the confectioner,
confectioner machinist of confectionaries, had not worked his machinery, but the
machinery would not have disturbed, would have disturbed no one if the doctor
had not set up his consulting room in that particular place. So in other words,
for Coase, it's reciprocal. Each one is harming the other. There's no good guy,
there's no bad guy, there's no private property rights. It's rather, how do you
How can wealth be maximized?
There's also no time dimension that he mentions.
Right. He does in the article saying, you know, who was there first and he gives the history of it.
But the time dimension is irrelevant to him.
The only issue is, how can wealth be maximized?
To finish up this quote, if we were to discuss the problem in terms of causation,
both parties caused the damage.
Dan caused the damage and I caused the damage.
That's what he's saying. If we were to attain an optimal allocation of resources, that is, maximize GDP, it is therefore desirable that both parties should take the harmful effect, the nuisance, into account in deciding on their course of action.
Now, if there's a zero transaction cost world, it doesn't matter what the judge decides, the rights will get to where they should be.
But in the real world, transactions cost something, so the judge's decision is definitive.
Now, two of my favorite TV shows are The Simpsons and South Park.
There was this wonderful episode of The Simpsons where Bart becomes rich, he becomes the protege of Mr. Burns.
I don't know if you remember this, and I show this to my class, they love it.
And what happens is that four of them, or the five of them with Maggie are sitting around,
and Bart is flicking peas at Lisa. And Lisa's going Bart stop it! And you know mommy, daddy Bart is hitting me. And Marge says you know Bart you know be nice to your sister. And then Bart somehow I forget the exact word but Bart says well I'm rich I can do what I want. And then Homer becomes a cozy and he says Lisa stop objecting to your brother you know stop getting your nose in the way of his peas or something like that.
The exact line is, Lisa, stay out of the way of your rich brother's peeves.
to be accurate, to say what he says. I don't think I've misstated it in my articles. I quote them exactly.
And then what I do is sort of like what Carrie-Anne does to me. Namely, you try a reductio.
You take the thing and you start applying it like me and Dan. He never talks about me and Dan.
I start applying it to O.J. Simpson and his wife.
See, on the O.J. Simpson case, there were two schools of thought.
One, O.J. killed her and he should go to jail.
The other, he didn't kill her and he shouldn't go to jail.
The third position, the Kosian position, is he killed her and he shouldn't go to jail.
Why? Because in the zero-transactions-cost world, she has low self-esteem, and he's got plenty of self-esteem, so he would have bought her, so he's the rightful owner of her.
GDP will be higher if he owns her than if she's free. I mean, it's a little bit of a reach, but, you know, go with me.
And if this were true, then he has a right to kill her.
Now, the criticisms leveled against me is that Coase nowhere ever mentioned O.J. Simpson or his wife, or me and Dan.
Well, of course not. That's the whole point of a reductio ad absurdum is you take the logic of it and you apply it to cases that he didn't in order to embarrass the theory.
So it's no good criticism of me that Coase never mentioned this.
The other case I mentioned is the rapist.
Here's a guy in jail or out to sea for, you know, months,
and he's really in desperate need of the services of a prostitute.
And the prostitute that has low self-esteem or does it for a hundred bucks or whatever,
in any case, he rapes her.
His need is ten thousand. Her costs are only a hundred.
So GDP is maximized if he is allowed to rape her.
And he shouldn't go to jail. And you keep coming up with reductios ad absurdum after reductio ad absurdum. It's such a great target, because the theory is weird.
Let me give you another one. I go over and I steal, what can I steal? Aha, I steal Rosemary's glasses. Haha, they're mine.
Now, the ordinary Kocian judge would say, well, now we're in court and we're disputing what's going on,
and the ordinary Rothbardian judge or the ordinary normal judge would say, well, whose glasses are they?
And she would show a bill of sale and she'd show a picture of them on her and it would show that it fits her face,
It's her face, whereas it doesn't fit my face, and I have no proof whatsoever that they're my glasses.
And I would be seen as the thief, and she would get the glasses.
But the Kocian judge would not look in the past.
The Kocian judge is not a historian.
The Kocian judge is a predictor of GDP.
And he's going to ask the question, well, if Block gets the glasses, what will GDP be?
And if Rosemary gets the glasses, what will GDP be?
And I'll say, well, you know, I'll write a great treatise, and, you know, GDP will be very high, and she's just a bum, and, you know, the GDP will be low if she keeps the glasses, and the Coase and Judge will give me the glasses.
So anyone can take anything away from anyone. There are no property rights. All you have to do is prove that you're the best user or the least cost avoider of an accident or what have you.
Let me see. Yeah, now take the Kelo case. It's a perfect example of
Kosianism run amok. Now, I don't know. I know that the Kos theory explains or
justifies the Kelo decision. I don't know to what extent the judges were
physically or psychologically or thymologically influenced by Kos, but the
The fact of the matter is that this article is the most heavily cited article.
All the prestigious law colleges, schools of law are inflicted with cosianism.
Certainly the University of Chicago and George Mason and all the many of the big ones.
It's not to say that it's taken the place totally.
There are still Marxist legal theorists and critical, the crits, critical legal studies.
But the Chicago law and economics has pervaded.
Henry Manning has been holding seminars and conferences for judges to teach him economics, to teach him Coasean economics.
So it's possible not only that the Kelo decision came about from a reading of Coase,
but that rather it's possible that not only did the Kelo decision come about unconnected to Coase,
It's also possible that they really got it from the Coase's mouth and now they're applying the theory.
I don't know. This would take me way too far afield. I'm not a psychologist.
I'm just hopefully trying to do the logic here.
Epstein too. Richard Epstein, my buddy, happens to be a friend of mine, but you know, you disagree with friends.
And he had this book, Takings, where he had the idea that it's justified to take for public use, but not for private use.
What's public use? Well, a road or a railroad or a courthouse or something like that,
but that it's not justified to turn a Motel 6 into a Hilton, you know, just because it's private use.
Stephen Ginsella, in one of the blogs, seemed to me to be very definitive. He said, look, if you're going to steal, I'd rather you turn it into a Hilton than into a jail or a courthouse. At least it's private, the Hilton, quasi-private. Now, it's not so fully private if they're engaging in theft.
So Epstein has sort of opened up a slippery slope down which kilo is sliding.
There's a whole other issue about, you know, whether the court should have upheld Connecticut on the grounds of decentralization, but I'm not getting into that issue.
So what we have is, for Coase, the judge is a central planner.
There's no weeding out process for judges who make a mistake given that judges are public servants or in the public, you know.
If a private judge makes a mistake, he'll lose customers. People will say, look, you know, you get lunacy from this guy.
No one would put him in a contract saying that if we have a dispute over a contract, we're going to Judge A, we'll go to Judge B.
But a Supreme Court, you don't have much of a choice.
Another point is, how can Coase ever know that he's making the right decision?
There is such a thing as interpersonal comparisons of utility, which Austrians are very amenable to or susceptible to,
whereas the Chicagoites, they'll have something like this, what they'll do, and this isn't just Chicagoites, the whole economics profession,
They have money over here and marginal utility over there, and they say there's a downward sloping marginal utility of money.
You get what I'm saying? In other words, here's a rich guy, and here's a poor guy, and the theory is that the rich guy is getting very little value out of, say, the last thousand that he's got.
Whereas the poor guy would get a lot of value out of a thousand and I mean these two to be equally wide, namely indicating a thousand.
So let's say this is a hundred thousand and this is a hundred thousand and one, right?
Here's a hundred and one thousand, here's a hundred thousand, and here is seven thousand, and here is eight thousand.
So if you take a thousand away from this guy, you reduce him from 101,000 to 100,000, and you give it to this guy, you increase utility by this much.
You get that? The difference between the two? This sort of justifies welfare.
This is a perfectly legitimate mainstream kind of a thing.
For the Austrians, this is lunacy on stilts or something, because you can't make interpersonal comparisons of utility.
You can't calculate utility. Once you put MU on an axis, you're now counting utils.
But there are no utils. There are no units of utility or units of happiness.
There are measures. I mean, Roderick doesn't like measures because he's a pure Austrian who's against math.
But there is speed, there's acceleration, there's weight, there's height, but there's not units of happiness.
For the Austrians, what marginal utility means is if you've got five gallons of water,
and the most important use of the gallon is, say, drinking, and the second is washing yourself,
and the third is washing your food, and the fourth is washing your car,
and the fifth is, I don't know, taking a bath or something,
And a hoodlum comes up to you and says, okay, give me one gallon of water or I'll kill you.
Which gallon of water do you give?
Well, you give the least valuable one because by definition or by praxeology or by necessity
you always use the marginal gallon for the least important purpose.
But we don't put numbers on it.
Rather, it's ordinal. First, second, third. Whereas for these guys, it's cardinal.
And, you know, if they deny it, ask them, how do you divide the 21st by 3?
You get 7th. I don't know why.
Okay, what else have I got on coasts?
This is reminiscent of another Chicagoite tax scheme.
What you do is, you know, there's a problem of evaluating property.
So they say, okay, everyone can evaluate this property and pay taxes on whatever your evaluation is.
So, for example, if I have a $20,000 car, I can evaluate it at $2,000 and pay taxes on $2,000.
However, if I do it, any of you guys can come up to me and buy that car for $2,000.
You get it?
So in a sense, you're getting a much better evaluation because I'm not going to do that.
But now I have this dog that I love, psychic value, and it cost me 50 bucks.
And if I rank it at 50 bucks, anybody can come along and take my dog away for 50 bucks.
So it's sort of an evil kind of Chicagoite scheme.
I'm ready to tell some stupid jokes.
And you have to pay attention because these will be on the final exam.
Why did the chicken cross the road?
Notice these are very clever and upscale jokes.
You're getting good quality here.
George Bush, I don't think I should have to answer that question.
Al Gore, why did the chicken cross the road?
I invented the chicken.
I invented the road.
Therefore, the chicken crossing the road represented the application of these two different functions of government
in a new reinvented way designed to bring greater services to the American people.
Ralph Nader, why did the chicken cross the road?
The chicken's habitat on the original side of the road had been polluted by unchecked industrialist greed.
The chicken did not reach the unspoiled habitat on the other side of the road
because it was crushed by the wheels of a gas guzzling SUV.
Pat Buchanan, why did the chicken cross the road? To steal a job from a decent, hardworking American.
Rush Limbaugh, I don't know why the chicken crossed the road, but I'll bet it was getting a government grant to cross the road.
And I'll bet somebody out there is already forming a support group to help chickens with crossing the road syndrome.
Can you believe this? How much more of this can a real American take?
Chickens crossing the road paid for by their tax dollars, and when I say tax dollars, I'm talking about your money, money the government took from you to build roads for chickens to cross.
Rush Limbaugh. Dr. Seuss, did the chicken cross the road? Did it cross it with a toad?
Yes, the chicken crossed the road, but why it crossed it, I've not been told.
Okay, questions on Coase or anything? Yes, Kevin.
The creation of prices in the first place possible, the entire measurement system is undermined by having this become a standard.
And I wonder if there were people, because I mean, presumably to be fair, the system could take a little bit of them without the whole thing being undermined.
It could handle it, you know, it could absorb it, but that couldn't be a judicial rule.
And I wonder if that criticism was just being made or if there's any awareness of it.
Because it seems very obvious to me that people need to believe in property rights for the system to work.
Well, you know, I agree with you in one sense that if one percent or one half of the people are thieves, society can do just fine, and that's roughly what we've got now.
But if one percent of government decisions are key low decisions, you know, that's going to start messing things up, especially if they're at the highest level.
at the highest level, you see it really undermines in a very vicious way because every time relative prices change, property rights change, because you know one day the ratio of weed and beef is this and then you give it to the wheat people and then relative prices change and now beef is more expensive and now you give the nod to the cattle and you know every other day the decision will be different, you can't plan, it brings a certain
and an amount of chaos into it.
But I don't think it's a matter of act versus rule utilitarianism.
I think that Coase fails on both grounds.
Certainly the rule of maximizing wealth
and letting a judge who is not dependent upon market success,
keep going, is a very bad rule.
But even the act, every act is an unjust act.
When we determine who should get that green shirt, you or I,
And we determine it not on the basis of history, but on the basis of, well, you know, I'm colder than you, or GDP will be better if I have your shirt, or whatever.
It just is totally unjust. But the word justice is not a word that naturally crosses the lips of the Kosians.
I mean, you read Posner, and he writes a ton. Well, Kos doesn't write a lot, and this is in law journals.
You know, you think that the law should have something to do with justice.
And justice means that Rosemaria keeps her glasses, and that I'm not be allowed to punch anyone, or rape anyone, or kill anyone.
It would be higher, as judged by some judicial central planner.
I was just suggesting, you know, like how Rothbard and Karl Marx have this praxeological refutation of certain types of ethical theories,
because they're means, countries, they're ends.
If their goal is to maximize wealth, what they're doing is going to eventually undermine that whole goal.
You're right. Even on pure utilitarian grounds, this is anathema. You're not going to be maximizing utility or GDP by letting Hilton take over Motel 6 or by letting these people take over Kilo.
There was this case, I think it was Pfizer was supposed to have an office complex around there in Connecticut
and Pfizer took out an ad saying, you know, this has got nothing to do with us
because people are outraged, people have a sense of justice
and they know that this is an abomination, a legal abomination
Now, in the economics profession, if I were to give this speech at the American Economic Association meetings
First of all, nobody would come, because this is lunacy what I'm saying. Everyone knows that Coase is right.
He won a Nobel Prize.
Yeah, he won a Nobel Prize. And if they came, you know, they would be polite about this,
because this is, you know, attacking the flag or something, or attacking the boys in Iraq, or I don't know why,
but it's not a debatable issue within the overall economics profession.
And what I greatly regret is that there's not much interaction.
People don't want, except for Demsens, who was gracious enough to at least engage me in
dialogue on this.
Kind of along the same historical lines, this original paper came out in 1960, and this
is my first exposure to it, and honestly it's pretty silly.
Was it not considered all that controversial?
Oh yeah, it was considered controversial. I think Milton Friedman in his, somewhere, I'm not sure of this, in his book with Rose Friedman about two lucky people, his autobiography, I think he has a section there where he says when Coase first came out with this, everyone in the Chicago department thought it was lunacy, but Coase convinced us all and now we uphold the banner of Coasinism. I think it was there, if I'm not mistaken.
Initially, it was, you know, controversial, but then it took the place by storm.
I mean, you know, I talk about the American Economic Review and the Journal of Political Economy.
Probably the Journal of Law and Economics, I don't know if it's the third best journal in all of economics,
but it ought to be in the top 10 or 15 by anyone's calculation in terms of the mainstream.
And that article pretty much launched the journal and launched the whole law and economics movement.
And I couldn't agree more with Mike. It's silly. The Emperor has no clothes.
This Nobel Prize winner has no clothes.
I mean, Murray wrote his air pollution article.
He has three or four pages attacking the coast thing.
I've had many, many articles on this. Others have criticized it, but they ignore us.
Well, I just keep hurling whatever intellectual ammunition at them.
I'm certainly going to write up the Kelo case as co-sianism run amok, and it'll be ignored, but what the heck, it's fun.
It'd be more fun if they would reply, but you know, you can't control other people's responses.
Isn't calendar Hicks efficiency really just a variation in the same idea that the proper distribution of property rights is the one that would result if you have group bribing or compensation or something, even though you don't have to have the actual compensation or bribing?
Well, there are parallels to it, but I don't think that it's, maybe psychologically it's not put in the same way.
The way I understand this, the thing is, we're at equilibrium if there's no trade that can make at least one person better off without making anyone else worse off, which I think is subtly different from what Coase is saying.
I mean, in equilibrium, there are no more possible trades that will benefit both parties because all trades have been consummated and we're at rest.
Not that we ever reached that, but it's an interesting theoretical construct to compare with the real world, and I have no objection to that, but it's a little different than Coasianism.
Yeah, but if it's used as a justification for redistribution,
I think this is closer to, we'll force people to make the exchanges
that they would already have made in this section as well.
But my reading of Kaldo Hex is that they don't say we should force people
to make trades that we think would be in their best interest.
It's just if there are any unmet trades that still haven't been made
that would benefit two people without hurting anyone else,
then doing it would get us closer to equilibrium or something.
So, I guess I have a more positive interpretation of it.
Yours is more critical. I'm not sure.
I'd have to go read it again with that in mind and see if your interpretation could be upheld.
Yeah, Dan.
At the beginning of the week, you distinguished between positive and normative sciences,
When you're attributing Coase as trying to say we should maximize GDP in court decisions,
can you defend against the claim saying that Coase was trying to be more positivistic in
in his analysis, because I can't seem to find where he would specifically say we should
encourage courts to rule, to maximize utility necessarily, but whether he describes economic
influences and forces in bargaining process, which he kind of presents as being an attack
against government regulation and taxation to show how people can solve conflict themselves
."
But where does he make the jump into saying this is how court should rule?
Because I know that people like Friedman and McCloskey, they would take notes and apply
that, oh, well, now we see how people individually can eliminate conflict regarding, but now
what we really need is markets to operate within courts.
I think you make a very good point that certainly a lot of Kosian-Posnerianism is positive, namely, it's not normative.
It's a description of the way courts do work. And he does make claims like that.
I also think that he makes other claims that are advice to judges kinds of things,
that here's what you should do if you want to be a good judge.
Now, I don't have the citations in front of me, but I can, or you can, comb through the Coase article
and comb through Demsetz and Posner and Landis and David Friedman and the boys,
and I'll bet you you'll find plenty of statements that are normative.
So just because there are a lot of positive doesn't mean there aren't normative, too.
And I think they're wrong on both grounds.
You're certainly wrong on the normative ground. It's immoral and unjust to do that.
But I don't think that most cases are like that. I think most cases, they don't ask things about the future.
They ask things about the past. Or take the average rape case.
There's no question that it's justified because he would have bought her in a zero transaction score.
Even attributing as like the beginning of that phenomenon of the reciprocal nature in court cases to close him, because he reversed the cases, the problem of social cost, which used the reciprocal nature.
Posner on courts, a person may make use of his own property or conduct his own affairs at the expense of some harm to his neighbor.
He may operate a factory whose noise and smoke cause some discomfort to others as long as he uses it in a reasonable amount.
Well, I don't know that he began the trend. I'm not a historian of thought. There might have been precursors and people who anticipated him, but certainly within the economics profession, he's widely credited with the first one to come up with the Coase Theorem.
I mean, any theorem, you could always look at predecessors and there's some hints of it, but my limited knowledge of the history of thought is he really deserves credit for, you know, coming up with this theory.
Now, if you go through all sorts of court cases, you can find some judges that their reasoning seems to be compatible with that, and then, I guess, as a matter of positive economics, it's a reasonable explanation.
But my feeling of law is that most, thank goodness,
Cosianism hasn't perverted even more.
Most cases, especially in the past, have not been decided on Cosian grounds,
but have been decided on historical property rights grounds.
You know, if there's a dispute as to the car, who owns the car,
we look for a bill of sale.
But looking for a bill of sale is irrelevant to Kos.
If there's a problem of two neighbors, you know, screaming at each other or something,
You look at the past contracts, is there a condo association or something like that?
You don't say, well, this guy is an opera singer so he can stream all he wants because, you know, he's Pavarotti and let him sing at three in the morning or something like that.
I don't think you get any cases like that. I might be mistaken, but I don't think so.
Do you think that this, I mean, it seems to me like it's just welfare economics masquerading in a legal realm to a certain extent and trying to maximize social utility or something like that.
And then also related to Dan's question, that even where it's trying to claim that it's positive, it's using loaded terms like benefits and utility that have a normative content, whether the authors want to admit it or not.
Oh, yeah. There's a whole spate of cases that are Kocian cases.
There was one case where a bunch of hoodlums were tossing over a coke machine,
because if you toss it over, the money will come out.
I'm told I don't know about this from personal experience.
And what happened, four or five guys were pushing it over, and it landed on one member of the gang,
and he got killed and his estate successfully either successfully sued or made such a good case that Coca-Cola settled with them
and now what they do is they put in a bolt so you can't tilt over the machine.
Take that case of the coffee and the McDonald's.
Remember that this lady bought the coffee or tea and put it in between the legs and drove off and it spilled on her and burned her?
And, again, I don't know if she successfully sued or they settled with her, but she had enough of a case, and this is on pure Cosian lines.
You see, the theory is that McDonald's knows more about heating coffee than she does.
Therefore, if McDonald's has to fix it, you know, GDP will be higher or something, or you can rely on them more.
There was another case a guy was mowing a lawn without shoes, and he mowed off one of his toes.
and he successfully sued the lawn mower company.
So you get a lot of cases like this that are cozy and ish, but they're perversions of justice.
You know, whatever happened to caveat emptor?
Take the tobacco and the gun cases.
The tobacco cases also fit because, you know, the tobacco companies know more than the average guy.
The average guy, the average guy is a moron, so you know, the tobacco company should do something, or the gun cases, you know, Smith & Wesson gets sued, you know, I go shoot somebody with a Smith & Wesson, and now it's a search for deep pockets, I've got no money, but Smith & Wesson's got some money, so instead of my victim suing me, or in addition to suing me, he just sues Smith & Wesson. Well, they have the least cost avoider. They should have made it with no bullets, or I don't know, I don't know what they should have done, but they should have done something
something such that I couldn't kill him but so you do get some cases that are
cocian cases but they're seen by most reasonable people as perversions of
It was interesting, when I was taught this, I took a class with the noble lawyer that was more for Washington than this, and he had a disciple who was a law professor named Govec, and I was pressing the lock-in point.
They were trying to say, well, it's so hard to determine, and I was saying, well, really, it isn't that hard. What about law? And eventually, I think I got to what it was, and I think I understood that I was wrong.
Natural rights are spooky to them. They think that they can't be naturalists, but they can't believe that everything in the world is what's described by physics, if they believe in things like rights.
And they basically said that. They said, well, all this natural law, natural rights stuff that you're talking about, okay, yeah, it sounds nice, yeah, it goes with most people's classes of intuition, but there can't be anything to it, because otherwise we have an anti-scientific worldview.
and that's basically what Drobach ended up saying to me, is that it just doesn't fit in and I think they feel, I think the idea would be just that Block is just so far out of the discourse, we can't even really discuss with him because he's questioning too many of our precepts and I really think that's what's going on and that's what I got from him.
Well, I would agree with you with one slight emendation, it's not Block, it's all of us, I mean it's Rothbard, it's Mises, it's Hans Hoppe, it's the Austrians or the libertarian theoreticians
who are cultish or religious prayer meetings because they're not scientific.
What I'd like to do, I've got a few minutes, and I'd like to talk based on what Kevin is saying about the scientific method
and talk a little bit about Austrian methodology.
Before I gave you this thing about declining marginal utility, what the mainstream, what they'll do,
I'm running out of pens here, is for them, let's say this is beer. What they'll say is that the first beer, you get so many utils out of, but it went down too quickly, you didn't really pay attention to it. So that the second beer, when you warmed up is even better, you get more utils out of it. And the third, now you're really grooving with the beer. And the third beer is even
more beneficial, but then you reach a point of diminishing returns so that you get a sort of a curve like that.
And what they mean by utility is units of psychological happiness or something like that.
Whereas for the Austrians, there's none of that.
It's this business of, you know, the first unit is used for the most important thing.
The second unit is for the next most important.
So there's no diagram, it's literary, it's seen as unscientific, so this is very similar to what Kevin is saying.
With regard to this, why is it necessarily downward sloping?
Maybe it's upward sloping, and if it's upward sloping, that means that poor people are such slobs that they really can't enjoy things.
Whereas when you're rich, you can really enjoy opera and stuff like that.
So what we want to do is take money from the poor and give it to the rich.
In other words, you can prove anything you want if you just switch the curve around a little bit.
Or maybe the poor have a low curve and the rich have a high curve.
Why do they have to be on the same curve?
So that's another way of getting around the welfare economics.
Now, Murray Rothbard wrote a small little book, I think it's in his Logic of Action, also reprinted on,
I forget the name of it, but it's his methodological thing, and that's where I'm getting some of this stuff from.
A few more Austrian points. You see, what I've done so far in the economics is, I've done economics,
remember I said that Austrian overlaps the mainstream,
And so far what I've done is a lot of this stuff, like environment or minimum wage or free trade is stuff that the mainstream also does.
Now I want to do a little bit of stuff that lies there that makes us seem unscientific and out of the dialogue.
Some of that is this business here.
One of the things I'd like to bring for your attention is this thing of indifference.
Now remember, I said that if we trade a pen and a tie, there's always preference.
You know, if you trade one, you prefer this or you prefer that.
What about indifference?
I've been having this debate with Brian Kaplan on indifference.
And he's another person who at least is willing to dialogue, so I'm very happy with him, even though we disagree, at least, you know, having a dialogue.
And one of the things I like about Brian Kaplan is that he really knows Austrian stuff. For a guy who doesn't agree with it, he probably knows the most.
And the reason for that is that he attended Mises Universities when he was a kid, when he was in high school and college, he attended three or four years, and he read the stuff.
was a lot of the people that disagree with us, you know, they don't really know the Austrianism.
Like this guy, Sherwin Rosen, who had this article that we ought to give up because, don't you believe, we've failed the market test, mainly,
that most economists are not Austrians, therefore, Austrianism is wrong, which is roughly like saying that,
saying that since rap music is more popular than Mozart, rap music is better than Mozart, a little slippage there.
In any case, the debate I've been having with Brian Kaplan over indifference is he says,
look, here are two bottles of water somebody offers me, and they say, well, which one do I want?
And really, in some sense, I'm indifferent.
They're both, you know, perfectly good glasses of water or bottles of water,
and it seems silly to say that I have a preference.
And yet, in the event, I grab this one.
Why this one? Well, maybe I'm a righty and this one is on my right,
or maybe this one for other reasons who knows but in the act I finally have to
pick one so the Austrian is going to say well therefore in some sense I prefer it
so maybe when I was over here before actually choosing I said to me and I
don't really care I'm just going to grab one and sort of close my eyes and grab
one but whichever one I touch in some sense I preferred it otherwise why did I
pick it you know sometimes when I'm not sure what to do I flip a coin and
and heads I'll do it and tails I won't, and then what I do is I monitor myself to try to figure out if I'm happy with the toying course so that I can figure out what I really want.
It's a little weird, but, you know, don't knock it.
Well, something like that might be occurring here. I don't really care, but in the event I pick this one, then I can say, well, am I happy with this one, or do I want that one, or what?
There is a sense in which indifference is a perfectly good English word.
Everyone knows what it means.
So I'm not saying that we should excise the word indifference from the lexicon.
I'm saying it has a perfectly good meaning in ordinary language.
But in technical language it has no meaning because it implies no action.
And the key to Austrian economics is human action.
See, preference implies that I'll take the tie or the pen, whichever I prefer.
Indifference implies nothing. What will I do?
It's similar in physics. They have a concept, work.
Work is force times distance or something like that.
Isn't that right? I'm a little weak on physics.
But suppose I held two dumbbells out like this, each weighing 15 pounds.
I would be doing no work and yet the sweat would be coming down my brow in about two seconds
because it's very hard to hold 15 pounds like this for more than a few seconds.
So that's another example where the technical language is different
with regard to synthetic a prioris.
In the view of most mainstream economists, there are two kinds of statements.
One kind of a statement is a truism, a tautology.
It's absolutely true, undeniable, and yet says nothing about the world.
For example, bachelors are unmarried men.
One plus one is two.
They're truisms, they're tautologies, no one denies them,
but they don't give us knowledge of the world.
They just give us knowledge of how we use words.
On the other hand, there are empirical statements,
such as there's a bottle on the table, Steve Berger is sitting here, we're in a lecture, or I was going to say minimum wage law creates unemployment,
but that's one of the divisive issues, so I won't get to that yet.
Now what's true with regard to these empirical statements?
What's true with regard to these empirical statements is that we have to test them in some way,
and they're not apodictically necessarily true because if they are apodictically necessarily true then by definition they can't say anything about the real world.
So there are these two kinds of statements and this is sometimes called logical positivism or what the Vienna School of Philosophy came up with.
Okay, now the Austrians, as I understand them, or the view that I uphold, is that there is a third category of statements and that's called the synthetic a priori.
And the synthetic a priori has the following characteristics.
One, they're absolutely necessarily, apodictically true.
And two, they tell something about the real world, they really provide insight.
And when you tell what I just said to a mainstream economist,
He says, you know, you've taken leave of your senses. You're a religious fanatic or something like that.
Let me, excuse me, let me give you some examples of what I regard as synthetic a priori statements.
One of them is man acts. To deny that man acts is to act. So you can't deny it.
And yet it tells you something about the world and indeed it's the basis of Austrian economic science.
Another one is that there is a tendency for rates of return on various investments to equalize.
Or profits in different industries tend to equalize.
Why is that?
Well, if you're making profits of 50% in corn and 10% in cattle, everyone's going to want to get out of cattle and into corn.
And as they get out of cattle, the profit rises there, and as they get into corn, the profit falls.
Is it possible to test this? Is it possible to falsify it? No.
Because any given state of the world, you'll find different profit rates.
But that's compatible with there being a tendency for profit rates to equalize.
or for profit rates to go down to zero.
Now, these are insights of economics
and yet they're totally out of the mainstream.
If you say things like this
in the American Economic Review,
they will not let you publish there
because it's not scientific.
And yet, I don't, to the best of my knowledge,
this does tell you about how the world works.
It tells you that money seeks the highest return it can get, investments seek the highest return they can get,
and that the more investments there are in any given field, the lower set of its parables, the return, and the less, the higher,
and that there is this equilibrating tendency.
It gives you real knowledge and it's undeniable, and it tells you about the world.
Let me give you an example that Hans Hoppe often offers. He says, look, here's a sentence.
Tell me the status of this sentence. It's a long sentence.
The sentence says, there are two kinds of sentences.
One is apodictically true and a tautology and tells you nothing about the real world.
The other kind of sentence is an empirical statement that tells you about the world,
but is not necessarily true. End of sentence.
Now, what's the category of that sentence?
If that is a tautology, it tells you nothing about the world.
And if it's an empirical sentence, you have to test it.
It may be true, you can't reject it.
You see the bollocks or the logical difficulty
that these people put themselves in
when they deny the synthetic a priori?
To deny it is to put yourself in this sort of a conundrum.
Let me give you another example.
Well, one that I've been giving.
All voluntary trade attains mutual benefit in the ex ante sense, so that's the attempt.
I've been talking about that all week.
Here's another one.
People act so as to render the future more desirable to them than had they not so acted.
When one understands the English language, one understands that this is a necessarily true statement,
tells you about the real world, informs you, is undeniable, and yet is not a trite truism that says nothing
and only tells you about how the language is used.
So in many ways, Austrians are out of step with a lot of people.
Another one is transitivity. I'm sort of running out of paper. Can I use the opposite side?
Okay, here's transitivity. We know that 8 is bigger than 7, and we know that 7 is bigger than 6, so we deduce that 8 is bigger than 6, and that's transitivity.
And I have no problems with that, that's logic. Now I'll give you another one.
I prefer apples to bananas, and I prefer bananas to carrots.
Now you'd think that therefore I prefer apples to carrots, but I need not.
It doesn't follow. Why?
Because I preferred apples to bananas at time t1, I prefer bananas to carrots at time t2,
And at time T3, I chose between apples and carrots, and maybe I went the other way around, or that way, in other words, there's no implication, people can change their taste.
If you pull this one on a neoclassical economist, they'll say you're illogical, because transitivity, you know, we have to hold preferences or something like that, but the preferences take place at different times.
So why should you be, what is it, put on a cross of carrots or something?
That's not exactly right. I'm yearning and searching for something.
Another one is methodological individualism. Adam, is he around here? There he is.
He had a magnificent article on this in the lewrockwell.com a few days ago or a week ago.
Austrians are methodological individualists. There is no group mind out there. There is no public good.
Whenever I say that society is better off and I add the cattlemen and the railroad or the farmer and the railroad
and I say society is better off, I'm speaking not as an Austrian. I'm speaking loosely.
I'm speaking as a Kosian because I want to transmit what Kos is saying.
but you have to take that with a grain of salt or an asterisk. The pure Austrian
view is that there are only individuals. Even in groups there are still
individuals who act independently or dependently. People affect each other but
they're still individual people. Then another element of Austrianism is
is subjectivism, that there are no objective values, that there are no interpersonal comparisons of utility.
When I get to the monopoly business on Friday, I'll talk about that.
Also, remember I gave you the monopsony case, which was an objection to the minimum wage argument?
Interpersonal comparisons of utility will play a part there.
Another one is that there is such a thing as teleology or purpose or anthropomorphism.
Now, anthropomorphism is improper by ascribing motives to the sun, by saying the sun comes up because it wants to illuminate the earth.
That would be improper.
But to say that people want to do things and have purposes, that seems to be okay to me.
And yet, in the mainstream, this would not be okay.
Questions?
Dan.
I was kind of asking you to just elaborate more on your last point, going back to Kevin's question, which mentioned natural law.
You talk about either the distinction or relationship between a priorism and natural law.
Well, it seems to me that in a positive science, natural law has no place.
But in a normative science such as law, which is by its very nature normative, that natural law would have some sort of place or, you know, justice would have some sort of place.
What these people are trying to do is to do legal theory without justice, or to do legal theory only positivistically, but then they sneak in their own values and start giving advice to judges
I think the difficulty is a little bit deeper in that it's not just that they don't like synthetic a priori statements, or the idea they have to write, it's that I think they don't like what they think their worldview would have to be in order to accommodate those things.
So a lot of times people start talking about synthetic opriori, they start talking about nature's essences, and then you start getting to something like, you know, maybe a scholastic worldview, or something like that, and, you know, Austrians, they haven't shot away from it really, but the very idea of that sort of key like for there to be natural rights, some people think that involves something like natural functions or something, and then they think that involves things like God, and they tend to think that that involves some sort of, like,
Well Murray has an analysis of court historians and court historians, it doesn't mean just historians, but all academics.
Academics have their bread buttered by the government. If there weren't a
government as all-encompassing as it is, if we didn't so heavily subsidize higher
education, there would be fewer jobs for intellectuals. I once gave a speech to a
bunch of antitrust lawyers, and I'll give you my antitrust joke. I should hold it
for the antitrust, but I'll give it to you now. There were three prisoners in
I was in the Soviet Gulag, and they were comparing notes as to why they were in jail, and the first guy said,
well, I was in jail because I came to work late, and they accused me of cheating the state out of my labor services.
The other guy said, I came to work early, and they accused me of brown-nosing.
And the third guy said, I came to work every day exactly on time, and they accused me of owning a Western wristwatch.
And I got a big laugh from the assembled lawyers in the antitrust field.
Lawyers and economists. Lawyers do it and economists are expert witnesses.
I have a friend who used to be in monetary economics and he once told me there's no money in money.
There's money in antitrust for economists to testify.
Then I told the second joke and I got deathly silence.
The second joke was, well, there were three businessmen in jail, in the US jail, on antitrust evasions.
And the first guy says, well, I got in jail because I charged too much and they accused me of gouging and profiteering.
And the second guy said, I was put in jail because they accused me of cutthroat competition and price cutting.
The third guy said, I charged the same price as everyone else.
So it's hard to see how he could have given these other guys, but forget that.
And they put me in jail for collusion.
And it was deathly silence because they knew that if we got rid of antitrust,
What kind of a law is it that no matter what you do, you go to jail?
It's a sick law.
But they're bread and butter, dependent upon that.
So what I'm trying to say is that your theories are good,
and I think our first thought should be why do our opponents disagree with us
and give them the benefit of the motivational doubt and say,
well, there are intellectual reasons, history of thought or whatever.
But we must always also, I think, keep in mind that there's a possibility
There's a possibility that the reason that they are so vociferously opposed to us is because of feelings for number one or self-interest.
Well, time is out for this session. Thanks again for your attention.