An Interview with Friedrich Hayek: Part II

0:00Now, let's go back to Austria, the Austrian School and Vienna. I know only a little about Vienna from the turn of the century through the 20s, as illiterate Americans pick up bits. Gorski's book is about all I really know about, at best. Now, Vienna was almost a capital of intellectual ferment from what I can see from, say, 1880 or 1980, probably through the 30s. Is that how you perceive it in retrospect? All right. I mean, you can date it exactly. It was a great reform in 1867.

0:53Until then, the University of Vienna was nothing. Now, in 1867, it begins to grow. At the end of the century, it reached a high point. It had its highest level in the 1890s and up to 1914. It revived once more after the war, through the twenties, and almost was the beginning of a furtive diet, not only in economics, but also now. Do you just, you don't have to, maybe you don't have an immediate answer, but as a feeling in retrospect, perspective, Do you think that the Austrian perspective could have or would have been likely to have flourished and to have come into existence anywhere else except Vienna?

1:42I wouldn't have excluded England, which happens to be the only other country which I know as intimately as I know Vienna, although there are very specific obstacles, but in general I found more understanding among English people as almost anywhere else. So, there's a large number of books which have appeared about Vienna, not one of them is any good, I have feeling. And when I'm not a historian, I will never write a historical book.

2:32for your information, the Stanford philosopher William Barclay, who is all the material for my intellectual work, who will now even be helping me on my current work. He's at Stanford. And in addition, since he is there, Barclay, William Barclay III, Stanford order gets all my papers, so it will all be there, and they're making efforts to get, they have now got some and Mahmoud papers will not be particularly interesting. They will get other Austrian papers.

3:18So, after my death, Stanford will be the center, where the material should be to study this development. That's, of course, closely connected with the cultural atmosphere of one aspect of which I spoke before in connection with the Jewish problem, which is one aspect on it. Well, of course, the extent to which you could grow up in a purely academic atmosphere. My grandfather was a zoologist. My father, a botanist. My two brothers, professors of anatomy and biology and biological chemistry.

4:04My children who grew up in separation from the family's result of the war. My elder is an insect specialist, and my younger boy a bacteriologist, so the bacteriologist... And I am really in my training, my biology, my training, in my own education, a biologist, it was a gay political former, it's at the end of World War I, which drew me into political problems. But even then, while I was studying officially economics, or I should say, no, officially law, I divided that time equally between economics and physiological psychology, and it was practical problems to make me decide for economics, rather than these problems on physiological psychology, which I ultimately published a book, The Sensory Order, which is much more important for my thinking than the economists generally understood, because in connection with the formation of the human perception that my conception not only of order in general but the relation of orders of different degrees of magnitude became fully looked.

5:38I believe I understand economics because I understand not what's commonly called psychology, the sort of psychology which Freud and so on did. I have nothing to do at all. And to see how a man is capable to interpret an extremely complex order in which he lives. by forming within himself a sort of replica of this order. The one economist that I can think of, and not a very good one, who recognizes this is a man named Ben Seligman. Ben Seligman, S-E-L-I-G-M-A-N. He wrote an extended critique of you 20 years ago, almost all of it devoted to the sensory order.

6:31I'll send you a note on that, and it was curious to me at the time, but in later years I've understood that I don't like his critique, but he lived at the right place. I'd still like to see it. The name is familiar to me, but I certainly haven't seen it. I'll remember to send it to you. But what I'm trying to get at, you lived in this unique period of time in this remarkable seat, and it was not just you. I mean, it was Freud, it was Wittgenstein, it was the underground, the occult underground as well, Hitler really flourished out of it. Intellectually, the dominating figure, either by reaction or by adaptation, was Ernst Mach, the physicist.

7:23That was the principle for thinking in which we all go, and at first all adopt with it. But somehow, in my psychological thinking, it begins directly with Ernst Mach. Ernst Mach, in his famous book, The Analysis of Sensations, explains or assumes that while all our individual sensations have an original pure quality, They are constantly modified by experience. There is only an original order and then the experimental change.

8:11If you can show that experience can change the thing, why need there be an original quality? The original quality may have arisen in the same fashion. But there is only a step beyond math, which turns against human results. and so on, that my own psychology developed. In this sense, I began from the same thing in which the whole logical positivism, Schlick, Neurath, Carnap and so on, developed from Vienna. But on a split, it's a base, it's a path, very much, but these two apparently absolutely contrary trends come from a common initial viewpoint in Mark.

9:04Well, now, to what extent was there a feeling of free thought in Vienna? Freedom, now, if, could you make a comparison to the freedom and the flourishing of the music through Vienna, Mozart, Beethoven, and Wagner, and all of these people, and then the freedom, is there any comparison? I have such a feeling of freedom at the university. I think the decisive point was simply that you were not expected to confine yourself to your own subject. I mean, I must have spent as much time in lectures and other fields with other people as I did with economics.

9:54Despite the jokers that nominally were studying law, it still, I can say it left me time, I took time, I spent my day at the university from morning to evening, but shifting from subject to subject. I would as readily hear lectures about art history or ancient Greek plays as I would hear lectures. Curiously enough, there are mere gaps in fact. It so happened that psychology had died out by natural death during the wartime.

10:43There had been, during the war, still two eminent psychologists who had died. There was still one dying, painfully, still giving daily lectures. But you could see this has been a brilliant man, for whom now the effort to get through. But he was sufficiently interesting for me to attract here. And it was to us, even make also a very small elite of the students, that it all happened at a time when the university was over flooded by veterans who were coming from the war.

11:28The number of students was probably three times the normal of whom nine-tenths wanted to get the degree as rapidly as possible. Yet, some of us managed, in an equally short period, not only to get, and I got a first class degree in law, but to study half a dozen other subjects. The University was welcomed, yes. There was never any test, either was you attended the lectures that you ought to attend, or was you attended any number of lectures where you had no right at all. I was going around all through the University, testing out people. I would try people like the famous camera, I probably remember the name of it.

12:21Kirzner wrote a book about this, he is the one man who believed he could prove the inheritance of a trial characteristics and became temporarily famous. But there were some very original figures. All of them at the universities, they were outside what you could call the professional staff. All these pivotal centers, who were just licensed to lecture, who had their own ideas of the center, who didn't take an organized scheme at all, It sounds very much like the University of Berlin in Marx's day.

13:27The same coffee house atmosphere, the brilliant young men coming in of all persuasion and of Of course, in their case, I guess Hegel being the overriding influence, the name Mach was in your day. It probably was, but in a contrast between the University of Vienna as I knew it in the present, is such that I avoid going to Vienna. In every other respect, Vienna is beautifully revived. It's nice, the better built, economically prosperous. When, what I remember, they were desperately poor, but there was this great intellectual excitement about it.

14:14And the main people who taught were absolutely first-class people. Every lecture, nearly everyone was intelligent and perhaps was contributive. I have never heard of a university since medieval time where that was true. You mean to say that the lectures actually counted for something? That students really went to lectures because they were good lecturers? No, no, but I'm thinking of people like you who went here and there and everywhere. Well, there was a small group of us who did it, a very small group, but I was by no means alone.

15:12I had friends with whom I could talk, who would have tried something else, and would tell me it's worth going to this man and worth going to this man, because they experimented in the same manner in which I did. Let me get back to Mark's original question though. Is there a relationship between what was going on in Vienna, the city of Vienna, and the openness, if it was openness, I gather that it must have been, and what was going on in the university, which sounds like another equally important experiment in the sharing of ideas? You know, the University was a world for itself. Now, where it's a university, at least in the law faculty, was a very violent political discussion, between organized socialists and communists.

16:11In fact, even I, although I've never since belonged to a political party, was one of my friends organizing a German Democratic Association in order to have a middle group between the Catholics on the one side and the socialists and communists on the other side. And when was this? What year was this? I was a student from 1918 to 1921. I would like to ask a question. I didn't finish for her. In spite of this, I did my law studies in a year short of the official time, because I had veterans' credits. So for that, I was allowed to do it in a short period.

16:59appeared and I managed to do it in spite of some complication. I came back from war with a fairly severe attack of malaria, was not in the best possible health, but having to spend every other evening at home with a high temperature didn't much interfere with the asthma. Now when were you in the war? What was the time period? When I joined up in the beginning of 1917, went out to Italy in October 1970 and spent exactly a year, just a few days over, a year on the Italian phones. I want to ask a couple of things. One is you triggered my memory saying Mises did not respond to your 1937 article as though it was a critique of him.

17:57Now I heard him say a very curious thing once and I can't remember where it was but I think it was probably over 20 years ago. years ago, he said Hayek's greatest book is the Counter-Revolution of Science. He may have said it to you, but it was public, he did say it. And yet the Counter-Revolution of Science is simply a development of the 37... The other way around. Well... That doesn't say Counter-Revolution of Science. It's a book form. Yes. Well... It's a development of the original perception that you had, yet he must have looked at that book. He said so. Do you think he never really saw it as a threat to his own epistemology?

18:46But I've worked in Auschwitz, I just don't know. Alright, fair enough. Now, I have a question regarding after the war. You saw, at least, the great German inflation. Oh yes. And did Austria participate in that? We had it before. The Austrian inflation began almost immediately before the war. My first job under Mises in October 1921, I got a monthly salary of 3,000 old kernel a month.

19:37In the next month, I had to be paid the 3,000 free time in order to be able to live on it. And by next June they reached one million in a month. So my first ten months of professional life were in what then was still regarded as an enormous inflection that the Germans, two or three years later, got much higher. That time that the currency should depreciate to finally one million per unit of their noise. Ten thousand became the new unit after the reform. But then a very major inflation. And by the time the German inflation came, we knew all about it.

20:28And Mises was the only one who taught us the mechanism of it. Mises was the great monetary expert. At that time, he was almost exclusively a monetary expert. His book on socialism was going to come. Only the first essay on the calculation had already appeared. And at one point, well I happen to know privately, but again please, off the record, but for your information, I knew that Mises had in his drawer all the papers which would have enabled him from moment to moment to take over the finance ministry, which he hoped he would be called for to stabilize the currency.

21:23He was never called for it, one of the great disappointments of his life. But he finally, seeing that it was politically impossible, had a considerable hand in the arrangement that the League of Nations Commissioner was sent to Vienna in charge of finance. And how far he has not been advising this League of Nations Commissioner, I don't know. I suspect that also officially, he had no hand with it, the ultimate stabilization was done on his advice. On Mises' advice? He was the only person in Vienna capable of doing it. Mark, ask him about the story.

22:08Well, there is a story, perhaps apocryphal, that Mises was asked by the government during this inflation, how to stop it. He said, meet me at 12 o'clock at this building, and it turned out at 12 midnight they met him at the printing, where they were printing the money, and then they said, well how can we stop this inflation? He said, hear that noise, turn it off. Sounds like a story told by Mises himself. Totally plausible. What was the relationship of the credit installed? Were they the inflation machine, the central bank?

23:00No, you're the central bank. Both the central bank finance the government. The government, the government from the beginning was short of revenue and from the end of the war financed the expenditure by printing money and the essential point was to stop this gap in the budget. That was done by the League of Nations, but to make sure that the government started inflating again, the League of Nations was given one condition, that after that the finances should, for a number of years, be in the hands of the League of Nations Commission. And I must say, I only suspect, I do not positively know that Jean-Baptiste Say had been regarded as a highly anti-papriotic measure.

23:50It was Mises who, behind the scene, said that the Austrian government money only in conditions that the administration was put in the hands of the League of Nations Commissioners. And he would have been right that unless it was given to him, it was not in Austria, half of it in Germany. An expert would really accept himself, would really understand it, who could have done it, but as it probably happened, the League of Nations had been committed on his advice, which I write down, but on his advice is my interpretation.

24:35Now, not financial, I mean, as the situation was, he had to keep it confidential, and would not be free even to tell me what, at that time I saw him every day as my official head in a different job. The only episode I can remember is that he once threw it off his door and said, there are all the papers, which never meet tomorrow to start a Minister of Finance. But they never asked him. Well, one of the reasons, if Mises in the end was a very embittered man, that was one of the episodes which made him so embittered. I don't think at the end that he was. Perhaps in the course of years, he had met him when he arrived.

25:26Oh yes, oh yes, then, but at the end I saw him just, well within a year before he died, and the American Economics Association had finally given him that award in 1969, and he was beginning to get younger followers, in fact he'd had them for quite some time. He began to get his respect about the time he was your age, really, and I didn't notice Well, I needed to know, as far as the map is concerned, is it worth pointing out, is credit home stalled still in the same building, or do you recall where they're located, or can we find that in Vienna? Yes. It had built a new building, adjoining, almost adjoining its original building in 1914 and the main building is since 1918 in the same place.

26:38Of course, it was then one of the four great banks. Now it has become the one great bank. Wasn't that the bank that precipitated its failure, precipitated the depression in the era? There was another one before, the Boehm-Credit Einstein failed first, but they were so close lit up that when I was already in London, when the Boehm-Credit Einstein failed, and I was just expecting the Credit Einstein company to come next by that stage. And did it? Again, you know, on the basis of Mises' prediction, Mises had no doubt that the banks were all in a state of quasi-bankruptcy.

27:27Let me tell you another episode, 30 years later, about a month, must have been in the middle 60s. I was asked by the then right-hand side, Chancellor of Austria, after it vainly asked Lachner that I would be willing to take over the presidency of the national bank, which I ascended on one condition, one of the great international accounting firms, check all the nationalized industries, that was the end of the conversation.

28:13I can well imagine that would have been an unpolar decision. When you studied as a young man, I gathered you were at some point influenced by Rickert and the South Baden School. I was not. Heinrich Rickert and Wendell Bond. You didn't? No, I personally, he had great influence in all of us. He was one of the familiar figures. Now, and you wrote the introduction to that book by Rickert. When it finally was translated. Years later. His very bad conscience had forgotten nearly all about it by the time. I'm curious about that because I see you as a man in the intellectual tradition of Kant and the Kantian movement, especially through the Vindelband approach. It sounds the same to me. The whole concept of understanding and historical understanding. Mises also said that he was, the language indicates that he was, and yet the two of you disagreed on epistemology.

29:31That's the thing that has baffled me. You're both conscience in perspective, yet you call him a utilitarian. How would you distinguish the two traditions? Well, it's again a complex story. You know the book by John Gray about me? I read it a month ago. Of course, he interprets me as a Kantian, and I first was inclined to say you exaggerate the influence. I've never studied carefully, but the fact is, at the crucial age of, say, 20 or 21, got very frequently fascinated by the works of a Kantian contemporary, named Alois Reel, who wrote a great work on criticism and two semi-popular introductions.

30:26And I suppose what I know about technical philosophy comes largely from a Kantian. So I'd afterwards to, first I told K. No, I knew far too little of kind directly to justify this, and then I had to admit indirectly I got a good deal. But you are clearly not a utilitarian. What? You are not a utilitarian in your perspective. in your perspective. Tell me not now. To begin with, well, I think it was Mises who made me familiar with the ______. And in my early stages, I'd studied very much, in fact so much so, I discovered in studying The papers of Jeremy Bentham at the University College, that Bentham had been a very good economist who had done very noticeable work on monetary theory.

31:32Short of currency, that's right. And I had started already the highly urgent work of organizing the Bentham papers, which were an awful mess. That broke down, and the first Bentham committee at the University College, which I had started, broke up during the war, and the definite start on an edition was only done after me, and after I'd been left random. If I had still been in London, there was no doubt the University College would ask me to come in again and to resume the thing. But I had by then gone to America, so a whole different group. I had nothing to do with the Great Bentham Edition, and I had then become fairly sceptical, Because I had become so very much aware that Bentham had been influenced much more by the French 18th century tradition than by the English, or I should say Scottish.

32:40I had discovered the sculpts and found that the early roots of my ideas lie with Smithson, Ferguson and these people. And there was a very distinct conflict between that tradition and the Benjaminite tradition. And then, of course, I did these many years of work on John Stuart Mill. It shook my admiration for what I thought a great figure very much indeed, Because my present opinion of Jean Stuart Mill is a very critical one indeed.

33:27The influence of Mises' socialism thesis, the economic calculation thesis, it moved you, did it not? Ruppke was moved. I gather Robbins was moved. There may have been others. That essay, or at least the book, was really a turning point. It was actually a turning point. Although I now see it as much less original as I then thought. It struck me as something completely new. The then dominating opinion, and I don't think Mises knew his predecessors, it was even on his terms completely original. I've since discovered, for instance, that the forgotten predecessor of marginal utility, the German H. H. Gossen, hands it up.

34:24This proves that without private property and calculation in prices, a market economy is impossible. It's all there, but none of us knew it. Coulson's book had been pulled out of circulation by him, had it not, by his public. He died a few years. That's a little suspected story. It did issue a new edition, but when I was asked to bring out the reprint of this, I discovered the so-called new edition was the original, was a new title page, page stuck on it.

35:12So there really was never a second printing, there was only a second issuing of the old edition with a new title page. When that article hit you as a young man and your contemporaries, it really turned everything, your whole way of thinking. Why do you think it is that even today, even today, textbooks generally, if it even was a footnote to the article, it is only indirectly when they quote Lange. Now this is 65 years later. It impressed you tremendously. It changed the lives of some of the great minds of our time, and yet it still does not seem to have registered in the minds of men.

36:00I've alluded before it was partially the utilitarian aspect, but I don't think it was just that. I figure Lange answered. Yeah, but that's because they didn't read Lange. In the framework of Mises' utilitarian approach, it doesn't quite fit in. But that doesn't apply to your three essays in later. I was completely convinced, have you by the way seen my latest effort about two years ago in the Journal of the London Institute, about three pages of fiction, where I make fun of Lange? I just analyzed Lange and showed that every single paragraph is nonsense.

36:46But every single paragraph is still taken seriously in the academic institutions, at least by the older tenured men. I suppose so, yes. I also have published this in a more vibrant, circulated order. I gave that moment to Ralph Harris, the London Institute, to publish in his journal, something which I incidentally did. But I don't think that even the believers in Lange can resist that Lange was a fraud. The Volcker Foundation, what was your relationship to the Volcker Foundation? Because it was a very quiet, very important organization that got no publicity deliberately, but was influential.

37:39That's the name Luno. Luno? Harold Luno. Yes. Who ran it? Yes. Who stopped it? Yes. Did he stop it? Well, yeah, but that was because Volcker had put in a self-destruct clause in the organization. Yeah. So there was legal, legality for that, for having it. Mune was the head of the firm called Mune. It was, well, I think it was the son-in-law. Yes, or Mune, I think nephew. Something like that. Now did they finance your coming to Chicago, or was there some connection? I believe, I wasn't killed at the time. I think John Neff who organized it, knew that Luna was favorably inclined, and to far as I know, got help from there, and went off to the University of Chicago, from the beginning.

38:31Again, it's a very long story if I start with it. When in 1945, six months after the autosurfing had been published, I was asked by the University of Chicago Press to come to the States for a lecture tour. I then was told, to four universities, four series of academic lectures, that tell the United States to start with this. Carefully written up four lectures to read to four universities, I had no idea what I was in for.

39:20When I arrived in the United States, while I had been in convoy on the high seas, the situation had completely changed by the leader's digest condensing, public opinion condensation of my book, which only incidentally, the University of Chicago Press had given the leader's digest as an advertisement. I never got a penny from this, but that's only incidentally. Anyhow, I have arrived in New York, the original plan is off, you have suddenly become famous, you go on a lecture tour of the United States. I can't do that, I have never gone on a public lecturing.

40:05Well, that's all arranged, you must try and do it. When do we begin? Oh, you are late already! Oh my! It was a Saturday afternoon. You start the morning at Town Hall, New York. It meant nothing to me. Mentioning this, revived in my picture this beautiful cartoon of some women of women's clubs. Forget what her name was. I thought Saturday, Sunday morning can only be such a women's club. It's only when I was picked up at the Regency Hotel and taken downtown, I began to inquire from my chairman who picked me up for the audience the whole whole three thousands, but there's no of them.

40:59I've never done such a thing. What am I supposed to lecture on? All we have taught is the rule of law in international affairs. I've never thought about it. I can't do this. But things are known. They're waiting for me. So I was ushered in this enormous fall, with all kinds of apparatus which were strange to me. At that time there were dictating machines, there were batteries of dictating machines, microphones, completely new to me, all of them. And my last recollection is, they asked the chairman, three quarters of an hour, oh no, it must be exactly an hour, you are on the radio.

41:47And so I got up on a subject which I had no idea and I still know that it began with a sentence, Ladies and Gentlemen, I suppose you will all agree when I say. I didn't know yet what I was going to say. And then I discovered that American audiences are grateful audiences. You can watch in their faces with interest, completely different from, say, an English audience. And gradually I worked them up into great excitement, and I got through this lecture with great success. I would never literally give a popular lecture, never lecture with a manuscript.

42:34Suddenly Farton was capable of popular lecturing of this kind. And all these things went all over the United States, as far as the mountains, back to the south, for five weeks, and gradually thought they'd become graduate lectures. On one of these, and the whole reason why I tell you this story, one of these and probably the most significant of these lectures, was to the economic club in Detroit. I had my head club with me at the Quadrarchy Club of the University of Chicago, since it was still the University of Chicago person who was behind it, The whole thing, incidentally, was in the hands of the National Concerts and Artists Organization.

43:30But that lecture was quite successful, and the next morning, or the day after, back in Chicago, a certain gentleman turned up at my club and said, Professor, I'm not going to take long of your time, but a book like The Old Reserve ought to be written for the United States. Can you do it? No. No, no, no. Can it be done? Well, if you choose a suitable man, it could be done. How much will it cost? Well, I am not familiar with American prices now, but suppose for $10,000 a year, for $3,000 a year, you could be done. Money's yours!

44:24But that was Mr. Luno. And I didn't take him frightfully seriously, because I had some long discussions about this with Henry Simons, who had become my great friend in Chicago. and there are some complications, but I finally had to return to England, I had to report Bluner in the course of his journey, I couldn't have done anything about it, cable deck, will you come back for my term to do it? not in your pay. If you arrange for a university to invite me to come with a visiting professor, I might incidentally look after this.

45:15Which universities would you prefer? How about Cable University? Oh, I said Chicago where I started talking with Henry Simons, and then I mentioned from no other grounds and I've never been to the West Coast yet. I mentioned Stanford with certain possibilities. Within three weeks, I had the invitations from the Chancellor of the three universities to go and divide...

45:51I really persuaded Henry Simon to take the post on condition that Aaron Director was then working in Washington, came to join him and work with him. Now, where would this have been, at Stanford or at Chicago? That was Chicago. The director was the brother-in-law of Mr. Friedman, but he was new in Chicago and taking a wartime job in Washington. and was in Washington at the time, while Henry Simons was the one whom I negotiated. Now, the thing broke off with first Aaron refusing to take this job, helping Henry Simons, and to my wife want some information to exclude me.

46:48But then the Kirz event happened, and Etta had moved on to Stanford to make further efforts there. Henry Simons died, or I believe killed himself. In fact, he died quite suddenly. The official story and possibly true story is that he was sleepless with the habit of taking sleeping pills and one night he woke up too frequent, took his oath and didn't wake up. Anyhow, as a result of this, Aaron Director felt, now I feel the obligation to continue what I wasn't willing to do in my assignments with a friend.

47:37So Aaron Director went from this fulcrum to Chicago with the official mission to write a road to serfdom for the United States, which he never did. This is merely the story of my beginning with Luna. I had after this no further direct contact with him except attending some of the discussion meetings which he called. But I have reason to suspect that when a little later, John Neff began to make an attempt to persuade, what was the name of the president of?

48:28of Chicago, Hutchins, first waited Hutchins to call me to Chicago, where it was incidentally an episode, somebody proposed me first to the faculty of economics and they turned me down. Is that true? That's astounding. Actually it turned me down. Friedman, when he opens the full story, he only naturally assures me that he was in faith in favor and indicates that the opposition was among others, but whoever was behind it was insistent and shifted his efforts from the faculty of economics to the committee on social thought, which to me was much more attractive because after teaching 20 years economic theory I was a little tired and the invitation from the committee on social thought was most attractive in the form you can lecture on any borderline subject in the social sciences.

49:37If at any time you don't want to teach, you need neither. This was a correspondingly higher salary, was irresistible, so I did go to Chicago. And I may well, as you suggest, on the whole time be paid out of money which came from LUNO, but I knew nothing about it. To me it came from Hutchins. Hutchins probably had an offer from LUNO, and I did later attend many of these focus seminars. And finally, all the extraordinary meeting in somewhere south of San Francisco, between San Francisco and San Francisco.

50:25The final meeting, when we probably said, after spending three days on the future of the Fulker Commission, I'm going to wind it all up. That's how it ended. And I'm told that he was then already in some of the unbalanced mental state. It was our understanding, and I was later hired by them two years later. I was there in 63. With Harper? No, after Harper. Harper left in 62. or yes, but it's a long pill to feed a whole op-ed to run it on quite a long pill. That's correct, the Volcker Fund.

51:10But what we were told was simply that Volcker's original instructions were that he was afraid if it went longer than one generation it would be taken over by people of an opposing ideological perspective. He had seen it happen... Rockefeller Foundation. years and years before and he was afraid that the opponents would get the money and I think it all finally went to Hoover or most of it Hoover Institution Did you know the Cronwells still? I'm sorry, the question? Cronwell No, I didn't. There were two in succession. Yes. The one went up to Hawaii and became Big Sugar Industries and the other is still about He's just done a book Yes, quite good books My final question. You've seen momentous changes in economic theory and practice. You've seen the rise of the welfare state and the strangulation and near bankruptcy of the welfare state. You've We've seen, in wartime conditions, the command economy and all of its inefficiency and tyranny.

52:42Come the final decades of the 20th century, economic and turmoil, the profession seems to be in intellectual turmoil. Where are we? As an elder statesman in the economic profession, where do you think we are and where do you think the profession is headed? Well, it's too big a question, but there is a sort of standard answer. I've been given to this question for quite a long time, which five years ago run about in these terms. You can now deduct five years from my time.

53:28What I used to say is, if the politicians don't destroy the world in the next 20 years, there's good hope because a new young generation coming up. How much one can hope from this. But that is so much more favorable than ever hoped. that I would live to know such a large number of young people actively working on these problems. See, I thought the maximum I could achieve, what I'd achieve within my own Montelloran society, which was already a great achievement, really against the stream, but have this large number of young people, actively, and such brilliant people, one of them, as my memory for proper names is going probably wrong, but the greatest, most pleasant surprise, and one of the most intelligent of them all, is that Negro, who is now in...

54:35Yes, I agree. In my generation, he's the greatest living economist of my generation. No question about it. But there's a certain Niko Williams who's the same length, not of that level. And all the young people, well what really sprung ultimately from the Harper Institute, the Institute of the Human Affairs, which is now moving to George Mason University, There's a whole group of really good young people. I mean, it's very much more than I ever dared to look. I wish Mises could have lived to see it. Mark, did you have a question?

55:21Just a couple of things. First of all, why don't you think Friedman and Stiegler and... The Chicago School, were they influenced by your being in Chicago, and did they ever look at the implications of your Austrian Theory of the Business Cycle on monetary... The same ones I should have agreed with, because that's what a catastrophe is. The others are in a methodological lane. They are in effect macroeconomists and not macroeconomists.

56:07The least of all, Friedman very much, and this is a continuous problem. Wilton and I agree on almost everything except monetary policy, but it creates an awful problem in the Mont Pelerin society with the constant dangers of society splitting up in the Friedmanite and the Hayek-Kartik group. And to avoid this, I tried to avoid discussions of monetary theory and this kind of thing, which bound to come out. Now, in this sense, the whole group, who saw this as derived from Wesley Clare Mitchell's Creation of the Institute of National Economic Research, led by Arthur Burns, another personal friend of mine, who might do not agree on economics, and they are in effect logical positivists, methodological.

57:21They believe economic phenomena can explain as magnum that you can assort thin causal effects from aggregates and averages of further things. What in a sense in observation is true, you may never necessarily connection. It is quite likely, in fact I should be preferred to demonstrate historically, that every period of inflation ends with a crash. But the historical demonstration is no proof that this must be so. The reason why it happens can now be accounted for by microeconomic analysis and not by a macroeconomic analysis.

58:10Now that, Milton Friedman does poo-poos. Steger, yes you can discuss it with him, he will see the problem. The other, probably the most gifted man in the Chicago School, is Becker, and he is theoretically also a more sophisticated thinker. But Friedman had this magnificent expository power, he is on most things general market problem sound, I want him on my side, I want nothing less than that the whole Friedman group, the majority of Americans would leave the more prevalent society.

58:59But, you know, I ought to add, I have often publicly said that one of the things I mostly get is not having to return to a criticism of Keynes' treatise, but it's as much true of not having criticized Milton's Positive Economics, which in a way is quite as dangerous a book. The difference would be Milton, unlike Keynes, would never change his mind and would fight you forever had you ever done it. Keynes might have changed his mind. You're perfectly right.

59:44Look, I've written a few essays on Keynes and we've seen some of them. It was sometimes comic how far he would allow himself to lead into considering things which had so far not existed in his thinking. For instance, that as a result of an over-accumulation of capital, there should be a fall of the rate of interest and a fall in the demand for capital. The old conception of overinvestment was strange to him, but it was interesting with him. But then you suddenly suggest that there's no direct connection between the final demand and investment.

1:00:30That's just stupidity. It would not work. Well, there have been some parts that Keynes's general theory was written purposely to confuse and to be complex. Do you think that's true? I believe I quoted the sentence already in my last conversation for him, when he actually said to me this theory was frightfully important during the Depression. If it ever should be wrong, trust me, I'm going to change the theory.

1:01:15For him, he was so convinced that he was cleverer than all the other people that he thought his instinct told him what ought to be done and he would invent a theory to convince people to do it. That was really his approach. He was very untrained as an economist in economic history, knowing he had a passion to live a bit near for the 16th century. He was a great expert on the economic history of the 19th century. He goes to England, because it is like John S. Tatteries. The 19th century is ugly. Why? Why did he hate it so much? Why did he hate the 19th century so much?

1:02:04Well, because he believed Tony and company on their history of labor. The impoverishment of the working class. It's all the dicks. Now, I have two other questions to just kind of pick up on everything we've covered. It appears that everyone, you, Mises, Schumpeter and so forth, left Vienna. You said you were the first one to leave, others left a few years later. So in terms of personal places, houses you lived in, so forth, are there any that stand out as a place where we could stop by and look?

1:02:55This was Hayek's house when he lived in Vienna? I think I can point out at least approximately where Mises lived. That's the only long period. You see, while I lived in Vienna for 30 years, I was first... You were born in Vienna? I was born in Vienna, but my father earned his living as a medical officer of health, doctor. All his interest was in botany, and finally he ended up as professor of botany. But it meant that he was an officer in Ghana and was shifted around. So I grew up in four different apartments, and then for the past five years I was still there married, so again another place, so I have no locality.

1:03:47Most of the other people in Vienna lived in apartments, not in houses. And in that period, I believe I can show you where Menger lived for a very long time, and where Mises lived. I knew very well the place where Mises lived, but that was the most delightful place. on the outskirts, up on the hills, but not a place that could then become a social center. While the Mises apartment and Menger apartment were in a sense social centers up to a point. If I can point out to you what the other question was. Apart from the university, chamber of commerce, the coffee houses, and these two apartments, I don't believe there are any locations worth mentioning, let me just point out these two.

1:04:45His son was still a boy of 16, so the widow applied to the professors for advice, what best to do with the library, which then, in the middle of the inflation, was very much a problem of raising money. and I was invited to inspect this marvelous library. Menger's library was one of the five or six greatest personal libraries in economics and they had an offer from Japan and the only task I really had was to answer the question, Was this price adequate? And was there a chance of getting an equal price in Europe?

1:05:40And they had to tell her the price was fully adequate and there was no chance of getting an equal price in Europe. It was the result of my information as the library went to Japan, which I very much regret, but it wasn't all fault at that time. The only other question I had was the use of the word von, as in von Mises, von Hayek, and so forth. Sure, so you should ask the question, but I can refer you to the note which I wrote for this. This is particularly difficult to read, but I hope you can read it to get the full answer here for the Theory of Politics.

1:06:53First the general and then the Mises story. The general story is, imagine that in England all the higher civil service men, professional men and commercial people will get this for a special merit, the title Sir, can inherit it to all their children and unmarried females. Then you have exactly the same position. Instead of being called sir, you are called son, usually derived from several generations. The complication arises only that this title was formerly abolished and even prohibited at the revolution of 1918.

1:07:46This is so that in Austria, slightly comically, nobody can legally use himself, whatever he uses on that person. And that is not illegal. You are only prohibited to call yourself from. and in Austria, but as a proletariat, you still address anybody who is historically entitled. The complication becomes even greater in my own personal case. I was a law-abiding citizen and stopped completely using the Title Fund, but it was of course inevitably on my birth certificate.

1:08:33and naturalized in England and for the purpose submitted the birth certificate. When I received the certificate of naturalization, my English came suddenly from Hayek. Now, it was at the moment when I was very anxious to go on an English passport on a holiday to Europe. So instead of invoking bureaucracy to change this, I put up with it. Ever since I live officially in Austria, I am legally Mr. Hayek, but in England I am officially Mr. von Hayek. And what about Mises and his father? Mises's father, the generally known story, I mean the documented story, he said it was one of Mises's ancestors and that it was for the merits of his father.

1:09:34He was an engineer and builder of railways and many of the great railways in North Western Europe were designed by Mises's father. The story which I believe is true is that this engineer, Mises' father, was the son of a rabbi. And when he was offered the title, he out of modesty suggested, No, I'm not worthy. Please give it to my father. So, it was really Mises, for the merits of Mises' father, that Mises' grandfather is approved to have been given the title. And is it an inherited title? Does it go father to son?

1:10:22Yes, yes. From it's always an inheritable title, and unlike the English helmet, the serb, which is all over-inheritable, Inheritance to all descendants, which is true of all the mental titles, except the very highest. If you are a duke, only the senior son becomes a duke, the others are merely princes. But apart from these highest, mean baron and so on, they're all inherited by all descendants. Is there anything that you would like to mention, or say, or comment on, now that we're coming to the end?

1:11:08Is there anything that, now that we're coming to the end of the tape, is there anything else you'd like to mention? No, I think I've said everything that's worth saying. We do thank you for the time you've spent.