An Interview with Walter Block and Bill Barnett

0:00Welcome to the Mises Institute Podcast, and we have a very special show that's been called today. We have two refugees from New Orleans. The Bopsy twins. They've been with us now for several months. Ever since that horrible time. Walter Block, who's a well-known Austrian economist and a libertarian theorist. But not as good-looking as... And then I'm glad that we don't have a video here, because you can see the glorious face of William Barnett, who is a specialist in macroeconomics, and also Mises, and they both are leaders of the Virginian movement there at Loyola University, where the Austrians are gathering increasingly, mostly undergraduates, yes, entirely undergraduates, they're wonderful colleagues and family, and we'll be able to talk just a little bit about that, but all students, all faculty were chased off, So, but New Orleans' loss is our gain. You've been here since... When did you get here, Ludwig?

1:03About a couple of days after... No, no. It was... The flood was September 28th? No. When was it? August 28th. Wasn't it? When was it? About then. August 28th. It was the end of August. I went to three or four days to Little Rock. I drove up there, because I thought I'd be because I thought I'd be coming back, and then when it looked as if I couldn't go back right away, I went to Vancouver for a month of September, and I've been here pretty much since the beginning of October, and now it's November 20th, so all of October and three-quarters of November. Well, actually, it's Bill, and I'm not really sure because I don't really think my mind doesn't work that way, I've spent a little bit over four weeks here, but gone home one weekend, and one time there was a two-week gap.

2:04So I'm talking about actual time here. One weekend. Was it? One week, whatever. Anyway, the actual time here amounts to, say, four-and-a-half working weeks. Working both of them, working from early mornings to very late at night, every day. No, no, that's not quite true. I work from early mornings. Walter shows up much later in the day. I'm always here before 7, sometimes before 6. Walter straggles in much later in the day. You work through the Auburn Alabama game. It's unprecedented. That is dedication. Yeah, well I straggle in at around 8 or 8.30 or 9 o'clock sometimes. We've been working pretty much 14-hour days because we've got no students, We've got no classes, no wives here, no family here, so we just have each other to work with.

2:59For years we've talked about the Mises Institute kind of serving the role of the Institute Geneva that took Mises under crisis. Yeah, and I tell you, the people here, I mean you of course, but you know, Lou and everybody, the whole staff, have just been marvelous to us. really, really has made us just feel so at home, provided for all our needs in terms of, you know, what we need for research, but also living facilities, and then of course the wonderful library here. So it really has been very, very productive. And I would say Walter says 14-hour days. The truth of the matter is we have been leaving here usually between 10.30 and 11 or 11.30 at night. Occasionally, you know, maybe a little bit after 10. But, And so we've been putting in good long days, more like 15-hour days, 16-hour days, whatever.

3:51But it's been very enjoyable, you know, because Walter and I get along very well, and interested in the same things. If I could talk about what you've been working on, it's not just crosswords or something like that. Mises' macro-crossword. I think I wrote three or four. It's strange. I've only been in New Orleans for four and a half years, or four years, depending on how you count it. Bill has been born there and worked there. Well, he'll tell you about that. So I have a different perspective. But In my experience, whenever there was a hurricane, it was sort of a pain in the neck, a minor disturbance, because you'd have to get into a big traffic jam and go ten hours for a two-hour trip, and then you come back a day later. So I was almost thinking, you know, I'll stay, and toward the last minute I chickened out again and I went and I had two days' worth of underwear, And I figured I'd come right back. And then when the things burst, the levees burst and the flooding, and I knew I couldn't come back. So it was very different this time.

5:09The view, of course, is it's not so much the storm as it was government incompetence with the levees and all sorts of other incompetences with the Army Corps of Engineers. And perhaps the best picture that I remember is all those buses, those school buses, tons of school buses halfway up to their hubcaps in water, and then there were people in the, it used to be called the Superdome, but now it's called the Sewer Dome. And so here you have people and here you have buses and never the train shall meet and that's sort of like, if you had to take one picture of government at work, you could do worse than pick that one. I remember very well these days, when everybody was concerned about the hurricane, and I think it was in Sunday, everybody was very worried, then Monday came, and all the reports said that it was fine.

5:59I seem to remember reading that the FEMA, even the FEMA bureaucrats were saying, well, it looks like we're going to dodge the bullet. Well, that's when the levees broke. Well, actually that's not true. The levees didn't break, although they may call them. We have levees at the river and the lake, and they are very broad at the base, and they rise. So there's a huge, you know, rise, the slope is very gradual, so that there's a huge amount of mud between the water of the lake or the river, because, you know, we're in between the lake and the river, and the land in between. But the canals, which is where they broke, these are, you know, flood walls, in effect, What about people who say that even if it were private that nothing could have stopped that storm, or at least that private markets would have never been willing to undertake the expense necessary to have stopped that storm? This is just a fluke.

7:10Well, I think if they asked the whole question, if it was private, would New Orleans exist like it did then, like, you know, at the time of the flood? I mean, you know, government subsidized flood insurance, government built levees, things like that. Without that, New Orleans, as we knew it before the flood, couldn't have existed. The land wouldn't have supported that kind of population, and it wouldn't, I don't think, The New Orleans is glorious, and if it wouldn't exist in the market, isn't that a market failure?

7:59The question is, you know, to what extent New Orleans should be rebuilt. Now, you have to understand, of course, that I come from a little bit different perspective. I live, you know, if you have this visual picture of New Orleans in that big bend in the river, the Crescent City, to the west there's the next downward loop of the river. It's like an inverted triangle with the apex at the base, you know, standing on that. And I live way down in that point, you see. So I am on very high land. I've been there through all kinds of floods in the last roughly 30 years. Never had a drop of rising water in my house. Don't even have to have flood insurance, but I do. And you know, I didn't evacuate. I slept through the hurricane and everything was fine and my wife stayed with me and she didn't leave until the next day when the rising water started and they said, well, you're not going to have electricity for six years and all that kind

8:56and Money and Credit, The Theory of Money and Credit, The Theory of Money and Credit,

9:26Let me talk about this market failure idea. I guess it's possible if we collected half the GDP, which, by the way, the government now does, but let's say half of what's remaining and put it all into Auburn. We could make palaces here, we could make Versailles or something like that, but it's not true. I mean, Auburn is just a small town of 20-30,000 and Opelika is an ordinary town, but we could have palaces of gold if we took, say, one quarter of the GEP and put it all into Auburn-Opelika.

10:15Does the fact that we didn't do that show that there's a market failure? You know, because in the view of the owners of this money and wealth and resources, they have decided in their infinite wisdom not to pour it all into Auburn. So it's hardly a market failure just because something magnificent and palatial could be existing here and isn't. You have seen the football stadium, though. Talk about palaces. But you know, there's another thing that I don't think most people realize with respect The Mississippi River comes down from the north, and it's got all kinds of loops and bends, but then it comes over and it makes a dogleg coming down from the north, it makes a dogleg to the east before it gets to the gulf.

11:01And the Mississippi River doesn't like that dogleg. The Mississippi River, forces of gravity and all that, would like to head due south through the Atch-Flyer Basin, the Atch-Flyer River, the Atch-Flyer Basin. You can see on the map where Morgan City is, that's where the Mississippi River wants to go. And the Corps of Engineers spends, I don't know, how many millions and millions and millions of dollars a year trying to keep it from going that way, to keep the water flowing past the city of New Orleans. And if that, what they call the old river control structure, if that thing ever breaks, the Mississippi River is heading south and New Orleans is going to be pretty high and dry, you know. going on since the interwar years, hasn't it? Actually, I think that the real, the levy system in getting all that started, started with the Great Flood of 27, which, you know, flooded out the whole Midwest and all that, and that's when the government really said,

11:54we're going to, you know, put this thing, you know, we're going to teach the Mississippi River a lesson, you know, about what it should do. We'll build up these levies. The more you ask these questions, the more questions there are. This levies-only strategy of the Army Corps of Engineers is probably just wrong-headed, or at least, since there's no innovation, there's no market test. Yeah, well, we really can't tell what the market would do. It's sort of as if shoes were socialized all the time and now some maniac was saying, well, we should privatize shoes and, you know, immediately the questions would come up. Well, how would we get brown shoes? Would we have black ones, pink ones, whatever? How about shoelaces? Where would they sell shoes? How would the poor get shoes? Whatever. One of my interests that I have been slacking off since I've been working with Bill on macroeconomics, which we'll talk The first thing I want to talk about has been privatization of bodies of water, puddles, oceans, lakes, rivers, seas, whatever.

12:55My view is that if it moves, privatize it, and if it doesn't move, privatize it. I'm not sure whether bodies of water are moving or not, but we've got it covered. They should all be privatized. Now, if the Mississippi River Company owned the Mississippi River and someone owned the Gulf of Mexico or the Atlantic Ocean or what have you, All we can say for sure is that things would probably be very different. They wouldn't be doing what the government is doing. And there would be some sort of market tests in terms of entrepreneurship and management, such that the people who treated their resources rationally would make money and others wouldn't. So my view would be that ultimately, if you're talking about privatization, you're not just talking about streets or whatever. We're talking about the river and the lake and the oceans to the full extent.

13:44And that would be the ideal, to have everything private. And if everything were private, you'd have entrepreneurs doing things, not FEMA type people who... It's not so much that FEMA didn't help. It's rather that FEMA prevented other people from helping. Somebody like Walmart would bring in bottles of water and FEMA would say, you can't do it. And then there were rescuers that were told to go to Atlanta to take lessons in sexual

15:06You know, when people say, well, you know, private charity won't work or anything, you know, look, here's, you know, those people, and they weren't the only ones. I mean, everybody was pitching in from the top to the bottom. Everybody was in there doing whatever they could to try and help their fellow man. People say that, you know, oh, without government taking care of the needy, you know, nothing, you know, they'll all die on them. It's just pure nonsense. People overwhelmingly are basically good. Overwhelmingly, people are basically decent, honest, hardworking, and that kind of stuff. And when you don't see the right characteristics in people, you can usually go back, almost always go back, and find that it's a result of something that government has done to change their mentality to a welfare mentality or something like that.

15:58But you leave people with their own devices, and they're basically decent, hardworking, nice people. This might be a peculiar question, but some decades ago there was a debate in the literature about the business and charity, whether business should be coughing up money for private donations for this and that, and Friedman wrote a famous article saying that really business shouldn't be, that the business of businesses maximizes value for the stockholders and that's it, so they shouldn't be giving donations and charity. Well, yeah, but there's more to maximizing value for stockholders than looking at the short-run profit and loss statement. In other words, the stockholders also, to use the terms of neoclassical analysis, are interested in utility welfare maximization, in the sense that, again, that's neoclassical language.

16:50But in other words, whether you are an individual, whether you're an individual owning stock, The Theory of Money and Credit for Employees. So, I mean, this idea that Friedman has that all the managers of the business should be doing is looking at what would maximize the short-run profits, you know, and it's just to my way of thinking, the way we're looking at it.

17:42Well, I think you have to divide the question into two. One, what would happen under pure free enterprise, and two, what would happen nowadays or what does happen nowadays. I agree. One of the big impetuses of the lawsuit against Microsoft ostensibly on antitrust was the fact that Microsoft wasn't giving charity, and not just charity, but payoffs to Washington, D.C., which I don't know if you want to call it charity or not. and so this sort of defensive charity, in other words, if a company knows that the bureaucrats are going to get after them, if they don't give to the Boy Scouts or the Girl Scouts, whatever, then you can justify it on the grounds, well, you know, they've got to protect themselves. Now let's forget about that. Let's suppose we're in pure laissez-faire society, so there was none of this motivation to give to the Boy Scouts or the Girl Scouts because if you didn't then they would raise your taxes.

18:35An example of that would be the price gouging, right? I mean, they're threatening Walmart with price gouging. First they would have an incentive to give things away to demonstrate that they're not gouging. Well, yeah, shoot them for part price gouging. But in a purely free society where there'd be no problems with price gouging, then the question would be, I guess, laissez-faire. Should a company have blue tablecloths or green ones or pink ones? Well, let the market decide. In other words, some companies would then say, okay, look, we adopt the Friedman rule. We give not one penny to anyone, and if you don't want to buy shares in our company, don't buy shares in our company. You don't want to buy our products because you don't want to work for us because of that.

19:21That would be one way of going. Another way of going would be, look, you know, we're members of the community, we've got to give to the symphony orchestra, we've got to give to the Girl Scouts and the Boy Scouts. The Boy Scouts, even though they don't want to have Gay Scout Masters, etc., which is another subject. And then there'd be third, so, you know, like Ben and Jerry's ice cream company would give money up the kazoo to everybody and then you'd have a moderate view. And it might be that all sorts of firms could survive, you know, like large, medium and small firms survive. Well, big, small and medium and no charity companies might all survive. In other words, the market would sort itself out and there is no right answer or wrong answer. Exactly. So Friedman has only sort of got part of the answer, but I don't think he grasps the full panoply or beauty of the marketplace, where many different strategies, it's very similar

20:10with tenure. Should you have tenure or not? Well, in a purely free society, some companies or universities would have lots of tenure, others would have no tenure, others would have intermediate, sort of like do you have long contracts or not? It's a management technique and we, Austro-libertarians, don't specialize, unlike the coctopus types, in dictating management strategies. We would say any non-invasive management strategy is legitimate and let the market have, Mao said many flowers bloom or let a hundred flowers bloom, or let a hundred techniques of charitable giving bloom and we'll see and maybe they'll all survive. This is a funny article that came out that soon after.

20:56Are you in favor of freedom?

21:02Sometimes it's difficult to figure out all the information about what that means, right? Yeah, well, it's a many-splendored thing. But there's an article that came out heralding Wal-Mart's role in after the flood, and the article concluded something like, well, making Wal-Mart should be in charge of FEMA. Which, of course, would be the worst thing, right? Yeah, then they'd have government bureaucrats in there telling them, well, you're bringing the wrong colored toilet paper to these poor people who've been flooded out, you know? So you'll have to change that. Putting Walmart in charge of the relief efforts instead of FEMA is very similar to what George Bush is trying to do, is give charitable groups welfare money and let it be filtered through them.

21:48Yeah, our private charity works better than the private charity. The reason it works is because it's private. Exactly. I mean, you know, there's this expression, shirt sleeves to shirt sleeves in three generations. It means that just because you're a successful businessman doesn't mean that you have any sort of guarantee. You're only successful today. Who knows about tomorrow? So what this philosophy is saying, ah-ha, you're a successful businessman, we'll put you in charge, we'll take you out of the market which made you successful in the first place, and we'll assume that you'll be successful forevermore. The Market is only a day by day, or you're only as good as your last sale. Well, it's even worse than that, Walter, because it's, to me, it's saying, look, here's a guy or a group of people who are wonderfully successful in the market as entrepeneurs, and now, because they were great as entrepeneurs, we're going to make socialists out of them, and, you know, socialist managers, and we expect them to be great at being socialist

22:40managers. And it seems to me that the very kind of people who are great as entrepeneurs and private Sector Managers would absolutely be at their worst in that socialist environment and be the very ones who after about a week would get me the hell out of here, man, let me go back to the market. And yet there is a certain coherence in it. In other words, when George Bush does that with, say, religious groups giving out charity because they do it so well, or when he says, let's let Walmart be in charge of relief efforts, there's a certain coherence about that. I mean, it's not totally crazy. The coherence is here there are people who've proven themselves successful, so let's get the government behind them. But the cloven hoof is that the market has its own logic and you're just short-circuiting that.

23:26And it's so sad too when you see, for example, a successful businessman being taken out of the market. What a loss to society that is. Yeah, absolutely. It's sort of like we say to our colleagues who become deans, you're going over to the dark side. Well, being a, what do you call it, a bureaucrat, an administrator, we're only kidding, but here it's really true, they are going over to the dark side. Well, in fact, if you think about it, probably the best thing you could do would be to get the worst businessman and put him in charge of the bureaucracy, because they might, you know, so bollocks up the thing and all that they could do less evil than they do now, you know what I mean? Well, you know, the agriculture department couldn't get the subsidies out to the farmers, The agricultural subsidy is a whole other issue, I mean at one time there were a lot of farmers and very few farm bureaucrats and as the years went on there were fewer farmers and more

24:33bureaucrats and now I think the bureaucrats outnumber the farmers, it's just... Supposedly that's true, that they have more people working for the ag department than they have foremen in this country, which makes eminently good sense to anybody who... It is interesting that there seems to be an impulse, and it's widely shared, that if you really want something to be institutionalized and become a permanent part of the structure of our life as a society or something, We should codify it with a government informator and say that was really great what Walmart did with this, but let's make sure they do it again and appoint them as the official... Yeah, absolutely. Precisely. I think there are a lot of people out there who really are of very, very good will, good intention and all, and they look at it and they just say, gee, Wal-Mart really helped The Theory of Money and Credit Motorcycles, and apparently had the right connections and got a contract to deliver over

26:19a hundred million dollars worth of, you know, campus, what do you call them, those motorhomes or whatever, not motorhomes, but you know, manufactured housing. I mean, if government's going to get involved, it's going to be corrupt. Let me answer your question in a slightly different way and more generalize it. Your question was, well, you know, why are people so open to this and why, when they hold hearings on price gouging, do the senators think they can get away with this? Why do they think they'll have public support? And I think they're correct. They'll have public support despite the fact that a lot of people have taken economics 101 and know just what price gouging means. And one of the answers that makes sense to me is this whole socio-biological thing. Another Another experience I have is every time I get a freshman student, they're filled with this milk of socialism or human kindness, socialism, they're just predicated on that.

27:18I remember I had this class, you know, they were really hopped up on the minimum wage, by the way, which Walmart has now shown itself to be a little weak on. And I wasn't planning on doing anything on the minimum wage, but somehow the class was so interested in this, so we did like six weeks of minimum wage, and at the end of that There was this bright girl, I think she was the valedictorian of the whole school, and what she said is, I see your point, but I don't like it. There's sort of this visceral hatred and suspicion of the market, and the sociobiological analysis of this is that we've only been civilized for, I don't know, 5, 10,000 years, but for millions of years before that we lived in caves or in the trees or wherever we were, And in those times you lived in groups of 10, 20, 30, 50 people tops.

28:05And then the only kind of cooperation that you could have would be explicit cooperation. You know, I'll scratch your back, you scratch my back, here help me carry this buffalo or whatever it is. There could only be explicit cooperation. But now we live in groups of millions and billions of people. Now there's such a thing called implicit cooperation markets. I mean the way to get people to help the New Orleansians is to allow prices in New Orleans to Rise, so that brings incentives for people from Tennessee or Auburn to come help us. In addition to the ordinary benevolence, you now have selfishness as a motive, but people are not biologically attuned to this yet because it's too short a time biologically. They're hardwired the other way? Hardwired the other way, precisely.

28:50Thank you, Professor Hayek, I believe. Is that your name? Hayek was, this was one of the Hayek insights. And look, Hayek wasn't all bad. When Drift came into the room, Bill and I were having this furious debate over Hayek, is he a pinko, is he really an Austrian, you know, this, that and the other. But I don't think... Well, actually, we talked about Kirzner about it. Well, Kirzner on Hayek, it was, but now it's relevant to the Hayek. And Hayek certainly I believe in this, yes, and I think there's a lot of sense to that, that people are hardwired towards socialism, which is why we have this sort of Rock of Sisyphus, we, the Mises Institute, the Loyola Group, all people who are favoring free enterprise, Austro-libertarians, you just keep having to keep pushing and pushing and pushing, it's such a struggle because biologically people are hardwired to have the opposite of you.

29:48When you say hardwired, see, I'm not sure, I mean, I think I agree with some of what you're saying. I'm not sure really exactly what's involved with that hardwiring, though. I think about the stuff about, you know, and we were talking about this very thing the other day, about the rationality versus the emotions. And much as, you know, in the Misesian sense, that yes, every human action is rational, but if you, you know, from a praxeological point of view, but if you go to themology The Theory of Money, or how do you pronounce that word. Then we get into psychology. We have to admit that there are, from that point of view, there's irrationality. Just like from praxeological, there's no indifference, but when you get over to the themology, you know, yeah, I'm indifferent to whether I wear the red or blue shirt. My point is that when you get over there, people are affected very much by their emotions. And so all kinds of

30:43from each according to his ability, to each according to his needs. Doesn't that sound great? Not if you rationally analyze it. My favorite one on that is, what is it, people not profits? Yeah, people not profits. And my favorite is, human rights over property. The point is, why is the emotion so antithetical to the mortgage? I don't know. See? Well, that's the socio-biology. Reverent? Oh, I don't think it's education. I remember my little daughter, when she was like in the second grade, she'd come home, daddy, daddy, you're being environmentally incorrect, you know.

31:31She's just a little baby and I would try to argue with her and my wife would sort of slap What about this insight, that to be aware of economic law as part of the structure of reality, and the way it limits how we can control the world, We don't like to think about that because we don't want to believe in it. Yeah, of course. Whereas the economic law says, no, there are some things you can't do.

32:17That's a... Nobody wants to believe in scarcity. Nobody wants to believe in scarcity because as soon as you have to face the reality of scarcity, it tells you, guess what, all those dreams that you have, all those longings and You better think again, because you're not going to have everything you want, or as they say, they don't say, but you can't have it all, and so sure, that's exactly it. People really, really want to live in a post-gacity world, and part of the problem with some economics as I see it is that it essentially tells people that, hey, if you just put the right people This point about you can have it all, I think, rings a chord in me with the feminist thing, The idea that young women can have it all, they can get a Nobel Prize in chemistry, they can have five kids, they can have a loving relationship.

33:34It's sort of post-scarcity or non-scarcity applied to feminism or to male-female relations, and it's been a horror. Absolutely. A lot of women went that way and didn't have children and greatly regretted it, and then this whole thing with the... What's his name from Harvard? The president of Harvard who said that maybe women couldn't... Sommers? Women couldn't be top mathematicians or something. He was practically killed by the academics because, you know, even at a supposedly great university like Harvard, you're not allowed to talk about these things, let alone actually analyze them. Well, it's also true with anybody coming out of an undergraduate degree these days, they believe that they're going to enter the workforce, get a high salary because they have a degree, and they're going to be in charge of others.

34:23Why, rightfully so! That's when I enter the workforce of the strategy. Listen, I just came up with an objection to your point about freedom. If what you're saying is right, you would have a hard time accounting for the liberal revolution, for the existence of liberty at all. Well, I would say that this, I've heard this argument before, and I would say that freedom is an aberration. If you look back at the broad history of civilization of all around the globe for the last, I don't know, five, ten thousand years, how much liberty have we ever had? Okay, you had the US in 1776 and you had England for a century and you have the Mises Institute. But the Libertarian Party gets what, one-tenth of a percent of the vote?

35:10Well, it's part of the evidence that freedom is an aberration, freedom is a precious flame I want to explain why the aberration exists. But no, but you say why they exist. It's something that happens. It's like throwing all the seeds up in the air. Most of them fall on fallow ground. But one happens to land in a place and it blooms for a while until a guy comes along with the sickle and cuts it down. We have less freedom today in this society than our forebears did 200 years ago. They didn't have this overweening federal government intervening in everything in their life, sending out every ten years, if not more frequently now, this so-called census where what they need to do is count people so they can allocate the representatives to the Congress.

36:03No, no, no. They send this thing out and they want to know how many bathrooms you have in your house and do you have carpets on you, all this kind of stuff. We have lost so much of the freedom that the people who went before us fought for and bled for that it's immoral for us to just acquiesce in this loss of freedom that we have. And in the United States, I mean, this is much like Rome, if you say, well, the Roman Empire ended when Caesar crossed the Rubicon and went down, you're kidding yourself, you know. I mean, excuse me, the Roman Republic ended then. You're kidding yourself. I mean, the Roman Republic, Caesar couldn't have crossed the Rubicon and been successful if the Roman Republic was alive in any real sense at the time he did that.

36:56Rome continued in its material glory in expanding the empire and all that for a long time after that. But, in terms of human liberty, Rome was on the decline, okay? In our society, I believe, it has been on the decline. I can't set an exact date, but I think it's the date in 1787 when Hamilton's gang hijacked the Articles of Confederation, went to Philadelphia and wrote a constitution. I am basically an anti-Federalist, not a Federalist. And so I really think that in terms of human liberty, we have been on the decline since then, even though materially we're growing.

37:46But now we're going to reach a point, who knows, it could be very soon, given the amount of debt that we have internationally and the way nobody's saving domestically and the huge amount of government intervention, where we enter into a long period of economic stagnation and Decline, and of course with increasing losses of our liberty. So I think Walter, I mean to go back, I think Walter's right, human liberty is an aberration. Well, I would give further evidence. Look at the careers of Mises and Rothbard, they spurned and hated and not given their due. I think at one time, I just read Guido's book, his forthcoming book on Mises' biography, magnificent book, and at one time Mises and and Hayek were seriously contemplating the end of Austro-libertarianism.

38:36When I first met Murray in 1966, 1967, thanks to him I think I knew every libertarian in the whole world. And there were just a dozen of them. And this was after the Mises Depression period, I don't mean economic depression, but personal depression over the fact that liberty was dying. It's just lucky that there was a Rothbard to carry it on and fan the flames and have and the presence to create a whole movement. Without him, possibly, you know, liberty would be something you read about in David Hume or John Stuart Mill or Adam Smith or the Founding Fathers or something. We're just very lucky we've got some of it. But I think that if you look at it realistically over all the centuries of all the countries in the world and ask how much liberty we've had, we've had very, very little of it. It's a very rare, precious thing.

39:27What are you talking about? We've got a tremendous market revolution taking place in China. The central planning is unraveling. Yes, there are some good things. No, no, no, no, no. Hold the horses here. To say that central planning is unraveling, you know, is, I think, to misunderstand, would you screw the mic up, Walter? The Socialist of All Nations as Hayek referred to them, and I would say, you know, the old definition of socialism, you know, ownership of the means of production, is really outmoded.

40:21But the real issue is, who's going to control, you know, things? Is it people who control their own lives or other people, and particularly, from my point of view as an economist, with respect to production, et cetera? Well, what they've realized is that this whole way of controlling things, where the state owns everything and makes all these decisions of, hey, that doesn't work and we, you know, we can't do it. So now they give up and say, okay, everybody can own property and you can do this and you You can do that and all, but guess what? Here's 400 pages of regulations if you want to open a snowball stand. Well, you say a plan market, I don't even know if I like the term. I like the idea of an interventionist. It's an interventionist economy. So the idea that we... Yeah, sure, the Chinese are having more economic liberty now than they did on the heyday of Mao, and that may go on increasing for a while, but they haven't given up politically. And even

41:15And even if the Communist Party loses power there, they're still going to have some sort of government. And that government and the people who constitute that government are going to find it in their own self-interest to increase regulation. And that's what's going to happen. And this gets us back to the point we were talking about earlier. There's this impulse to impose markets or to control them or to kind of make them public property. Well, as with the Iraq war, you know, part of the idea here is that we're going to go into this country, we're going to establish a sort of democratic market society, you know, to force. And it's the same thing with school reform, you know, in the U.S., we're going to impose a kind of market setting on education, you know, and social security, where we're going to have a kind of a market, a centrally planned market settings.

42:10We're going to use market forces to benefit of a good in some way. Yeah, I guess this is called neoliberalism. I'm not sure what it's called. Quasi-Markets. Milton Friedman is sort of a past master at this, you know, sort of getting quasi-markets in tradable emissions rights and educational vouchers and all sorts of other weird semi-demi Quasi-Markets, very similar to the Tito kind of communism, you know, sort of, will have a socialism, but within the socialism will have some sort of market, and, you know, this sort of just gives markets a bad name almost. But what it does, it allows the exploiters, the parasites, who Marx thought of as the bourgeois, the, what we would call, the anthropologists, but who in point of fact are the people who who are the governmental class, who are the parasites and the exploiters, what it does is allow them to maintain the exploitation longer. In other words, if the public schools are about to collapse like they are in New Orleans, Indiana, who knows what could replace

43:30it? My God, we might actually have free market education. Well, wait, I've got a reform here,

44:05for the oppressors, the exploiters, to extend their control in the face of a system that's coming to collapse, it's coming to gridlock, and say, well, wait, maybe we can break the gridlock and extend our control for a longer period of time. It's really striking. What it points to is the danger that the worst kind of leaders you could have right now are those who sort of believe in markets, you know, they come, they exercise enormous power and they believe in the power of markets, and so they're going to sort of harness those on behalf of the state and its interests, and it's probably what we see largely in something like a Republican administration. Yeah, and as I said... Wait, wait, wait. Are you suggesting that this administration, Republican administrations, for example, like Nixon and now like Bush, how much does the size of the government increase under these guys?

44:59Are you suggesting that they believe in small government other than rhetorically? Yeah. Because you and I are going to have to have a talk if you believe that. Well, but businessmen and staff, all of them, and all over the place, are people who are good at painting and liberal thought. Yeah. Well, it was the same with Reagan. I mean, Reagan was great on rhetoric. You listen to some of his speeches and you say, my God, Murray Rothbard was the speechwriter. But the government in California, when he was a governor, grew. The Governor Grew, The Government of the United States Grew. They're the worst in some ways. Oh, yeah. But the real question now between Democrats and Republicans is simple. Under which one will a government grow least rapidly? Under which one will it become...

45:44They're all becoming more intrusive in our lives. Under which one will the increase in intrusiveness be less? I hope that is our answer to that, a priori answer. Praxeologically, I have it, but I'm not telling anybody. Since it's praxeological, only I could know it, right? Why don't you all talk a little bit about what you've been working on, besides customers? We've been working on having a good time. We laugh a lot. We laugh a lot when we work together. The wing of the building over there used to be almost monastic, but now it's just all this rock is so interesting. Well, when we first came here, I made a list of Katrina projects, and we only had five or six of them. One of them was the triangle paper. Bill and I just wrote an article about the fact that the triangle, which is a big part of the Austrian...

46:39The Hayekian triangle. The Hayekian triangle, which is a big part of the Austrian analysis of Austrian business cycle theory, we have some problems with that. I don't think that's correct. Oh, no? I don't think it's correct to say it's a big part of the Austrian analysis. I think it's a big part of the way that Austrians try to explicate their analysis. Fair enough. I think there's a big difference there. We think it's a wrong path. Yes. So that was one of our criticisms of the Triangle, and we now have this paper called the Post-Triangle. You know, given that the Triangle is not the way to go, what is the way to go? And part of that is interest sensitivity of various goods, regardless of structures of production. The Theory of Money and Credit for Austrians. If you look at Mises, he didn't have any graphs.

47:50And there's a simple, what I believe, reason for this, okay? And that is, as soon as you draw a graph, a graph now, you're implying mathematics. And you can't capture the essence and the truth of human action in mathematics. And the triangle, as we point out, you don't need a triangle to do what they're doing. Really, the only thing that's important, quote The triangle is that hypotenuse, and I can write you an equation for any hypotenuse, because it's just a line. It's one line or curve in a two-dimensional space. So hell, I can write you an equation for that right now. And then, as soon as you put it in that, and we do in the paper, that's one of the things we do, then you immediately see, well, gee, you know, that equation, the way they wrote that, that doesn't look too different from, say, a neoclassical growth equation. How about that?

48:43The Theory of Money and Credit We have to write them down so we can remember which papers we're working on. Some of them, because of the opportunity we've had now, some of them we've actually started and finished since we've been here.

49:29We did one on rates of time preference. The ideas were kind of hanging around in the background, wouldn't you say, some place in a file, in a paragraph or something, but we were able to take that and turn that into Well, another paper was Laidler who was a mainstream person and every once in a while some mainstream person will condescend and sort of talk about Austrianism and usually they get it wrong, but we had this very interesting paper on Laidler and we sent it to a journal and one of the things that Bill and I keep laughing about is the referee said, what was I said, make believe Laidler's mother is reading it. No, we were too nasty in the way we wrote.

50:14Wasn't that there was anything substantively wrong with the criticism, but, you know, it was just... And that's Walter. I'm a nice guy. Walter's nasty, you know. But Laidler didn't become the Mises' mother. Oh, no, no, no, no. Oh, no. You don't seem to understand the game. Right. Let me explain the rules for you. It's a one-way street. So Bill and I now have this joke. Whenever there's anything that comes up, we go, what would X's mother think about this? So one-way street. So Bill and I now have this joke whenever there's anything comes up, well, what would X's mother think about this? But we were able to finish, you know, the revisions that they wanted, you know, and finish that paper. Another two mainstream economists who've criticized Austrian business cycle theory in ways that we haven't criticized that are Eichengreen and Michener, and we're working on a paper there, and then there's this guy Tyler Colin, who wrote another critique of Austrian business cycle theory and we're having a book, but there was a chapter in it on the ABCT, so we're criticizing that.

51:14Has that been criticized anywhere? Oh, I'm sure it has been. You mean his book? Oh, the book has, but I don't think that this article on business, I'm not sure, I'd have to go back and check and see if we cited anyone else who's criticized it, but to my recollection, Are there other people that have criticized Cowan's business cycle? Oh sure, yes, people have criticized, oh yeah, absolutely. I don't remember it offhand. Let's see, what else? Oh, Coase, we just got finished with a Coase paper. We're jumping on Coase for a change. That's with one of NYU's law journals, the Journal of Law and Liberty, I think. A new NYU journal, which is sort of libertarian. That article is in the proof stage now. We're talking about collecting all the Austrian writings, and of course the problem is that it's like a 15-volume work.

52:00Yeah, well, we have a little coast industry here. And then another paper that, again, it was kind of started before we came here with a paragraph stuck away in a file somewhere, but that we then completed just yesterday, I guess, when Walter set it off, was a paper about, it's about Say's law and Keynes' money, Money, and it brings in the post-Keynesians. And what it does is very, very interesting. If you read, you know, I can remember growing up, Walter and I about the same age, I think a few months older, a year older, and I can remember when they said that money doesn't matter. And for the Keynesians, money doesn't matter. And it always struck me as strange because his is magnum opus, it's the general theory of employment interest in money, you know. If money doesn't matter, why is he putting it in the title of his magnum opus? And then Just before that, he's got the two-volume treatise on money, and before that, the tract on money and all that.

52:56And then you go in this thing... Let me just make another point on this. The question is, are the Chicagoans Keynesians? And our view is that there are two types of Keynesians. There are the Keynesians located in Chicago, and then there are the Keynesians located elsewhere. They're all Keynesians, and Friedman was quoted by Samuelson I asked Norton about that, and he said, well, you know, Samuelson misquoted me, and here's what I said, and here's my paraphrase of it, and he said, well, when it comes to the public policy recommendations in macro and micro, there's a gigantic gulf and a big difference between us and the Keynesians. However, when it comes to the tools of analysis, we're all Keynesians now. And I thought this was a reasonable summation, because she said, we're all Keynesians now.

53:47Surely the methodological, technical way that you approach a problem is much more important and is the undergirding of the public policy recommendations which are mixed up with values and stuff like that. So we have a part in this paper where we lovingly characterize the Chicagoans as Keynesians. To me what's interesting about this is that in his 36th work, Keynes says that look, what's What's critically important is money, and money has these two essential characteristics, which he refers to as the zero elasticity of production and zero elasticity of substitution. And yet, if you go out in the literature and look, the first thing I can ever find on that is a 52 or 53 article by Abba Learnaway mentions it, but kind of gets it wrong.

54:36And the only school of thought that takes this seriously are the post-Cajuns, and they get it wrong. I mean, and one of the things we point out there is that Paul Davidson, who is the, you know, Dean of at least American post-Casians, if not worldwide, in something he was writing very recently, and I forget the exact site to it, says, man, he says, good God, look at what's happened to growth rates in OECD countries since, you know, we got off of fixed Fixed Exchange Rates in 1973, he says, the growth rates have collapsed and the unemployment rates have gone up and on, and one of the big problems, he's not saying the whole thing, one of the big problems is the lack of fixed exchange rates, and then you say, well, what about, oh no, gold, gold isn't money, gold can't be money, ah, anathema, anathema, you know what I'm saying, wait a minute, you know, the gold standard is the best system of fixed

55:35Fixed exchange rates you can have. Now, to have gold money is even better, because if you have gold money, you don't have a system of exchange rates. You know, it's just an ounce of gold for four quarter ounces or whatever. But if you have even a gold standard, it's the best system of fixed exchange rates you can have. And yet, they're absolutely opposed to the use of gold as money, Barbara's Relic and all that stuff. And yet, they all in favor of fixed exchange rates. So what do they want? They want fiat money, fixed exchange rates. The Chicagoans have been dining out on the notion that money matters, as if only the Chicagoan monetarists think that money matters, but even the Keynesians think that money matters. They have different views on it, and one of the things that this paper makes clear is that money matters for them as well.

56:20The big problem that they have with fiat currency is that when you have changes in liquidity preference and people want more money, that this doesn't create jobs, because you can And always add a zero to a dollar bill. It doesn't take anything to produce more money, you don't need labor to produce more money. Right, just add a few more zeros. And they do concede that gold is helpful. But only if you live in a gold producing country, then they can go into the gold mines and that creates jobs. Assuming that the gold was money. Assuming that you had money, gold as money, right. But only a few countries. But our point is, look, you don't have to have a gold mining country, industry in your All you have to do is produce pianos or something and ship it out for the gold.

57:05So it doesn't matter that you don't have a gold mining apparatus in your country. Well, and then the other thing too is that's the zero elasticity of production part. Then there's a zero elasticity of substitution. But again, it's relevant for a society of fiat money. But if you had a free society where you would have commodity monies, well, if everybody said, oh, assuming that in that kind of society, You could have one of these collapses in confidence and a flight to liquidity and all that. And everybody says, oh, no, we don't want to invest in goods. We want money, you know? And so all of a sudden everybody would be hoarding their gold, right, and the value of gold would be going up and nobody would be spending it, as Sean Corrigan would say, yeah, you mean they're not going to eat? But anyway, so at any rate, what would happen is if the value of gold coins as money went Let's use silver coins. Let's have some platinum coins. Let's make bronze, zinc, lead, whatever

58:08coins. You don't have a zero elasticity of substitution of other goods for money in a free economy. In fact, the money might consist of some other goods. You might have gold and Another point we make in this paper is that even if you have a fiat currency, as long As long as the government doesn't have controls over wages, you don't need jobs creating dollar bills or gold or anything.

58:58If ever you have unemployment, that means that the wages are too high. And if the wages fall, you have no more unemployment. So even with a fiat currency, I mean, obviously we don't favor a fiat currency, but even with a fiat currency, there's none of this neo-Keynesian stuff that's justified. But you still need to, even in that, get away from that super macro-analysis that the monetarists in the Keynesians use and all and say, well, it's not really that you need wages to fall. You need some wages to fall relative to prices, say a lot, and others to fall maybe a little bit. In other words, you've got to let the real wages adjust in the market to where they do it. But, you know, talking about these other things, a couple of other things we've got, which The point here is, suppose I prefer red sweater to blue sweater, is there a rate in which Which I prefer it? No, you can't have preference, it doesn't admit of rates. Preference is what

1:00:15Mises calls singularism, you know, it's either this or that. So you prefer a bow tie to a regular tie, someone else prefers a regular tie to a bow tie, there's no rate at which you prefer it. The same thing with time. The same thing with time. Preference. Did you say you finished this paper? I don't know. No, no, we finished it. Finished it, that's amazing, because a lot of times people dip into this area and never quite get out of it. Minister, that's amazing, because a lot of times people dip into this area and never quite get out of it. Oh, no, no, no, no, no. And it's a relatively short paper, because what you have to do is distinguish between interest and interest rates, okay, and get into time preference that way. And we're not saying that the concept of time preference is a praxeological oxymoron, we're saying the rate. The rate. As long as you talk about time preference, yeah, they're good.

1:01:01Now we've got Ardinal, you know, and we can do this, and we don't have rape. As soon as you say rape, wait a minute, rape, now you're talking about objective, and you're talking about cardinality, and that doesn't exist in economics. And then, so, you know, we've got that. You know all these lines, doesn't he, in his paper on interest rates, did you? Guido's paper on interest rates is an interesting paper. I've read it about three or four times, and I'm not sure what he says. I think what he, what I get out of it, and I think there's a lot more in there, the problem with Guido is you have to read things, I mean, he is brilliant. The problem with this is he puts so much in there, you really have to study it very carefully. What I get from him is he's talking about actual versus theoretical, or what would have occurred had it not been.

1:01:49The natural versus the actual. Right. But this is a very minor paper. In a sense, it's There's only a terminological dispute, if you wanted a deprecated, you could say it's just terminology, but I think it makes a deeper point, because rates lead to cardinality, and cardinality leads to math, and here we are with the view that math is not a technique applicable to human action, and all of a sudden we're talking about rates? Well, where do you get rates compatible with preferences? I mean, we get started on a lot and it takes time to do them all, but is the idea of the value scale, right? Yeah, yeah, that's right. The value scale is in fractiological action more on all sides.

1:02:38This is part of the demand curve math paper. Yeah, we've got a, one we just finished and sent out last night was one on math, demand curves as a mathematical. The idea is that, to me, it's one of those things. It's so obvious that as soon as somebody says it, you say, of course. If you were to look at the physics of a gas, and they relate three variables, the pressure, the temperature and the volume, and you say, well, okay, what we'll do is we'll show a graph of the relationship between the pressure and the temperature holding And you can do that. You can put the damn thing, the gas in a container where it can't get out. You can measure the pressure, you can measure the temperature, and you can vary one and the other one, and you can plot it, right? And notice, every place along that plot, you've got a different value of temperature and pressure, but the volume is the same. Now you can get a bigger

1:04:20Curve. You're saying, well, everything that affects the demand is held constant except the price and the quantity. So as price comes down, quantity increases. That's why the demand curve slows down. And what are these other things that are held constant when we teach them in principles? Tastes of preferences, prices of other goods, income, wealth, you know, that kind of stuff. And then I ask the question, I say, well, why then, if this is This is human behavior we're talking about, picturing. Why do you have to lower the price in order to sell more, for the buyer to be willing to buy more? And the answer is, because depending on which view of this you look at, and we go at both of them so we won't antagonize groups, one of them would say, well, look, it's very simple.

1:05:05The marginal utility of the fourth unit is higher than the marginal utility of the fifth unit. Well, then marginal utility has changed. But wait, that violates the rules. The rules say everything has to be constant along the curve. And if you say, well, no, I don't believe in that marginal utility stuff, you know, I believe in the new marginal rate of substitution stuff, well, then guess what? The marginal rate of substitution of the fifth unit is lower than the marginal rate of substitution of the fourth unit. In either case, something has changed along the curve. Well, that violates It violates the laws of mathematics and it violates the laws of economics and say that we're going to hold, you know, conceptually all the other variables that affect this constant, so it's part of this.

1:05:52In both cases it violates the same concept that something's changing. One is a mathematical looked at from a very, you know, mathematical objective point of view, the other is from a subjective point of view, but the answer is simple. You can't have a curve where you're graphing P versus Q and saying everything else is constant because it's not. So the main curves are A, mathematical. I thought that was interesting. Yeah, yesterday was the second day that we had what we call a two-paper day where we actually sent out two papers to journals. We did that once before, maybe two or three I would say we must have sent out about ten papers in the four or five weeks we've been here.

1:06:39We also list new ideas for papers that we'll write in the future, and we must have 25 new ideas for new papers. How many years did Mises have in Geneva? I think he had six years, didn't he? and Social Sciences. Mises in Geneva? Oh, I think, yeah, that's a good one. Maddox, you took a little bit of that, too. This is just the... Well, I think, I mean, look, look, to talk about him and I and Mises in the same breath, I think, you know, it's a, whoa, whoa, whoa. I mean, Mises is easily the greatest social scientist of all times, easily, you know? In my opinion, nobody else is in his class. You know, one of the things that I, I don't know if this is true, Bill, you speak to this

1:08:19is more of a Rothbardian, and I am more of a Missassian. Now, Rothbard is a natural rights person, and I am, too. I'm not a utilitarian like Mises. But Mises is a classical liberal, and Rothbard's an anarchist, and Walther's an anarchist, and I'm a classical liberal. Deviationist? Yes, yes, I'm a deviationist, and there's been more than one time when Walter has called the party, the Politburo together to get after me. But the other thing is that Walter, if you were to look and say, well, what is your first love in terms of your study, your research Research and all that, he would tell you anarchism or, you know, a libertarianism, and of course a major subset of that, right up there, is the economics. If you go to me and say, what about you? I'm not a libertarian theorist like Walter is. That's his thing. At the core of my being, I'm an economist. And that's what's important to me. And as far as writing

1:09:33The Theory of Money and Credit

1:10:03I mean, you know, I'm natural rights, not utilitarian, but again, to me, economics is the key, not the key, my true love, as opposed to anarchist theory. And whereas I think if Walter, if you gave him the choice, he could write the ultimate economics work or the ultimate anarchist libertarian work, he would choose the latter. No, I think there's a lot of truth to that. I would say the Mises Institute right now has two journals that are ongoing, scholarly journals, Quarterly Journal of Austrian Economics and Journal of Libertarian Studies. If Bill and I were to be appointed editors of each of them, taking over from Joe and Roderick, not that I'm suggesting this, we would reject it because we want to do writing rather than editing, but I would be clearly more JLS type and Bill would be more QJAE type. It's interesting before I came to Loyola I looked at my CV for the last five or six or ten years and a lot of my publications were libertarian not economic let alone macro I did very little macro and in the five years since I've been there there's been a reversal it's been much more economics and a little less

1:11:26It's libertarian, although I've still kept my end up on the libertarian front. But not only have I veered over, under Bill's tutelage, from libertarian emphasis to more of an equal emphasis, but within economics, I don't know how many articles I've got in economics, maybe 50 or 60 out of my 250 articles, but most of them, virtually all of them, were in micro. Maybe two or three out of the 50 or 60 were in macro. But since I've gotten under Bill's bail flow influence, he's convinced me that macro is to micro as chess is to checkers, and macro is where it's at, and I'm still not a macro economist, but I'm much more into it because we've co-authored a lot of articles in macro. So I'm much more heavily macro-ish than I was before.

1:12:13I'm so pleased that you two had a chance to work together, and you're leaving next week. Yeah, we're going back. I'll be leaving bright and early Tuesday morning, probably about 4.30, maybe. I'm not sure. It depends upon whether the place sinks or not. I might come back with my tail between my legs. New Orleans will open again in January. We've registered our students. I spent a day earlier this week on the computer registering students and, God willing, you know, the office is about... And the creek don't rise. Yeah, and the creek don't rise. But, well, we're all right if the creek rises in Mississippi Revolta. We're pretty safe from that, at any rate. But, you know, people are back working on campus. My wife works now at the law school. She's been going to work well every day. And the staff is expected back the Monday after Thanksgiving. And everybody's expected back January 2nd, which is a Monday, everybody, and faculty and all. And classes start January

1:13:44This has been great. Thanks, Joe. Our pleasure.