Disbanding Troops and Bureaucrats

0:00This is Jeffrey Tucker with another installment in our continuing series of interviews with economists about this book, Economics in One Lesson, and it's my privilege to introduce Walter Block, who is the editor of the book, actually not editor, he just wrote the introduction, Certainly one of the top enthusiasts for Hazlitt's work. So the first chapter we're going to cover is disbanding troops and bureaucrats, a particular problem in 1946, right? And the second one concerns this issue of full employment, which is a phrase we still hear today. So let's first talk about troops and bureaucrats. Maybe you can give some of the background behind Hazlitt's discussion.

0:51Well, in 1946, I think the book came out in 1946, so he might have written it in 45, I'm guessing, but maybe 44, late 44. Say it was 45 and he knew the war was just about over or it was over, and now there were many, many foreign soldiers located in Europe, located in Asia, many, many of them in World War II, and they wanted more than anything else to to come home, I'm sure, to establish families or to see their wives and kids who they hadn't seen for a while, and they were going to sort of inundate the U.S. with themselves, so there'd be many of them coming, and people were afraid. Would there be jobs enough for them? And I think that was the context under which Hazlitt was writing. And the fear would be that there wouldn't be jobs for them, because, you know, right now we have one percent unemployment and now you have several hundreds of thousands or even millions of people descending upon the US all within a matter of weeks or months at the most and maybe there wouldn't be enough jobs for them but Haslund quite rightly set this aside or gave it the back of his hand as it deserves.

2:06The idea we have to address is what creates jobs in the first place. We have to get down into the nitty-gritty. And the reason we have jobs in the first place is because of scarcity. And what is scarcity? Scarcity means we have less than what we want. We have this much, we want that much. And that's where the jobs come from. And as long as there's unmet needs, as long as people want more stuff than they have, have, they'd be jobs not only for all the U.S. soldiers but for a zillion Martians or Chinese or just anyone could come down to the U.S. or to the world or whatever and have jobs. Perhaps it would be easier to understand if people understood that Hazlitt was writing and also not just in light of the Second World War but also from the New Deal experience where we had all these years where the government was trying to reduce the unemployment rate but couldn't and the widespread perception that it was the war that solved the employment

3:10problem, right? Right. Well, Higgs has done a lot of good work on that. I mean, that was just silly. We certainly had unemployment problems. I mean, if you take millions of people and take them out of the labor force, of course the unemployment rates are going to look better. But I think the point needs to be made that I think we've said this before about Hazlitt is that it could have been written yesterday because right now we have soldiers in Iraq and Iran and we have 800 military bases in 140 different countries and suppose Ron Paul ran one for president and his first policy would bring the troops home, I don't know that there are as many troops nowadays in 2008 as there were in 45, 46, but there's There's quite a hunk of them in Germany and Korea. You name a country, there's probably a U.S. troop there.

4:03And if we were to bring them all now, it's the same situation as it was in 1946. But part of the fear, though, is that these people will have to be, I don't know if the word is retrained, but they would accept different kinds of jobs. Government jobs require different kinds of skills, especially in the military, than is required in the private sector. So that's part of the fear. Well, you see, I think the main fear was not so much that they would have to switch from killing people to making cars or something like that. The fear was that there just weren't any jobs, even if they were to switch. Now, you're quite right that the switching would take some time. People have to get allotted to the new slots. I can see that. But the fear that he was addressing in this chapter was that there wouldn't be enough jobs even if they were retrained because, you know, there are millions of them coming.

4:49These are them coming. Well, one way to look at it is that they come not only with arms but with mouths, and they'll be producing stuff that they'll be eating, or the additional amount that they produce they'll be eating. But, see, to look at that way is sort of a Keynesian-ish way to look at it, that what's really causing it is their mouths, the man. That's sort of backwards. First we have to produce, then we can eat. It's sort of a basic There's a premise that you can't eat first, eating can't be the cause of things, it's rather the producing. And as long as we want more things than we have, there's jobs for them to do to create those things that we don't have. Now there is one way out of that, and that is if we end scarcity.

5:38Lots of rock, as they say, but there are ways, I mean one way to end scarcity is produce more. very problematic because our eyes are bigger than our stomachs no matter how much we produce there's always something else we want on the other hand we could go the other route, the ascetic route like Gandhi where all you want is a diaper and some goat's milk and that's it although he did want the British out of India which is, you know, not nothing but apart from that, so if you had a group of ascetics who didn't really want much of anything well then there wouldn't be jobs for them but then there'd be no need for those jobs because we don't want the stuff so there's really no problem with the laissez-faire capitalism. You know it occurs to me too that this is also does have an impact on the immigration question. Oh, absolutely. The fear that the immigrants will come in and there won't be anywhere for them to work or another related fear is that there will

6:33drive down wage rates for everybody else. Well this is a very complex subject and And as you know, there is division among libertarians. Hans Hoppe and Murray Rothbard take one view on immigration. Not so much on the economic issues. Oh, no. Not on the economics. You're quite right. I stand corrected on that. Not on the economics. We all agree that there's no problem of creating jobs for immigrants, for soldiers, for Martians, for new babies who are immigrating from Storkovia. They come with Storks. I don't know if you knew this, Jeff, but they come from this country called Stork OVM. Storks bring them, and 20 years later, you've heard about this, and 20 years later or 15 years later they need jobs too.

7:19And where do all these jobs come from? And the answer is they come from scarcity. As long as we want more than we have, there'll be jobs for immigrants, there'll be jobs for anyone. What about the fear of wage rates declining? Well, there it's a very, this is not, we're now out of praxeology, we're into climology, and there will be, look, if say, the immigration consists solely of physicists, well, there might be a case where physicists' wages would fall. And if the wage consists of solely low skilled people, well then the wages of low skilled people might fall, but even there it's an empirical issue. It might be that economies of scale, even with physicists or low-wage people might increase it, it depends upon how much capital there is.

8:07These are very, very empirically dirty questions. Everybody is aware that the rarer your skills are, the higher your pay tends to be, provided that your skills are more demanded in the market. So if people who do your thing are more prevalent, then you need to move on. And we do that in life anyway, don't we? That's right. Look, what are we going to do? I mean, your daughter is now taking piano lessons. So she's ruining the piano industry because she's lowering the wages of all pianists And by the way, you know, why do we consider this to be such a terrible thing for a person to change? You know, how many of us, well, I guess all of us have a variety of things we're interested in doing. And if we find somebody who does what we're doing now just as well as us and does it at the same wage rate and does it even better, then it gives us an opportunity to move on and do something else. Why is that such a terrible thing?

9:03No, no, I agree with you. Hans Hoppe and I have an article co-authored where we say you You have the right to own things but you don't have the right to own the price of them because the price of them is determined by all buyers and sellers and the marginal buyer and the marginal seller. So if you get an extra physicist or pianist and the wages of physicists and pianists go down, tough. You shouldn't enter the market if you're afraid of things because you don't own the price. The price is determined by the market. And also wonderful because it gives you a chance to do something else, to seek out your highest value. You don't necessarily have to do something else. You could stay as a pianist or a physicist just at a lower wage or if you don't like the wage you go do something else. It's really not a problem. A lot of the issues that Hazel is dealing with here are refuting

9:51fallacies that are generated from a mechanistic view of economics that doesn't look at economics from the point of view of human actors but looks at these big aggregates working. One of these aggregates is the unemployment rate. There's this longing for so-called full employment And that doesn't really mean, in the economics literature, that doesn't mean that everybody's working, does it? Well, certainly not. What is full employment? Well, in this chapter, what I think Hazlitt is doing, the essence of this chapter is saying, look, we don't want full employment, what we want is full production. We want as much as production as we can get, because look, I think he has this, I forget where he has this story in which chapter, But I think it's in this chapter where he says, look, if you really wanted full employment, get rid of all the trains and then put the stuff that goes on a train, say from Auburn or say from Atlanta to Chicago, a big long train of 500 cars, each car has got tons of stuff in it, put that on people's backs, 50 pounds to a person, let them walk from Atlanta to Chicago, and then we'll have jobs not only for everyone in the United States,

11:02We don't have jobs for anyone who's ever lived and for trillions of people because, you know, and that way you'd have full employment. But everyone would be working on carrying stuff from Atlanta to Chicago. We'd have no food, we'd have no clothing, we'd have no medical care, we'd have nothing. So I think he's focusing us in the right direction, that full employment, employment is bad. We don't want employment. We're against employment. Employment is a bad thing. Play is good. Employment is a bad thing. It's a necessary evil, because we live in a world of scarcity, so we have to work in order to produce. But if I could press a button and say, look, no employment. You just want to play forever. And we just play, and stuff comes down from heaven like manna, and you want a bicycle, you sort of think a bicycle, you got one, you want lunch, you think about lunch and you have it.

11:52We don't want employment. We accept unemployment unhappily, because we're on the wrong side of the Garden of Eden. for in the Garden of Eden there'd be no employment, there'd be play. Now, Mises makes the very good point that the ideal thing is to be paid to play like a basketball player or a singer who I assume enjoys it and they get paid or you and I have a job, Jeff don't tell Lou otherwise he won't pass, but we're not working if I can include you in here. We've never worked an inch of our We have our lives here at the Mises Institute. We are playing. We enjoy this. If we could afford to, we would do it for no pay. We're having fun now. We're playing. It's true with being paid to play, which is the ideal, but not everyone can be paid to play because you've got to take out the garbage and not everyone likes dealing with garbage.

12:46Right. So, we don't want employment, and we don't want full employment. We don't want unemployment, namely people who want a job and can't get it, but that's due to government. Right. And that's very different. What about this idea that all unemployment in a free market is voluntary? Absolutely. Stick by that. All unemployment in a free market situation is voluntary in the sense that you're demanding

13:41This is one of the additional problems with minimum wage, it puts a floor on people's ability to evaluate their contribution. The analogy that I like to use sometimes with the minimum wage is that the skunk is a very weak animal, but it has a compensating differential, the smell, and if it didn't have that it'd probably go extinct. The porcupine is a very weak animal except for its quills, and if it didn't have that it would go extinct. The deer, too, except for its speed, these are very weak animals, but they have one little thing that keeps them alive, well, very unskilled people, too, have a compensating differential, the ability to work for low wages, and then they can get a job.

14:29But the minimum wage is like taking away from a poor person the quills of the porcupine But here we are entering into another period where the unemployment data is on the rise, a little bit. Right? We're seeing more evidence of this. And the policy tendency is to do exactly what you're suggesting is the worst thing to do. We just had a rise in the minimum wage. And we have another one scheduled, I think, up to 720 or something? Something like that. And there'll be other moves to try to pressure employers from firing workers, from laying people off, and so on and so on. Welcome back to the Depression.

15:14That's what FDR tried to do, keep wages up, artificially. And that's what caused the unemployment. If the wages would have been allowed to settle to their market levels, we still had a depression and there were misallocations of resources in the 20s. There would have been a lot of problems. But the depression could have lasted 10 months instead of 15 years, or 18 years, or however you count it. Well, and maybe we can say that Hazlitt hadn't written his book yet in the Great Depression, so maybe that's one factor, but he has written a book now, and so we have access to all this information. There's no excuse for repeating the same mistakes. Well, Hazlitt hadn't written his book by 29, but Mises had written a book or two, so there There was really no excuse, but the mainstream economists don't read Mises. That's the explanation, I think.

16:08Well, do you think it would assist in avoiding some of these terrible errors of the past for this book to be more widely circulated? You know, I used to be an anarchist, but I now believe in government, and government should have one function. They don't call me Walter Moderate Block for nothing. and the one function of the government should be to make everyone read that book. And that's it. See, I'm very moderate, I believe in government, but, you know, limited government, I'm not an extremist here, I'm a moderate and they ought to make everyone read that bloody book and have a quiz on it, and if they don't pass the quiz, they read it again. Would your law expire, or be it applied to every new generation? Everyone. Thank you very much, Dr. Block. My pleasure.

16:57In the name of the Father, the Son, and the Holy Spirit. I am the King of the World.