WEBVTT NOTE Economics and Public Policy 1 00:00:00.000 --> 00:00:05.000 I want to start by thanking Mark and Joe, who was responsible for the schedule, for putting the best at the end. 2 00:00:05.000 --> 00:00:10.000 I mean, everything this week has been kind of building up to my remarks here. 3 00:00:10.000 --> 00:00:18.000 Actually, what I would like to do is at least begin our discussion, you know, sticking to the contents of this particular chapter, 4 00:00:18.000 --> 00:00:22.000 but since this is our last time to be together in an organized fashion when we're not... 5 00:00:22.000 --> 00:00:27.000 What did Wood say? Not acting like wild beasts, but... Wild savages or something? 6 00:00:57.000 --> 00:01:12.000 Okay, so this is the last chapter. It's chapter seven of Power and Market, called Economics and Public Policy. 7 00:01:12.000 --> 00:01:20.000 It's a nice, certainly a very nice summary and conclusion chapter, particularly for the power and market section of the book, right? 8 00:01:20.000 --> 00:01:34.000 It deals with issues about the role of the economist in society, the role of economics in society and includes a lot of insights that are broader than strict praxeology. 9 00:01:34.000 --> 00:01:41.000 This is almost kind of a sociological character to some of the discussion, a sociological sort of historical character. 10 00:01:41.000 --> 00:01:54.000 In a sense, it parallels the last two chapters of Human Action, which also deal with similar issues about the character of economics, the place of economics in society, the importance of economics, and so on. 11 00:01:54.000 --> 00:02:07.000 Mises, of course, as we've discussed earlier, believed very strongly that the main problems facing society resulted from a lack of understanding of economics. 12 00:02:07.000 --> 00:02:13.080 and Politics. Mises believed that people supported bad policies because they didn't really understand 13 00:02:13.080 --> 00:02:18.320 the consequences of those policies and that through education, if the economists could 14 00:02:18.320 --> 00:02:25.960 explain or persuade people to recognize that they were not employing, that the means they 15 00:02:25.960 --> 00:02:31.520 had chosen were not appropriate to the ends they sought, that things would be a lot better. 16 00:02:31.520 --> 00:02:40.520 Rothbard, I think, was a little bit more, was focused more on issues like interest group dynamics, 17 00:02:40.520 --> 00:02:47.520 you know, so what people refer to now as public choice theory, or the ideas that even fully understanding 18 00:02:47.520 --> 00:02:55.520 that what they're doing is very harmful, certain special interests will pursue those harmful courses of action anyway, 19 00:02:55.520 --> 00:03:00.520 because they're interested in achieving some personal goal rather than some broader social goal. 20 00:03:00.520 --> 00:03:07.040 Principle. You know, some of the – there's four basic sections in the chapter, the nature 21 00:03:07.040 --> 00:03:12.640 and uses of economics, the failures of welfare economics, economics and social ethics, the 22 00:03:12.640 --> 00:03:16.520 market principle and the hegemonic principle. And again, this is sort of summary material 23 00:03:16.520 --> 00:03:23.440 because we've covered quite of this already. The little table that Bob reproduces in the 24 00:03:23.440 --> 00:03:29.680 study guide distinguishing the market principle from the hegemonic principle I think is very 25 00:03:29.680 --> 00:03:36.760 and you know I was thinking about this when David was in the last session was 26 00:03:36.760 --> 00:03:41.680 discussing the so-called libertarian paternalism and this idea that you know 27 00:03:41.680 --> 00:03:48.520 as Rothbard understands the concepts of freedom and coercion you know there it's 28 00:03:48.520 --> 00:03:53.600 a very blunt distinction right coercion is coercion plain and simple 29 00:03:53.600 --> 00:03:59.640 these so-called libertarian paternalists Sunstein and Thaler for example 30 00:03:59.640 --> 00:04:16.640 People argue that, well, we're not actually forcing people to choose X, we're simply requiring their employers or the restaurant owner to organize things in a certain way that people are more likely to choose X on their own. 31 00:04:16.640 --> 00:04:28.640 Whereas the Rothbardian would say, ah, but there's an act of coercion involved in requiring the employer to choose a different default retirement option than he otherwise would have, 32 00:04:28.640 --> 00:04:32.800 or requiring the restaurant owner to lay the food out in a different way than he 33 00:04:32.800 --> 00:04:36.720 otherwise would have. And that's coercion. 34 00:04:36.720 --> 00:04:40.240 By no means is that a less coercive state of affairs than the one in which 35 00:04:40.240 --> 00:04:41.680 people are simply forced to 36 00:04:41.680 --> 00:04:44.680 to eat this food or to choose this retirement plan or whatever. 37 00:04:44.680 --> 00:04:47.760 So Rothbard makes a very stark distinction between 38 00:04:47.760 --> 00:04:51.520 the order of the market, which respects private property and the non-aggression 39 00:04:51.520 --> 00:04:52.240 axiom, 40 00:04:52.240 --> 00:04:58.120 and the order of power, of hegemony and so on, in which coercion is part of the 41 00:04:58.120 --> 00:05:08.340 System. Just, you know, so what are some of the key insights and some important 42 00:05:08.340 --> 00:05:17.080 ideas, at least that I take out of the chapter. Rothbard has very candid and, 43 00:05:17.080 --> 00:05:22.560 in fact, much more candid than what you get in the typical economics textbook 44 00:05:22.560 --> 00:05:27.560 account of what economics really is and isn't good for, right? 45 00:05:27.560 --> 00:05:31.560 So he has this discussion of, you know, the role that the economist, 46 00:05:31.560 --> 00:05:34.560 the value of the economist to the businessman, 47 00:05:34.560 --> 00:05:42.560 which Rothbard explains is, yeah, I mean, just about nothing, okay? 48 00:05:42.560 --> 00:05:46.560 But economists just really aren't that, in the free society, 49 00:05:46.560 --> 00:05:51.560 the economist is not all that useful to the businessman. 50 00:05:51.560 --> 00:05:57.360 In fact, he says, well, sorry, we'll come back to things. 51 00:05:57.360 --> 00:06:11.060 He says, you know, I seem to have this discussion with people in the context of education reform. 52 00:06:11.060 --> 00:06:17.860 And, you know, I'm a college professor and it's certainly in my personal pecuniary interest 53 00:06:17.860 --> 00:06:22.540 to have as many students as possible going to college and as many employment opportunities 54 00:06:22.540 --> 00:06:25.620 as possible for economics professors. 55 00:06:25.620 --> 00:06:32.020 On the other hand, from the point of view of social welfare, I think there are vastly 56 00:06:32.020 --> 00:06:36.260 too many students in college and there are way more economics professors than there ought 57 00:06:36.260 --> 00:06:37.860 to be. 58 00:06:37.860 --> 00:06:42.940 Most of them are net value destroyers rather than value creators. 59 00:06:42.940 --> 00:06:46.980 So in a free society we would see a radical restructuring of the higher education sector 60 00:06:46.980 --> 00:06:51.300 Professor, and there'd be a heck of a lot fewer economics professors. I, of course, 61 00:06:51.300 --> 00:06:54.380 would continue to be employed, but all the marginal ones would just, you know, have to 62 00:06:54.380 --> 00:07:01.580 go into ditch digging or something like that. He has this discussion in the first section 63 00:07:01.580 --> 00:07:06.820 about, you know, the character of economic laws, and we've covered a lot of this already, 64 00:07:06.820 --> 00:07:12.180 namely that they're apodictically true. So that's a great Misesian word that doesn't 65 00:07:12.180 --> 00:07:17.380 can get used as much as it should in everyday conversation, you know. 66 00:07:17.380 --> 00:07:23.180 Tell my kids they should take out the trash, and that's, you know, an apodictically true statement. 67 00:07:23.180 --> 00:07:31.380 Right, so, notice that apodictically true doesn't mean that the laws may not be conditional. 68 00:07:31.380 --> 00:07:36.980 Right, some economic laws, like the law of diminishing marginal utility, are universal. 69 00:07:36.980 --> 00:07:47.080 But others, you know, that, you know, if demand above the current price is inelastic, then raising the price will increase total revenue. 70 00:07:47.080 --> 00:07:54.080 You know, a statement like that is obviously conditional on demand in fact being inelastic above the price at which we're discussing. 71 00:07:54.080 --> 00:07:56.880 There's a, you know, if-then statements. 72 00:07:56.880 --> 00:08:05.880 What that means, one thing that implies is that the application of economic law to specific historical circumstances 73 00:08:05.880 --> 00:08:10.720 is something of an art as much as a science, right? 74 00:08:10.720 --> 00:08:15.600 So the applied economist, the economic historian, has the task of figuring out, well, in this 75 00:08:15.600 --> 00:08:21.000 particular place, at this particular time, with these real human beings acting and interacting, 76 00:08:21.000 --> 00:08:26.000 was it in fact the case that demand was inelastic and that therefore the total revenue, you 77 00:08:26.000 --> 00:08:27.920 know, rose or whatever the case might be. 78 00:08:27.920 --> 00:08:34.840 Okay, so economic theory is scientific in the sense that David was describing it in 79 00:08:34.840 --> 00:08:40.280 in the last session, but applied economics or doing economic history is not scientific 80 00:08:40.280 --> 00:08:41.280 in the same sense. 81 00:08:41.280 --> 00:08:47.760 It doesn't mean it's arbitrary or unsystematic, but applied economics doesn't have the same 82 00:08:47.760 --> 00:08:52.740 a priori truth status as economic theory. 83 00:08:52.740 --> 00:08:57.240 Something else that is typically forgotten by many economists is that economic laws in 84 00:08:57.240 --> 00:09:03.760 the Mangerian, Rothbardian, causal realist tradition are qualitative rather than quantitative 85 00:09:03.760 --> 00:09:09.040 Laws, and we've tried to emphasize that throughout the week with discussions of ordinal utility. 86 00:09:09.040 --> 00:09:16.200 I was just having a conversation with some people earlier today about the way that Rothbard, 87 00:09:16.200 --> 00:09:22.080 following Menger, writes the preference, an individual's preference ordering, and rather 88 00:09:22.080 --> 00:09:28.460 than writing, ranking the objectives one, two, three, four, five, I mean, when I teach 89 00:09:28.460 --> 00:09:33.260 I teach this to undergraduates, I try to use A, B, C, and D. 90 00:09:33.260 --> 00:09:39.020 A is preferred to B, B is preferred to C, C is preferred to D, rather than 1, 2, 3, 4, 91 00:09:39.020 --> 00:09:43.780 because then people naturally start thinking, well, so, you know, this one is twice as good 92 00:09:43.780 --> 00:09:46.860 as this one because it's twice as far on the scale as that one. 93 00:09:46.860 --> 00:09:51.340 No, that's not the characteristic, not the character of economic laws, right, they're 94 00:09:51.340 --> 00:09:52.340 qualitative. 95 00:09:52.340 --> 00:09:56.580 There are no mathematical constants in human action, as Mises, as Mises puts it, as there 96 00:09:56.580 --> 00:10:01.660 There are constants in the physical sciences. David did a nice job explaining Rothbard's 97 00:10:01.660 --> 00:10:07.740 view of the value freedom of economic analysis, that economic laws are, let's see if I can 98 00:10:07.740 --> 00:10:14.020 say it in Hoppean fashion, Wucht frei. Is that good? Wucht frei character of economic 99 00:10:14.020 --> 00:10:23.020 laws. No offense to any German speakers here who may find that an insensitive characterization. 100 00:10:23.020 --> 00:10:27.020 Okay, so what then do we say about applied economics? 101 00:10:27.020 --> 00:10:29.020 Well, first of all, what do we mean by applied economics? 102 00:10:29.020 --> 00:10:34.020 Well, in the Rothbardian system, all, you know, what most people, 103 00:10:34.020 --> 00:10:39.020 what mainstream economists call empirical work, is really economic history, right? 104 00:10:39.020 --> 00:10:44.020 Even if you're talking about prices that people paid in the market yesterday or this morning, 105 00:10:44.020 --> 00:10:50.020 it's still historical in the sense that these are actions that, you know, took place in the past, 106 00:10:50.020 --> 00:10:59.020 even if it's the very recent past, and economic history can involve quantitative relationships 107 00:10:59.020 --> 00:11:04.020 because we're not talking about apodictically true statements, but rather trying to make educated guesses 108 00:11:04.020 --> 00:11:09.020 about the quantitative magnitudes of certain phenomena, okay? 109 00:11:09.020 --> 00:11:15.020 You know, we know that, you know, looking at the, Doug was talking about the housing bubble, right? 110 00:11:15.020 --> 00:11:29.020 The Austrian Theory of the Business Cycle tells us that due to Fed policy, with monetary expansion and interest rates being below their natural rate, 111 00:11:29.020 --> 00:11:34.020 this will lead to malinvestment in particular sectors and its consequences and so on. 112 00:11:34.020 --> 00:11:42.020 But economic theory doesn't tell us how large will the malinvestment be if there's a way to come up with a reasonable way to quantify that. 113 00:11:42.020 --> 00:11:52.020 The Theory doesn't tell us, the only way to clarify that is to lead to a little malinvestment or a lot of malinvestment in a few sectors or many sectors, will the malinvestments take just a little time to be cleansed? 114 00:11:52.020 --> 00:12:03.020 I thought that was a great word that Doug used over lunch, wasn't it? That your position at the bank was a malinvestment that was either cleaned, I think was the word you used. 115 00:12:03.020 --> 00:12:09.180 So, will that happen quickly, or will it take a very long time for malinvestments to be corrected, and so on? 116 00:12:09.180 --> 00:12:16.260 But theory doesn't tell us. The only way to come up with reasonable characterizations, that is to look at the data, 117 00:12:16.260 --> 00:12:19.740 to look at the facts, both qualitative and quantitative data. 118 00:12:19.740 --> 00:12:24.940 I think someone, maybe it was Walter in an earlier lecture, said something about econometrics, 119 00:12:24.940 --> 00:12:30.460 that there are different views among Austrians about the appropriate use of econometrics. 120 00:12:30.460 --> 00:12:35.940 I think all Austrians believe that econometric, would agree with the statement that econometric 121 00:12:35.940 --> 00:12:42.100 analysis badly done is, is bad, okay, and there's a lot of problems with the way econometric 122 00:12:42.100 --> 00:12:49.640 analysis is typically done. There's actually an interesting book by McCloskey and Ziliak, 123 00:12:49.640 --> 00:12:54.900 they just published it in book form, but the articles have been around for a while, criticizing 124 00:12:54.900 --> 00:12:57.860 and what they call the cult of statistical significance, 125 00:12:57.860 --> 00:13:01.700 namely that researchers in so-called empirical economics 126 00:13:01.700 --> 00:13:03.540 or we would say economic history 127 00:13:03.540 --> 00:13:06.860 typically confuse tests of statistical significance 128 00:13:06.860 --> 00:13:08.780 or the idea of statistical significance 129 00:13:08.780 --> 00:13:11.500 with economic significance, right? 130 00:13:11.500 --> 00:13:13.340 That just looking at t-statistics and so on 131 00:13:13.340 --> 00:13:15.960 doesn't tell you whether phenomena are important, 132 00:13:16.860 --> 00:13:18.740 that there's way too much emphasis placed 133 00:13:18.740 --> 00:13:21.180 on significance testing and hypothesis testing 134 00:13:21.180 --> 00:13:23.080 and applied historical work. 135 00:13:23.080 --> 00:13:29.160 Now, some Austrians have gone even farther and argued that even well-done econometrics is, 136 00:13:29.160 --> 00:13:36.920 econometric analysis is misleading even as economic history, but I think that's a minority view among Austrian economists. 137 00:13:36.920 --> 00:13:48.280 Anyway, the point is that when economic historians or financial analysts or business forecasters do quantitative analysis, 138 00:13:48.280 --> 00:13:52.440 they're not acting as economists per se when they do that, right? 139 00:13:52.440 --> 00:13:58.840 They're acting as consultants or forecasters or historians, hopefully making use of economic 140 00:13:58.840 --> 00:14:03.360 analysis in doing what they do, but they're going far beyond economics, per se, in doing 141 00:14:03.360 --> 00:14:06.760 that sort of thing. 142 00:14:06.760 --> 00:14:11.040 Rothbard doesn't say, he talks a little bit about applications of economic analysis to 143 00:14:11.040 --> 00:14:18.580 managerial problems, and he's pretty unimpressed with so-called operations research, which 144 00:14:18.580 --> 00:14:21.580 I think was pretty unimpressive at the time that he was writing. 145 00:14:21.580 --> 00:14:30.080 I think some areas of sort of applied quantitative business administration have gotten better in recent decades. 146 00:14:30.080 --> 00:14:38.580 Actually, personally, I'm a little bit more sympathetic than Rothbard to the usefulness or utility of economic theory 147 00:14:38.580 --> 00:14:45.080 in doing sort of applied work in business administration, in management, finance, accounting, marketing and so on. 148 00:14:45.080 --> 00:14:49.680 We can talk about that a little bit in the question period, if you like. 149 00:14:49.680 --> 00:14:55.180 But this is the way Rothbard puts it, with his typical succinct prose. 150 00:14:55.180 --> 00:14:58.380 What can the economist do on the purely free market? 151 00:14:58.380 --> 00:15:02.080 He can explain the workings of the market economy, a vital task, 152 00:15:02.080 --> 00:15:07.480 especially since the untutored person tends to regard the market economy as sheer chaos. 153 00:15:07.480 --> 00:15:10.880 But he can do little else, emphasis in the original. 154 00:15:10.880 --> 00:15:13.080 He can do little else. 155 00:15:13.080 --> 00:15:17.640 Contrary to the pretensions of many economists, he is of little use to the businessman. 156 00:15:17.640 --> 00:15:22.840 He cannot forecast future consumer demands and future costs as well as the businessman. 157 00:15:22.840 --> 00:15:27.320 If he could, then he would be the businessman, and I think that's exactly right. 158 00:15:27.320 --> 00:15:32.440 And it's funny how many academics in not only economics, but in management studies 159 00:15:32.440 --> 00:15:37.560 and so on, you know, make these sort of snide, dismissive remarks about business people and 160 00:15:37.560 --> 00:15:43.160 and their forecasting errors and, you know, it's easy to say, to sit there in one's ivory 161 00:15:43.160 --> 00:15:46.560 tower and talk about these foolish speculators and so on. 162 00:15:46.560 --> 00:15:54.000 I was at a conference recently with one of the keynote speakers was the CEO of one of 163 00:15:54.000 --> 00:15:56.840 my favorite companies, the Lego Company. 164 00:15:56.840 --> 00:16:02.720 I mean, that's just one of the greatest, you know, sort of feats of human creativity 165 00:16:02.720 --> 00:16:04.840 ever is the Lego brick and all the... 166 00:16:04.840 --> 00:16:09.840 Anyway, so the guy was talking about different things Lego was doing and, you know, he said, 167 00:16:09.840 --> 00:16:14.840 but, you know, really at the end of the day, you know, we have a toy where, you know, 168 00:16:14.840 --> 00:16:21.840 such that a small child can take these bricks and stick them together without any glue or without any tools 169 00:16:21.840 --> 00:16:24.840 and the pieces stick together. 170 00:16:24.840 --> 00:16:28.840 You know, the kid can throw it up in the air and it'll fall down and it'll still be stuck together, 171 00:16:28.840 --> 00:16:32.840 but then when the child wants to build something else, he can pull them apart. 172 00:16:32.840 --> 00:16:37.040 At the end of the day, that's what we have, that's our source of competitive advantage. 173 00:16:37.040 --> 00:16:38.880 That was pretty good. 174 00:16:38.880 --> 00:16:44.600 So, during the break, I heard these two management professors, you know, this guy, he thinks 175 00:16:44.600 --> 00:16:47.360 that having a unique product is the source of his competitive advantage. 176 00:16:47.360 --> 00:16:50.600 Well, of course it's not, because you can easily imitate that. 177 00:16:50.600 --> 00:16:54.800 He doesn't realize it's his strategy that's his source of competitive advantage. 178 00:16:54.800 --> 00:16:59.440 I just thought, wait a minute, you're talking about the CEO of Lego, come on. 179 00:16:59.440 --> 00:17:04.440 Why don't you guys go out and be in the toy company if you're so darn smart? 180 00:17:04.440 --> 00:17:12.600 Okay, so this emphasizes the point that we made earlier, right, that the economist can 181 00:17:12.600 --> 00:17:17.160 spin out all these keteris paribus qualified statements but doesn't know if keteris is 182 00:17:17.160 --> 00:17:21.360 really paribus in one situation or another. 183 00:17:21.360 --> 00:17:27.720 Now what happens in the mixed economy, right, where the government is very active at intervening 184 00:17:27.720 --> 00:17:33.960 in the Economy. Well then, there's lots for the economist to do in analyzing the effect 185 00:17:33.960 --> 00:17:40.640 of government policy, and in many cases, helping to design government policies. These are the 186 00:17:40.640 --> 00:17:45.560 guys who would be, you know, in really bad shape in Walter Block's Libertarian Nuremberg 187 00:17:45.560 --> 00:17:52.840 trial. Rothbard says, when government intervenes in the market, the usefulness, notice the 188 00:17:52.840 --> 00:18:02.840 The usefulness of the economist expands. In the realm of the free market, the economist must give way to the entrepreneurial forecaster, but government actions are very different. 189 00:18:02.840 --> 00:18:07.840 Because the problem is now precisely what the consequences of government acts will be. 190 00:18:07.840 --> 00:18:13.840 Here the economist, with his knowledge of the various alternative consequences, comes into his own. 191 00:18:13.840 --> 00:18:24.840 In other words, the trained economist, the praxeologist, is in a better position to analyze the effects of rent control, for example, than a practitioner in the housing market. 192 00:18:24.840 --> 00:18:36.840 So the practitioner may have much more hands-on experience and knows the nuances of particular markets and so on, but in terms of deriving general laws about how price controls work and so on, 193 00:18:36.840 --> 00:18:41.840 the economic theorist is, you know, in a pretty good position here. 194 00:18:41.840 --> 00:18:45.840 You know, some economists even try to write the rules themselves. 195 00:18:45.840 --> 00:18:51.440 Won't mention any names, except maybe someone who many of us know, Randy Krosner, 196 00:18:51.440 --> 00:18:54.840 who is a sort of libertarian, supposed to be a libertarian economist, 197 00:18:54.840 --> 00:18:57.840 who's now on the Board of Governors of the Federal Reserve System, 198 00:18:57.840 --> 00:19:04.140 and not only is on the board, but is actually the board member charged with designing 199 00:19:04.140 --> 00:19:09.840 all the new mandatory disclosure rules that will prevent, you know, the next housing bubble. 200 00:19:09.840 --> 00:19:16.040 And, I mean, he's a very smart guy, and I know him fairly well, but he has, you know, 201 00:19:16.040 --> 00:19:23.480 is reputed to be one of the leading libertarian, you know, economic analysts. 202 00:19:23.480 --> 00:19:26.840 So he should run away from Walter Block. 203 00:19:26.840 --> 00:19:32.920 Now, Rothbard doesn't go into a lot of detail about, you know, how the economics profession 204 00:19:32.920 --> 00:19:39.680 changed, how did, I mean, look, I just want to emphasize one other point that has been 205 00:19:39.680 --> 00:19:44.680 have been made a few times in the week that Rothbardian economic analysis, 206 00:19:44.680 --> 00:19:51.680 which is an extension of Mangerian, Boehm-Bawerkian, Misesian, causal realist economics, 207 00:19:51.680 --> 00:19:53.680 was not always in the minority. 208 00:19:53.680 --> 00:19:59.680 Even in the US, in the early 20th century, it was, if not the mainstream view, 209 00:19:59.680 --> 00:20:03.680 at least a viable contender among mainstream views. 210 00:20:03.680 --> 00:20:07.680 But now Austrian economics has been marginalized. 211 00:20:07.680 --> 00:20:31.680 And, you know, I don't have the exact numbers at hand, but, you know, if you look at the role of the enrollment, the membership roles, excuse me, of the American Economic Association, and I think this is true of other countries as well, you know, as many as a third or even a half of the professional economists are employed by government agencies. 212 00:20:31.680 --> 00:20:45.480 Okay, so on behalf of, obviously universities are major employers, but vast numbers of economists are employed by government agencies and they are not economists in Rothbard's sense of the word. 213 00:20:45.480 --> 00:20:54.280 They are government bureaucrats who may use economic analysis to do policy work and to do forecasting and policy design and so on. 214 00:20:54.280 --> 00:21:07.280 So how did this happen? This isn't in Man Economy and State, but it's an interesting story that is beginning to be told, but maybe needs to be told in even greater detail. 215 00:21:07.280 --> 00:21:16.280 And Joe mentioned this distinction that he has between vocational economics and professional economics. 216 00:21:16.280 --> 00:21:21.280 The vocational economics is a vocation as opposed to economics as a profession. 217 00:21:21.280 --> 00:21:27.400 And I highly recommend, particularly for young scholars, Joe's paper on the vocational economist. 218 00:21:27.400 --> 00:21:28.400 Is it published somewhere? 219 00:21:28.400 --> 00:21:33.400 No, it's on mises.org. 220 00:21:33.400 --> 00:21:41.040 But the increasing professionalization of economics has a lot to do with the problems of contemporary 221 00:21:41.040 --> 00:21:42.040 economics. 222 00:21:42.040 --> 00:21:47.280 And I would just add, I had to be talking about Salerno all the time because his ego 223 00:21:47.280 --> 00:21:48.280 is big enough as it is. 224 00:21:48.280 --> 00:22:18.280 He's got this really nice paper on sort of the decline in Austrian price theory, in Mangerian price theory around World War I and this sort of how the problems with the Austrian school really were really apparent then and the Keynesian revolution maybe, you know, struck the last blow but the Austrian school was already in pretty bad shape even before that because of various internal problems, internal contradictions and I think that story is right but there's kind 225 00:22:18.280 --> 00:22:23.280 We have a complementary story that places more emphasis on external factors. 226 00:22:23.280 --> 00:22:30.280 And this has been mentioned some this week, you know, like the growth in public universities, right, 227 00:22:30.280 --> 00:22:37.280 who are much more likely to employ interventionist economists than praxeologists. 228 00:22:37.280 --> 00:22:44.280 You know, GI Bill in the U.S. with this massive increase in public expenditures on higher education 229 00:22:44.280 --> 00:22:49.760 to an influx of marginally qualified economists into the profession, all the economists going 230 00:22:49.760 --> 00:22:52.200 to work for World War II. 231 00:22:52.200 --> 00:22:56.720 The formation of the American Economic Association itself is a pretty sordid tale. 232 00:22:56.720 --> 00:23:04.280 Most economists today aren't aware that the founders of the AEA in the late 19th century 233 00:23:04.280 --> 00:23:12.520 were explicit socialists and they complained that most economists were too laissez-faire 234 00:23:12.520 --> 00:23:18.280 and that economics needed to become more interventionist, more like its Prussian counterpart. 235 00:23:18.280 --> 00:23:23.940 They want to be more, they were all these guys, Richard T. Ely, after whom the annual 236 00:23:23.940 --> 00:23:28.920 distinguished lecturer at the American Economic Association is named, had studied in Germany 237 00:23:28.920 --> 00:23:34.840 and under the younger historical school, the bad guys, and wanted to bring that same style 238 00:23:34.840 --> 00:23:37.000 of economics to the U.S. 239 00:23:37.000 --> 00:23:40.680 And we talked earlier this week about World War II and all the economists, you know, from 240 00:23:40.680 --> 00:23:44.520 John Kenneth Galbraith and Milton Friedman who were employed by the federal government 241 00:23:44.520 --> 00:23:50.840 doing various activities in World War II. There's an interesting story about harm-to-management 242 00:23:50.840 --> 00:23:55.360 practice as well, that a lot of the stuff that what Rothbard described as operations 243 00:23:55.360 --> 00:24:00.080 research, that all came out of World War II procurement studies as well and a lot of those 244 00:24:00.080 --> 00:24:05.240 guys like Robert McNamara went on to apply those same harmful management techniques to 245 00:24:05.240 --> 00:24:12.240 to Ford and, of course, the Vietnam War and the World Bank and other institutions that he wrecked. 246 00:24:16.240 --> 00:24:20.240 So where does that leave us here in this group? 247 00:24:20.240 --> 00:24:27.240 Well, I mean, I hope that we haven't depressed you this week, but rather that we've inspired you to look for error 248 00:24:27.240 --> 00:24:33.240 and to fight against error and to help to spread the truth. 249 00:24:33.240 --> 00:24:38.240 And I think, you know, I've had conversations with some of you this week about your, 250 00:24:38.240 --> 00:24:44.240 some of you who are in graduate school and working on a thesis or trying to think about your career 251 00:24:44.240 --> 00:24:48.240 and what kind of employment opportunities are going to be available and so on. 252 00:24:48.240 --> 00:24:53.240 And, you know, sometimes you go to an Austrian conference, right, and it's all gloom and doom. 253 00:24:53.240 --> 00:24:59.240 It's all the mainstream is, you know, out to get us and we can't get jobs anywhere 254 00:24:59.240 --> 00:25:02.840 because all the Keynesians are blocking us or whatever. 255 00:25:02.840 --> 00:25:07.840 And okay, I mean, it's not surprising that that kind of discussion, 256 00:25:07.840 --> 00:25:10.440 those kind of remarks often come up in the discussion, 257 00:25:10.440 --> 00:25:14.640 but there's a lot to be optimistic about too, right? 258 00:25:14.640 --> 00:25:20.440 And just as the large public university deserves some of the blame 259 00:25:20.440 --> 00:25:24.840 for the harm done not only to economics but to other academic disciplines as well, 260 00:25:24.840 --> 00:25:29.040 the, you know, to put it nicely, the challenges facing the university 261 00:25:29.040 --> 00:25:31.640 are good for sound economics. 262 00:25:31.640 --> 00:25:39.560 I don't know if the word, maybe the word crisis is too strong, but particularly in the U.S., 263 00:25:39.560 --> 00:25:42.720 universities have many, many serious problems. 264 00:25:42.720 --> 00:25:48.640 They don't have the resources they need to carry on their current level of activities. 265 00:25:48.640 --> 00:25:55.040 Enrollments in many public universities are flat or even falling. 266 00:25:55.040 --> 00:26:01.840 The fastest growing segment of the higher education market is non-traditional, specialized, 267 00:26:01.840 --> 00:26:04.640 often vocationally oriented institutions. 268 00:26:04.640 --> 00:26:09.820 Some of you in the U.S. have heard of places like the University of Phoenix or DeVry University, 269 00:26:09.820 --> 00:26:14.400 which used to be called DeVry Institute as sort of a vocational school. 270 00:26:14.400 --> 00:26:18.920 Those are on the rise, distance learning has facilitated the rise of non-traditional forms 271 00:26:18.920 --> 00:26:23.520 of education and the university is sort of in bad shape. 272 00:26:23.520 --> 00:26:30.440 In the US, in secondary schools, high schools and below, the homeschooling movement has 273 00:26:30.440 --> 00:26:35.080 been a very important kind of alternative educational institution and there are many 274 00:26:35.080 --> 00:26:41.760 opportunities to get sound economic analysis into these non-traditional institutions. 275 00:26:41.760 --> 00:26:51.180 Personally, I think there is, I think the literature that I know the best, the mainstream 276 00:26:51.180 --> 00:27:04.900 is becoming more and more Austrian-friendly in my judgment. 277 00:27:04.900 --> 00:27:09.020 So yes, the challenges remain and so on, but there's an increasing appreciation for and 278 00:27:09.020 --> 00:27:15.100 sympathy to non-traditional ideas including those of praxeology in those fields and there 279 00:27:15.100 --> 00:27:17.740 are a lot of opportunities, potential opportunities there. 280 00:27:17.740 --> 00:27:24.340 I think the fact that so many, that financial professionals and even policy outfits are 281 00:27:24.340 --> 00:27:29.740 sort of all of a sudden a little curious about this Austrian business cycle theory is sort 282 00:27:29.740 --> 00:27:33.380 of a good thing for the movement, if not for the economy. 283 00:27:33.380 --> 00:27:38.380 And you know Doug was talking about this at lunch, but you know the Austrians have a better 284 00:27:38.380 --> 00:27:44.940 explanation for the housing crisis than most mainstream macroeconomists and this is beginning 285 00:27:44.940 --> 00:27:51.940 What theories do you have that can help us understand what's going on, and they don't have good answers to that, and the Austrians tend to have better answers.