Roundtable on the Semicentennial of Rothbard’s 'Man, Economy, and State'

0:00Let's begin with our last session of the conference, our closing session. Yeah, I know, oh no, it's sad. Welcome to our roundtable on the semi-centennial of Man Economy and State. Of course, we've been celebrating Mises' great book, The Theory of Money and Credit, at this conference with several designated sessions, because of course, it's the centenary of the publication of that very important book. But let's not forget that it's also the 50-year anniversary of Murray Rothbard's seminal treatise, Man Economy and State. And by the way, I'm already planning the centenary sessions on Man Economy and State for the 2062 Austrian Scholars Conference, so please send me your proposals and I'll consider them for those sessions.

0:51Man Economy and State has a widely acknowledged place in the Austrian canon, but even some of the books admirers tend to regard it not so much as an original theoretical contribution, but as sort of a more systematic, more carefully exposited version of Mises' Human Action. In other words, seeing the book more as, seeing the treatise more as a textbook than as an original scholarly contribution. Now it's certainly true that when Murray Rothbard, oh thank you very much, it's true that when Murray Rothbard began working on the book, he tells us, in the late 1950s, he had in mind to make a version of Mises' economics that would be more accessible to the non-specialist reader. As you know, Human Action is by no means an easy book and Mises assumes a great deal of knowledge on the part of the reader to make sense of Mises' arguments and Rothbard thought it would be useful to fill in some of those gaps to lay things out in a more systematic fashion and he originally imagined

2:08a relatively short book that would be a suitable introductory text for college courses. Of course as he began to work on the project he quickly Theoretically realized that something like that was not feasible. While Mises had laid out the foundations and many of the applications of his mature theoretical system, Mises had left many gaps in his treatment on important issues. Mises did not provide a very detailed account of the pricing process, for example. Ludwig von Mises saw an opportunity to integrate the price theory of the Austrian economist through Mises with the contributions of many other important economists, causal realist economists who had been somewhat neglected by Austrians such as Federer and Davenport and Wickstede and J.B. Clark and so forth.

3:09Also, there's not a very systematic treatment of the capital structure in human action. It's somewhat unsystematic, somewhat the remarks are scattered throughout various parts of the book. So what Murray Rothbard ended up producing was not only a systematic exposition and critique of previous views, existing views, both within the Austrian and the neoclassical literature, but a highly original treatise with a number of innovations in theory, in methodology, in application, in analysis and critique of other views, and so on. Now I should emphasize, and this is a theme of a 2008, sorry, 2010 article that I wrote called The Mundane Economics of the Austrian School, Rothbard's Man Economy and State is mostly about what I call mundane or what we might call plain vanilla or blue-collar economics. Not a lot of esoterica in the book.

4:15In fact, if you look at the table of contents, there are 12 chapters of the original edition. All but two focus on the sort of ordinary details of value, price, exchange, capital, money, competition, and so on. You know, there's one chapter on methodological issues. There's one chapter on the and The Theory of Government Intervention. Production theory alone gets five chapters, five of the 12 chapters are devoted to production theory. Even if you include Power and Market, which as most of you know was originally, was intended by Rothbard to be part of the book, but was cut out by the publisher and then only released several years later in 1970 as a standalone work. Even if you include those chapters, there's virtually nothing in Rothbard's book about subjectivism, expectations, learning, equilibration, spontaneous order, and so forth.

5:09And of course, this is true of the earlier Austrians as well, Menger, Boehm-Bawerk, even Wieser, and of course, Mises. Now, perhaps for this reason, some contemporary Austrian economists have sort of disregarded Rothbard's treatise as too elementary, or too ordinary, or even backward-looking, rather than forward-looking. In my article, I deal a lot with Karen Vaughan's 1994 book, Austrian Economics in America. She says, for example, that Rothbard's book, quote, must have seemed to a typical reader to be more or less familiar economics, presented almost exclusively in words with a few controversial definitions and some strange discontinuous graphs. In other words, not much original contribution and very little that would interest Austrians as young Austrians of the so-called Austrian revival.

6:03And I mean, it is sort of true that Man Economy and State is a little bit out of step with some of the other contributions post-1974 within the Austrian tradition, works that dealt with, exclusively with subjectivism and spontaneous order and equilibration, et cetera. So, what is the proper place of Man Economy and State in the Austrian Canon. What did it contribute to the Austrian revival? What are its many innovations and not only pedagogical innovations but substantive theoretical innovations as well? Has modern Austrian economics fully incorporated the substantive contributions of Rothbard's treatise? Has modern Austrian economics moved beyond Man Economy and State or does the book still contain important insights that have not been fully understood, fully implemented, the details worked out and so forth, even within the Austrian camp.

7:03These are the kinds of issues that our panel will discuss, issues that we will explore together this afternoon. So the way we have this panel structured is in a fairly informal way. So we have five panelists, Professor Salerno, Herbiner, Rittenour, Gordon and Hulsman. And I'm going to ask each to offer just a few minutes of prepared remarks, reflections on the sorts of questions that I've just described. Then I'll give each of the panelists an opportunity to respond to remarks made by other panelists, and then we'll turn it over to the floor for some discussion and some interaction between the audience and the panelists, between the panelists, maybe even between the panelists and the moderator, I'm not sure about that.

7:50But we want to make this a fairly informal event, so no speeches, no PowerPoint, no lectures, but rather a discussion among all of us about the importance and the continuing importance of this great treatise in the Austrian tradition. So I'll first turn the microphone over to Joe Salerno. Thank you Dr. Peter and for taking most of what I was going to say. But let me start just by talking a little bit about what I perceive as the place of Man Economy and State in the revival of Austrian economics. I've argued that actually there are two approaches or there are two views of the Austrian revival, which occurred in the mid-1970s.

8:39There was a very famous conference held in South Royalton, Vermont. It's come to be known as the South Royalton Conference. and that occurred in 1974. Shortly thereafter in 1975, or rather in 1976 rather, what was it, 75 when Hayek received the Nobel Prize? 74, right, so June was the conference and Hayek received the Nobel Prize in 1974 and October and these two events together are taken at the beginning of the and the revival. Well, I call this the big bang theory of the Austrian revival. That someone all of a sudden decides, you know what, let's have a conference in North America on Austrian economics, where there had never been one before.

9:29And so it's sort of like the field of dreams, if you hold it, they will come. Well, where did they all come from? Where did the 30 of us that attended, graduate students and young PhDs, I was a graduate student at the time, where did we get the idea that Austrian economics would be something Well, my argument is that, in fact, revival did not really begin in 1974. It wasn't spontaneous. In fact, it arose out of the publication of Rothbard's Man Economy and State in 1962. So let me just give you some background on that. There were actually three great streams of price theory. I mean, today, in mainstream economics, there really are two that have been blended together. are all blended together. That is the Volrasian stream, which traces its roots back to the Swiss economist, Volras, and then the Marshallian stream.

10:25And they've been combined in different ways by the Chicago School, for example, by mainstream neoclassical priciers and so on. But my argument is that, in fact, there's a third stream stemming from Menger, and we have a distinguished Menger scholar here, Sam Bostaff, who actually got me very interested in Menger when I first read his article in the Atlantic Economic Journal, but stemming from Menger, and that actually became very, very popular and actually gained worldwide acceptance up until World War I, okay? Theoretical economists, Wichstead, Federer, Davenport, these are all great, J.B. Clark, all great theorists that have more or less been forgotten when the Marshallian theory or stream took over.

11:16At the end of, for various reasons, after World War II, after World War I, in the 1920s, the Mangerian stream continued in certain places, for example the London School of Economics in Great Britain. Britain, and at a few places in the United States, but it began to die out. Marshallian economics, the economics of Alfred Marshall, a partial equilibrium approach, began to take over in the 20s in the US. However, on the continent, there was still strong Mungarian stream. So there were three different streams. Eventually, by the mid-1930s, the Volrazian approach was actually brought to Great Britain and then later to the United States actually by Hayek who had J.R. Hicks read Pareto for the first time and then later on Samuelson with his book.

12:15So my thesis was simply that the Mangerian approach, the Austrian approach was really poured down the Orwellian memory hole. People just forgot about it. It was never refuted, it was never exposed as being deeply flawed or anything of that nature. It was just forgotten. Now, Mises made a heroic effort between 1934 and 1939. He worked single-mindedly on his book, Human Action, in which, though people tend to overlook this, a lot of it was devoted to reviving the price theory of Carl Menger. But by the time the book came out, World War II had broken out, at least in Europe, and the Swiss publisher who published it in German went bankrupt. There was no market in Germany. So the book was republished in the United States in an extended form as Human Action.

13:03By then though, there was no market for it. By then, Samuelson, Hicks and so on, and also the Chicago School, Stigler, they had taken over Price Theory. So the Chicago School had pretty much followed Marshall, and the neoclassicals combined Marshall with a few chapters of Al-Ras at the end of the post-war micro textbooks. and that was it for a long time and then Rothbard out of nowhere revived this whole tradition, worked on this book from 1951 and it was published in 1962. So to make a long story short, to tie this back into the Austrian revival, people began to read some of Rothbard's, began to read younger professors and graduate students became familiar with this work and began to read it.

13:56I read it in college. I'm not going to date myself, but it was a while after it was written. It was not a Kindle. No, it was nothing like that. It was on a papyrus. But anyway, my contention is that to the man and woman, because there was at least one woman at South Royalton, maybe two, Everyone was a Rothbardian. Israel Kirzner, who was also one of the important figures in post-revival Austrian economics, had not written his great book, Competition on Entrepreneurship, until 1973, the year before South Royalton. It was Rothbard's books, and he had a few others that had come out during the 60s and early 70s, of Power and Market, America's Great Depression, and so on.

14:49So everyone was a Rothbardian at that point, and now what was it in this book that differentiated it in price theory, because that's what I think is the core of any economic system, is price theory, and a good deal of this book is devoted strictly to price theory. Basically what Rothbard did was to reintegrate price theory with monetary theory and with with Capital Theory. Now, in 1963, and I'll get about a minute or two more. In 1963, Israel Kirzner published a book called, and he by the way in the 50s was Mises' graduate assistant, he published a book called Market Theory and the Price System, and it was a price theory book, and it was a thin volume, a typical, I guess a length that any microeconomic book would be at the time.

15:44and he had some Austrian insights in it but it was just it's just been republished by Liberty Fund and it's been described by its editors of Pete Betky and Frederic Sauté as very Stiglarian that is following George Stigler and they try to argue in the introduction that in fact it wasn't yes it follows Stigler but it's really Austrian and Rothbard who wrote a huge memo to the publishers Rothbard claimed that Rothbard didn't understand the fact that he was using some equilibrium constructs that were consistent with Austrian economics. But that's beside the point. What I want to do is just to read you two short passages from the review, which I wrote an introduction to and then published this year in libertarian papers.

16:37This review is a memo that was written to the publishers and you can see the difference between this Mengerian approach which tries to integrate all aspects of human action in price theory and the Stiglarian Chicago approach, which Kirzner tends to follow. One thing Rothbard writes is, one fundamental flaw is the artificial and even disastrous isolation of price theory from monetary and from time phenomena. I know that questioning such isolation means bringing into question perhaps the very idea of a textbook devoted solely to price theory, but I'm afraid that this questioning must be done. The abstention from money is unfortunate, but not fatal, but the abstention from time and capital analysis is, and this cannot be remedied by an appendix that Kirzner promises us on time.

17:26This is before the publication of the book. Problems of time, capital interest must be infused into the price analysis. As a result of the failure to infuse, Kirzner ignores the vital structure of production analysis, which he claims makes little difference to one's view of the economy. Now here's where Rothbard demurs from Kirzner. He says, the result of abstention from capital leads to all of the crucial errors of the cost curve analysis, which fills Kirzner's book and is completely absent from this book, but it's cost curves. For example, it is the claim of the cost-curve theorists, in the ranks of which Professor Kirzner joins, that a firm will invest funds in production up to the point where marginal revenue equals marginal cost.

18:12And maybe I lost the rest of this quote. But he goes on to say that, in fact, that's not the case. If you look at it from a point of view of capital theory, everybody's looking to maximize their rates of return on investments. When you infuse that into the price analysis, then the MR equals MC thing, it doesn't work. It might work within the firm for batches of products that you're talking about, but everyone is continually searching the market to make investments where their capital is returning the highest possible returns. So the key is that firms are the capitalists. Firms are the ones that receive the interest return. Interest return. Interest is not a cost under your cost curve that you're paying to some bondholder to a stockholder. Stockholders and bondholders are the owners, are the capitalists, are the people who run the firm, and disinvest and reinvest. So it's a dynamic, forward-looking sort of price theory. I'll stop at this point. There are many other differences and many

19:16and many other objections that he has to Kirzner's, at this point, as a manuscript and I recommend that you read the article. It's in the libertarian papers and it's from this year. It's under my name and I write an introduction and then I reprint the memo. Thank you. Thank you. Let's go with David Gordon next. Peter has mentioned that this is the 50th anniversary of the publication of Man Economy and State. I remember very well when the book came out near the end of 1962, and I read it at that time. It came out, it was in two volumes, published by the Van Nostrand Company, it sold for the enormous amount of price of $20, and Human Action was available in the second edition published by Yale University Press was $15, so this was $5 higher.

20:20I want to say a little bit about what I think are some of the philosophical contributions of Man Economy and State. When Murray Rothbard attended Columbia University, he took a course in philosophy of science from Ernest Nagel, who was one of the leading authorities at that time on philosophy of science and logic. Rothbard liked this course very much. His notes are available on the course, and he told me very much on how impressed he'd been by Nagel. One idea I think he took from that course that has defined in Human Action is the notion of that Nagel stress is the notion of an operational definition and by that what is meant is that in science a term that's used in science has to have exact criteria for the use and and Application. If you can't give exact criteria for when the term applies, then it isn't a proper scientific term. I think we see the use of this concept in several areas in Manny Cunningham State. For example, in Chapter 10, the famous chapter on monopoly, Rothbard

21:51rejects the notion of there being a monopoly price on the free market. What he says is that economists can draw a diagram showing how there is a monopoly price is above the competitive price, but one could never show in practice or no way of establishing He's saying that any particular price on the free market is a monopoly price. He said, why, if you said, well, the monopoly price, the competitive price would be lower than a certain market price, he says, how would you know that the price you say is the real competitive price isn't the sub-competitive price and the alleged monopoly price is the real competitive price?

22:42There's no way you could establish this. So I think this is an example of how he was using the notion of an operational definition and applying it to economics. Again, I think we see this when he stresses demonstrated preference, which he takes in a very strict way to be preference that is expressed in action, as opposed to the notion of revealed preference found probably most famously in the work of Paul Samuelson. In revealed preference, what's involved is taking probability distributions over various bundles of goods and seeing when the people or the chooser is indifferent between various bundles of probability distributions and what Rothbard's objection is, again, we couldn't demonstrate in action that someone has such preferences and he takes only what can be demonstrated in action as Acceptable for Scientific Discipline of Economics.

24:01One last illustration of the operational definition occurs in the book where he's criticizing the once influential work of John Kenneth Galbraith, The Affluent Society, which came out in 1958. Galbraith said that he thought that a lot of consumer spending was wasteful. People were spending money on silly things like big tail fins on cars, when instead they should really be spending money on useful government projects. So, what Rothbard says is, well, he says, Galbraith says certain spending is wasteful, but he gives us no way of delimiting what is the wasteful spending, so again we have this demand for an exact criterion.

25:09Now he says Galbraith does appeal to the undoubted fact that as one gets more and more units of a good, the good will diminish in utility. But he said you can't use that point to show that there's waste because it doesn't follow from the fact that utility is diminishing, that the utility is diminished to zero, and And the fact that the person who spends the money on the good is doing so shows that the good has positive utility for him. So he dismisses what Galbraith says is useless for science. I want to turn now to, I think, very important contributions that Rothbard makes to get in And really, although the book is on economics, I think he makes very important contributions to political philosophy.

26:12One is, he extends an argument that Mises had for criticizing various measures of intervention in the free market. Mises famously argued that one could show that certain measures from the point of view of Money. A few of those who advanced them would fail to achieve the ends that those people wanted, and Rothbard had some criticism of that. What Mises was saying was, if you say you want to end unemployment, so you put in a minimum wage law, without making any value judgments, you could show that the minimum wage law won't get rid of unemployment, it will cause unemployment, it will hurt the workers it's supposed to help so what Rothbard's extension that was say in addition to means that won't achieve their ends there are some ends that one could show are impossible to realize for example he gave absolute equality would be one such and he said that since people are in different locations there There are always differences between the people, at least in some respects. You could never

27:33show that two people were absolutely equal, so absolute equality has to be ruled out as a possible goal, not on any controversial grounds of appeal to a value judgment, but simply because the goal couldn't be achieved, as he says it's praxeologically impossible. The last contribution I want to make is, one, he makes what I think is a brilliant section where he makes a remark that applies to a type of argument for egalitarianism and against the free market that since he wrote has become extremely influential. Some people say that John Rawls in his 1971 book, The Theory of Justice, is perhaps the the best example that it's very unfair that some people are much wealthier and earn much larger incomes than others because they have superior abilities in that the people have these superior abilities simply because they're luckier.

28:44They happen to be born with certain genes or they have better upbringings, better environment. So they are luckier than others, and there's a very influential school in political philosophy called luck egalitarianism that argues for redistribution on the basis that people shouldn't get rewarded based on luck. So Rothbard has one brilliant sentence, he says, there's no natural distribution for luck. means by that is until you specify some criterion for what the proper distribution is, you can't say that someone is unlucky, gives the example if you say that people should be get income in accord with their marginal productivity, it could turn out the people who are in higher incomes are actually unluckier because they're not getting their full marginal productivity even though they're earning higher incomes than others.

29:49So the basic point, which Susan Hurley had developed independently in a book that came out some years ago, is that until you specify a particular distribution, you can't speak of people being lucky or unlucky, and Rothbard anticipated that criticism in 1962, and so I think that's one of his most important insights. So I think one of my most important insights is it's time to stop now. David, do you have any sense from the reviews of the book, either friendly or hostile, that did anyone appreciate or recognize the significance of these philosophical contributions?

30:38I'm not aware of anyone who's mentioned those. All right, thank you. Let's turn next to Sean Rittenhour. All right. Although it's very clear from the remarks already made, and for anyone who's read Man Economy and State that it is a monumental economic treatise and in the classical definition a great book, That does not mean that it's not very useful for teaching economic principles, and that's what I want to comment on today. Man Economy and State's been very intimate in my career, intimately related to my career teaching principles of economics.

31:25When I got my first job, graduating from Auburn, I went and assigned Paul Hayne's Economic Way of Thinking, in large part because Murray Rothbard recommended that as a good book and but I used or I assigned supplementary pages for voluntary reading and put them in the syllabus from Man Economy and State and I lectured straight out of Man Economy and State. I once had a professor tell me that the secret to success teaching undergraduates is to assign them the second best text but lecture out of the The Best Tax. I think that's somewhat facetious, but it worked for me. When I was offered the position at Grove City College, Jeff Herbner was already using Man Economy and State for for Teaching Principles of Macroeconomics, and I thought, well, if our students at Grove City College could handle it, then I will sign it for Principles of Microeconomics.

32:31And the bookstore was swamped with orders. They were sold out of Man Economy and State within a matter of a week, and they had to restock. But it works fantastic, because although Man Economy and State has the two things that a good economics text needs to have, and the economics treatise needs to have. One, it's readable, and two, it contains a body of economic thought that is both universally true and thoroughly realistic. It is readable. That's one reason. I remember that Gary North said that Murray Rothbard would never win the Nobel Prize. It's because he wrote with extreme clarity, using logic, and then he committed the unpardonable sin of using italics when he wanted to emphasize a point.

33:21And so students, when you read Man Economy and State, you know what he says, you know what he means, you can understand what he is saying. And on top of that, because he builds his economics from the premise of human action, the idea that people engage in purposeful behavior, you get this sense that the economics that is being developed in that book is not something that rests on the shifting sands of arbitrary Hypotheses. But they are really true. They are reflective of the reality of the way people actually live and actually behave. And, for instance, when students read through Man Economy and State, perhaps guided by the professor, they see, for instance, that action implies choice, choice implies the necessity of evaluation, evaluation implies concepts of benefits and cost, implies the Concepts of Profit and Loss.

34:20And so we get all these economic principles just from our understanding of the reality of human action. And I want to sort of piggyback on what Joe mentioned about Rothbard's treatment of price theory. The one thing I liked the most about the book, as I use it to and the principles of microeconomics was that he begins with subjective preference rankings that manifest the law of marginal utility and the idea that if you obtain more units of a particular good, each unit, each subsequent marginal unit will be valued less than the previous unit.

35:10As someone does this, that implies the law of demand. So that the law of demand is not merely, again, hypothetical. It is something that is implied by the reality of human action. So it's something that's true, the idea that there is, in general, an inverse relationship between the hypothetical price of the good and the quantity of the good that people demand at the point of action. And just by way of distinguishing this, I want to read, I want to quote George Stigler from his theory of price. I came upon this when I was in graduate school as well. This is the way Stigler defends the, Rothbard defend, well doesn't defend, he demonstrates the law of demand using human action and the law of marginal utility that rests upon the premise of human action.

35:56Stigler says this, quote, how can we convince a skeptic that this law of demand is really true for all consumers? And this comes from Stigler's theory of price. That the law of demand is true of all consumers, all times, all commodities. Not by a few, four or 4,000 selected examples, surely. Not by a rigorous theoretical proof for none exists. It is an empirical rule. Note, not by stating what is true that economists believe it for we could be wrong. Perhaps as a persuasive, a proof as is readily summarized as this, if an economist were to demonstrate its failure in a particular market at a particular time, He would be assured of immortality, professionally speaking, and rapid promotion. Since most economists would not dislike either reward, we may assume that the total absence of exceptions is not from lack of trying to find them.

36:51And that's the basis of his defense. It doesn't get any better than that for George Stigler. Oh, I would argue that the explanation of law of demand is much better by Murray Rothbard because again, he traces it back to the reality of human action and as students read this and they understand how the laws of economics are not something that exists in an ivory tower of artificial ideal worlds then they learn that they can have confidence in the economics that they are learning and I think that we way undervalue that quality of good economics and Economics, that students are tired of getting fed economic principles that apply if the constraints of this model also happen to apply.

37:43They want economics that is true, and that is the kind of economics we get in Man Economy and State, the kind of economics you can take to the bank, a 100% reserve bank at that. One final point that I'd like to make. A conversation about using Man Economy and State appeared on an economic blog a few months ago, and one of the contributors to this discussion suggested that Man Economy and State should not be used to teach economics at the university level because it will not prepare them for the graduate school by exposing them to professional models. And I actually was able to contribute to that debate in a small way by just pointing out that look, especially at the principals level, at the beginning, the goal is not to train people for graduate school, the goal is to teach people how things really are.

38:40And so we build economic theory from human action on up to teach people how things really are. And then at the intermediate micro and intermediate macro stage of your education, you can then expose them to alternate theories, Thank you, Sean. I'm just curious, are there, for the professors and teachers in the audience, are there others who have used Man Economy and State as the primary text in an introductory course or an advanced course? A few? Okay, terrific. I hope that during the Q&A period you'll offer some comments on how you found that experience.

39:32Can I make one more addition? I should point this out too, that I'm still, although I don't use Man Economy and State as a text anymore per se, because I use my own foundations of economics book, the pedagogy, if you read Man Economy and State in my book, the pedagogy is drawn heavily from Man Economy and State. And so, I still see myself using Rothbard's pedagogy and his economics as I teach now for, I guess, 15, 16 years. Great. Thank you. Let's turn it over now to Guido Hulsman. My book is not the cited best. Yes. It was wise that you wrote it for that reason.

40:17I was amazed when David Gordon mentioned that he still remembered the year when the book first appeared, 1962. I didn't remember his first publication because I wasn't there. But I still remember how I first came across this book. So I had heard about the Austrians, I had read some Hayek, and that was in France, and when I returned to Berlin, I set out to study the Austrians in some more detail. I had a look at Human Action, wow, this was a very big book, so I just copied a few pages, what I needed for a research project. I had a look at The Theory of Money and Credit, of course, the good German edition, without translation for errors.

41:08And I had to look at Man Economy and State. Man Economy and State was different than the things that Mises had written. Two things that struck out right away. The first thing was this chapter or this section in which Rothbard discusses property rights. This I've never seen in an economics text. What had property rights to do with economics? Prices and quantities being produced and inflation or whatever and unemployment. and Unemployment, Property Rights, and you're kidding me, this is an ideologue, it's obvious. And then it was clear that he set out later on to criticize government interventions, so it was suspicious, because I was a good social democrat, I was on my way of healing, but I was still pretty social democratic.

42:00And then there were these weird chapters on production. So Mises' book by and large looked like a neoclassical book in the general structure of certain things that were different, but you had a big chapter on the market, you had a big chapter on money prices, and then a few remarks on capital theory. So without going into detail, without reading it, so I just looked at the structure, it looked somehow familiar. In Rothbard then come these three big chapters on production. Production of the structure, pricing of the interest rate, pricing of the factors of production. This was also very strange. I said, this is a very, very strange book. And I put it back onto the shelves.

42:47And then I started off and the first really Austrian treatise that I read and that I studied in detail was The Theory of Money and Credit. But I ordered Rothbard's book and had it then seven or eight months later on my table. Then I started studying Rothbard and then it made much more sense after having first read Mises. And I guess this is part of the, reflects in a way, right, the difficulties that a typical reader would have when he first confronts Rothbard. In a way, it's radical. It flies into your face and it's difficult to digest, much more difficult to digest at first than what Mises has to say. And this is not only because Human Action, for example, is a much more mature work than Man Economy and State, because Rothbard, after all, was just 36 years or so old when he published it.

43:42So in this book, let me just, as far as the book is concerned, let me just make a few comments on precisely those chapters dealing with the theory of production, which in a way can be said to restate Austrian capital theory. One reason why this subject has been dealt with just on a few pages, 30 or 40 pages in Human Action, so out of 900, that's not a big deal. One reason was that Mises felt Boehm-Bawerk had dealt with this question in great detail. So Boehm-Bawerk had written three volumes on capital theory, so Mises probably felt, well, there was no need to add on this, since any cultivated person was supposed to have read those thousand pages first, because he turned to human action.

44:32So Rothbard did us the great service to restate this, and restate this also in the light of the subsequent literature, in particular, especially elaborations coming from Hayek and from Mises himself, and also from the American Austrians, Vetter in particular, and of course Rothbard had digested Irving Fisher and all other works that had meanwhile been written on capital theory, revising also the debates on capital theory and the theory of interest between John Bates Clark and Boehm-Bawerk and also between Hayek and Frank Knight in the 1930s. So all of this creates these three or four chapters which are the most advanced statement of capital theory and I think they are still the most refined statement of capital theory that we have today.

45:24I need to open another parenthesis to say something about the use, pedagogical use of Man Economy and State, because actually I do use it in my classes, in Angers, because we are privileged to have a French edition. We have a wonderful, wonderfully translated French edition, this is a great guy who translated this, Hervé de Quengo. And so I'm using this text. But it's difficult for students of the first year. And the proper way to study Man Economy and State is to return to the book repeatedly. in the cause of one's studies. One cannot possibly expect that a student setting out to study economics in his first year, even if you manage, as a teacher, and usually you do not succeed, but even if you manage to get him through this book and actually read Lars Walswijk, it's impossible to expect that he would actually understand what he's reading.

46:18So it's a good book to learn economics, But probably, you can be happy if the students just absorb the essential lessons, therefore in my lectures, I don't go through all technical points, it's also a matter of time that's impossible. So you just focus on the essential points, right? The value process, the pricing process, speculation, the fine distinction between demand via exchange, and then eventually you get to capital theory and then my course is by and large finished once I'm done with capital theory. So this is all you can do and what you would have to do later on is to go through the same chapters again and then sort of say slowly turn sort of say to the footnotes and read also sections that you didn't read the first time.

47:08This is the proper way to study economics. and read also sections that you didn't read the first time. This is the proper way to study economics and in the mainstream of course we have a completely, it's a complete disaster how economics is being studied because the little theory that you actually do is all done in the first year, it's very superficial, necessarily so because they are all beginners. It's very superficial and then in the second year there's no more study of economics at all, The Theory of Money and State

48:07Maybe another text is somewhat lighter, Foundation of Economics or something like this, but then return to this text in the second year and also in the third year, and have them read different parts of this in order to grasp the fine points of economic theory. So it's a great way to use this. So what does he do in these production chapters? Parenthesis now closed. I will respect my time. So what he does here, he is the first of the Austrian Capital Theorists writing after Mises. So for Mises, of course, he benefits from the whole methodological discussion, methodological groundwork that Mises prepares. In particular, Rothbard uses the evenly rotating economy. Now, I do not think that one needs ERE strictly speaking for economic theory, But when the ERE is a highly useful construct, the imaginary image of a static economy is highly useful for pedagogical purposes, because it allows us to illustrate quantitative relationships between different spending streams, spending addressed to consumer goods as compared to intermediate goods, various intermediate goods, capital goods and so on,

49:20and so on, spending going on addressed to original factors of production, labor, landowners and so on. So we can get this and if we do not presuppose a static economy, it wouldn't make any sense to compare these different spending streams. So this is what you need it for. And Rothbard also introduced the crucial hypothesis that is very useful in this context in order to get to comparative statics, Statics, that is, for example, to compare a capital poor and a capital rich economy, you need to make the hypothesis that the monetary conditions remain constant. So in order to have analytically to separate a variation in the savings rate on the one hand from a variation of the money supply.

50:06That's of course the basic methodological procedure that Mises had already chosen in The Theory of Money and Credit, where he has in the second part, he discusses just the The pricing of money per se, money in the narrower sense, and then in the third part proceeds to analyze the pricing of money in the larger sense, so including fiduciary media. So you need to make this distinction. And Rothbard is the first one to apply this to the discussion, to the analysis of the capital structure. Many years later, George Reisman does the same thing, and George Reisman sometimes gives and it gives the impression that he himself has invented this methodological device where in fact he has adopted it from Rothbard 101.

50:52I'm a great admirer of George Reisman's too, but it would have been useful in his book if he had spent a few more pages just comparing his achievements to those of Rothbard in order to just demonstrate to which extent he was intellectually indebted to Rothbard. So we have the right methodological approach and on the basis of this methodological approach we have then a discussion of the pricing process, pricing of factors of production. To finish, there's one peculiar feature that we find in Rothbard's Capital Theory, which is the deduction of the pure interest rate in terms of Demand schedules and supply schedules. Demand for present goods and supply of present goods.

51:45And this might represent a difficulty, and I mention this because I just think of George Reisman. So George Reisman insists and says, yes, the interest rate is not a price. That's correct, because there's originally interest. You can imagine an economy without debt. All capital that is being invested is equity capital. And without debt, there are no debt contracts. In terms of contracts, therefore, in a technical sense, yes, we have no interest, there's no price being paid for capital. That's true. But still, we would have originary interest in the Boehm-Bawerkian sense, that is, there would be a remuneration of capital, remuneration of the savings that are being invested. This is, of course, a residual remuneration, what is left over of profits after a deduction of costs.

52:33So what Rothbard does is a very subtle discussion that brings these two elements together and shows us that we can derive a remuneration of capital, even though there might be no contractual remuneration, but you can derive it from demand and supply schedules. So he closes a big parenthesis, the theory of interest is no longer something separate from the rest of economic theory. It integrates fully well in terms of the same basic concepts, demand and supply, subjective Value, as all other prizes. Thank you, Guido. Incidentally, your remarks about reading and rereading Man Economy and State reminded me of something that Walter Block said in the previous session. Some of you were here about Ayn Rand's novel Atlas Shrugged.

53:20Walter said that he first read Atlas Shrugged as a young man in his early 20s, I guess, and that he rereads it every 10 years to gain fresh insight. So he's read it eight or nine times by now. And Walter slipped me a note while Guido was talking, asking me to identify the gentleman in the picture, going through a little slideshow of Rothbardian images. This is Murray Rothbard and his young friends in the late 1950s who called themselves the Circle Bastiat. That is Ralph Reiko on the left, then Murray Rothbard, George Reisman, mentioned by Guido, Robert Hessen and Leonard Ligio.

54:05And you can see that George Reisman is beaming, he's smiling happily because Rothbard has just given him some insights in Capital Theory that he will use later. So our last but not least panelist is Jeffrey Herbner. As Peter and Joe both mentioned, the core of economics is price theory, and I propose to talk for a few minutes about Rothbard's treatment of speculation in the formation of prices, and to see how distinct Rothbard's treatment is, I went through some other texts, mainly contemporary texts, just to see what their treatment of speculation is in the same context.

54:54And I started with George Stigler's The Theory of Price. I went up to the library and I pulled Rothbard's copy from his personal library, first edition published in 1946. And his typical Rothbard book, everything's marked up, total thing, everything, right? You've got the notes everywhere and everything's underlined and, you know, his egads and, you know, shocking, monstrous, all through it. But the one thing he did not find in that book is speculation. There's no entry in the index. There's no section in that book on speculation. In the third edition of the book, in 1966, there is one short section, two or three pages on Speculation, and what Stigler talks about is the futures market. If you look at Paul Samuelson's Foundations of Economic Analysis, 1947, nothing, nothing in the index, no entries, no sections in the book. Milton Friedman's Price Theory, 1962, nothing, no entries in the index, no sections in the book. J.R. Hicks' Value and Capital, 1946, has three entries on Speculation and No Section.

56:08The three things he talks about are futures markets, speculation in futures markets like Stigler. A second thing he talks about is how speculation can be destabilizing in markets. It's self-fulfilling, so you expect prices to go down, then you change your demands and prices go down, and then this feeds more speculation about falling prices. So it destabilizes markets. And the third thing he just mentions that if we're going to make models of the economy, we have to make assumptions about people's expectations in order to make the models tractable. Alchin and Allen's University Economics, 1964, has three entries on speculation in the index. It has one section.

56:54The section talks about futures markets. Kenneth Boulding, Economic Analysis, 1966, has four entries, one section, in addition to talking about futures markets, he also talks about this Hixian argument about destabilizing markets, and then he has a very interesting discussion of speculation, I'll tell you why it's interesting, we go through Rothbard's treatment, it's an interesting comment that on Speculation in a section he has on agricultural prices, and he says this, this isn't a quote, but a paraphrase, he says, even if speculative demand decreases price fluctuations in markets by making demand and supply more elastic, it thereby makes incomes of the farmers more variable, so he's again finding bad things about speculation.

57:51Man Economy and State has 11 entries in the index on speculation, it has five sections of the book on speculation, so it has three to four times as many entries in the index, it has five times the number of sections in any of these other books. Now when Rothbard theorizes about speculation, we can usefully break his treatment into these categories. He first points out how speculation works for the individual person. The individual person is speculating with respect to the future about his own actions, about the outcome of his own actions. And then the second category is the speculations that a person makes about the actions of others that he intends to interact with.

58:39So this is where we get the market. And within that category, he talks about speculation that people make on their own about what other In Man Economy and State, All Action is Speculative on Page 6. The general theory of human action doesn't apply to pricing per se, but Rothbard carries this through to the section on pricing.

59:26So when we get to the section on pricing with demand and supply, he explicitly points this out. He says, look, both demand and supply are speculative. When a person has a preference rank and they say, I prefer an iPad 2 to $500, both those entries in the preference rank are speculative. The person doesn't know before getting the iPad 2 and using it to attain his end what the realized value of having the iPad 2 is. He doesn't know until he gives up the $500 what exactly the opportunity cost is that he forgoes in the future. So speculation is in the very formation of demand and supply. Woodward builds this into his pedagogy when he develops his presentation of the theory of demand and supply with the total stock, total demand analysis.

1:00:22So here he's not just trying to show that prices must of necessity be determined just by preferences, but he explicitly brings out the speculative element in that presentation. So the conclusion from this, of course, that he arrives at is that prices themselves, both the level of prices in markets and changes in prices that come through shifting demands and supplies, both of these things are speculative. Prices themselves are not like facts of nature. They're results of human action that are based upon speculation. Here he's building on the point that Mises makes in Theory of Money and Credit. Okay, now to go on to the second category where he talks about how people speculate about the actions of others in markets, what are we to say about this?

1:01:16Here's where he makes this point that Bolding mentions, and notice again the date of Bolding's economic analysis is four years after Rothbard's work, so one wonders whether he's responding to Rothbard in the comment he made. Because what Rothbard points out is that when there's speculation, at least accurate speculation in markets, this makes both the demand and supply curves more elastic, because the persons will not supply or demand as much as they would have with inaccurate speculation. And what concludes from this is that because of this, any deviation in the price from market clearing will create these enormous excess supplies and excess demands.

1:02:03And as a consequence, the market will not deviate from the market clearing price, because even the slightest deviation creates these catastrophic discoordinations among people. And so this is actually a positive thing then in the market by bringing about market clearing, as he says, without trial and error. Then he moves on to the latter part of the speculating about other people where he introduces the specialist, the specialist in speculating. And he says, here, of course, this is another improvement in the way that the market works because entrepreneurial ability will not be evenly distributed among all people. And so if we're just left in markets to our own speculative anticipations, you know, some Some people will be better at this and other people's not as good, they'll be worse at it, but specialists can arise in the market to take on the task of making these speculations for us.

1:03:07And if we turn them over to the specialist, then we'll get even more accurate speculations and even more economizing activity in the market. And then the last thing I want to mention on this, he carries, this isn't price formation per se, but he carries over this insight into production theory where he points out that entrepreneurs are precisely the specialists in speculation and when they're forming their production plans, when they're making their production decisions, they're just doing the same thing that this specialist trader is doing in the market and forming speculations about the future The very efficiency of the market in matching production to our preferences also depends upon this entrepreneurial specialist engaged in speculation.

1:04:08And then just one last point on this. What he does with this analytically, of course, is completely separate the production decisions from pricing decisions. Again, very Austrian, very unusual, unorthodox from a mainstream viewpoint. He shows that these two things are not wedded together in markets, but they're separable precisely because the entrepreneurs are speculating on what future prices will exist in markets when they make their production decisions. But the prices that exist today in those markets are set by demand and supply. So we can have a separation of understanding. We can understand the separation of the prices that are formed for consumer goods today and the prices that are forming for factors of production, which are based upon the speculation of the entrepreneurs into the future.

1:05:07Thank you. Jeff, how do you explain the fact that many contemporary Austrians have charged Rothbard's framework as being sort of, you know, static, equilibrium bound, and not taking sufficient account of time, disequilibrium, subjectivity of expectations and so forth. Just a simple misreading? Yeah, it's hard to explain. It's so apparent as you read through it and maybe if you're not sympathetic, you miss these things. I'm not sure, but yeah, it's hard to explain. Okay, thank you very much. Let me just ask each of the panelists if you want to make a brief, Joe, brief comment on Something the other panelists have said, let's do that now. Yeah, I want to comment on Sean because Sean brought up a good point.

1:05:54When I first started teaching, I went to Murray Rothbard and I told him that I was teaching and he immediately interrupted me and said, of course, you know, the whole point of teaching is to minimize contact with the students. That was one of his many laws. But he discouraged me from using Hayne. He said, there's no analysis in it, Joe, no supply and demand, it's all just words. So he wanted analysis. So he used a series of textbooks, he never used his own stuff, he always used straightforward standard textbooks. And so he would use Courtney and Strupp, he used Roger Leroy Miller, Edwin Dolan. And he had a second law, the second law was that every edition of a textbook is worse is worse than the previous edition because it incorporates more of the fads and flaws but doesn't scrape away any of the other crap that was in there to begin with.

1:06:51So I remember him calling me up one day and he said, I found a great book. It's got the market for kidneys. He loved stuff that had a lot of drugs or kidneys or something like that. He wanted to entertain the students. But my last point about him, his courses were invariably a running commentary on neoclassical Economics, and it's ever since. He taught the supply and demand, he taught cost curves and so on, but he had very insightful comments in his courses that are missing from Man Economy and State because he doesn't deal with these things. And that is up on Mises.org, his course on microeconomics, and there's another course I think on free market economics, which incorporates some macro at the end. And it's economic history courses too. Yeah, but I'm saying, but just for the analysis, I mean he was an analytical economist. I mean He liked graphs, he liked careful analysis, careful logical analysis. He didn't like the Hain approach where you just tell a student, well this is opportunity cost and then you

1:07:51sort of talk about it for an hour. He wanted the analysis in it. Anybody else? David? Well, just one point I want to mention on why some Austrian economists tend to criticize Rothbard as too static or too oriented toward equilibrium. I think in some cases that some of those economists have the view they think we can't know anything at all about the future and they have what in my view are very bad or no arguments for for that view. And they overemphasize speculation to the point that they're denying all, they're really evacuating economics of any possibility of attaining knowledge.

1:08:44So I think the reason they think that is that they extend the point about speculation beyond what it's worth. Thank you, David. Let's turn it open to questions from the crowd. We have about 20 minutes and we have a microphone that will be available. So please raise your hand.

1:09:10Hi. So I fought my way through the book at high school. So I guess I misunderstood most of it, but I will reread it. But there is something I always wonder about, that when you read Mises, for example, its practical conclusions seems to be monarchist. And when you read Rothbard, and he should be relatively similar to Mises, he uses strictly or very methodological approach, and its practical conclusions are more anarcho-capitalistic. So I wonder, it's a huge difference in the conclusion, and I wonder why there is such a big conclusion, even though it shouldn't be such a big difference in their methodology.

1:10:04David, do you want to answer? Well I don't think the difference there is really a difference in economic theory or methodology, just a difference in really political philosophy, and I think particularly Mises just couldn't conceive that a society could exist without a state and he just I think blocked that possibility out and Rothbard from his natural rights point of view thought that no state was justified but it isn't a difference in economic methodology, it's more of a difference in ethical assumptions, certain assumptions about how the world works Other comments and questions, please, Conrad.

1:10:59This is for any takers. If you are recommending this book to a student, say this is a great book, it has all these things in it, but I would watch out for this one point. What would you think of that maybe, you know, since the book came out, something has been revised that wasn't quite on track to make sense. Right. So what are some of the weaker areas, places where further clarification is needed or came subsequent? Yeah. The text is of extraordinary quality. In fact, there's no chapter where I would say, I mean, this chapter is really complete, is awful, is even bad or something, or is weak. All chapters are very strong. But there are certain issues, I mean, some of it is a quibble, right, but it's nothing that comes to my mind right now. There are certain things that he doesn't deal with, but that would have been interesting, too. For example, there's no comparison, competitive Comparative Statics of the Savings Process.

1:12:14This is lacking. So, George Reisman, one of George Reisman's contributions that does precisely this, right? So, there would have been other elements, right? There would have been interesting that Rothbard does not get into it, but we will excuse him because he has already delivered us a thousand pages. They cut a few off, so he had to stop somewhere. Joe? I would just say that there has been a lot of research since that point in Austrian economics, in Austrian theory, a lot of it is in our quarterly journal of Austrian economics. For example, just recently, maybe two years ago, Xavier Mira wrote an article extending the monopoly theory that Rothbard talked about into factor markets. So there are advances and there are a few points where Rothbard was a little confused or a little mixed up.

1:13:05Next up, for example, Jeff talked about speculation, and earlier we had the talk about the different equilibrium constructs. Rothbard tended to confuse the basic moment-to-moment equilibrium on occasion with a Marshallian short run, or let's put it, sort of a fully arbitraged sort of equilibrium. Every once in a while he'd shift back. For example, he would say markets clear very quickly, but the point is that whenever there's In the beginning of the book he sort of says that, he gives you that analysis, but then later on, I think you've seen this too, Peter, in the book. Yeah, there are some inconsistencies, just loose phrasings and so on.

1:13:52His price theory, he went to Columbia and he learned price theory using Alfred Marshall's text and even though he criticizes Marshall extensively in parts of the book, he lapses into sort of a Marshallian analysis on very few occasions. Another thing that's worth pointing out is there are two tracks or two lines of thought in the book. in Text, which, I mean, as Sean nicely described, is, you know, sort of written for the ages in the sense that he's expounding truth without going into a lot of, you know, historical detail about history of doctrine or criticizing other approaches, but if you look at the footnotes, the footnotes provide an amazingly detailed kind of commentary on the scholarly literature at the time, very insightful criticisms of neoclassical economics, of Keynesian economists and so forth.

1:14:49And of course the problem with that is that the footnotes are dated, right? I mean it's references to the cutting edge mainstream scholarly journals up through the end of the 1950s. And it's extremely valuable insight in there, but has the advantage, disadvantage of course that it's 50 years old. Walter, yeah, actually, let's do Fritz first on the way and then Walter. Thank you, since you invited comments, I'll make a comment instead of a question. I come from Francisco Marroquin University in Guatemala and we were basically brought up with the idea that Austrian economics was the normal economics and the neoclassical was the weird economics.

1:15:37And from the very beginning, when I studied there, we didn't really feel that we had a textbook. And Joe Kaikisen, that some of you may know, who was in the Mises Seminar for a number of years, and who was my teacher, basically put together the program using different readings from different authors, where Rothbard was an essential part of that program. In our experience, we tend to concur with Professor Holzman that it's pretty difficult to digest Rothbard for like first year students or principal students in the same way that Mises would be extremely hard to digest for starting students.

1:16:25Our experience is that he is very good to come back to When students have had some principles and then they've had the weird economics, which is the way we do it, we do Austrian principles or Austrian economics, then we give them some standard neoclassical models, then they have to come back, so they get kind of confused and we use Rothbard to come back. Another observation that I would make in Man Economy and State is that for someone who is trying to teach economics where students are supposed to learn these definitions and regurgitate back what the teacher is teaching them, Rothbard is no good.

1:17:13and Haynes for example much better. For a more Socratic type method of discussion, Rothbard is excellent because that's what he does, really go through a elaborate discussion of concepts as opposed to trying to teach like definitions and catchy words. So, we find Rothbard extremely useful for what we call a Socratic discussion. Thank you. A small addendum that occurred to me when someone else was talking about pedagogy. You know, while Rothbard, when he set out to write the book, he did have in mind, you know, making Mises' ideas more accessible. But I think he was thinking of the reader as sort of the intelligent lay reader, not necessarily the college student. It might It might be worth noting that during the time when Rothbard was writing the book, he was not a college professor.

1:18:12He was a research economist with the Volcker Fund. And he did not have any daily contact with undergraduate students. He was not himself teaching out of a textbook. He wasn't teaching at all during that period. So, you know, again, his intended audience may have been other sort of mature thinkers who perhaps were not as well versed in the Austrian School, but I don't think he had in mind the college students. I wasn't sort of thinking about, okay, how do I get this idea across to a 19-year-old or a 20-year-old because he wasn't in daily contact with those folks. Walter Block? I wanted to, is this on? I wanted to say I had the honor of once substituting for Murray as a professor. He was teaching at Brooklyn Poly and he had to be out of town for some reason and I took his class.

1:18:57It was a highlight of my career. I asked him what to do. He said, do rent control. Well, that was my PhD dissertation and I asked, you know, any specifics and just go get them or something like that. I wanted to correct Jeff when he said in Murray's margin he had things like EGAD and monstrous. He had that, but he had other things that were quite a bit more pithy. Somebody asked how about the weaknesses of Manning-Conestay and I forget what Murray wrote where because I've read a lot of it and it sort of fades as to where I got it, I don't know if I got it, but there are two issues where Murray himself changed his mind. One was immigration, and the other was IP. He used to have the view, I think, that patents were legit, but...

1:19:46Illegit, but copyright was okay, but then he changed to the Consolian view that... He didn't do that? I'm not a historian. I screwed that one up, I'm sorry. I just wanted to mention one other thing, and thanks for the correction, Joe. One of the things I got, whether it's Man Economy and State or somewhere else that hasn't been mentioned, that I thought I'd quickly mention, and that is his attack on math econ or mathematical economics, which assumes very small changes. In order to differentiate a curve, you have to be able to differentiate, you have to have infinitesimal changes, and infinitesimal changes are not compatible with Human Action. One of the diagrams that I loved the most was this thing where if you have a U-shaped smooth cost curve and a downward sloping demand curve, it has to be tangent at a point other than the bottom point of the average cost curve.

1:20:40So Murray had this U-shaped average cost curve with a little dip at the bottom of it and then the demand curve could intersect that. And I just thought that was the cat's pajamas. I thought that was the greatest diagram I'd ever seen. Stigler actually had that in his Price Theory textbook. He drew a jagged cost curve. And then he said, this is more realistic. But then, of course, he goes off to U-shape once. Please. Are there any economic contributions of Rothbard that have been maybe accepted Have you accepted or filtered the way more into mainstream? Particularly, I'm thinking about his monopoly theory. Has it even been addressed or discussed, debated, refuted at all into mainstream?

1:21:31Not really, but his theory, he took it a step further, was the theory that most American economists accepted well up to what's called the perfect competition, monopolistic competition revolution. So what he did was he took that theory and then he took it a step further. But that was sort of the theory of Wichstede and many of the early American economists who were mainstream price theorists. And more generally, as I mentioned in the introduction, Rothbard was not simply drawing on Mises, Menger, Boehm-Bawerk and so on. If you find upstairs his copies of Wichstede, his copies of Federer's Principles, they're marked up in the more or less colorful way that these guys describe.

1:22:23you know lots and lots of in fact I remember remark something like I think it's something in Wigstead he says you know use this like use this in my treatise so he was really studying the some of the great works in causal realist price theory which he thought he was you know he situated his work as a continuation of that tradition rather than as something that he was creating out of whole cloth you know I want to make a correction to what I just said His theory of the business cycle and its application in America's Great Depression, which came out the next year, is now being cited and quoted from by a top UCLA macroeconomist, Leo Haney, who has written two papers pointing out that the 1930s, contrary to what Friedman says, did not involve a failure of monetary policy, but a failure of labor policy, that is the Rigid Wages, and he explicitly cites Rothbard, and one of them was a JPE article and then there's a second article, an MBER paper maybe or something, but that's a very

1:23:27exciting development. That was two years ago. Yeah. GP? I just had a question about, I think, I might be wrong on this, but Rothbard developed significantly the marginal productivity theory of factor pricing, I don't know if the earlier economist had such a detailed analysis of, you know, within the firm and throughout the economy the two different applicability of marginal productivity theory, I was wondering if someone could comment on that? I'll comment on it. That is probably the most neoclassical part of Man Economy and State, and that's all to to the Good, because marginal productivity theory was developed in the US, starting with John Bates Clarke, and it was pretty much accepted throughout.

1:24:21Now what happened was after the monopolistic competition revolution, cost curves began to come in. Actually before that with Jacob Weiner in 1926, you had cost curves beginning to come in. So now you have, as Rothbard points out, a redundant analysis of the quantity of production, of output. One stressing the combination of factors and using marginal productivity analysis and the other stressing sort of given factor prices and theory of the firm. So what Rothbard basically said was that the productivity analysis is right, marginal productivity analysis, and the cost curve analysis is at least redundant. Why do we need it? And it makes the further error of taking input prices as fixed, even though from the point of view of the firm they are, but they're never explained within cost curve analysis.

1:25:09Oh, he was actually more neoclassical than neoclassical in that sense. Okay, I think we have maybe time for one more question, anyone care to have the last word? I just have a quick question. I know it was briefly remarked on how textbooks be revised, and he was sort of saying that every new textbook is worse than the earlier edition. And sometimes when authors, they look back at things they write, they sort of say, I wish I commented on this more or maybe I didn't say that right. I don't know if you guys knew that any of his after because he had a very productive career after he wrote the book in the early and you know in the 50s if you ever thought that maybe like there was something that he didn't talk about or he you know maybe he would have revisited not not like revision but maybe he just oh I wish I elaborated on that more kind of in terms of economic theory pure economic theory he was supposed to write a second edition

1:26:06When did the second edition come out? At first he was going to revise the whole thing, and then he realized it would take a long time. His mind had changed on many things, and then he was going to write a very, very long introduction to it, pointing out where he would say things, have said things differently, had he knew at that point. And again, he was busy with other projects, writing his History of Economic Thought book, and so it just came out with a very short introduction and really no revisions. I went through and I found some of the diagrams that were a little bit off and I fixed some of the diagrams in another edition after that, but you don't want to touch his work because I don't know what else he would have said. In talking to me he would say, I wish I said this differently or that, but you can only speculate, so to speak.

1:26:59Thank you, Joe. Before we break, I'd just like to take a moment to thank the people who made the conference possible. The supporters of the Mises Institute for a generous financial support, Lew Rockwell, the founder and chairman of the Mises Institute, Doug French, President of the Institute, Joe Salerno, Vice President for Academic Affairs and the Conference Director, All of our presenters, discussants, commenters, and of course all of you for coming, so let's all thank each other.