Mises as Inspiration

0:00Congratulations again to Lew Rockwell and Jeff Tucker and all my friends associated with the Mises Institute on their 25th birthday. It's sort of my 25th anniversary also. I've been associated with them one way or another from the very beginning. In fact, I know some of the people in this room, including myself, can remember exactly where they were when they heard that John F. Kennedy was assassinated. And I know probably everyone in this room remembers exactly where they were when they heard about 9-11. Well, I remember exactly where I was when I heard about the Mises Institute. I was in my faculty office at George Mason University and I opened a letter, a mail. It was a flyer announcing that something called the Mises Institute had been created. And the first thing I did was I whipped out my checkbook and I wrote, Lou, a very small check as a donation.

0:48I was an assistant professor of economics at the time. And I wasn't a wealthy multi-billionaire full professor like I am now. But Lew wrote back and he sent me a von Mises tie and I remember writing him back, him and Murray, saying I will wear it proudly and it's bound to have the same effect in academe as flashing a cross in front of Dracula. And I was told Murray got a big belly laugh out of that one. So I do remember that. If you remember that, that was the moment I heard about the Mises Institute and my first visit to Auburn, they were in an office about the size of this area where the fire extinguisher is, in a little building next to the football stadium that has since been bulldozed, and that was the beginnings of it.

1:37Well, Lewis asked me to talk about Mises as inspiration, and I only have 17 minutes, something like that, but Mises has always been an inspiration in much of my research and writing, And I first read Human Action my first semester in graduate school, way back when the dinosaurs roamed the earth and is a very unusual thing. So I knew about Austrian economics long before the Mises Institute came around. And so what I thought I'd do in the little time I have is offer a few quotes from Mises on the topic of the study of history. In recent years, I've been interested in economic history, mostly in the history of the Civil War, or back in Alabama, we call it the war to prevent southern independence.

2:23And so I'll read you a few quotes from Mises and give you illustrations of how this has sort of influenced my thinking. And this is from Human Action, and one of the quotes is, It is obvious that the historian must not be biased by any prejudices and party tenets. Those writers who consider historical events as an arsenal of weapons for the conduct of their party feuds are not historians, but propagandists and apologists. They are not eager to acquire knowledge, but to justify the program of their parties. They usurp the name of history for their writings as a blind in order to deceive the incredulous. and Tom Woods gave us some good examples of this a little earlier and but to give you an example of how you know one of the reasons I got involved in writing a book on Lincoln for example as an economist is I was a Civil War buff as they call it I'd read dozens maybe hundreds of books on all the battles and

3:23the biographies and so forth and and I started thinking of how I could combine my profession with this hobby of mine and when I started reading a lot of the and mainstream historians, and just so much just didn't add up at all. And I'll just give you a few examples of works that seem to fit in this definition of just using history to justify a particular political program, not studying history to learn the truth about how the world works, but to justify some agenda. Well, one example is the book by Mario Cuomo and Harold Holzer who's considered to be one of the preeminent Lincoln scholars. It's entitled Why Lincoln Matters Now More Than Ever and the theme of the book is that if Abe Lincoln were alive today, he would be a social democrat just like Mario Cuomo and Harold Holzer and Hillary Clinton for that matter who's close friends of both of them. That's sort of an egregious example. I did some research a few

4:22A few years back on the economics and politics of Reconstruction, the post-Civil War Reconstruction and one of the real eye-openers, I ran across a book edited by Kenneth Stamp, who was a former president of the U.S. Historical Association, very well-known academic historian, and I was kind of surprised to read that in some of the introductory material in there, several of the authors came right out and said that their purpose, in the 1960s of sort of reexamining the history of reconstruction was that they wanted to use that history to promote Lyndon Johnson's legislative agenda that existed in the 1960s. And so, and I had read some of the earlier works that were done by such people as William Archibald Dunning that was just really a wonderful scholarship and you just get the idea on every page that these people really were interested in pursuing the truth, but at least these These people admitted it, that they had an agenda and they were literally rewriting history, which I didn't like at all.

5:27Another anecdote, Eric Foner, if you ever see a Civil War documentary on television, there's a good bet that they'll drag out Eric Foner from Columbia University to tell you how you should think about it. He's a Marxist historian and I quote him in my latest book on Lincoln in an article he He wrote in the Nation Magazine in October of 1991 and he made the case against the breakup of the Soviet Union. He was against the breakup of the Soviet Union and he said in the article, Abraham Lincoln would not have been such a softy as Gorbachev and allowed the 11 Soviet republics to secede peacefully like that. He would have kept the Soviet Union together. He called it a grand experiment and things like that.

6:12And the title of the article was Lincoln's Lesson, so he actually argues that thank goodness R. Lincoln was much more of a brutal dictator than the last dictator of the communist Soviet Union was. On the right, an example that I make a big deal of in my latest book is there's a political scientist named Walter Burns at Maryland, the University of Maryland, he wrote a book The book called Making Patriots a few years ago, and there's a chapter mostly about the civil war, Lincoln in particular, and he says the big problem with young Americans today, young people, 18 and 19 year olds, is that they may be willing to join the military if their country is genuinely threatened, national defense, but they're not willing to join the military in large numbers for global crusades for democracy, or if we turn the military into meals on wheels with tanks or something like that.

7:12They'll defend their country, but they won't go to Iran. And that's a problem. They're too self-centered. They're too interested in pursuing their careers and their education and raising their families. It's not a good thing. How can we persuade them to change their attitudes? And Walter Byrne says, well, we need a national poet who can more or less mesmerize the youth into marching in line Marching into Iran and Syria and Lebanon and you know I can just see Newt Gingrich getting goose bumps as he reads this kind of stuff and and then he says fortunately we already have one Abe Lincoln who he calls the the martyred Christ of democracies passion play and so that's my example of a right-winger associated with the American Enterprise Institute who just obviously just uses this history to promote that and speaking of Newt Gingrich he wrote an article in the Wall Street Journal The Wall Street Journal, a while back, in which he advocated the invasion and occupation of Syria, Lebanon, Iran, North Korea, and I think one other, pretty much the whole Middle East plus North Korea, invasion and occupation, and the title of the article in The Wall Street Journal was Lincoln and Bush, and once again he started out, he strung together all these quotes of Abe Lincoln, and the idea is supposed to be, well, he would approve of this, but those of you who know anything

8:35But Lincoln, even if you hate Lincoln, he was a brilliant politician and I don't think he would have been so stupid as to follow Newt Gingrich's lead in something like this. And so I don't think he would have agreed with that at all. And so these are some of the things, you know, once I got into the whole literature and the use of this literature by politicians especially, that I smelled a rat, a very big rat. So that's, and von Mises sort of got me thinking along these lines of where to hunt for rats. That's a lot of what I do for my career as a, I'm sort of a rat hunter out there. And so another example, another quote, a couple of quotes from von Mises in Human Action about the study of history.

9:21No unanimity exists in regard to many theological, biological and economic issues. Accordingly, historians disagree. A mercantilist or neo-mercantilist must necessarily be at variance with an economist. An account of German monetary history is conditioned by the author's monetary doctrines. The historians disagree on such issues not in their capacity as historians, but in their application of the non-historical sciences to the subject matter of history. An economist looks at history through a different lens in that he or she will ask different questions, for example, and have different understandings of the role of tariffs, for example, in the Civil War and things like that. Another quote is that, quote, history can never be studied without presuppositions, and that dissension with regard to the presuppositions, i.e. the whole content of the non-historical branches of knowledge, must determine the establishment of historical facts.

10:25And then he says, changes in the teachings of the non-historical sciences consequently must involve a rewriting of history. Subjective economics produces historical works very different from those based on mercantilist doctrines, which certainly is very true. And I'll give you one example from my own research again. About two years ago, probably the most preeminent Lincoln scholar in America is David Donald. He wrote a Pulitzer Prize winning biography of Lincoln. I think it's called Lincoln. It's likely that's all the books are. And he was invited by the Smithsonian Magazine to write an article on what if the 1860 election had turned out differently? They had a whole series of what if the 1980 election had turned out differently?

11:11What if the 1932 election had turned out differently? And he did the 1860, and here's what he says. He said, had the Democrats won in 1860? and not Lincoln and the Republicans. It quote, would have blocked the important economic and social legislation enacted by the Republicans during the Civil War. So he doesn't even talk about slavery and these other issues, social legislation. So thus, there would likely have been no high tariff laws that protected the iron industry, so essential in post-war economic development. No Homestead Act, giving 160 acres to settlers willing to occupy and till land out west. No transcontinental railroad legislation. No land grant colleges. No currency or national banking legislation.

11:57Horrors. No Department of Agriculture. What a terrible thing. To offer expert guidance on better seeds. What a catastrophe that would have been. Without such legislation, the economic takeoff that made the United States a major industrial power by the end of the century would have been prevented altogether. And so, there are a lot of good economic historians that have written a lot of really good solid analysis of this period of history, but historian historians are uniformly very lame on this for the obvious reasons that Mises gave. They write about economic issues, but without the benefit of having studied even principles of economics in a lot of cases. And a lot of them I found tend to look, they come up with some idea that, well, this politician has good intentions.

12:46His heart is in the right place. Therefore, whatever legislation he supported must be good for the whole country or they're sort of neo-mercantilists of one sort or another like David Donald on these issues. But if you look at these things, he praises the high tariff laws, which existed until 1913 when the income tax came in. I don't have to tell this crowd that that was not a good idea to have 45 to 50 percent average tariff rates for all those years in terms of the economy. Even the Homestead Act, there's a historian named Ludwell Johnson who taught at William and Mary for many, many years. He's retired now. He did some research on the Homestead Act that I haven't seen anywhere else of this kind of research. He made the case that about three-fourths of all the land, he argues, was given to railroad corporations, mining corporations, timber companies, and a relatively small amount was given to real actual settlers, So it's not quite as libertarian-oriented idea as you would think.

13:49In other words, it was sort of a veiled form of corporate welfare. Not totally, but to a very large extent. No transcontinental railroad legislation. Well, I've written, and many others have written about the fact that James J. Hill built a transcontinental railroad without any government subsidies. So it probably would have happened a little later than it did. and it wouldn't have had all the corruption and the swindling and probably the biggest political corruption in the history of American politics, the Crédit Mémobilier scandals of the Grant Administrations was associated with Transcontinental Railroad subsidies. And I even argued in some of my publications that this really strengthened the progressive movement several decades later because these people were corrupt.

14:38They were corrupt, and so a lot of the regulation that was put in place, some of it, most of it was put in place by the corporations themselves actually, so it really wasn't harmful to them, but some of it was intended to be a response to all this corruption, but it wasn't capitalism that was corrupt, it was neo-mercantilism, which David Donald kind of likes. And the Department of Agriculture called it no currency or national banking system. We wouldn't have had the Fed, you know, decades later, heaven forbid, if it weren't for this. And, of course, the Department of Agriculture, I sort of lampooned this idea in my latest book that farmers need bureaucrats in Washington to tell them which seeds to plant. And, of course, the main impact of the Department of Agriculture has been to enforce agricultural cartels periodically over the years.

15:25And so that's the sort of silliness that you see from historians who don't understand the one thing about economics, praising all these institutions. And one final example, I've got about two or three minutes left, but something else I've written about is another application of these quotes that I just read from Mises is, I've always thought of macroeconomics as sort of warmed over mercantilism covered up with mathematics. When I first started studying it in school, after studying microeconomics, supply and demand, opportunity cost, real economics, has always seemed like contrived engineering exercises to me, macro. And I ran across an article in the Journal of Political Economy, which is one of the prestigious economics journals a couple of years ago, August 2004, by two UCLA economists, Harold Cole and Lee Ohanian, and one of them is the editor of the American Economic Review, the other prestigious journal.

16:25And some 60 years after Ludwig von Mises and Friedrich Hayek and Henry Hazlett explain why the New Deal made the Great Depression worse, not better. These guys finally discovered this and they published it and they wrote it up in the language of game theory. I guess that's what you have to do to assert truth nowadays in economics. And they say things like this, real gross domestic product per adult during the Depression, which was 39% below trend at the trough of the Depression in 1933, remained 27% below the trend in 1939. Similarly, private hours work were 27% below trend in 1933 and remained 21% below trend in 1939, end quote. So they finally discovered that the New Deal didn't work in 2004.

17:12Things like I said that the Austrians explained over and over and over again 60 years earlier. How did they come up? Why is this? Why did they miss this? How did the mainstream miss this? I think it's because of their theory, their bad, their sort of neo-mercantilist theory, which I call, in one of my writings, the Frankenstein monster theory of economics because the language of, and here's what they say, he says they're just surprised that, quote, the weak recovery from their depression and the New Deal policies is puzzling because of the large negative shocks that some economists believe cause the crash including monetary shocks, productivity shocks and banking shocks. I make the analogy to the movie Young Frankenstein where they try to shock the monster into life. That's how macroeconomics talks about trying to shock the economy back to life during a recession.

18:01And if that doesn't work, if you remember the movie, they try to inject him with some gigantic needle and make him come back to life. And of course, these authors talk about various injections of government spending or easy credit that would supposedly cause a roaring recovery. And I read this stuff, and I don't know, in my perverted mind, I think, well, they're shocking the monster, they're trying to inject it with something. Why? Because they want the monster to come roaring back, like the economy. They use this weird language. And this is economics, you know, shocks, injections. It reminds me of when I first took economics as an undergraduate. Time's up. I'm a little bit bigger than Mark, so I'll take two more seconds. Maybe many of you remember this.

18:46Chapter one had a bathtub in it, a picture of a bathtub. And there was water going in, and there was water leaking out somewhere. The water going in was supposed to be government, government spending, and the whole problem of economics was to patch up those leaks and keep the water going in the bathtub, and that's another reason why I thought, this is insane, this is not economics, what is this? And von Mises, he must have been having a very hard time in his day because I had a lot more people who agreed with me at the time and do today than von Mises did, who was really a lone wolf for which we should all ever be grateful, and thank you very much.