It Didn’t Have to Be This Way: Why Boom and Bust Is Unnecessary—and How the Austrian School of Economics Breaks the Cycle

0:00I have to tell you that I had the time of my life writing this book, and if you notice, you'll see some of the jokes in the book. I'll tell you the story of the book. I was asked by ISI, one of my former students, who now is their second-in-command and very libertarian, to write a book on Austrian economics. So I said, okay, we just need something in six months because none of the students that we're meeting understand anything about it. So I Okay, so I got my old bachelor's thesis out, which was published, or not published, but written back in 66, and I started, you know, going through, you know, Ben Bawerk and Menger, et cetera. And then, it was about 2006, and 2007 started to happen, and of course it looked like it was going to be a tremendous mess.

0:51The Austrian School, most of us knew that this thing was coming and it provided a wonderful opportunity because it gave us what's called a target rich environment. We knew that the economy was going to turn down and I knew it would follow the Austrian thing so I told the other, let's wait because it's not ready yet. I said this thing is going to go through a tremendous mess and we can follow the whole thing step by step. So if you'll notice when we did the book, what I tried to do when I had a strategy, I tried to use non-Austrian sources to support the Austrian case. And if you go through, there's all kind of irony in the book. In fact, I would come down with my two roommates and I would tell them in the morning, guess what I found last night.

1:38and of course 2007-2008 the establishment turned on itself and of all people George Soros said and I would quote him well mainstream economics didn't predict this they can't explain it and they don't have any cures beautiful that's exactly what I needed from George Soros and if you'll notice when people ask me they say well you know one of the nice things about it is Because I came from Detroit, or where Detroit used to be, and Detroit is a wonderful laboratory for government intervention, okay? The picture on the book is from Detroit, and of course the debate was whether we're going to use the old railway station or whether we're going to use one of the plants that the windows have been knocked out and whatever else.

2:28So it was easy in a lot of ways to get examples of what was going on and of course the first thing I took in the first chapter was on positivism and it is surprising how many of these guys are attacking mathematical economics and if you'll notice I go through the irony, I'm doing a seminar at my house, a discussion group on the book and I said why did you put this paragraph here? I said don't you see the irony in it that you have John Kenneth Galbraith saying that economics prediction looks like, makes astrology look respectable. You see? And the whole thing is to use them on the other side. And of course, one of the things I found out is they don't read their own sources.

3:13They have no concept of what their people are saying. So it was easy to go through Financial Times in the morning of the Wall Street Journal and to find out they were criticizing their own operation. And it was fun. I have to tell you, I'm thinking of writing a new book on the common good, in which I want to take the, because I've heard this from the leftist and the Christian movement about common good, common good, and the next thing I want to do is turn it around on them and the common good is the free market. But in any event, I have to thank the Mises Institute because of the works that they made available, okay? And I will tell you this in my, I think there's three or four pages of acknowledgments. It was a real division of labor. I mean I had help from Paul Swick, I had enormous help from Professor Weglars, enormous help from my students, from my roommates, we had, it was a ball writing this, and it was a ball

4:05finding out how the other side is just twisting and turning and they're trying, they don't know what to do. I mean they're really stalled. Interesting, Nixon said he was a Keynesian, yet he did everything he could to destroy the system Keynes set up. I mean the irony, there's all these ironies out there. And I often make the statement there isn't any capitalist or free market system. It's what you get when you do the right things. And of course one of the chapters in the book is the prerequisites for prosperity, in which I go through private property, rule of law, etc. And of course we have a wonderful example in the rule of law when they stole all the, excuse me, bankrupt the General Motors and left the bondholders out to lunch.

4:50Okay, so it was very easy to come up with this stuff, the opposite. So the question was, and I often speak to tea parties, because the book is not full of mathematical equations. Okay, I can tell you, forty percent of the book, and most, a lot of the jokes, were left on the cutting room floor by my editor. But I often speak to tea parties, and what should we do? I said, it's in the chapter of my book, So what I did is, the first part of the book, I went through the history. I have to say, I have to thank, again, the Mises Institute for the marvelous seminars that I got, Ralph Reiko and a number of others, who really opened my eyes. I think Thule was another fellow. I did his course. And on World War I, I started to discover, as a research, what exactly that thing did. So it was very, very interesting.

5:43It was a lot of fun doing it, and so the first part of the book is the attack on positivism, which I'm now discovering more and more, and just had to do a seminar on Mises Socialism at CPAC, in which I discover that he not only attacks the positivism of the mathematics, which are absolutely worthless, but he's also attacking the positivism of Social Darwinism Darwinism, and how that led to World War I, and it's opening up entirely new chapters for me. So as I say, I can't wait for the next one. So anyway, I did the attack on Positivum, the next thing was of course setting out the history of how we got here, and then getting into the whole concept of the Reconstruction of Economics, which is a statement of the importance of the division of labor.

6:37It's very interesting how Menger added a number of things. In fact, Menger could be considered to be the father of the information revolution. He really came out and said, look, technology is there. Then I did an analysis of human action. And fortunately, I was trained in Aristotelian and Thomistic philosophy, so I could talk about the virtue of prudence, and that would bring in a number of the people on what might be called traditional conservatives, Because the prudential thing to do is to follow the free market and I analyze human action. There's a number of corollaries there that I picked up from many of the Thomistic sources that you'll see, the corollaries of human action and then of course the inflation and then the trade cycle.

7:22Then the trade cycle, you'd be surprised, I mean the nice thing about Keynes is you can get Keynes to say anything, okay? I mean, my students asked me, well, what about John Maynard Keynes? I said, which one? Okay, which one? He was for the gold standard, he was against the gold standard. He said, if you expand the money supply, guess what's going to happen? You're going to create a boom or a bust. There, it's right there. Some people challenged me, I said, well, wait a minute, your guy said that. Ipsy Dixit, your guy said that. And that's the nice thing about doing it. I had, it's interesting, I have run into, the only objection I've gotten is not from and Mainstreamers. But there's this kind of an offbeat Catholic group called distributivism. And so they asked me a question, and they're generally pretty angry. And I said, your guy's for the gold standard. Belloc says it in Economics for Helen on this page, because they don't

8:14read their own literature. Okay? So truth, well, I found out, is solitary. And it doesn't matter who says it. It matters what's said. Remember, authority is the weakest of the arguments, reasoning is the strongest. So a lot of times, guys who are working who might be, we might consider opposed to us, are actually discovering and saying things that bolster our case. Okay? And this meltdown, and I have to say that I have to thank Professor Weglars for putting me in touch with a number of books by what we call mainstreamers who attack the whole concept of positivism and economics and show how that was one of the enablers of the Meltdown. So it was a lot of fun to read, a lot of fun to write, and if you read the book, you'll see all kind of irony in there, okay, because I love the use of irony.

9:04Milton Friedman, great proponent of mathematics and economics, Chicago School, you can't, science is prediction, etc. with all the equations, and then at the end of his life, I have his biographer, one of his people say, Milton really doubted the whole thing. Yeah, it's an Osterfeld's book, a Chicago school. He doubted the whole thing. The interesting thing, Schumpeter, Schumpeter was, I found out he was a great influence on Samuelson and wanted mathematical economics. And at the end of his biography reports, at the end of it all, he said, well, sorry guys, it doesn't work. So I mean, this is the wonderful thing about it. And so I would, I would advise all of you, News, irony, I tried to write it, and my editor, I have to say, my editor Jed Donoghue at ISI was great because he cut out a lot of the can't and he would get me back to it and he'd say, Harry, look, the public does not understand this, okay?

10:07And I had two editors. I had Jed who was an academic editor and he edited a number of books, but I think the last one was on Coolidge for Regnery. And then I had a newspaper fellow who would help me. James McNally, who told me, he says, you've got to pull the reader into this thing. You've got to pull him into it. And so he would help me write the others. So I would say it was a joint effort. If you read the acknowledgments, you'll see it actually goes back to the seventh grade. And my instructor in the Constitution, Mr. Schnabel, who took us through. At that time, we got the Constitution three times. We got a seventh grade, we got a twelfth grade, and we got it in college. College, that was the pre-Vatican Catholic educational system.

10:54So in any event, but I could go back and I had a good memory. I could remember what these guys said and I could remember Ed Schnabel in class talking about the division of powers in the seventh grade and the tyranny of unified government. I could remember what my professors said. And so it was a joint effort. And I would say, it took me about 60 years to write the thing, and it's the product of all of that. It's the product of so many different influences and so many different things coming together. I think one of the things was being, as a young person, and I will tell you, young folks who are here, it was a product of getting to know a lot of the really star lights of the conservative movement. When I was your age, I had lunch with Ludwig von Mises.

11:41I had met Hayek. I knew Russell Kirk personally. In fact, he and I were roommates for a while. I knew Lew. I knew Skousen. I knew a lot of these folks. So I would say for the young folks here, you'll write your book, okay? And you'll remember the people who are here, and you'll reach back in your memory, and you'll find them, and you'll say, hey, that person helped me here, and that person helped me there. But I would say this. Read the other side. Now, I mean, the mathematics stuff, just to throw it out, it's about as worthless as, you know, I mean, they're all living in some kind of a wonder wonderland, and I think Tom DiLorenzo referred to it, it's this utopian vision that is completely worthless. And I'll finish with this, I often start an economics class, kids come in there, so how many of you guys hated economics?

12:29Most of the hands, how many of you had economics before? Most of the hands go up. How many of you hated it? The same hands go up. And I say, well, why do you hate it? Oh, it's just a bunch of graphs and charts and I never understood a thing. One of the most ironic things in Marshall's book is he says go through this mathematics and then what? Burn the mathematics. This is Marshall saying it. So what you have to do, my advice to you is get to know the other side because they don't read it. And I'll finish in this, I had in a radio interview, I've had about 30 of those. ISI, by the way, was very good about getting on the radio. And some lady called up, I think she had one of these kind of offbeat PhDs, I could tell by the voice, in some kind of studies or something.

13:15And she says, sir, she says, you know, Paul Krugman disagrees with you. And I said, well madam, that's very interesting, because Paul Krugman just had a conference in London, sponsored by George Soros, and he criticized mainstream economics. She said, you're quoting them out of context. I said, for the whole weekend? And then she said, well, Jeffrey Sachs disagrees with you. I said, really? I said, two weeks ago he had an article in the Financial Times praising Hayek. And Hayek was an Austrian. She said, well, we need more regulation. I said, ma'am, I absolutely agree with you. We absolutely need more regulation that works. We need to regulate the dollar to gold. But that was the end of the conversation.

14:01It's fun dealing with these people because they don't have any conception of their own sources. Most of them, it's a template that they picked up and sometimes you can't break through the template. But sometimes you can do it with humor and irony and I will say that if you read the book, every sentence, there's a reason for every sentence. There's a little irony or a little poke that I'm trying to give the other side. Hopefully I'll be here, I'll have my fountain pen tomorrow if you want me to sign the books, otherwise it's with ballpoint today. But I have to tell you this, I really appreciate everything that the Mises Institute did. Their publications of works by Reb and Key that were unavailable, some of the things in the banking that were unavailable, has made the scholarship so much easier, really has made it so much easier.

14:50So I want to thank the Mises Institute for having me and for doing all the work and hopefully you'll enjoy the book and it has a lot of things in there in Detroit. I suggested to the Philadelphia Society that we have a conference on the failure of government intervention and we hold it in what was Detroit.