WEBVTT NOTE Misesian Economics in Truly Private Schools 1 00:00:00.000 --> 00:00:12.000 As a person's education, wrote Murray Rothbard, is the, quote, entire process of growing up, developing all the facets of a man's personality, close quote. 2 00:00:12.000 --> 00:00:18.000 From the helplessness of infancy, a child learns about himself, others, and the world around him through his actions. 3 00:00:18.000 --> 00:00:27.000 In developing ends and discovering means, he forms judgments about others, the environment in which he acts, and his relationship with them. 4 00:00:27.000 --> 00:00:32.280 His choices are based on his personality and what he has learned about moral and aesthetic principles 5 00:00:32.280 --> 00:00:38.760 and causal relationships between ends and means. When he finally reaches adulthood, Rothbard wrote, 6 00:00:39.400 --> 00:00:45.080 he has developed his faculties to whatever extent he can and has acquired a set of values, 7 00:00:45.080 --> 00:00:52.280 principles and scientific knowledge." A person is self-educated in the process of living his life. 8 00:00:52.280 --> 00:00:58.120 He owns his mind and body and learns through the actions he takes with them. 9 00:00:58.120 --> 00:01:03.240 The complementary means he uses in action from his environment condition what he learns, 10 00:01:03.240 --> 00:01:08.800 but it is his mind that forms judgments about himself and the world in which he acts. 11 00:01:08.800 --> 00:01:14.840 It is a fundamental fact of human nature, Rothbard wrote, that a person's ideas are 12 00:01:14.840 --> 00:01:17.120 formed for himself. 13 00:01:17.120 --> 00:01:22.440 Others may influence them, but none can determine absolutely the ideas and values which the 14 00:01:22.440 --> 00:01:27.880 individual will adopt or maintain through his life." 15 00:01:27.880 --> 00:01:33.560 If education is a natural part of life, grounded in private property and human action, what 16 00:01:33.560 --> 00:01:38.840 is the role of schooling or formal education in learning? 17 00:01:38.840 --> 00:01:44.480 When a child first learns about himself, others, and the world is thymological knowledge. 18 00:01:44.480 --> 00:01:48.840 that is knowledge acquired through his experience as it relates to the success or failure of 19 00:01:48.840 --> 00:01:54.720 his actions. Although time-ological knowledge is naturally acquired through the mundane 20 00:01:54.720 --> 00:02:01.400 activities of daily life, it is not itself simple but quite complex. It is a composite 21 00:02:01.400 --> 00:02:08.400 of what a person has learned about natural, moral and praxeological laws and the particular 22 00:02:08.400 --> 00:02:13.880 contingent conditions that affect his actions. It takes sustained intellectual effort to 23 00:02:13.880 --> 00:02:19.880 to separate the distinct elements of time-ological knowledge and investigate them on their own terms. 24 00:02:19.880 --> 00:02:22.880 That is the role of formal education. 25 00:02:22.880 --> 00:02:28.880 Learning about the various branches of theoretical truth within which experience occurs 26 00:02:28.880 --> 00:02:32.880 requires abstracting through theoretical laws from experience. 27 00:02:32.880 --> 00:02:38.880 For praxeological laws, this is not done primarily to improve one's actions, 28 00:02:38.880 --> 00:02:42.880 but to comprehend the operations of the social organ. 29 00:02:42.880 --> 00:02:51.880 Praxeological laws describe the cause and effect relationships by which the division of labor is created, maintained, and improved. 30 00:02:51.880 --> 00:02:58.880 Without sustained intellectual effort, knowledge of these universal laws and what they imply would not develop. 31 00:02:58.880 --> 00:03:03.880 Such knowledge cannot be drawn directly from the thymological knowledge itself. 32 00:03:03.880 --> 00:03:09.360 Fortunately, although thymological knowledge, being particular to his own actions, can only 33 00:03:09.360 --> 00:03:15.160 be acquired by a person through his own experience, praxeological knowledge, being universal to 34 00:03:15.160 --> 00:03:21.400 all action, can be constructed by the efforts of others into a vast network of theoretical 35 00:03:21.400 --> 00:03:24.080 truth waiting to be learned. 36 00:03:24.080 --> 00:03:28.640 The average person would make little progress along these lines by his own effort. 37 00:03:28.640 --> 00:03:35.140 He could neither devote sufficient time to it, to the neglect of efforts to satisfy his consumptive ends, 38 00:03:35.140 --> 00:03:42.000 nor does he possess the capacities needed to reproduce all praxeological knowledge from scratch. 39 00:03:42.000 --> 00:03:49.000 Even the most gifted person would find it economizing to learn praxeological truth from the efforts of others. 40 00:03:49.000 --> 00:03:53.740 Reading human action is easier than writing it. 41 00:03:53.740 --> 00:04:02.740 The formal instruction of a child too young to grasp the advanced theoretical truth is done to prepare him for such systematic intellectual inquiry. 42 00:04:02.740 --> 00:04:06.740 It therefore begins with the development of his intellectual faculties. 43 00:04:06.740 --> 00:04:16.740 He must learn the basic building blocks of reasoning and develop his intellect as a natural progression from facts to reason to application. 44 00:04:16.740 --> 00:04:21.740 The formal education of a child is the natural prerogative of his parents. 45 00:04:21.740 --> 00:04:26.260 They possess custodial rights of a child and exercise them for his physical, mental and 46 00:04:26.260 --> 00:04:28.660 spiritual development. 47 00:04:28.660 --> 00:04:33.620 Parents are in a position to know their child and care for the development of his personality. 48 00:04:33.620 --> 00:04:39.040 They bear the responsibility of attaining this end and are in a position to tailor formal 49 00:04:39.040 --> 00:04:44.560 education to the strengths and weaknesses of their child by either their own tutoring 50 00:04:44.560 --> 00:04:49.260 or the hiring of appropriate specialists to instruct their child. 51 00:04:49.260 --> 00:04:54.300 Parental directed tutoring then is the best type of formal education since it is the most 52 00:04:54.300 --> 00:05:00.740 apt to result in learning harmonious with the natural development of a child's personality. 53 00:05:00.740 --> 00:05:05.060 Private and primary elementary schools with one teacher and many students have been a 54 00:05:05.060 --> 00:05:11.260 compromise from parental directed tutoring made out of economic necessity. In pre-capitalist 55 00:05:11.260 --> 00:05:17.460 societies only the richest elite had sufficient wealth to indulge in private tutoring. Most 56 00:05:17.460 --> 00:05:22.940 Some parents consume their day with the labor necessary to scratch out a subsistence living. 57 00:05:22.940 --> 00:05:27.380 As wealth has expanded under capitalism, it has become increasingly possible for the middle 58 00:05:27.380 --> 00:05:33.660 class to do what the rich have always been able to afford to do, that is, private tutoring. 59 00:05:33.660 --> 00:05:37.540 Today middle class parents are wealthy enough to indulge in substantial private tutoring 60 00:05:37.540 --> 00:05:43.180 and could do more if they were free from the burden of financing state schools. 61 00:05:43.180 --> 00:05:49.180 And even where wealth is not sufficient and parents choose schools, a market for private 62 00:05:49.180 --> 00:05:54.260 schools would suppress the deficiency of schooling as parental spending would guide schools to 63 00:05:54.260 --> 00:05:59.500 find the most effective arrangements for developing each child's personality. 64 00:05:59.500 --> 00:06:04.460 As with thymological knowledge that the child gains from his own actions, formal education 65 00:06:04.460 --> 00:06:08.580 then proceeds naturally and privately. 66 00:06:08.580 --> 00:06:12.720 When the child reaches maturity and is no longer under the custodial care of his parents, 67 00:06:12.720 --> 00:06:42.720 The diversity of interests and aptitudes among persons would lead them into different specialized intellectual pursuits, and therefore a market for higher education would have a variety of schools catering to these specialized areas, such as medicine, engineering, philosophy, theology, and economics, and a spectrum of these schools would emerge to cater to the different interests and aptitudes of the students. 68 00:06:42.720 --> 00:06:46.760 If the state would see the truth about the world for its own sake as in philosophy, or 69 00:06:46.760 --> 00:06:51.520 for its usefulness as in engineering, then by their demands schools would be dominated 70 00:06:51.520 --> 00:06:54.880 by the search for and transmission of truth. 71 00:06:54.880 --> 00:06:58.800 In such a setting, necessity in economics, which explains the nature and working of the 72 00:06:58.800 --> 00:07:03.000 natural social order, can develop. 73 00:07:03.000 --> 00:07:07.480 State interference in education usurps the child's rights and displaces the custodial 74 00:07:07.480 --> 00:07:23.480 The State must resort to force because neither the child nor the parents want the natural arrangement to be overturned. 75 00:07:23.480 --> 00:07:32.480 Because the State rests on compulsion, its activity extinguishes the very basis for the development of the personalities of children, which is freedom. 76 00:07:32.480 --> 00:07:38.480 Moreover, state officials lack the knowledge of and concern for the child possessed by his parents. 77 00:07:38.480 --> 00:07:44.480 The state has no interest in developing the personalities of children or in catering to their interests and aptitudes. 78 00:07:44.480 --> 00:07:49.480 The state does not desire them to participate in the social order by their free associations. 79 00:07:49.480 --> 00:07:55.480 The state funds and regulates formal education to further its own interests and attain its own ends, 80 00:07:55.480 --> 00:08:00.480 even if it did adopt the natural, privately secured ends of education. 81 00:08:00.480 --> 00:08:06.480 No method of instruction it adopted could improve upon the private system of education. 82 00:08:06.480 --> 00:08:13.480 Short of mass enslavement, the state could not provide individual tutoring to children and would have to resort to schooling. 83 00:08:13.480 --> 00:08:18.480 Instead of the diversity of schools in the market striving to develop the personalities of students, 84 00:08:18.480 --> 00:08:25.480 the state is interested in uniformity of schooling and in the concomitant suppression of individual personalities 85 00:08:25.480 --> 00:08:55.480 The State has no interest in developing the personalities and learning faculties of children, it has no interest in fostering their pursuit of truth as adults. It will support truth that increases its power and suppress truth that challenges its power. It will also support lies that increase its power. Sound engineering will find a place in state controlled higher education since the state needs 86 00:08:55.480 --> 00:09:04.480 The State will welcome Keynesian economics because it justifies the exercise of state power. 87 00:09:04.480 --> 00:09:09.480 But sound economics will not find a home in state-controlled higher education. 88 00:09:09.480 --> 00:09:19.480 Misesian economics is a foremost threat to the state, or it explains the working of the natural order of society and the crippling effects of state interference. 89 00:09:19.480 --> 00:09:24.480 From time immemorial, the education of children has been done by their parents. 90 00:09:24.480 --> 00:09:32.480 In the ancient world, private schools first arose to train priests for religious service and to educate children of nobility. 91 00:09:32.480 --> 00:09:37.480 They typically centered around a teacher or group of teachers renowned for their wisdom. 92 00:09:37.480 --> 00:09:42.480 State schools came into being to train bureaucrats to operate the state apparatus. 93 00:09:42.480 --> 00:09:51.480 Throughout the ancient world, state schools waxed and waned, and private schools stagnated and progressed according to whether the state was weak or strong. 94 00:09:51.480 --> 00:09:56.480 In the oriental despotism of China, state education was training for civil service. 95 00:09:56.480 --> 00:10:02.480 In the totalitarian collectivism of Sparta, the state controlled education for military training. 96 00:10:02.480 --> 00:10:07.480 When the state was weaker in Athens, then private education came to the fore. 97 00:10:07.480 --> 00:10:16.480 The sophists organized formal education in the natural way, a group of students congregating under a teacher whose wisdom they believed was worth paying for. 98 00:10:16.480 --> 00:10:23.480 Hellenistic formal education developed along the natural lines, which would form the foundation of education in the Middle Ages. 99 00:10:23.480 --> 00:10:34.480 In the Roman Republic, where the state was relatively weak, education was done naturally in the family and for children of the elite by tutors after family education was complete. 100 00:10:34.480 --> 00:10:41.480 By the late Roman Empire, however, the state had erected a system of education to train civil servants. 101 00:10:41.480 --> 00:10:49.480 After the fall of the Roman Empire, state-controlled education declined and formal education was again done privately. 102 00:10:49.480 --> 00:10:55.480 Christianity revived the Israelite moral imperative for parents to instruct their children. 103 00:10:55.480 --> 00:10:59.480 And as the Jews had established schools for the training of priests and rabbis, 104 00:10:59.480 --> 00:11:06.480 Christians set up church schools throughout the monasteries and cathedrals of Europe after the fall of Rome. 105 00:11:06.480 --> 00:11:18.480 After Moslem invasion led to the decline of the monastic and cathedral schools, Charlemagne revived them, but put them into service for the Empire as training centers for those who would become his officials. 106 00:11:18.480 --> 00:11:27.480 As the Empire declined, the Catholic Church reasserted the traditional function of the monastic and cathedral schools and extended formal education to the poor. 107 00:11:27.480 --> 00:11:32.480 These institutions constituted formal education in the medieval period. 108 00:11:32.480 --> 00:11:39.480 From these church schools an intellectual movement blossomed which provided the seeds of the Renaissance of the 12th century. 109 00:11:39.480 --> 00:11:43.480 Central to this rebirth was the development of the university system. 110 00:11:43.480 --> 00:11:57.480 The rise of the universities depended not only upon the recovery of lost ancient works, but on peace, political and legal improvements, and also the creation of wealth set in motion by the rise of capitalism. 111 00:11:57.480 --> 00:12:09.480 Greater prosperity not only provided additional means to be devoted to formal education, such as books, travel, and charitable funds, but also more leisure time to pursue it. 112 00:12:09.480 --> 00:12:15.480 Groups of teachers and students congregated to devote themselves to studies beyond the liberal arts. 113 00:12:15.480 --> 00:12:24.480 Law at Bologna and theology at Paris at the beginning, and then by the end of the Middle Ages, 80 universities had been established throughout Europe. 114 00:12:24.480 --> 00:12:34.480 The scholastic project begun within the university system was to search out all of God's truth and transform the world to make it conform to these truths. 115 00:12:34.480 --> 00:12:43.480 The crucial presupposition they held was that truth is decreed by God, embedded into the nature of creation and discoverable by man's reason. 116 00:12:43.480 --> 00:12:47.480 Central to the unimpeded pursuit of truth was independence from the state. 117 00:12:47.480 --> 00:12:55.480 From the time of the Papal Charter of the University of Paris, the common method of securing independence was to obtain a charter from the Pope. 118 00:12:55.480 --> 00:13:02.480 Like all private enterprises, the universities had to facilitate the mutual benefit of those who participated in them. 119 00:13:02.480 --> 00:13:08.480 Students received detailed contractual conditions to ensure professors delivered the education they paid for, 120 00:13:08.480 --> 00:13:15.480 and exercised the power of boycott and required professors to post bonds to enforce these conditions. 121 00:13:15.480 --> 00:13:33.480 The University System, built by the Catholic Church, gave wide scope to intellectual inquiry and generated an international community of scholars that gave birth to both the natural and social sciences. 122 00:13:33.480 --> 00:13:48.480 For any state sponsored effort to succeed as part of this system, it had to meet its high standards. Lacking the power to coercively interfere with the system, state sponsored schools had to compete for professors and students. 123 00:13:48.480 --> 00:13:56.480 And so it was that centuries after the establishment of the university system, a group of scholastics gathered at the University of Salamanca. 124 00:13:56.480 --> 00:14:11.480 Given their Christian presuppositions and the freedom of inquiry the system permitted, they began the project of Austrian economics in trying to explain the consequences to the social order of the 16th century monetary inflation in Spain. 125 00:14:11.480 --> 00:14:17.480 Misesian economics was born in the private university system of the high middle ages. 126 00:14:17.480 --> 00:14:25.480 The Spanish scholastics not only explained the natural order of markets, but the harmful consequences of state interference with it. 127 00:14:25.480 --> 00:14:38.480 Scholars who did not fear to write openly about the conditions under which rulers could be assassinated felt no constraint to denounce price and wage controls as state interference with the working of God's natural laws. 128 00:14:38.480 --> 00:14:47.480 Such anti-state views were unthinkable in the state schools of the ancient world and never would have arisen outside of truly private schools. 129 00:14:47.480 --> 00:14:58.480 The fateful turning point for the medieval university system came when the reformers Martin Luther and John Calvin accepted state control of education as a means of advancing their own doctrines. 130 00:14:58.480 --> 00:15:15.480 Luther's Saxony School Plan of 1528 became the pattern for most of the Protestant states in Germany, and Calvin established state schools in Geneva and inspired movements to establish compulsory schooling in France, Holland, Scotland and New England. 131 00:15:15.480 --> 00:15:21.480 State control of formal education in Europe proceeded furthest in Prussia, where the state was strongest. 132 00:15:21.480 --> 00:15:28.480 The Prussian state passed compulsory attendance laws, centralized and bureaucratized control of formal education, 133 00:15:28.480 --> 00:15:37.480 suppressed private schools, examined and certified teachers, used graduation exams to control entry into the professions and civil service, 134 00:15:37.480 --> 00:15:42.480 and used the system to enforce uniformity in language and culture. 135 00:15:42.480 --> 00:15:48.480 The Prussian system was extended to all of Germany with the formation of this centralized German state. 136 00:15:48.480 --> 00:15:55.480 Consolidation made state control over the German universities strong enough to entirely suppress laissez-faire views. 137 00:15:55.480 --> 00:16:04.480 University positions in economics came to be reserved for members of the German Historical School, appointed on the advice of Gustav Schmoller himself. 138 00:16:04.480 --> 00:16:11.480 himself. Misesian economics could not arise in such a setting and was barely able to gain 139 00:16:11.480 --> 00:16:16.600 a foothold at the University of Vienna as Guido Holzman chronicles in his magnificent 140 00:16:16.600 --> 00:16:22.160 biography of Mises. By the time Mises attended the university, it had been controlled by 141 00:16:22.160 --> 00:16:27.040 the state for nearly a century. Economics was taught in the Department of Law and Government 142 00:16:27.040 --> 00:16:32.720 Science. The professors were civil servants, impossible to fire, collecting their paychecks 143 00:16:32.720 --> 00:16:44.240 Mises' main professors in the early years of his study, Carl Grunberg, had been hired 144 00:16:44.240 --> 00:16:50.040 to bring German historicism to Vienna. The other main influence on Mises at the University 145 00:16:50.040 --> 00:16:55.240 at the time was Eugen Philipp Rothach. Although he was not an historicist, his views were 146 00:16:55.240 --> 00:17:00.920 decidedly interventionist. In spite of the influence of his teachers, Mises found economic 147 00:17:00.920 --> 00:17:05.920 Theory on his own by reading Carl Menger's Principles of Economics. 148 00:17:05.920 --> 00:17:12.360 Menger was something of an anomaly at the university, a throwback to the traditional view of economics, 149 00:17:12.360 --> 00:17:17.360 which saw the economy as a natural order and was skeptical of government intervention, 150 00:17:17.360 --> 00:17:22.760 a view that had arisen as we have seen in the medieval university system and was characteristic 151 00:17:22.760 --> 00:17:28.680 of classical economic thought. Menger faced opposition in the department as a candidate 152 00:17:28.680 --> 00:17:33.640 for the position and during his tenure at the university, only reaching the secure position 153 00:17:33.640 --> 00:17:39.160 of full professor because of his servants to the emperor as tutor to his son. Menger 154 00:17:39.160 --> 00:17:43.400 then used his personal influence to secure positions at the university for Eugen von 155 00:17:43.400 --> 00:17:49.860 Boehm-Bawerk and Friedrich von Wiese. Boehm-Bawerk, the Mengerian of the two, was appointed only 156 00:17:49.860 --> 00:17:55.640 with difficulty and as Holtzman writes, quote, after the death of Boehm-Bawerk, academia 157 00:17:55.640 --> 00:18:08.760 Mises would have to become a private scholar, supporting his writing with full-time occupation, 158 00:18:08.760 --> 00:18:13.640 mainly at the Chamber of Commerce. The only regular academic position Mises ever held was 159 00:18:13.640 --> 00:18:19.840 at the Graduate Institute of International Studies in Geneva. The institute was overseen 160 00:18:19.840 --> 00:18:25.600 by the University of Geneva, privately funded by the Rockefeller Foundation, which was its 161 00:18:25.600 --> 00:18:29.120 Mises' main financial sponsor for nearly 20 years. 162 00:18:29.120 --> 00:18:32.600 Holtzman writes, quote, during the Geneva years, 163 00:18:32.600 --> 00:18:35.040 Mises' salary was paid to a large extent 164 00:18:35.040 --> 00:18:36.920 out of Rockefeller money. 165 00:18:36.920 --> 00:18:40.440 And so things would remain for the next decade, close quote. 166 00:18:41.420 --> 00:18:43.880 Conditions were hardly better in American academia 167 00:18:43.880 --> 00:18:46.000 where educational reformers had adopted 168 00:18:46.000 --> 00:18:48.640 the Prussian model of formal education 169 00:18:48.640 --> 00:18:51.640 and German universities have served as training ground 170 00:18:51.640 --> 00:18:53.360 in social engineering. 171 00:18:53.360 --> 00:18:59.080 For the first generation of American PhDs who became professors in American universities, 172 00:18:59.080 --> 00:19:03.200 the state's control of formal education marched hand-in-hand with the expansion of federal 173 00:19:03.200 --> 00:19:08.240 government power during the 20th century. Private universities came to surrender their 174 00:19:08.240 --> 00:19:14.120 independence from the state to receive its largesse. State control inverted the medieval 175 00:19:14.120 --> 00:19:19.560 system from one in which state-sponsored universities conformed to the private system to one in 176 00:19:19.560 --> 00:19:25.280 in which private universities conformed to the state-controlled system. Only those few 177 00:19:25.280 --> 00:19:30.900 who refused state favors retained a modicum of their independence. 178 00:19:30.900 --> 00:19:36.200 By the time he emigrated to America in 1940, American academia had no room for the likes 179 00:19:36.200 --> 00:19:42.240 of Mises. He found himself in the same position he had been in Europe, an independent scholar 180 00:19:42.240 --> 00:19:47.480 supported privately. As Rothbard wrote, quote, for the rest of their careers in American 181 00:19:47.480 --> 00:19:53.120 in academia, the salaries of both Mises and Hayek were paid for by the William Volcker 182 00:19:53.120 --> 00:19:59.440 Fund. After the fund collapsed in 1962, the task of financing Mises's post at New York 183 00:19:59.440 --> 00:20:06.440 University was taken up by Leonard Reed and a consortium of businessmen, close quote. 184 00:20:06.480 --> 00:20:10.720 The situation was a little better for Rothbard, who toiled in the academic backwater of Brooklyn 185 00:20:10.720 --> 00:20:16.440 Polytechnic Institute for decades. His writing was supported privately by the Volcker Fund, 186 00:20:16.440 --> 00:20:22.240 of the Earhart Foundation and the Lilly Endowment, and his position at the University of Nevada, 187 00:20:22.240 --> 00:20:28.680 Las Vegas was endowed from the wealth of forestry entrepreneur S.J. Hall. It took the sponsorship 188 00:20:28.680 --> 00:20:33.600 of the great oil entrepreneur J. Howard Pugh to secure a position for Hans Sendholz at 189 00:20:33.600 --> 00:20:39.880 Grove City College. This precarious foothold for Misesian economics was made secure by 190 00:20:39.880 --> 00:20:44.880 by Lew Rockwell when he founded the Mises Institute in 1982. 191 00:20:45.120 --> 00:20:47.200 The Institute is largely responsible 192 00:20:47.200 --> 00:20:50.960 for the burgeoning international resurgence 193 00:20:50.960 --> 00:20:54.840 in Misesian thought in the past 25 years. 194 00:20:54.840 --> 00:20:57.320 Thousands of students and scores of professors 195 00:20:57.320 --> 00:20:59.280 have learned Misesian thought 196 00:20:59.280 --> 00:21:02.040 through the Institute's instructional seminars 197 00:21:02.040 --> 00:21:04.040 and topical conferences. 198 00:21:04.040 --> 00:21:08.160 Millions have read Misesian analyses on its website. 199 00:21:08.160 --> 00:21:16.320 The Institute's publishing has been indispensable in keeping the assessing works available to an increasing number of interested readers. 200 00:21:16.320 --> 00:21:24.400 The Mises Institute is the premier educational organization dedicated to political and economic truth. 201 00:21:24.400 --> 00:21:28.520 And as more and more people take formal education back from the state, 202 00:21:28.520 --> 00:21:33.680 the Mises Institute, a truly private school, is the wave of the future. 203 00:21:33.680 --> 00:21:40.680 and the economic and political truth it advances is the hope of liberty.