Archive for April, 2010

An Interview with LVMI President Doug French on Austrian Economics

April 30, 2010

Doug French on Mises, Rothbard and the Advancement of Free-Markets with Scott Smith and the Daily Bell

Introduction: Douglas French is president of the Mises Institute and author of Early Speculative Bubbles & Increases in the Money Supply. He received his Masters degree in economics from the University of Nevada, Las Vegas, under Murray Rothbard with Professor Hans-Hermann Hoppe serving on his thesis committee.

Daily Bell: Can you give us some background about yourself? Where did you grow up and how did you become interested in Austrian economics?

Douglas French: I grew up in Abilene, Kansas and like Dwight D. Eisenhower, was an average student at Abilene High School. Sports was my primary interest in school. I lettered in three sports, and went on to play football at Washburn University in Topeka, Kansas.

I dropped out of college in my third year out and worked as a bartender and bar manager for ten years. During that time I returned to college to finish my undergraduate degree with a major in economics and finance.

After moving to Las Vegas in 1986, I took an entry-level job at a bank and ultimately worked in the banking business in Nevada for 22 years. In the fall of 1989 I decided to enroll at the University of Nevada at Las Vegas (UNLV) and pursue a masters in economics. In the fall of 1990 I took “History of Economic Thought” with Murray Rothbard and my life was changed forever. I took “U.S. Economic History” with Murray as well and wrote my masters thesis under his direction. While researching and writing my thesis on early speculative bubbles I became interested in Austrian Economics, especially Austrian Business Cycle Theory.

Daily Bell: Tell us what you do at the Mises Institute and how you came to your important free-market role.

Douglas French: I serve as the President of the Institute. Lew Rockwell and the late Burt Blumert asked if I would come to work for the Institute in the fall of 2008. Along with being a student of Murray’s I had been a donor to LvMI and had attended a number of events as well as speaking at a few conferences. So I feel like I’ve been closely involved with LvMI’s mission for a number of years.

Daily Bell: You studied under Murray Rothbard and with Professor Hans-Hermann Hoppe. Can you give us some background and anecdotes about them? What has made them such famous proponents of free-markets and human action?

Douglas French: Murray was the happiest person I’ve ever met. Especially considering that the UNLV economics department did all it could to discourage students from take his classes and classes from Hans. He was generous with his time and his students would wait long periods just to chat with him. Thankfully, someone eventually found a chair and put it outside his door so we didn’t have to keep sitting on the hard tile floor in the hallway.

The first night of class I remember Murray walking through the door and he started talking immediately about the crazy politicians wanting to fix gas prices. Anyone who has taken classes with Murray will tell you he was a walking bibliography. His lectures were filled with endless reading suggestions. And not just book titles but author, publisher, date published. Of course, as a thesis advisor he was the best: references, strategist, and cheerleader.

Of course Murray selected the rest of my thesis committee for me and professor Hoppe was at the top of his list. However, I never had the opportunity to take classes from him.

My thesis defense lasted for more than a couple hours as I remember. Sitting through my oral defense had to seem like the longest two hours of my committee members’ lives. But none of the Keynesian faculty members who dropped by to comment chose to stick around long enough to critique me.

Since I had no background in Austrian economics or Libertarianism, at the time, I had no idea how lucky I was to be studying under the man who is considered the father of the modern libertarian movement and was the dean of the Austrian school until his death, not to mention having one of the most important scholars of our time and the current dean of the Austrian school as a thesis committee member.

Daily Bell: Give us a historical – economic – framework for Ludwig von Mises. How did his thinking evolve?

Douglas French: When Mises went to college he described himself as a statist “through and through” like most of his fellow classmates. However, he was anti-Marxist, writing that the “platitudes of Marxist literature repelled me.” Mises believed that all the Marxist scholars he met were mediocre, except Otto Bauer.

By his fifth semester he began to have doubts about government interventionism. His work on housing conditions in Austria revealed to him that taxation hindered capital investment and limited supply leading to higher rents. But, reductions in these taxes didn’t reduce rents and led the government to impose other taxes to replace the taxes that landlords had been paying: early insight that one government intervention leads to a series of others due to the unintended consequences of this intrusions.

In 1903 Mises read Carl Menger’s Principles of Economics and from that book, he wrote, “I became an economist.” Mises attended Eugene Böhm-Bawerk’s seminar in Vienna until 1913 and witnessed continuous debates between Böhm and Bauer over Marxist theory. Mises applied Menger’s marginal utility theory to money and the business cycle and these were the subjects of the seminar the last two winter semesters that he attended. The finished manuscript for The Theory of Money and Credit was in the hands of the publisher in early 1912.

Daily Bell: Mises is one of the greatest men who ever lived for his insights into what he called “human action.” How did the concept of human action evolve in his mind and why is it one of the most profound statements about the human condition ever uttered?

Douglas French: It was actually Carl Menger who developed a complete theory of social institutions arising from interactions among humans, each with his own subjective knowledge and experiences. It is the spontaneous evolution of these human actions that create institutions whereby individuals discover certain patterns of behavior that aid each person in attaining his goals more efficiently. Menger, and then Mises, applied this insight to the development of money which in turn makes the division of labor possible and satisfaction of wants attainable. This reasoning is the bedrock for understanding how societies and human progress advance. Conversely, this same understanding reveals how government intervention causes society to devolve.

Daily Bell: Can you summarize his great work, Human Action for our readers? Can you recommend some other books by von Mises?

Douglas French: I remember Murray talking about Human Action in class. He said that after he had read it, someone asked him what the book was about, he replied, “Everything!” So, can I summarize a book about everything? Not adequately. To quote from the Introduction to the Scholar’s Edition, Human Action is “a comprehensive treatise on economic science that would lay the foundation for a massive shift in intellectual opinion that is still working itself out fifty years after publication.”

Mises explained why he wrote Human Action:

Economics does not allow any breaking up into special branches. It invariably deals with the interconnectedness of all phenomena of acting and economizing. All economic facts mutually condition one another. Each of the various economic problems must be dealt with in the frame of a comprehensive system assigning its due place and weight to every aspect of human wants and desires. All monographs remain fragmentary if not integrated into a systematic treatment of the whole body of social and economic relations.

To provide such a comprehensive analysis is the task of my book Human Action , a Treatise on Economics. It is the consummation of lifelong studies and investigations, the precipitate of half a century of experience. I saw the forces operating which could not but annihilate the high civilization and prosperity of Europe. In writing my book, I was hoping to contribute to the endeavors of our most eminent contemporaries to prevent this country from following the path which leads to the abyss.

Bob Murphy, writing in the preface to his, Human Action Study Guide, “Suffice it to say, one cannot really claim to be an Austrian economist – certainly not a Misesian! – without reading Human Action.

In an essay written about Mises, Murray wrote that Human Action is “one of the finest products of the human mind in our century.”

One can’t go wrong reading any books by Mises. For those interested in booms and busts, I leaned extensively on a book that is now titled The Causes of the Economic Crisis when writing my thesis. For those who wonder why intellectuals and opinion makers hate capitalism, The Anti-Capitalist Mentality is very revealing. Want to understand big government? Read Bureaucracy. Theory and History was Mises’s favorite next to Human Action.

Of course the big three are Human Action, Socialism, and The Theory of Money and Credit.

Daily Bell: Tell us how Mises and FA Hayek expanded and finalized the concept of the business cycle.

Douglas French: As I mentioned, Mises applied marginal utility analysis to the money and the problem of the business cycle which became Austrian Business Cycle Theory (ABCT). As Murray Rothbard wrote in an essay about Mises, “At long last, economics was whole, an integral science based on a logical, step-by-step analysis of individual action. Money was fully integrated into an analysis of individual action and the market economy.”

Mises exposed the fallacies of the quantity theory of money and Irving Fisher’s “equation of exchange.” Mises put individual choice into monetary theory and dispensed with the “distorted concentration on mechanistic relations between aggregates.” Mises’s Regression Theorem showed that money can only be established by the market, beginning with barter, not by government construct. This of course has been proved right as every fiat currency in history has ultimately been made worthless.

Mises formulated his ABCT during the 1920s out of three elements; the boom-bust model from the Currency School, Swedish “Austrian” Knut Wicksell’s delineation between bank interest rates and the “natural” rate, and Böhm-Bawerk’s capital and interest theory.

“Mises’s remarkable integration of these previously totally separate analyses showed that any inflationary or created bank credit,” wrote Rothbard, “by pumping more money into the economy and by lowering interest rates on business loans below the free market, time-preference level, inevitably caused an excess of malinvestment in capital goods industries remote from the consumer.”

Hayek’s ABCT work continued from Mises’s explaining the origin of the business cycle in terms of bank-credit expansion.

Daily Bell: Did John Maynard Keynes know Mises? Keynes knew Hayek, but we wonder if he avoided Mises somehow or was in some way reluctant to engage him.

Douglas French: I can’t find any evidence that Keynes knew Mises personally. But Keynes did review the German version of The Theory of Money and Credit for the Economic Journal and dismissed it as being unoriginal. But as Donald Boudreaux pointed out in a letter to the Wall Street Journal, “in his 1930 book Treatise on Money, [Keynes] confessed that ‘in German, I can only clearly understand what I already know – so that new ideas are apt to be veiled from me by the difficulties of the language.'”

Daily Bell: Were there differences between Hayek and Mises intellectually and otherwise. Was Hayek Mises’ favorite pupil?

Douglas French: Hayek attended Mises’s Privateseminar, be he didn’t necessarily consider himself a student of Mises. He wrote in the introduction to Mises’s Memoirs that he was closely associated with Mises. But he came to Mises, “not as a student, but as a fresh Doctor of Law and a civil servant, subordinate to him, at one of those special institutions that had been created to execute the provisions of the peace treaty of St. Germain,” Hayek wrote. “The letter of recommendation by my university teacher Friedrich von Wieser, who described me as a highly promising young economist, was met by Mises with a smile and the remark that he had never seen me in his lectures.”

Murray writes in Keynes, The Man that Hayek was charmed by Lord Keynes but he didn’t succumb to Keynes’s ideas. However, Hayek never wrote a critique of The General Theory. And Mark Skousen speculates that Hayek backed off of Keynes in the 1940’s not wanting to interfere with Britain’s financing of the war effort.

So while Hayek may have been politically pragmatic, Mises never was. Mises’s widow Margit described her husband’s character, quoting the words Mises wrote about Benjamin Anderson. “He never yielded. He always freely enunciated what he considered to be true. If he had been prepared to suppress or only soften his criticism of popular, but obnoxious policies, the most influential positions and offices would have been offered to him. But he never compromises.”

“Of all the Misesians of the early 1930’s, the only economist completely uninfected by the Keynesian doctrine and personality was Mises himself,” Rothbard wrote. “And Mises, in Geneva and then for years in New York without a teaching position, was removed from the influential academic scene.”

Hayek was able to secure teaching positions at the London School of Economics and the University of Chicago, and in 1974 was awarded the Nobel Prize. Mises would never secure such positions, was driven from his own country and had to fight for students and a chance to teach at all. While Henry Hazlitt wrote in Barron’s, “If ever a man deserved the Nobel Prize in economics, it is Mises,” he of course was never awarded the prize.

Daily Bell: Mises was a proponent of a gold standard was he not?

Douglas French: He was, and wrote: “The superiority of the gold standard consists in the fact that the value of gold develops independent of political actions.” (more…)

If You Think the US Chamber of Commerce is in Favor of Free Markets, Think Again

April 28, 2010

Once again, Ron Paul gets the lowest GOP score from the U.S. Chamber of Commerce

By: Timothy P. Carney

The U.S. Chamber of Commerce has issued its 2009 congressional scorecard, and once again, Rep. Ron Paul, R-Tex. — certainly one of the two most free-market politicians in Washington — gets the lowest score of any Republican.

Paul was one of a handful of GOP lawmakers not to win the Chamber’s “Spirit of Enterprise Award.” He scored only a 67%, bucking the Chamber on four votes, including:

  • Paul opposed the “Solar Technology Roadmap Act,” which boosted subsidies for unprofitable solar energy technology.
  • Paul opposed the “Travel Promotion Act,” which subsidizes the tourism industry with a new fee on international visitors.
  • Paul opposed the largest spending bill in history, Obama’s $787 billion stimulus bill.
http://www.washingtonexaminer.com/opinion/blogs/beltway-confidential/once-again-ron-paul-gets-the-lowest-gop-score-from-the-us-chamber-of-commerce-92225644.html#ixzz0mNH6BlTy
Last year Tim Carney wrote:

Sen. Jim DeMint, R-S.C., had the most conservative voting record in 2008 according to the American Conservative Union (ACU), and was a “taxpayer hero” according to the National Taxpayer’s Union (NTU), but the U.S. Chamber of Commerce says his 2008 record was less pro-business than Barack Obama, Joe Biden, and Hillary Clinton.

Similarly, Texas libertarian GOPer Rep. Ron Paul—the most steadfast congressional opponent of regulation, taxation, and any sort of government intervention in business—scored lower than 90% of Democrats last year on the Chamber’s scorecard.
Pro-freedom is not pro-business in the US Chamber of Commerce’s perspective evidently.

Austrian Economics Rising

April 17, 2010

Austrian Economics Rising

Written by Thomas R. Eddlem

Peter, you have been mocked on all of these financial shows going back to 2005. Going back to 2005! Not only did you predict problems, you actually explained what was going to happen. Why didn’t anybody listen? You were Cassandra!”

— MSNBC commentator Joe Scarborough to “Austrian school” economics adherent Peter Schiff on Morning Joe, March 25, 2009

Scarborough’s reference to Cassandra — the character from Greek mythology given the gift of prophecy and the curse that nobody would believe her predictions — was particularly apropos to the Austrian school of economic theory until the latest economic crash. The name of this free-market economic school acknowledges the fact that many of the school’s “founding fathers” were Austrian nationals and disciples of the Austrian economist Karl Menger. Of course, the “Austrian school” is not a school in the traditional sense of the word denoting a physical structure; the term defines those who believe in pure free-market economics and laissez-faire principles. The Austrian school has a long history of amazingly accurate economic predictions while at the same time being completely ignored by the political establishment and virtually ignored by the mainstream media.

Prescient Predictions
But that lack of credibility to the public faded entirely once the Austrian school’s predictions again came true. One of the few exceptions to the media blackout against the Austrian school before 2008 was Euro Pacific Capital President Peter Schiff, now a candidate for the U.S. Senate in Connecticut, who had given a number of television interviews in advance of the current recession. Schiff repeatedly pointed out with astonishing accuracy what would happen and — more amazingly — why it would happen. Among the more famous of these interviews was an August 28, 2006 CNBC-TV debate with Reagan-era “supply-side school” economist Arthur Laffer. Laffer, a famed economic advisor to President Reagan, is perhaps the most prominent of the supply-side theoreticians and best known for the “Laffer curve” that explains how government can extract the most taxes from taxpayers without choking economic activity. After hearing Schiff predict a severe recession in 2007 or 2008, Laffer replied:

What he’s saying is that savings is way down in the United States, but wealth has risen dramatically. The United States economy has never been in better shape. There is no income tax increase coming in the next couple of years. Monetary policy is spectacular. We have freer trade than ever before…. I think Peter is just totally off base, and I just don’t know where he’s getting his stuff.

Schiff replied: “When you see the stock market come down and the real estate bubble burst, all that phony wealth is going to evaporate and all that is going to be left is the debt we accumulated to foreigners.”

Laffer next bet Schiff a penny in the same interview that Schiff was wrong. Laffer claimed he hadn’t paid Schiff the penny on HBO’s October 24, 2008 Real Time With Bill Maher show.

Schiff was not the only Austrian to accurately predict the current recession. Congressman Ron Paul made virtually identical predictions. Interviewed on February 23, 2010 — shortly after Paul won the Conservative Political Action Conference (CPAC) presidential straw poll on who conservatives would like to run for the next presidential election — on MSNBC’s Morning Joe, Scarborough noted:

Here’s what Ron Paul predicted in 2003 about … the bubble that was growing through Fannie and Freddie and the banks: [Video clip] “Ironically, by transferring risk of a widespread credit default, the government increases the likelihood of a painful crash in the housing market. Like all artificially created bubbles, the boom in housing prices cannot last forever. When house prices fall, homeowners will experience difficulty, their equity will be wiped out. The more people who will be investing in the market, the greater the effects across the economy when that bubble bursts. Even Fed Chairman Greenspan has expressed concerns that government subsidies make investors underestimate the risk of investing in Freddie and Fannie.” You called it right. That was in 2003, Congressman. 2003, five years and five days before the crash. How did you know?

Actually, Rep. Paul had also said essentially the same thing a year earlier than that, in a July 16, 2002 speech before the U.S. House of Representatives.

How did he know? Representative Paul explained to Scarborough that he was

just trying to understand economics from an Austrian free market perspective. It sort of goes to show that with a little perseverance sometimes you can come as a winner in the end. And I think we are winning on arguing the case for free markets over government intervention…. It isn’t me that makes these predictions, it’s the predictions made by good Austrian economists, people like Mises and Hayek and Rothbard and Sennholz. They taught us this, it’s available, and the young people especially are responding to this and studying this school of thought.

Austrian school economics received a massive national hearing during Rep. Paul’s presidential race in 2008, though — like Cassandra — his predictions of an economic crash were not accepted by enough Republican Party primary voters to win him the presidential nomination. That has all changed since the crash, Rep. Paul told The New American in an interview for this story. He sees a rising interest in the Austrian school: “There has been a dramatic change with the collapse in the economy because the Austrians predicted it. They’ve been right before.”

He’s right on both counts. The media is covering Austrian economists more than ever. Rep. Paul has been a frequent guest on national television and enjoyed two national best-selling books, The Revolution: A Manifesto and End the Fed, since losing the Republican presidential nomination. His “Campaign for Liberty” — a non-political interest group founded to continue the grass-roots activism of mostly younger 2008 campaign volunteers — received more than $4 million in donations in just the first few months after President Obama was elected. Rep. Paul acknowledges that “the campaign lit a match.” But he’s quick to add that “the work was done many many years ago,” by Ludwig von Mises and others.

Found to Be Fundamentally Sound
Rep. Paul is correct about the Austrian school making accurate forecasts in the past in addition to analysis of the most recent recession. Austrian school economist Friedrich A. von Hayek predicted the Great Depression years in advance of the infamous 1929 Wall Street stock market crash. Hayek’s Monetary Theory and the Trade Cycle — first published from Austria in 1929 — predicted the Great Depression. Hayek was granted a Nobel Prize in Economics (much later, in 1974) for his pre-Depression and Depression-era related work in the study of economics. The Nobel committee explained in a press release about the award:

Perhaps, partly due to this more profound analysis, he was one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929. Von Hayek showed how monetary expansion, accompanied by lending which exceeded the rate of voluntary saving, could lead to a misallocation of resources, particularly affecting the structure of capital. This type of business cycle theory with links to monetary expansion has fundamental features in common with the postwar monetary discussion.

Originally written during 1928 — and published in the German language in 1929 — Monetary Theory and the Trade Cycle provided the theoretical models that proved an economic crash was coming in the United States and other countries. The June 1932 preface to the English edition explained more specifically that the Federal Reserve had continued an inflationary, easy-credit policy under the Hoover administration (further continued and accelerated by the Roosevelt administration) that was bound to drag out the Depression: “Far from following a deflationary policy, central banks, particularly in the United States, have been making earlier and more far-reaching efforts than have ever been undertaken before to combat the depression by a policy of credit expansion — with the result that the depression has lasted longer and has become more severe than any preceding one.” The acceleration of that easy-credit policy under the Roosevelt administration guaranteed that the Great Depression would last until the end of World War II (though the war itself “cured” the unemployment part of the depression). And for many Austrians, today’s Federal Reserve policies are mirroring those of the early 1930s.

Hayek’s “trade cycle” is today called the “business cycle” by most Austrians, who use a term called “praxeology” to describe their approach. Praxeology is simply a word of Greek derivation employed by the Austrian school that means “the study of human action.” The action being studied in this case is economic action of a people. Austrian school economists understand the common-sense principle that nations — like people — build wealth from savings and investment and not from borrowing and spending.

The seminal work in Austrian economics is Human Action, authored by Hayek’s tutor (and Menger’s student) Ludwig von Mises. Von Mises was an Austrian who emigrated to the United States just before the Second World War, served as a member of the editorial board of American Opinion (a parent magazine of The New American), and lived the Cassandra complex that Scarborough said Schiff had endured. Despite Mises’ brilliance, the Austrian crown denied him a full professorship at Vienna University. Mises instead found work as an economist for the Vienna Chamber of Commerce and Industry from 1909 though 1934. Although von Mises was denied full political recognition for his substantial economic accomplishments in his native country, his staff (which included Hayek) at the chamber of commerce attended regular economic sessions in his office, and spread von Mises’ influence across the globe.

Von Mises argued that government can’t make accurate judgments in the complex human marketplace because government officials don’t have the knowledge to make millions of economic decisions every day better than the consumers themselves:

Starting from purely arbitrary assumptions concerning allegedly eternal and absolute values and perennial justice, they arrogate to themselves the office of the supreme judge of earthly affairs. They misconstrue their own arbitrary value judgments derived from intuition as the voice of the Almighty or of the nature of things.

Arguing that big-government arguments for intervention in the marketplace would not really replace laissez-faire chaos, von Mises’ logical critique of state planning was withering against socialism and fascism/Keynesianism. Von Mises wrote in Human Action, “The alternative is not plan or no plan. The question is whose planning? Should each member of society plan for himself, or should a benevolent government alone plan for them all? The issue is freedom versus government omnipotence.” Von Mises explains that “laissez faire does not mean: Let soulless mechanical forces operate. It means: Let each individual choose how he wants to cooperate in the social division of labor; let the consumers determine what the entrepreneurs should produce. Planning means: Let the government alone choose and enforce its rulings by the apparatus of coercion and compulsion.”

Von Mises championed the laissez-faire theory that government should not interfere in the economy because it is not competent to make the people happier or more prosperous than the people can do for themselves by making their own economic decisions. “Government is in the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen,” von Mises noted. “The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.”

This is not to say von Mises, or any particular adherent to the Austrian school, must necessarily think the state is an evil (though some do). Von Mises acknowledged that sometimes force is necessary, although he distilled the essence of the state as force rather than a positivist actor in the economy. The Austrian school is often associated with the libertarian movement, though one need not be a libertarian to accept the economic realities that the Austrian school explains. As von Mises argued:

Economics is not dogmatic, as the self-styled “unorthodox” advocates of government omnipotence and totalitarian dictatorship contend. Economics neither approves nor disapproves of government measures restricting production and output. It merely considers it its duty to clarify the consequences of such measures. The choice of policies to be adopted devolves upon the people. But in choosing they must not disregard the teachings of economics if they want to attain the ends sought.

There are certainly cases in which people may consider definite restrictive measures as justified. Regulations concerning fire prevention are restrictive and raise the cost of production. But the curtailment of total output they bring about is the price to be paid for avoidance of greater disaster. The decision about each restrictive measure is to be made on the ground of a meticulous weighing of the costs to be incurred and the prize to be obtained. No reasonable man could possibly question this rule.

Von Mises stressed that “the task of economics is to analyze and to search for truth. It is not called upon to praise or to disapprove from any standard of preconceived postulates and prejudices.” But in general, he concluded government was too blunt and inefficient a tool to make any decisions to increase human happiness in the economic sphere.

Hayek and von Mises’ work is echoed in modern Austrians, such as Peter Schiff, who argued recently: “What the government is going to do is to turn this into an inflationary depression which is going to be much, much worse…. Even President Obama will acknowledge — and Ben Bernanke acknowledges — that we got into trouble by borrowing and spending too much money. The solution isn’t to go borrow and spend even more, the solution is that we do the opposite.” Like Hayek in 1932, Schiff is making the same economic analysis: “Unfortunately, as painful as it is, the recession is what we need. The recession is the market’s way of curing the economy. And the more the government interferes with the recession, the worse we’re making the problem.”

Llewellyn Rockwell of the Ludwig von Mises Institute says that the sudden increased exposure of the Austrian school can be attributed to two major factors. “I would say Ron Paul and the Federal Reserve’s latest business cycle” sparked increased interest in the Austrian school, Rockwell told The New American. “It’s still a minority, but it’s so much bigger a minority that it’s no longer in the same league.” Rockwell founded the Mises Institute in 1982 with Mises’ widow Margit von Mises, garnering the support of Hayek and fellow Austrian economic giant Murray Rothbard.

Rockwell told The New American, “When I started talking about this 35 years ago, I couldn’t get anyone interested in the Fed. It was just a name on a bill in your pocket.” He now believes “there has been a huge shift. But the main problem we have is not that bright young people are attracted to Keynesian economic theory. The problem is Keynesianism is the economics of state power. This is what you do if you want to enhance the power of the state.”

Detractors and Donations
Rockwell explains the actual lure of Keynesian economics: “Most economists are interested in working for the government and therefore they are not in free markets, but in running your life. They would never put it that way, because they are ‘helping’ you.” Rockwell adds that government economists have an interest in enriching the power of the state while at the same time preventing the total destruction of the private sector. “They learned their lesson from communism. If you have communism, the rulers are poor too. So we have fascism.” And fascism is simply an economic system that involves government intervention in the “free” market. British economist John Maynard Keynes merely put a friendly, non-Axis power face on the economic philosophy.

Austrians have also struggled against other so-called free-market economic schools. While the supply-side school popular during the Reagan administration has all but disappeared, Milton Friedman’s Chicago school continues to hold many adherents. It holds many free-market beliefs similar to the Austrian school, but Rockwell notes that the Chicago school has no problem with the Federal Reserve Bank manipulating the currency and interest rates. “The Chicago school is pro-Fed,” he told The New American. “They’ve endorsed the Fed; they love the Fed; they believe that the Fed should be doing even more of what it is doing.”

Rockwell’s Mises Institute has seen a dramatic uptick in interest, as have other Austrian organizations. His personal website, LewRockwell.com, is the most trafficked libertarian website on the Internet (“We have more traffic than the Fed or the UN,” he says). “We’ve seen a significant increase in financial support, including even in this depression,” Rockwell says of the Mises Institute, adding, “Of course we’re still small if you compare us with the government-connected think tanks in the Washington beltway.”

The uptick in donations is all the more significant because the Mises Institute gives away its publications on the Internet. “It’s all available for free,” Rockwell boasts. “If anyone wants to study economics in the whole world, the Ludwig von Mises Institute is where they go either on the web or in person.” Online texts include the entire volumes of Mises’ work (including Human Action), Hayek, and other Austrians in PDF and HTML formats.

“The Mises Institute has been very instrumental in doing this,” Rep. Paul told The New American, who adds: “Where I find the most interest is on the college campuses. They knew all the names of these economists.” While the most famous economists have passed on, Rockwell is quick to add, “If you follow physics, you don’t always have Newton around.” Rather than a handful of famous men in the past, Rockwell explains that “today there are hundreds and hundreds of professors” across the world teaching Austrian economics.

Asked if he thought there was increased interest in the Austrian school on Capitol Hill, Rep. Paul told The New American there may be, but adds that “I don’t think there will be any action.” He’s not pessimistic, however, because “intellectually there are a lot of reasons to be optimistic. And the intellectual work has to be accomplished before the political progress.”

And the intellectual work has received a tremendous shot in the arm over the past two years.

The New American has a long association with the Austrian school, beyond von Mises serving on the editorial board of our predecessor publication, American Opinion. Its book-publishing affiliate Western Islands published Age of Inflation by Austrian school economist Hans Sennholz (also a longtime contributor to American Opinion) and has long distributed the works of Mises and Hayek through its affiliate, The John Birch Society. Lew Rockwell, founder of the Ludwig von Mises Institute, is a contributor to The New American.

Intro to Austrian Economics

April 14, 2010

Jörg Guido Hülsmann and Hans-Hermann Hoppe gave this lecture series ‘Introduction to Austrian Economics’ in Klampenborg (Denmark) in 2005. They are senior scholars at the Mises Institute.

The Ludwig von Mises Institute was founded in 1982 as the research and educational center of classical liberalism, libertarian political theory, and the Austrian School of economics. It serves as the world’s leading provider of educational materials, conferences, media, and literature in support of the tradition of thought represented by Ludwig von Mises and the school of thought he enlivened and carried forward during the 20th century.
www.mises.org

(more…)

Bastiat and the Broken Window

April 2, 2010