Economics and Moral Courage

0:00All right, our next speaker needs no introduction. As I said earlier, in 1982, he founded the Mises Institute after serving as Ron Paul's Congressional Chief of Staff for four years. He is the editor of a number of books that we have outside for sale, The Gold Standard Perspectives in the Austrian School, The Free Market Reader, The Irrepressible Rothbard, author of two books, Speaking of Liberty, and his newest book, The Left, The Right, and The State. Frequent guest on Judge Andrew Napolitano's Freedom Watch with the Judge on Fox.com. Oh, and he has a website you may have been to called LewRockwell.com.

0:47He is a living libertarian legend, and today he is speaking about economics and moral courage. Please help me welcome Lew Rockwell.

1:22You are right. It must be really painful to be an economist of the mainstream today. Today, or at least it should smart a little. In a financial and economic calamity of the current scale, people naturally want to know who issued the warnings about the real estate bubble and its likely aftermath. When private sector jobs have grown none at all in ten years and when ten years of domestic investment is systematically undone in eighteen months, When housing prices in some sections of the country collapsed 80% and when formerly prestigious banks go belly up or receive many, many billions in rescue aid, people want to know which economists saw this coming.

2:14Perhaps it is these economists, the ones who had long issued the warnings and not the ones relentlessly consulted by the mainstream media, who should be giving the guidance about going Maybe it is they who ought to be weighing in on whether the new stock market boom is a reflection of reality or another bubble developing within a bust that could lead to a secondary depression. Among the mainstream, however, no one saw it coming. This is because they have never learned the lesson that Frederic Bastiat sought to teach, namely that we need Need to look beneath the surface to the unseen dimensions of human action in order to see the full economic reality. It is not enough just to stand back and look at points on a chart going up and going down, smiling when things go up, frowning when things go down.

3:17This is the nihilism of an economic statistician who employs no theory, no notion of cause and effect, no understanding of the dynamics of human history. So long as things were going up, everyone thought the economic system was healthy. It was the same in the late 1920s. In fact, it has been the same throughout human history, and it is no different today. The stock market is going up. Actually that is a sign of economic health, but people ought to reflect on the fact that the highest performing stock market in the world in 2007 belonged to Zimbabwe. It is because of the tendency to look at the surface rather than at the underlying reality that business cycle theory has been such a source of confusion throughout economic history.

4:12To understand the theory requires looking beyond the data and into the core of the structure of production and its overall health. It requires abstract thinking about the relationship between capital and interest rates, money and investment, real and fake savings, and the economic impact of central banks and the illusions they weave. You can't get that information by watching The numbers blowing by you at the bottom of your TV screen. Then when the crisis hits, it comes as a complete surprise and economists find themselves in the role of forging a plan to do something about it. This is when the crudest form of Keynesianism comes into play. The government spends what money it has and prints what it doesn't have.

5:01Unemployed people are paid. Tricks to prop up failing industries abound. Generally the approach is to gin up the public to engage in some form of exchange to keep reality at bay. Austrians counsel a different approach, one that takes account of underlining reality during the boom phase. They draw attention to the existence of the bubble before it pops, and once it goes away, the Austrians suggest that it does no good to blow another bubble or otherwise keep uneconomic Production and Plans Going. The Austrians in the late 1920s and early 1930s found themselves having to explain this again and again. But that was at the onset of the age of positivism, the method that posits that only what you see on the surface really matters.

5:54So they had a very difficult time making points that were more sophisticated. They were like scientists trying to address The Convention of Witch Doctors The same is true today. The Austrian account of the Depression requires thinking on more than one level to arrive at the truth, whereas economists these days are more likely to be looking for obvious explanations and even more obvious solutions even when these neither explain nor solve anything. This puts the Austrians in an interesting position within the intellectual culture of any time in Any Place. They must go against the grain. They must say things that people do not want to hear. They must be willing to be unpopular, socially and politically. I'm thinking here of people like Benjamin Anderson, Gerrit Garett, Henry Hazlitt, and of course F. A. Hayek and most of all Ludwig von Mises. They gave up career and fame to stick with the truth and and say what had to be said.

7:01Later in life, Hayek was speaking before a group of economics students. He bared his soul about the problem of the moral choices economists must make. He said that it is very dangerous for an economist to seek fame and fortune and to work closely with political establishments, simply because in his experience, the most important trait of a good economist is the courage to say the unpopular thing. If you value your position and your privileges more than the truth, you will say what people want to hear rather than what they need to hear. It is a feature that marked the life of Ludwig von Mises. Today, his name resonates around the world. The tributes to him pour in on a monthly and weekly basis.

7:48His books remain massive sellers. He is the standard bearer for the science in service of human freedom, especially at Like the Guido Hulsman biography of Mises appeared, the appreciation for his courage and nobility have grown. But we must remember that it was not always so, and it did not have to be so. This kind of immortality is granted in no small measure because of the discreet moral choices made in life. If you had asked anyone about this man between 1925 in the late 1960s, the bulk of his career. The answer would have been that he was washed up, old school, too doctrinaire, intransigent, unwilling to engage the profession, attached to antique ideas and his own worst enemy.

8:42They called him the, quote, last night of liberalism as a way of conjuring up images of Don Quixote. Mises was undaunted, excuse me, When Yale University Press solicited opinions on whether it should publish Human Action, most people answered that this book should never see the light of day. Because after all, its day was long past, and it was thanks only to the intervention of Fritz Machlup and Henry Hazlitt that Yale University Press bothered it all. But Mises was undaunted then as he had been throughout his life, and as he remained until Before going into that choice, I would like to speak of another economist who was a contemporary of Mises. His name was Hans Meyer. He was born in 1879, two years before Mises. He died in 1955. But while Mises worked at the Chamber of Commerce in Vienna because he was denied a paid position at the university. Meyer served as one of three full professors, along with socialist Amar Spahn and Count Degenfield Schoenberg. Of Spahn, Mises wrote in his memoirs

10:01that, quote, he did not teach economics, instead he preached national socialism. Of the Count, Mises wrote that he was, quote, curly-versed in the problems of economics. It was Meyer Mayer wrote a handful of essays that contributed little to nothing, but then again his main concern had nothing to do with theory and nothing at all to do with ideas. His focus was on academic power within the department and within the profession. People outside Inside of academia, may not understand what this means, but inside academia, people know all about this. There are people in every department who expend the bulk of their efforts on the pettiest form of professional advancement. What is at stake? Not much, but as we know, the smaller the stakes, the more vicious the fight.

11:02Among the prizes are better titles, higher salaries, the ability to get the best possible to advance one's favorite people to get a larger office with a puffier chair, to know all the right people in their profession, and best of all to be able to lord it over others, and to be able to reduce the influence of your enemies and increase the influence of your friends in a way that makes people into your lifetime minions and supplicants.

11:37In a political system, there are even more prizes to be close to politicians, to get outside gigs in which you serve as an expert in drafting legislation, or in legal proceedings, to testify before Congress, to get called by the MSM to comment on national affairs and the like. The point is not to advance ideas, but rather to advance oneself in a professional sense. Outsiders imagine that university life is all about good ideas, but insiders know know that the real battles that take place within departments often have very little to do with ideas or principles. Strange coalitions can develop based entirely on the pettiest of issues. Professional ambitions are the driving force, not principles. There are people in every department who are highly accomplished, but whose accomplishments have nothing to do with science, teaching truth, or pursuing a vocation of real scholarship.

12:33This has been the case, of course, for many centuries in academia, although somehow it seems worse today, and these petty pursuits are often rewarded in this life while those who eschew them in favor of truth are pushed aside or relegated to a permanent low status. This is part of the facts of life, and that is what Hayek was referring to, and Mises's life illustrates this point perfectly. Let's return to Professor Meyer. The main energies of Meyer were spent in an open war on his rival for power, Atmar Spahn. This consumed him almost completely. He believed he had to keep Spahn at bay in order to advance himself. Meyer smeared Spahn in every possible way and place and brought unrelenting scandal to the department with his war to the knife. I note that Meyer and Spahn did not disagree on any matter of policy in any substantive way. It was all about position and power.

13:30He wasn't consumed with his hatred for and plots against Spahn. Meyer spent the remainder of his energy building up his power base within the university. It began well for him as the acknowledged successor to Friedrich von Wieser, the previous power broker. Meyer had established himself as the most grumbling student of Wieser's, and his reward was that Wieser picked him as his successor by passing not only Ludwig von Mises but the amazing Joseph Schumpeter. Let's begin Meyer's march. He called the shots. Mises himself was on the enemies list, of course. In fact, Meyer was responsible, in the large part, for the denial of a paid position at the University of Mises. But that wasn't enough for Meyer. He treated Mises's students very badly during examinations, and for this reason, Mises went so far as to suggest to his students and to his seminar participants They declined to be officially enrolled in order to prevent them from being harmed by Meyer.

14:31Meyer also worked to make it nearly impossible for any student in the department to write a dissertation under Mises. The politics were vicious and unrelenting. So what was Mises' attitude towards this? He writes in his memoir, I could not be bothered by all of these things. He just kept on doing his work. You can easily imagine scenes from this period. Mises is in his office writing and reading, trying to hammer out and perfect the theory of the business cycle or reflect on the problem of economic methodology. A student might come in and let him know about Meyer's latest antics. Mises would look up from his work, sigh with exasperation and tell the student not to worry about it, and then go back to work. He refused to be drawn in. The Mises circle was aghast by the goings-on, but the members did their best to make light of it. They even made up a song set to a traditional Viennese melody that they called the Mises-Meier Debate, which

15:29featured the two economists talking past each other and sharing no common values at all. At one point, Mises's circle grew into a full-blown economic society associated with the university. Mises could only be vice president. Meier would, of course, be president, since Mises was the master of the universe as far as economics in Vienna was concerned. Meyer wouldn't have it any other way. He never missed a chance to underscore who was in charge and what he could do about it. Mises' position as vice president would not last. The time came when Nazism grew in influence in Austria. As an all-time liberal and as a Jew, Mises knew that his time was limited. Sensing the possibility of even physical harm, Mises accepted a new position in Geneva and left for his new home in 1934.

16:21The society declined in membership and otherwise floundered. In 1938, Austria was annexed to the German Third Reich. Meyer had a choice about what he would do. He could have stood by principle. But why would he do that? It would have meant sacrificing his self-interest for the greater good, and that is something Meyer had never done. Quite the opposite, his entire academic career was about Meyer and Meyer alone. So to his everlasting disgrace, he read all members of the economic society. The announcement was that all non-Aryan members were hereby expelled. This meant, of course, that no Jews were allowed. He cited, quote, the changed circumstances in German Austria and a view of the respective laws now also applicable to this state, close quote.

17:13So you can see then that all of Meyer's power over his underlings was bested by the greater power of the state, to which he was unfailingly loyal. He thrived under the social democrats. He thrived during the Nazi takeover. He helped the Nazis purge the Jews and the liberals from his academic department. Now note that Meyer was no raging anti-Semite. His decision was the result of a series of discrete choices for position and power in the profession against against Truth and Principle. One day it seemed harmless in some way, and then the moment of truth arrived, in which he played a role in the mass slaughter of ideas and those who held them. Perhaps Meyer thought that he made the right choice, after all, he maintained his privileges and perks, and after the war, when the communists came to power, he thrived then too.

18:07He did all that an academic was supposed to do to get ahead and to achieve the glory that that an academic can achieve, regardless of the circumstances. But consider the irony of this power and glory. In the bigger picture of continental economics, the Austrians were not highly regarded by the profession at large. Since the turn of the century, the German historical school had captured the mantle of science. Their empirical orientation and stance against classical theory had, over the decades, melded nicely with the rise of positivism in the social sciences. Never forget that the phrase Austrian School was coined not by the Austrians, but by the German historical school, and the phrase was used as a put-down, with overtones of a school mired in medieval scholasticism and deduction rather than real science.

19:01So our friend Meyer thought he was master of the universe, although he was in fact a small fish in an even smaller pond. But he played the game, and that was all he did. He thought he won, but history has rendered a different judgment. He died in 1955, and then what happened? Well, justice finally arrived and he was instantly forgotten. Of all the students he had during his life, he had none after his death. There were no Mayarians. Hayek reflected on the amazing development. He expected much to come out of the Wieser-Meier School and not much to come out of the Mises branch. He writes that the very opposite happened. Meier's machine seemed promising, but it broke down completely. While Mises had no machine at all, it became the leader of a global colossus of ideas. If we look at Mark Blaug's book, Who's Who in Economics, a 1300 page tome, there is an entry from Menger, Hayek, Boehm-Bawerk and and of course, Ludwig von Mises.

20:06Henry calls Mises, quote, the leading 20th century figure of the Austrian School and credits him with contributions to methodology, price theory, business cycle theory, monetary theory, socialist theory and interventionism. There is no mention of the price he paid in life, no mention of his courageous moral choices, no mention of the grim reality of a life moving from country to country one step ahead of the state. He ended up being known only for his triumphs, about which perhaps not even Mises was aware during his lifetime. But guess what? There is no entry at all for Hans Meyer. It is not that his status is reduced. Not that he is noted and dismissed. Not that he is put down as a minor thinker with power.

20:53He is not called a Nazi collaborator. He is not called a communist collaborator. Not at all. He isn't even mentioned. It is as if he never existed. Meier's legacy vanished so fast after his death that he was forgotten within a few years. His status is so bad that Wikipedia doesn't have an entry for him. In fact, this talk today has probably given him more coverage than any other in 50 years, This may be the last time you ever hear him mention. The Meyer Line ended, but the Mises Line was just beginning. He left for Geneva in 1934, accepting a dramatic pay cut.

21:38His fiancee followed and they were married, but not before he warned her that while he would write much about money, he would never have much of it. And in Geneva he stayed for six years, having left his beloved Vienna and watched the world go through the shredding of civilization. The Nazis ransacked his old apartment, stole his books and all his papers. He was living a nomadic existence, unaware of where his next position would be. And that was the way he lived in the prime of his life. He was in his mid-fifties and nearly homeless. But as he dealt with the Meyer problem during his years in Vienna, Mises would not be distracted from his important work. For six years he researched and wrote. The result was his magnum William Opus, a massive treatise on economics called Nationale Economie.

22:28In 1940, he completed the book and it was published in a small print run. But how intense was the demand in 1940 for a book on the economics of freedom written in German? This was not destined to be a bestseller. He surely knew that while writing it, but he wrote it anyway. Instead of book signings and celebrations, Mises faced another life-changing event that year. He received word from his Geneva sponsors that there was a problem. There were too many Jews taking refuge in Switzerland. He was told that he needed to find a new home. The United States was his new safe haven. He began to write letters for positions in the United States, but think what this would mean.

23:13He was a German speaker. He had a reading knowledge of English, There were serious ideological problems in the United States too. The country was enthralled with Keynesian economics. The profession had turned. There were very few, if any, real free-market Economists in the United States to champion his cause. There were a few leads he had on jobs, but they were mere promises, no discussion of pay or any kind of security, and he ended up having to leave with no assurances at all. But in the United States, Mises did have a major champion outside of academia. His name was Henry Hazlitt. Let me review his history He became so well known as a literary figure that he was hired as literary editor of The Nation magazine before the New Deal, a very major post. His free market views were not a special problem for him then, but after the Great Depression, liberal intellectuals had to make a choice. They had to adhere to free market theory or embrace the industrial

24:38and Planning State of FDR. The nation went with the New Deal. That was a major reversal for this organ of liberal opinion that had long championed freedom and condemned industrial statism. The New Deal was nothing if not the imposition of a fascist system of economics. But the nation set a precedent for the American left that this ideological tendency has followed ever since. All principles must eventually yield to the one overriding imperative of imposing capitalism no matter what. But Hazlitt refused to go along with the change. He argued with his colleagues. He pointed out the fallacies of the National Industrial Recovery Act.

25:23He patiently tried to explain to them the absurdities of the New Deal. He wouldn't give in, so they fired him. H.L. Mencken saw the greatness of his work. In fact, Macon referred to him as the one economist who could really write, and so he made him his own successor at the American Mercury. Sadly, this didn't work out because the ownership of that publication did not like Hazlitt's Jewishness or his free market bent and sent him packing again. In different ways, in different sectors, in different countries, it seemed like Mises and Hazlitt were living parallel lives. At each crossroad in life, they had They both chose the path of principle. They chose freedom, even when it was at the expense of their own bank accounts, and even when their choice brought professional decline and risked failure in the eyes of their colleagues.

26:16Hazlitt eventually moved to the New York Times, which back then did not have nearly the prestige, I must say the unearned prestige, that it has today. He was later fired by the Times for opposing Bretton Woods, but while he was there, in part he used his position to write about Mises' books like socialism. This grabbed the attention of a handful of American business people like Lawrence Ferdig, later to become a very generous donor to the Mises Institute, as indeed Henry Haslett was too. It was Ferdig and his friends who knew of Mises' arrival in America, and they were thrilled. They had seen what a devastating blow FDR and Keynesianism were for free market ideas. They put together a fund that would provide Mises a position at New York University where he could teach and write. He was never paid by the university, where he was always a visiting professor for decades, but through this private endowment.

27:14Do you see how this all links up? Hazlitt took the moral road, the courageous road, the The road of sacrifice and principle. It was because of that that Mises, who had taken a similar road, could find safe haven in the United States. It was not the position that he deserved. He would be treated much worse than Keynesians and Marxists. But it was something. It was an income to pay the bills. It was a chance to teach and write. He had the freedom to say what he wanted to say. That was all he needed. So we can see how these two men of principle, worlds apart, ended up being drawn to each other because they each recognized a type, men who were willing to do what is right. Regardless of the circumstances, each could have gone another way. Mises might have been every bit as famous and powerful in Vienna as Meyer had been, but he would have thrown away the immortality of his ideas in the process. Hazlitt could have had a high position with

28:17One of the people who had been drawn to Mises through Hazlitt's writings was the head of Yale University Press. He approached Mises about doing an English language edition of his magnum opus from 1940. Mises had already dedicated six years to that book and it had Sunk Without a Trace. Now he was being asked to translate it into English. It was a daunting task but he agreed. Yale then set out to find referees to approve such a huge publishing risk. Yale first went to Mises' old colleagues and they were about as disappointing as referees as they were in other aspects of their careers. They wrote that there was no need to publish Mises' ideas were old and superseded by Keynesian theory, but Yael persisted and Hazlitt finally managed to assemble a group of people who would endorse the book's translation and Mises got to work.

29:22Now we all know the frustration that comes with losing a file on one's computer and having to recreate it. Imagine what it was like for Mises to lose a thousand page book, to lose it to history in Dark Times and Being Asked to Recreate it in Another Language. But he was undaunted. He got to work and the result appeared fully nine years later and of course that book was called Human Action. By academic standards, it was a best seller and remained so 60 years later. Even so, Mises remained at his unpaid, unofficial position, but he gathered around himself students for his seminar, even though other professors warn the students not to take his class or attend the sessions. They discourage their students from having anything to do with them at all, and the dean seconded their hostility. The dean was John Sawhill, who later became the first energy czar under Richard Nixon, a very bad man. But Mises, who had navigated But Mises, who had navigated the wars at the University of Vienna, this was very small potatoes, nothing to pay attention to at all, slowly his fame spread, but we need to remember that even at its height at this time, in the United States, it was tiny compared to what it is today.

30:45In fact, Mises died a year before what is usually considered the Austrian revival, which is often dated from 1974 when Hayek received the Nobel Prize, a prize that was entirely unexpected and a real tribute, excuse me, a prize that was entirely unexpected and which he shared with a socialist and which shocked a profession that had no interest in the ideas of either Mises or Hayek, both of whom they considered to be dinosaurs. It's interesting to read Hayek's acceptance speech with the Mises Institute published this year. It's a tribute to a profession with which he wanted closer ties, but it was not a loving presentation of the glories of academia. In fact, it was the opposite. He said that the most dangerous person on earth is the arrogant intellectual who lacks the humility necessary to see that society needs no masters and cannot be planned from the and the top-down, and intellectual lacking and humility can become a tyrant, he said, and an accomplice in the destruction of civilization itself.

31:49It was an amazing speech for a Nobel Prize winner to give on the implicit condemnation of a century of intellectual and social trends and a real tribute to Mises, who had stuck by his principles and never given in to the academic trends of his time. A similar story could be told about the life of Murray and Rothbard. He might have become a regular star in an Ivy League department, but instead decided to follow the lead of Mises in economic science. As a result, he taught at a tiny college in Brooklyn for many years at very low pay. But as with Mises, this element of Rothbard's life is largely forgotten. After their death, people have forgotten all the trials and difficulties these men faced. And what did they earn for their commitments? They earned for their ideas a certain kind of immortality.

32:39What are those ideas? They said that freedom works, and freedom is right. That government does not work, and that it is the source of great evil in this world. They proved these propositions for thousands of applications. They wrote these truths in scholarly treatises and popular articles, and history has vindicated them again and again. We are living now through another period of economic planning and we're seeing economists split on both sides. The overwhelming majority are saying what the regime wants them to say. To depart too much from the prevailing ideology of power is more of a risk than most want to take. A small minority, the same group that warned of the bubble, is again warning the stimulus is a fake and they are going against the grain in saying so. I'm with Hayek on this point. To be an economist with integrity means having to say things that people don't want to hear and especially to say things that the regime does not want to hear. It takes more than technical

33:48knowledge to be a good economist. It takes moral courage and that is an even is a shorter supply than economic logic. The Mises Institute will continue to be a harbinger of both, as it has been for the whole of its history. And just as Mises needed Haslett and Ferdig, so we need our supporters, everyone in this room, to give us a voice and to help us reach out to many more students, faculty, professionals and citizens of all types as we can. It's a burden we must all bear. As Mises said, in the end, no one is safe if civilization is sweeping to destruction. And the only way to fight bad ideas is with good ones.

34:34That's a fight I'm willing to engage in so long as God gives me breath. And I hope that all of you will continue to fight or join the fight with the Mises Institute.

34:50I don't know if you all know, but when Lew took the job starting the Institute, he promised He made the deal with Ludwig von Mises' widow that he would spend the rest of his life with the Mises Institute and devote the rest of his life to this, and he has. He continues as chairman and CEO, and we are all the better for it.

35:38I want to make one comment about, I understand we've run out of books. What a terrible thing. So thank you for your book buying prowess. I'm not sure this has happened. If we have books, there's only a few left, but I want to remind you, just go to Mises.org. Actually, there's no www to it. Mises.org, go to the store. We've got everything there available for Purchase. I do want to mention the gift cards on the table again today. I get a copy of Reassessing the Presidency. It will go to the fine work that Lew started so many years ago and continues to this day. You actually heard from two gentlemen who have gone through through the program, Peter Klein, M.U. class of 1989, and Bob Murphy, M.U. class of 2000-2001.

36:36So I think you have a good taste of what Mises Institute and Mises University produces. Again, I want to thank our sponsor today, Mr. Jim Wolfe, for his fine sponsorship of at this event. And of course thank our speakers, thank our staff, taking this show on the road takes a little doing, a lot of moving parts, but they all do a fine job, Christy, Will, Chad, James Fogel, so I want to thank them.

37:22and Lou mentioned that great Mises quote but I'd like to repeat it because I think it bears repeating everybody carries a part of society on his shoulders no one is relieved of the share responsibility by others no one can find a safe way for himself if society is sweeping toward destruction therefore everyone in his own self-interest must thrust himself vigorously into the intellectual battle I want to thank all of you for thrusting into the intellectual battle this Saturday. Enjoy the rest of your weekend.