An Interview with Joseph Salerno

0:00I'm sitting here with Joseph Salerno, Professor of Economics at Pace University. How many years have you been coming to Mises? How many years have you been teaching here? I've been teaching here, I believe, since 1989. That was my first Mises University. How has it changed over the years, you think? Well, people know a lot more now, obviously because of the Mises.org and the number of books that are being sold by the Mises Institute. So the students are much better prepared than they were previously. Yeah, I do get the sense that everybody is doing their reading ahead of time. Yeah, and I think not only for this university, but they're doing reading on their own. And the website, I think, is the reason for that.

0:48I've had a number of people say that the conference is surprisingly rigorous and that if it hadn't been for the readings in advance that there would have been no chance of keeping that going, I mean to keep up with the lectures. And students haven't always said that. Do you think that the level of the conference is increasing in some way? Yeah, actually I think that many of the students have heard lectures again on the website. I think in general they've become much more attentive in the last few years. I don't see as many people that seem lost when I'm lecturing.

1:47Now, the topics you're covering are some of the more technical stuff, right? I mean, you've got... Yeah, today I just did entrepreneurship, I did a socialist calculation. There was someone who told me yesterday, a young student, and actually he's, I think, a chemical engineer, a graduate student of chemical engineering, that he had heard my socialism lecture nine times, he had listened to it, and this is before he'd even met me. One of your ambitions for this conference, and it's been a constant emphasis over the years, is that the purpose of the conference isn't just to introduce Austrian themes. Maybe you want to explain, what is the difference between an Austrian theme and Austrian economics? When there were fewer Austrian economists back in the 1970s and into the 1980s, The approach was to talk about the various aspects of Austrian economics, to talk about economics, to talk about methodological individualism in a disjointed fashion.

2:53And I think now the emphasis has become more, at least by myself and by many other senior faculty, to drill the students in actual technical theory. The Theory, not at a very high level initially, but to show them that it's really a systematic theory that can be learned and then used to understand the real world. So we're not just talking about Austrian economics, we are teaching Austrian economic theory. So you're teaching economics. We're teaching economics rather than talking about how Austrian economics differs for example from mainstream economics or from monetarism, which is what we tended to do in the past. Yeah, and there was also this tendency to just sort of emphasize Austrian, unique Austrian contributions that could be plugged into a kind of mainstream apparatus, you know, in the past. Well, not so much at Mises University, but this has been a tendency. So what does the Austrian School add? Well, it adds an insight about entrepreneurship, it adds process analysis, you know, that sort of thing.

3:55In other words, we never really, well, it wasn't really here at the Mises University, but other Austrians tended to approach Austrian economics in a way that showed, or in a way that embellished, showed as an embellishment of mainstream economics. More and more here at Mises University, what we do is begin with the fact that Austrian economics is a unique tradition. There are some points of contact with the mainstream and we don't ignore those points of contact. But what we do do is that we give sort of an integrated explanation of what Austrian economics is. And I think that's very important for the younger students to learn.

4:40And the reason why they're learning it is because they are doing reading. Once again, there are books that are up now on Mises.org and so on. So they're actually reading some of these works of the masters like Mises and Hayek and Rothbard. Right, and you know, it's actually difficult for us to entirely explain to people who support these programs just how unique this Mises University is, because it's not a conference where you hear a bunch of talks on individual topics, you know, so you can gain insight on this point and insight on that point, but it really is, and you've made a huge contribution in organizing the way the thing runs from beginning to end, but you really sought to make it Systematics, so that it's really a teaching conference.

5:29That's right. It's an instructional conference. The first two days we have plenary lectures in which everyone gets the basic foundations of Austrian economics, after which they can pick and choose among concurrent courses, which allows them to branch out into areas of their own interests. But everyone has a common core, and to the extent that it's interactive, and I think that they're paying attention and picking up what we're giving them, I think they're getting a nice integrated view of what Austrian economics is in a week's time. I think that's great. And it's different from the Scholars Conference too in the sense that each professor is not necessarily giving his own research, but is trying to fit his own teaching into an overall program. Right, that's a good way of putting it. We emphasize that it is a teaching conference and that what we're trying to do is, while we have our own ideas about certain things, we're trying to give an overall and systematic view of Austrian economics.

6:27That's not to say that we don't, especially in the concurrent lectures, give some of our cutting-edge research, but we make sure that it fits into what the students have learned. Does it surprise you just how many, for example, I don't know how many applications we got but just only some of the people who applied were able to get in this year and every year we get more. Does it surprise you that there's so many people interested in it or does that not surprise you? It surprises and gratifies me that this year we have 125 people and we were turning people away. And as I mentioned before, these people are well prepared and it makes teaching them much, much easier and much more fun. How does free market policy fit in to the conference overall?

7:15I think what we do is we use the theory that we're teaching them and apply it. So as I went along in my lecture on entrepreneurship, I showed how entrepreneurship is inherently anti-monopolistic. That is to say that if you have free entry, entrepreneurs will operate in a way that will ensure that the market tends to serve consumers so they really don't need antitrust. So in other words, what we're doing is we're drawing out the implications of the theory for policy as we go along. and then later lectures are specifically on policy topics. So you don't feel the need to constantly say, now let me emphasize that Austrian school is value-free science and you don't have to draw these conclusions?

8:01No, I think they understand that early on that Austrian theory is value-free and that any conclusions that we might draw, if it's a normative conclusion, that this is applying the theory in conjunction with value judgments. So a dedicated socialist could come here and learn a lot. Yeah, absolutely. The devil himself who wanted to destroy mankind could come here and just do the opposite of what we're teaching. Crush entrepreneurship. Yeah, absolutely. Put on price control. So on. Yeah, have an antitrust policy, protections and whatever. Do you, it used to be said a lot concerning entrepreneurship that this is one of the unique Contributions of the Austrian School, and that the mainstream doesn't seem to have a role for entrepreneurship. Do you think that's still true, and if so, in what respect?

8:58I think it's still true, the mainstream, certainly mainstream textbooks either downplay it severely or ignore it altogether. But I don't think that's the only contribution, or the only way in which we differ from the mainstream. I think also Austrian Capital Theory, it's extremely important to teach Capital Theory as it's been developed from Boehm-Bawerk and especially through Hayek and Rothbard. So we have a number of theoretical courses on Capital Theory and I think that's very important and it's a very distinguishing feature of Austrian Economics. So do students read Boehm-Bawerk? I don't think Boehm-Bawerk is on the reading list, does he? I don't recall if we have anything by von Boehm-Bawerk, but whatever is in von Boehm-Bawerk that's of value, that doesn't mean they should not go back and read them if they become more advanced, is certainly in the readings that we give them in Rothbard and in Hayek.

9:51Yeah, I remember it was Mises when he reviewed von Boehm-Bawerk's three volume book on capital interest, he said that this is a book that every voter should read. There's been a lot of controversy about your contributions concerning the calculation debate and the knowledge debate. Do you find that students are particularly interested in that? Students are very interested and still interested in socialism and why the Soviet Union and other centrally planned economies collapsed.

10:38So yes, I get very good response to that lecture on socialism and calculation. And really, every Austrian theme, if I can use that word here, every Austrian theme is really embodied in that lecture and in that topic. Yeah. So if there were one lecture you'd encourage everybody to listen to online, it would be probably that one. Yeah, my lecture is certainly that one, I think, is the one that's most interesting, and again, it's the most fun to give. You know, I remember several years ago, you said we were having to talk about the kinds of things the Mises Institute does, and you've always emphasized the importance of training Austrians in the technical aspects of the Austrian tradition, in the same way that neoclassicals are trained in their methods.

11:24Do you think a week is really a long enough time to do it? I mean, how is it possible to do all of this in a week? Well, I think a week is long enough to whet their appetite, to get them interested in reading further in Austrian economics. I don't think you can completely drill them in Austrian economics. I think that takes actually a number of courses to do that. But I think a week is long enough to give them the overall view of a systematic theoretical edifice Do you get the sense that, well, what is your observation about the demographics here of the student population? What percentage of them, it's about half graduate students, half undergraduates, right? Yes, yes, and there's even a few high school students here. But I get the sense that the undergraduates, more than before, are very well prepared for the lectures.

12:18The lectures are aimed at probably, I would say, advanced undergraduates, and they certainly are something that graduate students benefit from. It's kind of difficult to talk about who is a beginner and who is an advanced person in this because you can have a person who is very, very well educated in economics and yet know nothing about the Austrian tradition in the case of that person. He or she would be considered a beginner, right? That's correct. In fact, Austrians are such good writers, Rothbard, Haslett and so on, that people who just pick these books up on their own are pretty well prepared, depending on what they read when they come here. And even if they've had no economics, they benefit from this. And on the other hand, people who may have had only mainstream economics but are interested in Austrian economics, they actually might be behind these other people in their level and in their understanding.

13:26And in the journal, what is your overall view of the journal's place in the research program of the Austrian School right now? I think it's very important to have the journal, it's important to have a resource whereby people can publish their cutting edge research, that is research strictly on Austrian economics and they don't have to tailor it to any particular view of the mainstream. So what I see it as is really something that is in the vanguard of the movement. Right. That it's driving Austrian economics forward. We've also had a number of important debates in there that have advanced the Austrian theory.

14:15And we're not shy about having people who are not necessarily sympathetic to the Austrian view, but who understand it and are willing to engage it in a scholarly fashion. So I think more than any other journal in economics, we're extremely open and there's a lot of interchange. One of the things that people get confused about, something like a niche journal, is this idea that somehow you have to do it because these writers can't get into mainstream journals. But anybody who's submitted to mainstream journals, one of the most frustrating things is that the referees don't know what the heck you're talking about. That's right. Because Austrian Economics is not in the mainstream, it's very difficult to write an Austrian article and to get good feedback from the referees, to get comprehending feedback from the referees.

15:13So one advantage of the quarterly journal of Austrian Economics is that the referees know what you're talking about and they can make sensible comments on how to improve. So the school can advance, otherwise they seem to be always starting from the ground. Right, you're always trying to rewrite the basic Austrian tenets and you're trying to make the referees in the mainstream journals understand what you're talking about. And that conveys the impression that the Austrians keep saying the same thing over and over again. Right, exactly, that we're repeating ourselves endlessly and not advancing. That's why it's important to read our journal, because that's where the advances are occurring. Yeah, right, and in many ways it's advancing on a separate path from the mainstream journals, and so that's...

15:58Yes, I mean... That's what's important, that's why I think. And there are other schools that pursue the similar strategy, right? Right, the post-Keynesian schools have done this, the behavioral economists have their own journals, and they've been successful, yeah, law and economics and of course public choice. In some ways it does seem like the only way a revolutionary paradigm can really succeed is just my forging ahead. I mean, because you can't expect to take the mainstream along with you step by step. Right, you can't do that. I mean, what's going to happen is that the mainstream is a degenerative or degenerating research program now, and we have to see what's going on in the mainstream, but we have to advance forward on our own, neither looking to the right or the left, but going straight ahead. And those people that find us, that's

17:17This is fascinating. I don't really understand all of this stuff, but there really is something here, so it attracts you. Right. I mean, the research in the quarterly journal is new research, and it's attempted to extend the masters, Mises, Rothbard, and so on, without repeating them. Starting from them, standing on their shoulders, and going forward. Do you have enough copy? Yeah, more than enough. If you measure these types of things, as the mainstream does, we have a fairly low acceptance rate, around 30%. But that's not something that I think is a mark of a good journal, necessarily. Yeah, I've never really understood that whole idea that you have to reject a lot of stuff. It seems like a strange, very strange.

18:08Now, quite often I get comments from people asking who or when is the, who's going to do it, who's going to complete Rothbard's history of economic thought and take his history into the 20th century, because of course he died before he was able to do that, even though he left us some wonderful recordings, MP3, And your name has often come up over the years as being the person to do this. What are your thoughts about that? Well, I've been, you know, many of the articles I've written in the last few years have been filling in the gaps in the 20th century. That is showing that, in fact, actually starting before the 20th century, but right after the Martialist Revolution, showing in fact that there are two traditions in Austrian economics, that Wieser was the head of one One in Boehm-Bawerk was the leading member or founding member of the other tradition and then going forward from there and showing the place of human action in economics in general and in Austrian economics in particular and then talking about Rothbard's contributions.

19:16So what I have been doing in a way with my articles is following a plan of going from Menger up through Rothbard and beyond in outlining sort of a third volume, though it would of course not be near the quality of something that Rothbard could have written. Yeah. Well, and it's a different thing. I mean, it's kind of a, I would think, it's a strange thing that you should say. I mean, you know, I mean, Mozart died before his rec room was finished and it had to be finished by somebody else. I mean, nobody really wants to be put in that position. That's correct. Right. One thing about being in that position that a student here pointed out last night was that Rothbard, had he written the third edition, He himself was a major contributor. It would be very difficult for him to write about his own contributions.

20:04So someone else doing that has actually better perspective. He once even told me that when I mentioned that he was more a Boehm-Bawerkian on capital theory than Mises was, he said that he needed me to point that out. He hadn't realized that. He was always so generous that way, wasn't he? Yeah, absolutely. He was always so anxious to tell everybody how smart they were, you know. Right, I remember when we attended at least the first Austrian, Mises University that I attended in 1989. He said something like, this is the greatest gathering of Austrian brain power since old Vienna. Well, ninety percent of that of course was him just being there.

20:50And in so many ways we miss him. But, you know, to me, one of the, you know, I'll never forget the day that, that, that we got the news that he died, and it did seem like, you know, where's, where's the future? And yet, here we are, 12 years later, more students than ever, more books than ever, it's a, it's a, in many ways, his death kind of, it was strange, I mean, it's really set off a kind of, an explosion in Austrian research all over the world, and Rothbard's a bigger deal now than he ever was. The Austrian Movement has become stronger, not because of it, but as a result of everyone closing ranks and pushing forward and following his ideal.

21:43Appeal. Yeah. And there'll never be another Murray. No. Absolutely not. Yeah. But there's so many people. What do you make of the International Appeal? I mean, there's so many international things. There's an incredible number of international students from many different countries. The International Appeal has filtered through Hernando de Soto and ... A history script. and Pascal Sala. All of that though, they tend to be free market economists, but it was Murray's writings that had made them more hardcore. And because it's a universal paradigm, it does have this kind of universal appeal to the truth that is taught.

22:37Virtually every day we get requests for translation rights from somewhere. You can't possibly keep up with that. Right, I just had an article of mine on the role of human action in economic thought being translated into Czech as an epilogue to the human action, the Czech edition of the human action. So every day these things are coming in and I think it shows a universal appeal. I think the whole idea of praxeology as a theory of action is something that is universal in its attraction to other minds. Yeah. Well, it is especially appealing once you realize, I mean, just for listeners, praxeology isn't something that occurs to you or you wouldn't be taught otherwise.

23:30You're either taught that there's the natural sciences that use the scientific method and there's everything else. Social sciences aren't taught in a way that presumes that there's an immutable logic at the core of the formation of society. Right, that there are immutable and universal laws that govern society that are not different from the universal laws of nature or physical sciences. and I forget who it was that was saying that yeah I guess it was Jeffrey Herbiner he said he said he said you know Murray was really right that this is the very core of Austrian economics and and this eternal debate about who is and who isn't an Austrian can really turns on this question are you do you embrace this logic of action yeah that was always Murray always emphasized as opposed to the the laundry list view of Austrian economics in which you list a number of characteristics of Austrian economics which goes back to what you were saying before about about just teaching themes and teaching about

24:43Austrian economics rather than teaching them the as you've called it the the immutable logic that that is with which you deduce these laws from from Human You've been fascinated and done a lot of work over the years on the question of predecessors of the Austrian School, particularly within the French tradition, and part of what draws you is precisely that they were curious about this phenomenon too, this logic that is at the root of the development of society. Yes, in fact, there was a very early French economist, de Tracy, who talked about a universal logic of society, and he was an early praxeologist.

25:34It's just remarkable, because once you realize that, so much else falls into place, and so much can be ruled out. And, you know, I've wondered why is it, well, first of all, it's difficult to explain to people, but there's also the problem that praxeology places such limits on the intellectual imagination in some way, don't you think? Well, it focuses the imagination of praxeology. In other words, it forces you to think through to its conclusion all of the consequences of action. So it rules out a lot of quack approaches to economics and I think that's one of its important functions.

26:2090% of political books you read out there today are speculating about things that just can't happen. Yeah, absolutely. Someone who is schooled in praxeology, these books are easily critically read and dismissed. Whereas if you haven't had this, if you don't know Austrian economics, I think it's difficult when you're reading books on history and politics to realize that many of these books, what they're saying is simply nonsense. Yeah. They're just dreaming. And I mean, this defines, well actually, most political books throughout all of history, just imagining things that just can't be. Well, I think Mises said that any historian or someone writing on history of politics must know a number of sciences, including statistics and logic, but also praxeology.

27:12You can't be a good historian without knowing praxeological economics. We have an example of an historian here who knows Austrian economics, has been schooled in it, Tom Woods, and who is an excellent historian as a result. Yeah, what about other disciplines? Not everybody here is an economist, right? I talked to a fellow last night, he was studying literature, and there's a developing branch of the Austrian School that's focused on literary studies. Yes, with Paul Cantor. In fact, the fellows here, many of whom were in economics, attended the Paul Cantor seminar and were very, very interested in it. So because Paul Cantor sort The French Liberal School in particular, not all of them have been very successful.

28:27Translated to English, but certainly Bastiat is an extremely important figure and we're finding out that he's now with further research that in fact he isn't just an economic journalist but that he had some pretty deep theoretical insights and the character of Bastiat as someone who is not a theorist at all as Schumpeter said but just a good journalist is falling by the wayside I think with further research. So I do recommend Bastiat as a very important predecessor of the Austrian School. You know what's great about reading Bastiat, too, is he has almost this frenzy about his writing. He has some sense that he has a limited amount of time and he's just... Well, I mean, he had a terminal illness when he was writing many of his works in the late 1840s.

29:12He died in 1849, so that explains part of it, but also there's an extreme passion in his writing that is just... it's considered to be unscholarly today to write that way. Murray Rothbard, by the way, wrote that way also. Well, in the French school. There are a number of books in English by Paul-Lewis Bouillieu, one on collectivism, one on the modern state, which is an extremely good book. It was published in the 1890s, and it's very Spencerian, that is, it's like Herbert Spencer. I recommend him. He was a late French liberal. And of course, J.B. Say. J.B. Say's treatise is something that every informed person should read. It's much better organized and systematic than Adam Smith's Wealth of Nations. I would read that before I read The Wealth of Nations.

30:14I'm really fired up about our new J.B. Sage shirt. I told you what a friend of mine said about it, right? No. Because, you know, the shirt says, market's clear, right? Yeah. And he said, you wouldn't want to wear that into a rough Keynesian bar. If there are any Keynesians left. Right. Yeah, a fund of controversy, right? What class do you teach? Here at the Mises University? I teach in the MBA program, so I teach a class on macroeconomics for the MBAs. I also teach managerial economics, which is sort of an applied micro course. And I teach a money banking and capital markets course, in which I'm able to use quite a bit of Rothbard's writings on money.

31:03What's your choice of textbook for the macro class? For the macro class, I use Gregory Mankiew's textbook. The reason I do that is because The short-run Keynesian model is pushed to the end of the book and treats it as a special case that exists when markets don't clear. The first part of the book is good in that it shows that markets clear and that the interest rate doesn't get stuck and that the markets generally serve consumers and so on. Yeah, so Manki was a complete mainstreamer in every way, I mean this is probably the best-selling, biggest textbook. Yeah, absolutely, right. By the way, he has two, one is on the intermediate level and another one is for principles.

31:52But you use them because he's a good writer and... Very clear writer, the book is short so that it's easily supplemented with Austrian text and it's easy to show the transition or it's easy to show where Austrian business cycle theory fits in tobacco in that you simply point out that look prices don't get stuck in the short run and are not stuck in the long run okay that's sort of schizophrenic view in fact prices are always flexible and but yet even with flexible prices you could have business cycles and you have them because the Fed has the power to manipulate Another book that is often used is the old Paul Hain book, I guess that's more for micro though isn't it?

32:46That's a micro book, there's a few chapters on macro at the end, but it's mainly a micro book. Do you prefer Mankiw? Yeah, I prefer Mankiw to the Hain book. Do Austrians need to get busy writing textbooks or do you think it's just really not much point in that? Well, I think there has to be, maybe not something that is written as a textbook that's going to be adopted, you know, with an eye to being adopted, because then you'd have to trim your sails and you'd have to take a different tack, but there needs to be a systematic book setting out Austrian theory for advanced undergraduates and maybe even graduate students. and Peter Klein and I are in the process of working an outline up for a book on sort of modern Austrian economic analysis in which we focus on the actual analytics of Austrian economics and on the heuristic devices and models, if you want to use that term.

33:45How much of a high priority is that for you? Where does that come from? That's a very high priority. I gave two weeks of lectures here at the Mises Institute earlier this summer in order to really set out an outline that a book could follow and then Peter Klein, who's more in micro and I'm in macro, we're going to combine and do the same type of thing next year and hopefully get together and have a book come out of that. And you've also got your continuing studies in the history of economic thought in the 20th century. What's the next installment in that? You've done the Rothbard Man Economy and State, right? Right, right. I've talked about that. Are you talking about what the articles I've been reading?

34:36Yeah. Well, I think something has to be written and I'm actually working on something for the Austrian Scholars Conference and also for the Southern Economic Association meetings in which There's sort of a summarizing of what has happened with the debate over socialist calculation, how it has advanced Austrian economics from 1989 when it started to this point. It turns out that many people that were on the other side of the debate that supported sort of the knowledge view versus the calculation view, that they began to now pick up many I'm not sure we've even talked about that debate, but just by way of review, I mean, you single-handedly brought that whole question back again. I mean, after it had been settled once, settled again, and then suddenly went back.

35:35Right, right, right. I just happened to notice that Mises and Hayek, in going through Mises and writing something about how Mises thought about the spontaneous order, which is Hayek's term, I found that really Mises didn't have a notion of the spontaneous order, in fact that Mises had a very different view of the price system than Hayek, and then that led me to look again at their contributions to the calculation debate, and that then led to going back even further and finding that in fact there's two in Austrian economics. So I think that's a very fruitful avenue of research and there's much more to be done. And some of the younger scholars that have heard some of these lectures in the early 90s are now writing in this area. So I think this area in particular has pushed Austrian economics forward.

36:23Oh, say, let me ask you this because one of those writers in particular is the favorite candidate, so the Whispering Campaign would suggest for winning the $2500 prize at the end of this week. So, what's your sense? Is that prize, of course, follows oral exams. Have you heard talk about this prize this week? Well, I mean, I know about the prize. It's given for the person that gets the highest honors in the oral exams, but I haven't heard of any frontrunners yet. Thank you Dr. Salerno for spending time with us today.

37:13My pleasure.