Book Blog – “Economics: A User’s Guide” (#economics, #heterodox, @Cambridge_Uni)

Economics: A User’s Guide, by Ha-Joon Chang, published 2014 (Buy from

Who is Ha-Joon Chang?

Born in South Korea in 1963, Ha-Joon Chang is currently a professor of economics at the UK’s University of Cambridge. He gained his PhD after successfully completing a thesis on “industrial policy” under British Marxist Robert Rowthorn, which advocated a “middle way” between central planning and free markets.

In a section on his personal website entitled “Economists Who Have Influenced Me“, Ha-Joon Chang states,

Many people find it difficult to place me in the intellectual universe of economics. This is not surprising, given that I have been influenced by many different economists, from Karl Marx on the left to Friedrich von Hayek on the right.

Of Austrian economist FA Hayek, Chang further states,

Hayek is very different from the Neoclassical school, even though many Neoclassical economists mention him in the same breath as Milton Friedman, on the basis that he was one of the most influential advocates of the free market. Unlike Neoclassical economists, however, Hayek does not take the socio-political order underlying the market relationship as given and emphasizes the ultimately political nature of our economic life. This is a big contrast to the Neoclassical view, which thinks that economics and politics can be, and should be, separated. Indeed, if you read Hayek’s book, Individualism and Economic Order, you will see that he is very critical –sometimes even abusive – of Neoclassical economics.

And with regard to Marx, Ha-Joon Chang claims,

With the collapse of communism, people have come to dismiss Marx as an irrelevance, but this is wrong. I don’t have much time for Marx’s utopian vision of socialism nor his labour theory of value, but his understanding of capitalism was superior in many ways to those of the self-appointed advocates of capitalism. For example, when free-market economists were mostly against limited liability companies, Marx saw it as an institution that will take capitalism on to another plane (to take it eventually to socialism, in his mistaken view). In my view, 150 years after he wrote it, his analysis of the evolution of labour regulation in Britain in Capital vol. 1 still remains one of the best on the subject. Marx also understood the centrality of the interaction between technologies (or what he called the forces of production) and institutions (or what he called the relations of production), which other economic schools have only recently started to grapple with.

On the dreaded Keynes, Chang admits,

Despite having been educated and taught in Cambridge, I have not been very ‘Keynesian’ in my approach to economics. This is not because I disagree with Keynesian thinking, but because I have mainly done my research on ‘micro’ issues, such as trade and industrial policy. However, I have come to be drawn more into ‘macro’ issues in the process of thinking about the recent financial crises, especially the 1997 Asian crisis and the 2008 world crisis. In thinking about these issues, John Maynard Keynes, Hyman Minsky, and Charles Kindleberger have been big influences.

According to biographical information in his book “Bad Samaritans”, Chang grew up in relative poverty as the son of a South Korean finance minister. He has written a number of books on the subject of economics, specifically with regard to economic history, global economic development and global trade patterns. Henceforth in my book blogs I will refer to him as “HJC” to save myself time.

Because of HJC’s intellectual background, pre-eminent social and intellectual position and large and established bibliography of thought, his ideas are worth studying and critiquing as a representative of a popular strand of “economic” thinking supported across countries and institutions.


My purpose in this book blog is to apply my own understanding of economics (informed, to date, by a mainstream US college education in the subject as well as intense and ongoing self-study in a variety of alternative theories) to the methods and arguments provided by HJC in this introductory economic work of his and in so doing arrive at conclusions about the soundness of his thought. In particular, because HJC represents a strain of “new thinking within the mainstream” and my personal convictions lie with what is known as the “Austrian school”, I want to empathetically highlight the areas where the two schools are in agreement, as well as try to explain wherein the differences lie.

Let’s get started!

“Why Are People Not Very Interested In Economics?”

HJC wonders why economics is an unpopular subject:

95 per cent of economics is common sense – made to look difficult, with the use of jargons and mathematics.

This is actually a point the Austrians make– that good economics involves simple logical deductions within the grasp of any reasonably intelligent person and that the introduction of jargon and higher math is used to keep laypeople out and make the discipline unintelligible to the uninitiated. HJC says that economics doesn’t appear to be relevant to most people’s lives and that the issues that they believe economics deal with, such as international currency movements, government budgets and foreign aid debates, are not things people believe they can comment on or think about competently without economic training.

On the other hand, HJC laments the “megalomania” of many economists who would just as soon argue that economics is the most relevant intellectual discipline in that it seems to explain everything, and more. HJC critically cites the success of titles like “Freakonomics” and the braggadocious quality of many economic book titles that purport to show how economics is behind anything that can be imagined.

HJC sees a more limited role for economics in human thought, though still an important and useful one, which raises two specific issues: is economics a science and, to the extent it is, what is economics actually about?

Is economics a science?

HJC is pretty clear on the matter:

economics can never be a science in the sense that physics or chemistry is [because] human beings have their own free will, unlike chemical molecules or physical objects.

He also adds that,

people have been led to believe that, like physics or chemistry, economics is a ‘science’, in which there is only one correct answer to everything

Instead, HJC argues that

What is needed is to learn economics in such a way that one becomes aware of different types of economic arguments and develops the critical faculty to judge which argument makes most sense in a given economic circumstance and in light of which moral values and political goals (note that I am not saying ‘which argument is correct’).

Let’s consider these claims one by one.

The first claim, that economics can never be an (empirical) science like physics or chemistry is something that Austrians would again agree with. The Austrian view of the epistemology of economic science strictly prohibits the use of inductive logic derived from empirical observation and research. The reason for this is that in “hard” sciences like physics, the effect is known but the cause is unknown. Physics, as an example, is a study of effects in search of causes. Various factors deemed to be the significant causal agent dictating a particular result can be tried in a series of controlled experiments and then conclusions can be arrived at by the experimenter based on the manipulation of the variable factor and the observed changes in the experimental data.

Economics, by contrast, is a science whose causes are known (human action) but whose effects are often mysterious, because multiple causal factors can occur simultaneously in the lead up to an observed result. For example, the price of two pounds of chuck roast at the supermarket involves a negotiation between a group of suppliers of chuck roast and a group of buyers of chuck roast and these suppliers and buyers are unique and uniquely motivated at a given time and location. The method of the economic sciences, then, must be the “gedanken experiment” (thought experiment) in which a conceptual reality is held in mind and the logical implications of changes in one factor at a time are deductively explored. This is impossible when studying human action, that is, economic activity, because it is never that one thing only changes and it is never guaranteed that the same reaction will occur by the people observed because of the nature of free will.

It is in fact curious that HJC makes this specific point because later on he seems to contradict himself when he says,

we need to look at history because we have the moral duty to avoid ‘live experiments’ with people as much as possible.

The questionable moral claim of having a duty to avoid human experimentation in economic matters “as much as possible” aside, this quote suggests that HJC believes economic theory can be derived from historical (experimental, empirical) data and observations despite earlier claims to the contrary. This is one of many confusions and muddled writing/thinking that the book suffers from. It also begs the question, well-known to Austrians, of what interpretations of the significance of various historical data could tell us on their own without any kind of intermediating and pre-selected theory applied to them.

History, as a discipline, is a process of careful selection of particular facts for a particular purpose. The past provides us with a nearly infinite quantity and quality of data to choose from. It is the task of the historian to pick from this quantity only the data that is relevant to examining a particular historical question. To do this, the historian must already be versed in valid theories from the applicable branches of science to which his question belongs. For example, a historian studying the incidence, severity and consequences of disease would need to understand human biology and epidemiology. Or a historian studying the history of money in France circa 1750-1850 would need to already understand monetary theory (a branch of economics) as well as other theoretical knowledge pertaining to the historical episode (for example, a theory of the State in general and a theory of post-Medieval French statism in particular).

We can not validate an economic theory by looking at the historical record. All we’d manage to do is to assume that which we’re trying to prove and thereby fool ourselves.

This gets us to the second claim. To reiterate, while it is true that economics is not a science “like” physics or chemistry (pertaining to the necessary differences in methodology), it is NOT true that economics is not a science in that it offers one right answer to a given question. If economics can not offer objective truths about universal causal relationships, then it would not be a science, it would be a canon of opinion and not worth studying any more than studying people’s opinions on the superiority of vanilla versus chocolate ice cream is worth studying. It would not be productive to write books about economics, it would be pointless to try to explain economics to other people and ultimately, any arguments or claims about one economic phenomenon or another would be arbitrary. This would be the position of philosophical nihilism in the realm of economics.

It’s hard to believe that this is what HJC personally believes or is advocating because it would then make most of the rest of what he has to say about economics empty of content and meaning. It would also make puzzling comments such as “95% of economics is common sense” as nihilism in any realm is typically not the common sense position, not to mention that the concept of “making sense” implies rationalizeable facts about reality. Yet, this is what this man, who is an economics PhD and responsible for instructing others in the philosophy, claims is the “state of the art.”

And thus we arrive at the third claim about economics which is almost the most puzzling of all. We’re admittedly early on in the book so I hope HJC is going to spend some time explaining the meta-epistemology of how one can know which circumstances call for the application of which economic arguments but it is already seeming like a muddled concept because we’ve rejected the idea that we can look at history as a source of theory about economics, and we’ve rejected the idea that economics is devoid of any content and meaning whatsoever and thus “non-scientific.” This would only leave one alternative to mind, that of logical deduction from axiomatic assumptions to arrive at conclusions which must be true.

It’s worth noting at this time that the Austrian school provides a special comment to this concept that economic arguments must be chosen and applied based on a specific moral or value-based perspective. The Austrians argue that to be scientific (“objective”), economics must be wertfrei, or value-free. That is, the knowledge of economics is not dependent upon the economist’s class, creed, race, nationality, personal preferences or other personal identifications. It is dependent upon logic which universally belongs to all mature human beings and is necessarily embedded in the biological structure of the mind.

Economics is not a tool for furthering a particular interest group’s agenda. It describes causal relationships between specific phenomena, ie, “If X, then Y” and it comments on whether specific ends aimed at can be achieved with specific means employed– NOT whether the ends aimed at are “good”, “right”, “holy”, “moral”, “desirable”, “valuable,” etc. For example, economics can help us understand the consequences of certain actions undertaken by human beings, but it can not tell us if those consequences are good, bad, etc. It simply tells us, “If you do this action, it will lead to this consequence, all else equal.”

I think this is a very different position than the one taken by HJC in the text and I look forward to exploring this idea and its implications in contrast to HJC’s claims further on as it seems inevitable he’s going to have to come back and explain this more eventually.

So what is economics?

From HJC’s comments so far, it’s unclear if he believes economics is a science. But because the book doesn’t end here, we’ll operate from the assumption for now that he believes it is a science. The question then becomes, what is the proper scope of economics as a science?

Here HJC levels his criticism mostly at popular, mainstream and “neoliberal” economists following what is termed neoclassical economics. Citing a contemporary (and former critic) of Keynes, Lionel Robbins, HJC says,

Robbins defined economics as ‘the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses’

He claims that most economists

define their subject in terms of its theoretical approach, rather than its subject matter

based off of Robbins’ logic. In other words, economics is a study of “rational choice” and focuses on the calculations entertained by people choosing between specific means to achieve specific goals in a variety of circumstances (choosing a spouse, choosing what to eat, choosing where to work, choosing what to invest in).

In contrast, HJC offers his definition of economics:

My belief is that economics should be defined not in terms of its methodology, or theoretical approach, but in terms of its subject matter, as is the case with all other disciplines. The subject matter of economics should be the economy – which involves money, work, technology, international trade, taxes and other things that have to do with the ways in which we produce goods and services, distribute the incomes generated in the process and consume the things thus produced – rather than ‘Life, the Universe and Everything’ (or ‘almost everything’), as many economists think.

In other words,

what we want from economics is the best possible explanation of various economic phenomena

It’s hard to argue with the idea that economics should be defined by its subject matter like any other science. Of course, the preceding paragraphs in the book up to this point are a litany of potential subject matter according to HJC versus those he criticizes in the neoclassical mainstream, which seems to beg the question.

And HJC even makes a point about subject matter that Austrians would sympathize with, namely that

The economics profession, and the rest of us whose views of the economy are informed by it, need to pay far more attention to production than currently [because] production is the ultimate foundation of any economy

This is a criticism leveled by Austrians at Keynesians with regards to macroeconomics, namely that there is an undue focus on consumption patterns and an incorrect emphasis on consumption (“aggregate demand”) as the driving energy of an economy without study or consideration of the productive activity necessary to enable it.

As a matter of comparison, it’s worth considering the thoughts of Austrian economics patriarch Ludwig von Mises on the questions of whether economics is a science and, if so, how to define it. The following passages are from Mises’ 1949 “Human Action“:

Economics is the youngest of all sciences. In the last two hundred years, it is true, many new sciences have emerged from the disciplines familiar to the ancient Greeks. However, what happened here was merely that parts of knowledge which had already found their place in the complex of the old system of learning now became autonomous. The field of study was more nicely subdivided and treated with new methods; hitherto unnoticed provinces were discovered in it, and people began to see things from aspects different from those of their precursors. The field itself was not expanded. But economics opened to human science a domain previously inaccessible and never thought of. The discovery of a regularity in the sequence and interdependence of market phenomena went beyond the limits of the traditional system of learning. It conveyed knowledge which could be regarded neither as logic, mathematics, psychology, physics, nor biology.

Thoughts so far– economics is a science, it is the youngest of sciences, it revealed new knowledge about observed market phenomena and this knowledge was separate and distinct from existing sciences (that is, economics is not a branch of a then-existing science, such as psychology). Mises continues,

Philosophers had long since been eager to ascertain the ends which God or Nature was trying to realize in the course of human history. They searched for the law of mankind’s destiny and evolution. But even those thinkers whose inquiry was free from any theological tendency failed utterly in these endeavors because they were committed to a faulty method. They dealt with humanity as a whole or with other holistic concepts like nation, race, or church. They set up quite arbitrarily the ends to which the behavior of such wholes is bound to lead. But they could not satisfactorily answer the question regarding what factors compelled the various acting individuals to behave in such a way that the goal aimed at by the whole’s inexorable evolution was attained.

Whether or not we define economics by its methodology, it is clear that in Mises’ mind, the discovery of a valid method for economics was one of the critical pillars of its emergence as a science. Prior observers witnessed mass phenomena, but had no method for explaining how component behavior led to the mass phenomena. Again, Mises continues,

Other philosophers were more realistic. They did not try to guess the designs of Nature or God. They looked at human things from the viewpoint of government. They were intent upon establishing rules of political action, a technique, as it were, of government and statesmanship. Speculative minds drew ambitious plans for a thorough reform and reconstruction of society. The more modest were satisfied with a collection and systematization of the data of historical experience. But all were fully convinced that there was in the course of social events no such regularity and invariance of phenomena as had already been found in the operation of human reasoning and in the sequence of natural phenomena. They did not search for the laws of social cooperation because they thought that man could organize society as he pleased.

If there are no “regularities in the sequence and interdependence of market phenomena”, that is, no universal scientific laws of cause and effect, then any social schemer’s vision for reforming society should be possible. The only thing that could get in the way of such a scheme would be purposeful obstruction or moral flaws in the individuals in society with whom the scheme is concerned. Instead, says Mises,

The discovery of the inescapable interdependence of market phenomena overthrew this opinion. Bewildered, people had to face a new view of society. They learned with stupefaction that there is another aspect from which human action might be viewed than that of good and bad, of fair and unfair, of just and unjust. In the course of social events there prevails a regularity of phenomena to which man must adjust his actions if he wishes to succeed. It is futile to approach social facts with the attitude of a censor who approves or disapproves from the point of view of quite arbitrary standards and subjective judgments of value. One must study the laws of human action and social cooperation as the physicist studies the laws of nature. Human action and social cooperation seen as the object of a science of given relations, no longer as a normative discipline of things that ought to be–this was a revolution of tremendous consequences for knowledge and philosophy as well as for social action.

Now we’re getting into the juicy part of the epistemological differences of the Austrians and an economist like HJC. First, Mises is describing the history of philosophy here. He is talking about the historical emergence of economics as a scientific discipline a couple hundred years ago (writing in 1949, he would be relating events that took place from approximately 1749 onward, and he is purposefully glossing over the proto-economic thought of groups like the Spanish scholastics as well as various contributions made by those in the Eastern philosophical traditions) and the impact on social thought and social events that followed. Consider, for example, HJC’s reference to Adam Smith’s “The Wealth of Nations”, which put forth one of the first serious philosophical challenges to the then predominant “mercantilist” thought of contemporary political economy, a “technique of government and statesmanship” as Mises termed it.

Second, consider how radical this emergence was then, and how radical it is in the face of what HJC is saying now. As we will see very shortly, HJC provides a revisionist “history of capitalism” and spends most of his effort trying to make the claim that much or most of what is historically appreciated as the capitalist industrial development of the Western world did not occur via free markets and free trade, but rather through a series of calculated tariff and other regulatory structures, “techniques of government and statesmanship.” The Misesian/Austrian argument, then, is not that Western capitalism was developed through state intervention but that the remarkable economic development of the West took place in spite of these “techniques of government and statesmanship” which were implemented in ignorance or disregard for the existence of “regularities in the sequence and interdependence of market phenomena”.

Finally, then, note that Mises is directly supporting the claim that economics is a science with discoverable, constant laws of cause and effect (like physics) and therefore “one truth” in answer to a given question, but that the methodology of economics is not based on empirical experimentation (unlike physics) and that it was the radical departure from “ought” and the new focus on “is” that allowed economics to emerge as an objective and true science. This is somewhere close to the polar opposite claim HJC is making when he argues that economics involves learning to figure out which of many competing intellectual school’s claims should be applied as an explanation to a given set of observed economic phenomena based on their pre-existing moral or value systems (“oughts”).

And Mises does HJC one better:

For a long time men failed to realize that the transition from the classical theory of value to the subjective theory of value was much more than the substitution of a more satisfactory theory of market exchange for a less satisfactory one. The general theory of choice and preference goes far beyond the horizon which encompassed the scope of economic problems as circumscribed by the economists from Cantillon, Hume, and Adam Smith down to John Stuart Mill. It is much more than merely a theory of the “economic side” of human endeavors and of man’s striving for commodities and an improvement in his material well-being. It is the science of every kind of human action. Choosing determines all human decisions. In making his choice man chooses not only between various material things and services. All human values are offered for option. All ends and all means, both material and ideal issues, the sublime and the base, the noble and the ignoble, are ranged in a single row and subjected to a decision which picks out one thing and sets aside another. Nothing that men aim at or want to avoid remains outside of this arrangement into a unique scale of gradation and preference. The modern theory of value widens the scientific horizon and enlarges the field of economic studies. Out of the political economy of the classical school emerges the general theory of human action,praxeology. The economic or catallactic problems are embedded in a more general science, and can no longer be severed from this connection. No treatment of economic problems proper can avoid starting from acts of choice; economics becomes a part, although the hitherto best elaborated part, of a more universal science, praxeology.

Now this is powerful stuff and, based on HJC’s lampooning earlier in the chapter of “Economics: A User’s Guide”, the author would likely find this perspective quite challenging at first. As HJC laments, economists seem to think that economics explains “life, the universe and everything.” To this point, Mises replies, “No, economics does not explain this– but praxeology comes close.”

Now is probably a good time to refer to my notes from “Lecture 1” of the 2014 Rothbard Graduate Seminar. For Austrians, praxeology is the broader science studying all human choice (“rational choice” from earlier?), of which economics is a dependent part and probably best developed. Political economy would also be a branch of praxeology, or as Austrians refer to it, the theory of violent intervention in the market (although it’s questionable whether war is a subset of praxeology, or of violent intervention in the market). And within economics, the area best developed and most relevant for the purposes of most people on planet earth, yesterday, today and tomorrow (sorry, Zeitgeisters/Singularityists/Post-Scarcity Societyists) is the branch of economics known as catallactics, or the theory of exchange and especially money exchange.

In future book blogs, these particular issues of methodology and epistemology will undoubtedly be returned to as they form the core disagreement between most economic schools of thought, including HJC, neoclassicalism and the Austrian school. In the next installment, we’ll move on to HJC’s revisionist treatment of the “history of capitalism.”

Book Blog – The Great Deformation, Part III, “New Deal Legends” (#economics, #newdeal #FDR)

Book Blogs are notes about books I’m reading, as I read them. They may or may not be followed up by wholesale reviews in traditional format.

The Great Deformation, by David A. Stockman published 2013 (buy on

Chapter 8
Stockman doesn’t go into much detail on where the boom ending in 1929 came from, but he does provide an interpretation of why the bust lasted so long and went so deep– the forcible closing off of international trade via protectionist policies and the undermining of the global gold-backed monetary regime by American and European governments alike.

In Stockman’s telling, American president Herbert Hoover was a mostly free enterprise and sound money kind of guy who wanted to avoid inflationist solutions to the economic slump. By 1932 the economy had liquidated the bulk of the malinvestments in excess inventories and capital assets and was ready to turn toward genuine recovery. This process only took as long as it did because ill-reasoned policies like the Smoot-Hawley Act in the United States and similar nationalistic policies in European states along with uncertainty about the British plans to keep the gold-backed pound sterling in place hampered international trade flows. According to Stockman, the United States between 1914 and 1929 had become, much like China circa 1994-2012, a major exporter of capital and consumer goods to the rest of the world particularly in response to trade and economic disruptions of industry and agriculture in European economies during the First World War. The US economy was geared up to provide steel, cotton, cereal grains and other commodities to the rest of the world and had a hard time adjusting output to meet domestic demand when the collapse came in 1929.

Then came FDR and his unique brand of economically inane autarkic nationalist policy. Stockman faults FDR for prolonging, nay, creating, the actual Depression singlehandedly. First, FDR began his presidency by fomenting a banking crisis and declaring a major bank holiday which Stockman saw as unnecessary. As Stockman tells it, the 12,000 some bank failures in the United States during this period mostly occurred in over leveraged regional/rural banks centered around the agricultural and export-oriented areas of the economy representing at most 3% of banking system deposits. Major money center banks in financial centers such as New York never faced a solvency crisis, making FDRs response a solution to a nonexistent problem and therefore a serious problem-creating blunder itself.

Second, FDR torpedoed the London Conference on international monetary mechanisms, throwing the whole system into chaos and instigating another round of protectionist measures at home and abroad. Third, he arbitrarily decided to undermine the USs own commitment to a constant redeemability ratio for the dollar, creating further fear and uncertainty in the economy. And finally, he created a cartel system (National Recovery Administration) which served to freeze prices, arbitrarily shift capital around the economy and buy votes as necessary but did nothing to create the kind of stable conditions preferred by businesspeople and entrepreneurs attempting to make capital investments to serve anticipated consumer demand.

The Depression was a recession that was working itself out despite the protectionist political measures put in place which made adjusting the structure of production to domestic rather than foreign needs, but then FDR came along and made the economy his plaything as he tinkered according to his whims and played powerbroker on the side. That’s what turned the recession into a true Depression.

Chapter 9
Fannie Mae, which was envisioned as a way to revitalize a moribund middle class housing market during the Great Depression by creating a “secondary market” for uneconomic 30 year mortgages at subsidized interest rates, has in the 75 years since its founding led to the total corruption and now nationalization of the home loan market. The creation of the secondary market divorced mortgage underwriting from mortgage servicing as it allowed for mortgages to be easily issued, packaged up and sold to investors as government-backstopped financial products. Further, it resulted in local savings funding local housing investments being transformed into a national and now international market, with the final result being that “Red China” bankrolls $1T+ of the federal home loan market due to balance of payment issues tied to competitive currency issuance.

Social Security, rather than being the crowning social achievement of the New Deal, was its greatest fiscal folly and has created an embarrassing Ponzi legacy that is with us even today. The systems actuarial projections were based on an impossible 5% continual GDP growth rate. The payroll tax used to fund it has proved “regressive” and continues to grow over time, with a current 6.5% of GDP consumed by the tax. The $3T of “trust fund reserves” have been lent out and spent by other parts of the government and represent nothing more than future taxes due.

In so many words, the innovation of deposit insurance combined with the Glass-Steagall act, a bout of inflationary monetary policy which destroyed the profitability of traditional deposit lending under Glass-Steagall and then a round of “deregulations” designed to create new areas of profitability for banks at the expense of growing moral hazard resulted in the utter corruption of the system and the inevitability of a major financial meltdown as witnessed in 2008.

With the outbreak of war in Europe in 1914 and the initiation of a war loan program by the United States government, US farms became the breadbasket of the world. They took on massive debt to expand capital machinery and bring additional acreage into cultivation which resulted in growing farm output prices. When the war ended, the capital investments, including the debt overhang, remained. The financial collapse in the 1930s further exacerbated the situation, leaving farmers as a desperate coalition looking for a political solution to their contractual obligations.

With the nations farmers the hardest hit by the twin spikes of failing cash flow and high debt burdens, they became a powerful voting bloc that got FDR elected which allowed for the cartelization of the farming industry to take place. The thought was that cartelizing the industry and pushing up farm and farm output prices would result in a return to prosperity as rural buyers bought manufactured products from city centers. With their programs in place, the farming lobby was then willing to trade votes for growth and maintenance of these subsidies and controls going forward into the future.

The “Thomas Amendment” created four options for expanding the money supply via currency issuance or gold or silver content debauchery. This inflationary response was seen as the proper antidote to too much debt and too little money and political authorities of the day figured it would give them a free pass to avoid the pains of the bust following the ill-gotten gains of the boom.

FDR channeled the $2.8B windfall from his emergency dollar “revaluation” against gold into his Exchange Stabilization Fund, which the Secretary of the Treasury was then able to disburse at his discretion, turning him into what Stockman calls a “money czar” much like Hank Paulson and Neil Kashkari during TARP.

Chapter 10
In this chapter, Stockman argues that World War II and the Korean War were the last wars to be mostly financed by current taxation in the US. WWII in particular saw a rise in household saving and a decline in household indebtedness that offset the massive rise in public indebtedness. He attributes this in part to the fact that wartime command economy measures dictated that there was little to consume on store shelves, in part to the fact that the government’s propaganda campaigns for war bond drives were a success and in part because the government had adopted an arbitrary bond yield peg that lowered investment returns in competing assets and made government bonds more attractive as a conservative savings vehicle.

Stockman claims that William McChesney Martin, who headed the Fed through the 1950s, was a “tribune of sound money” and saw it as his mission to restrain credit expansion and tame the inflation rate, rather than to stoke it like modern Fed heads. He also claims that the Fed only lent on liquid commercial receivables during this era, compared with the present where the Fed has become a warehouse for illiquid claims on real assets.

Chapter 11
Stockman argues that President Eisenhower was the “last of the fiscal Mohicans” dedicated to trimming federal budgets and making government spending respectful of tax revenue means. At the same time, a growing chorus of voices on the right and the left begin arguing for a “new economics”, Keynesian government planning of the macro economy, to not only fight recessions but “fine tune potential GDP” during recoveries and booms. This theory comes at the expense of sound money and has a pro-inflation bias.

Chapter 12
Following World War I, Great Britain attempted to return to the pre-war parity between the pound Sterling, gold and the US dollar despite a massive inflation during the war years. At the same time, the British government embarked on an expansion of its domestic welfare programs which ultimately broke the back of the pound culminating in the London gold conference in 1931 which proved the futility of maintaining the old exchange ratios in the face of inflationary chaos.

At the end of World War II, the United States attempted to take the lead with a gold-backed dollar as the world’s reserve currency in a new arrangement, the gold exchange standard, engineered at the Bretton Woods conference in 1944. Of course, the architect of this scheme was the exact same architect of the doomed British plan (monetary and social policy), the imperious Lord Keynes. And rather than a true gold standard, what Keynes wrought was a feeble attempt to hide dollar inflation by creating a scheme where foreign exchange was to be exchanged for dollars, not gold, which was ostensibly suppose to allow additional credit and currency to be pyramided atop the same amount of gold reserves at formal exchange rates.

For a time, this precarious system seemed to work, helped along by the US-led international “gold pool” which sought to exchange gold against currency to calm price increases in the private London gold market.

However, the decision to engage in fiscal expansionism in the US via welfare spending increases and costly wars abroad (ie, Vietnam) all financed by deficit spending rather than real tax increases led to an unhinged inflation and a boiling London gold market. The international gold pool was quickly depleted in a series of panics in the late 1960s, eventually culminating in Nixon’s infamous closing of the US gold window.

This “guns and butter” policy, led by the intellectual disciples of Keynes ensconced in major US universities, was the final nail in the coffin of sound money in the US, and perhaps even the world, and ushered in a new era of freely floating currencies, chronic deficits, massive credit expansion and a seemingly never-ending series of financial and economic bubbles that we are all living with the consequences of today– ironically, the media at the time was fooled into believing this “enlightened” policy had permanently tamed the (government-policy induced) business cycle.

Chapter 13
Milton Friedman, hailed as a staunch libertarian and champion of small government politics and free market economics, gave intellectual blessing to the greatest economic bastardization of all time– the transformation of the gold standard US dollar, once and for all, into the “T-bill Standard”.

Friedman’s erroneous analysis of the cause of the Great Depression — a crashing M1 money supply caused by an overly tight Federal Reserve — led him to faith in a new standard for monetary policy, a simple inflation targeting of 3% per annum, with the market smoothing out the rest. Friedman believed that if the Fed could credibly adhere to a uniform rate of inflation over time, the business cycle could be banished and the economy would be free to grow without abatement and without the restrictive context of a gold-backed currency.

This new policy proved its danger almost immediately with the out of control inflation of the 1970s and opened the door for unending deficit finance by the federal government. And while Friedman had hoped for a series of Fed chairmen who would objectively guide the M1 money supply along this path (a strategy destined to failure because it turns out the Fed doesn’t control M1, market demand for loanable funds does) instead the office has been inhabited by activist acolytes since the tight money days of Volcker.

The current global monetary regime of competitive free floating currencies is truly without precedent and much of the modern US’s largesse was financed by willing mercantilist politicians in foreign trading partner nations. It remains to be seen what happens to this system when one or more countries reach the end of their rope, domestically, and are not longer willing to import the United States’ inflation as they export their wealth to foreigners for consumption.

Notes – The 2014 Rothbard Graduate Seminar (#economics, #gradstudies)

Last year I attended the Rothbard Graduate Seminar at the Ludwig von Mises Institute in Auburn, AL as an observer. The following are notes I typed while listening to lectures and discussions between faculty and graduate students. They have been edited for clarity, organization and in some cases privacy.
Lecture 1, Praxeology, David Gordon
Praxeology is the science of human action, uses deductive methodology, begins with axiom of man acting, deduced with supplementary postulates (Rothbard uses action axiom, Mises never refers to “Man acts”, he refers to the concept of action)
Supplementary postulates: leisure is desired over work, there are a variety of economic resources
Economics is the best-developed branch of praxeology: Crusoe economics (isolated human action), catallactics (economics of exchange) including barter and money
The study of violent intervention in the market, socialism and interventionism, are also part of praxeological analysis, as well as “games”, but these have not been well-developed (no systematic treatises?)
Examples of praxeological reasoning— every action uses means to achieve an end; every action is a choice between alternatives; the actor always chooses his highest valued alternative
Methodological individualism— only individuals act, not groups or societies or nations or classes, however this doesn’t imply that nations and classes don’t exist
On Austrian Methodology” by Robert Nozick, an interesting article
Methodological Individualism has been used to deflate various ideologies such as nationalism, statism, etc.
Why should we do economics this way (praxeology)?
Popular objection: principles of praxeology are supposed to be synthetic (truth about the world) and a priori (knowable by simply thinking about them), but you can’t learn about the world just by thinking about it, the meaning of concepts is conventional, people just decide to use words a certain way, you can’t make something true about the world just by defining words, other a priori truths are logical and tautological that say nothing new about the world
Rothbard’s answer: concepts come from experience, action isn’t an arbitrary construction but rather an abstraction from experience, if we get the concept from experience we know action exists, then anything we deduce from that applies to the world, deduction transmits truth from premises to the conclusion, if the premises are true the conclusion is true
Tautology objection: rests on an equivocation
Rothbard’s objections to the mainstream: they construct mathematical models and then test predictions derived from the models; math substitutes functional relations for causation, also introduces the false assumption of continuity but human action occurs in discrete steps, he objects to the testing because there is no way to perform controlled experiments as all phenomena are occurring simultaneously, and there are no quantitative laws of human action, human action is the product of choice
1.) In property rights theory, how can joint ownership (or government ownership) of a resource be explained if “only individuals act”?
2.) How do we know the experience of action is true? Don’t we need a prior theory to interpret the empirical experience of action as action?
3.) Can Austrian economics be translated into math? If not, does this suggest it is not rigorous or coherent?
4.) Why is the Austrian ERE a useful abstract tool for studying elements of reality in isolation, but the “equilibrium” economy of mainstream thought is not?
Discussion session:
Rothbard’s book (Economic Controversies) had great depth, not just covering epistemology and economic theory but historical commentary, etc., this book is also digestible, repetitive so you get the same concept dissected from different angles, straight to the point, challenges the mainstream orthodoxy, accessible to the layperson, Rothbard starts with realistic premises and deduces from there which makes this approach even more empirical (econometric models falsify the real world), his criticisms are very thorough and you want to smile after you read them which is unique in reading academic papers. Rothbard isn’t ashamed to say there is meaning and truth.
Methodological individualism applies only to the concept of action, it does not exclude the idea of something like a “cosmic consciousness”, there is a difference between ontological and methodological claims; praxeology is not a metaphysical system, it simply takes the world as we find it
Mathematical annotation is more precise than verbal logic, but one problem is how do you convert initial premises into mathematical annotation (and back when a conclusion is reached)?
“Academic choice”, public choice analysis applied to the incentive structure of academia and how this influences their search for truth
Lecture 2, Methodological Debates, Jeff Herbner
Every academic discipline is defined by its method and scope (boundaries).
Rothbard— Each subject matter has a proper method; neoclassical approach— there is only one scientific method.
Praxeology’s divisions:
  1. Theory of Isolated Person (autistic exchange)
  2. Theory of Voluntary Exchange
    1. barter
    2. medium of exchange (catallactics)
      1. unhampered market
      2. violent intervention
      3. violent abolition of market
  3. Theory of Games
  4. Theory of War
  5. Unknown
Neoclassical divisions:
  1. Rational choice model
    1. Market participants
    2. Political participants
    3. Social participants
  2. Behavioral economics
Economics— voluntary associations w/ economic calculation (UME, HME)
Sociology— voluntary associations w/o economic calculation (family, church)
History— contingent, concrete conditions of action blended w/ theory
Ethics— personal action, interpersonal action, voluntary and involuntary
Politics— involuntary associations (gangs, states)
Praxeology— logic of action, economizing, underneath all 5
Praxeology and Ethics— public policy (economic science is value free, but economic policy is value laden and requires assumptions or principles about ethics and what is desirable to make conclusions), critique of ethics, political philosophy, welfare economics
Misesian Economics— a.) economic theory b.) economic history (understanding economic action in the past) c.) applied economics (predicting economic effect in the future based on proposed economic cause, i.e., policy)
Neoclassical Economics— economic model and empirical testing
1.) Is the division in economics between calculating and non-calculating, or financial calculation and non-financial calculation? How are non-calculating actors choosing if not by some form of calculus?
2.) Who has best developed Games and War theories of praxeology?
3.) Why aren’t Austrians trying to develop comprehensive treatises in these fields?
4.) What is the application of game theory?
5.) How do you know when a circumstance is new and requires an extension of the existing theory, or when it is “unoriginal” and can be explained by the previous body of theory? How do we know when existing theory can’t explain a new phenomenon or historical incident? How is this explanation different from the pragmatist argument about a lack of common principles?
6.) Who, if anyone, is worth reading right now outside of the Austrian tradition, and why?
7.) How can “proportionality” be administered in a judicial punishment setting without treading into utilitarianism or other non-subjectivist value systems?
Lecture 3, Austrian Microeconomics, Peter Klein
Price theory, production theory, the theory of the firm, some parts of capital theory, etc., constitute “Austrian micro”
It is not mainstream micro minus calculus and some graphs plus “spontaneous order” and “radical subjectivism”, etc.; this is a misconception of the contribution of Austrian econ
Mengerian economics— focused on mundane topics, not esoterica; shares subjective utility and marginal analysis of Walras and Jevons; not simply verbal version of neoclassicism, emphasized cause and effect real market behaviors and thus “causal-realist”
Fundamentals of Austrian micro— economics as the analysis of action (praxeology); teleology, means and ends; economic goods which are concrete (real prices of real goods, not abstract prices of conceptual entities) and are limited and desirable, split into consumer and producer goods (direct and indirect serving of human needs); time, implied by action, itself a scare means and the notion of time preference; production is rearrangement, not creation ex nihilo, takes time and uses stages
General insights on valuation include emphasis on discrete, marginal units, not abstract categories, as well as attention to demonstrated preference
Menger’s utility theory— the value of particular means, marginal utility being the value of the highest-ranked end that cannot be achieved if a unit is lost, law of diminishing marginal utility (not a psychological concept, a logical concept focused on individual use of each unit not the benefit)
Contrasts with neoclassical utility theory— consumers in NCM are choosing among heterogeneous bundles, choosing between total utility of each bundle; marginal rate of substitution is rate at which consumer substitutes unit of good X for unit of good Y (slope of indifference curve) vs. causal-realist where substitution occurs at the margin and demonstrates that the marginal utility of X is greater than the marginal utility of Y w/ no separate income or substitution effects; indifference can not be demonstrated in action and is therefore not a scientific concept (focus is on explaining actions, not states of being)
Price determination— analysis of the marginal pairs (see Greaves, paper by Egger) states that prices are set by pairs of buyers and sellers; characteristics of the equilibrium price, determined exclusively by individuals’ subjective valuations, subjective valuations of buyers and sellers matter, not set unilaterally by sellers, the real prices actually paid in market transactions
Prices and knowledge— buyer and seller valuations can include speculative demands (they don’t need to know in advance what equilibrium price will be), prices as signals (Hayek)
Factor pricing— Austrian theory of imputation, rental prices imputed backwards to the ???
Applications and extensions— no distinction between production and “distribution” (Piketty), wealth is “distributed” in the act of production, it is not produced and then arbitrarily distributed by capitalists, government, etc.; rent = unit price of services of any good (Fetter); production functions, but no cost curves; firm as an organization, not a productive unit
Discussion section:
Kirzner and Schumpeter restrict entrepreneur to nothing but alertness, the Misesian approach is more expansive and includes everyone in some capacity acting as an entrepreneur
Mises in Human Action talks about the entrepreneur as a leader, who is far-seeing, comes from Weiser, who also mentored Schumpeter; Mises was uncharacteristically fuzzy and unclear on his writings on the entrepreneur, occasionally he refers to the “promoter” (ideal type) involving leadership, having a quicker eye than the crowd, etc., but typically he refers to the function of entrepreneurship
Kirzner is talking about alertness to opportunities for profit, but entrepreneurs create goods, capital, companies, etc., not “opportunities for profit”, opportunity implies objective configurations of resources that allow for a decision or action or take place, but is this analogous in the business world? Or is “opportunity” a metaphor? Do we need the construct of “opportunity” to explain what entrepreneurs do?
Kirzner’s equilibrium is the condition under which no unfound profit opportunities exist
Mises vs. Knight on judgement— Mises never refers to Knight in this context, judgement is more of a black box for Mises than for Knight
1.) If Austrian econ is not distinct, why do mainstream thinkers argue so violently with Austrians?
2.) Did the anglo-American Austrians, etc., self-consciously identify with the “Austrian school” or did we lump them in post hoc? If so, what did they refer to themselves as?
3.) When challenging Keynesianians and other mainstream opponents, Austrian critics often accuse them of “not understanding economic calculation”. Is this criticism accurate? Why or why not?
4.) Would it be better to distinguish between “offers” and “prices”, where “offers” are ratios of exchange advertised but not consummated, hypothetical, whereas “prices” represent historical data of consummated exchanges between buyers and sellers?
5.) Is Kirzner’s “capital-less entrepreneur” really a description of professional managers, and if it is, is it a legitimate analysis or does it still lack connection to reality?
6.) Is “public choice” an analysis of entrepreneurship in socialism, or in privatization within socialism?
Lecture 4, Taxation and Public Finance, Mark Thornton
Rothbard’s approach: nature of taxation; technical corrections to mainstream analysis; theories of “just” taxation; neutrality of taxation; approaches to tax reform
Interventionism: autistic (ruler tells the ruled what to do); binary (e.g., taxation, transfer of property from owner to intervener); triangular (ruler tells two ruled how they can interact with each other, e.g., prohibitions and regulations)
Impoverishment caused by taxation is in proportion to the amount of taxation, not the form the taxes take
Taxes can not be passed on to consumers because of competitive pricing of supply and demand
Taxation distorts market outcomes in two ways: the withdrawing of resources from the economy, and the redistribution of those resources across the economy
“Benefit principle”— pay taxes in accord with the benefits you receive
“Ability to pay principle”— pay taxes in accord with your relative wealth
There are no scientifically valid principles of taxation, there is no conceptually possible neutral tax
Discussion section:
How to explain countries where majority of taxes are paid by a minority of people, as Calhoun’s analysis suggests the majority bear the costs for a small minority to benefit from? The answer could be additional implicit subsidies such as protections from the State in terms of liability or regulation that they see taxation as payment for
Can the State make investments? Rothbard is writing against the idea of “social investment” such as infrastructure spending, and he is writing in terms of capital structure— they’re not integrated into economic calculation, they’re not part of the capital structure; counter-example, State-owned oil production
1.) Why doesn’t taxation create business cycles due to mass misallocation of resources?
2.) When taxes are “shifted backward” to suppliers through lowered net revenue, aren’t consumers STILL paying the tax due to lower supply and lower quality of remaining supply versus free market outcome?
3.) Why can employers shift taxes to employees if businesses can’t shift taxes to consumers?
4.) In the marketplace, how is price discrimination explained in reference to the benefit principle?
5.) Does the lack of scientificness of taxation principles imply the irrationality and injustice of government in general?
6.) “Over” and “under” exploitation of a government owned resource… relative to what? How do we know how much the free market would exploit it?
Lecture 5, Monetary Theory, Joe Salerno 
Money as a medium of exchange— trade requires barter in the absence of money, creating high search costs due to the double coincidence of wants
Money as unit of account— used to express prices and record debts, simplifies relative price comparisons
The value of money— measured as the inverse of the price level measured against an arbitrary basket of goods (i.e., 1/P), what does one unit of money buy?
The (neo-)classical dichotomy— the theoretical separation of nominal and real variables; Hume and classical economists suggested monetary developments affect nominal variables but not real variables; if money supply doubles, for example, all nominal variables, such as prices, will double; in the short run, supply and demand determine the value of money, in the long run cost of production determines the value of money
The neutrality of money— proposition that changes in the money supply do not affect real variables
Purchasing Power Parity (PPP)— relies on the “law of one price” which establishes that arbitrage opportunities eliminate differences in value of common goods in different markets; exchange rates are supposed to be ratios of price levels between two economies
Discussion section:
What Has Government Done To Our Money?” is Rothbard’s explanation of how an economy “progresses” from commodity to fiat money, because Mises said that a true fiat money is a historical question given that every episode in the past has been a form of “credit money” based on expectations about an eventual return to a commodity money that predated it
1.) For a relative price to be a useful data, wouldn’t it have to be collected from a real exchange (i.e., barter exchange)?
2.) Do mainstream models explaining fiat money violate Occam’s Razor?
3.) If velocity of money is increasing, isn’t the “velocity of hoarding” increasing at the same rate because all money balances must be held by somebody at some time?
4.) If IEOR policy is causing banks to “hoard” bank balances and this is non-expansive, is this money “neutral” to the economy or what effect is it having? What role does it serve? (Compare to Jingjing’s question on corrupt Chinese official cash balances)
Lecture 6, Professional Strategies, Career Advice and Current Research Topics, Peter Klein
 [I did not take any notes during this discussion.]
Discussion section:
[I did not take any notes during this discussion.]
1.) What about pursuing a career as a “private lecturer” by establishing yourself as an authority on Austrian economics with a crisp website?
2.) How can Austrian economist career hopefuls improve their career by thinking in terms of their “personal brand”?
Lecture 7, Monetary Policy, Jeff Herbener
Monetarists— micro efficiency, but macro instability caused by monetary regime; optimal monetary regime would create stability in the price level; requires an elastic money supply to offset forces causing price inflation or deflation to keep price level roughly stable; avoid trade imbalances w/ flexible exchange rates
Monetary Disequilibrium Theory (MDT)— micro efficiency, macro inefficiency; means of payment must accommodate changes in money demand; avoid price deflation from excess demand for money; separate unit of account from general medium of exchange, supplant general medium of exchange with means of payment; competitive issue of means of payment adjust to accommodate changes in money demand;
Banking school FB— micro efficiency, macro inefficiency; money stock and credit supply must accommodate the needs of trade; avoid price deflation from excess demand for money; competitive issue of fiduciary media adjust to accommodate changes in money demand
Currency school FB— micro efficiency, macro efficiency; production of money and money substitutes should be integrated into the social economizing process of economic calculation by entrepreneurs
“Free banking” in Scotland— Rothbard suggests using Vera Smith’s schema of 4 groups (free vs. central banking Banking School, free vs. central banking Currency School) rather than Larry White’s 3 groups; there was no Banking School free banking in Scotland, and the system didn’t work well, numerous bailouts, pyramiding credit on top of Bank of England notes;
Free Market Monetary reform— separate money from the State; abolish fFed, dollar redeemable in gold, legal enforcement of 100 percent reserve on money substitutes;
Ancillary roles for the State— Hayek (Sennholz), abolish all legal disabilities on private enterprise production of money and money substitutes; Yeagar (Timberlake), state defines the unit of account in terms of market-basket of goods, the general medium of exchange is eliminated, private enterprise provides means of payment
Central role for the State— Fisher, state defines a market-basekt of goods for the unit of base money, currency is redemption claim for base money, supply of currency managed to keep price level stable; Friedman, Fed conducts non-discretionary monetary policy to keep the price level stable
Discussion section:
 [I did not take any notes during this discussion.]
1.) What “problem” did the MDT respond to? Similarly, did the Monetarist framework develop in response to existing statist monetary regimes or was it to address perceived problems with a theoretical free market monetary regime?
2.) Does the existence of taxation in general complicate or prevent the possibility of private production of the money supply?
3.) Is “balance of payments” thinking by mainstream economists an anachronistic way of thinking in a non-commodity standard money world?
4.) Why do socialist countries have money? How does money function in these economies?
5.) How can the crash and then explosion in the price of gold since ~2000 be explained in Austrian monetary theory?
Lecture 8, Mark Thornton, Comparative Economic Systems
Hoppe’s A Theory of Socialism and Capitalism (1988)— systematic, offers a theory of comparative economic systems, based on the concept of private party
Capitalism— based on property rights; property is the result of scarcity; provides non-violent mechanism for resource allocation; Garden of Eden, property right to your body; original appropriation; contractual exchanges; wealth; absence of systematic aggression; no unemployment (idle resources) problems
Russian-style socialism— socialism par excellence; State owns the means of production; equality vs. anarchy of production; aggression and democracy; less investment, appropriation (black market); calculate the structure of production = waste; Mises (1920) complete vs. relative; East vs. West Germany
Social democratic socialism— “reform”, taking steps at the ballot box; “commanding heights” (the sectors deemed essential by socialist planners for control such as education, utilities, transportation networks, etc.); owners remain caretakers with partial ownership; property owners taxes for redistribution; dominant form in Europe; Sweden
SDS vs. Russian-Style and Capitalism— solves the calculation problem; compared to Russian, less impoverishment, less over utilization of resources, more leisure, more incentive to work, save and invest; but it’s still poor compared to capitalism; both reduce production of talent and skills, increase the production of aggressive and political skills, both increase barter and black market activities
Conservative-style socialism— supports status quo, old order; private property, commanding heights; sin taxes, not income taxes; price controls, unions, prohibitions, not redistribution; regulations and cartels; Nazi Germany, Fascist Italy, Imperial Japan (Prussian social monarchy?)
Similarities between conservative and social-democratic socialism— both have private property and commanding heights; both infringe on private property; both have negative effects on labor, savings, investment, innovation; SDS stresses egalitarianism, CS stresses nationalism; both underperform capitalism
Socialism of social engineering— American pragmatism, technocracy; positivism and empiricism; reality must be verifiable or falsifiable by experience, “socialism might work”; however, empiricists must implicitly assume the existence of non-empirical as knowledge of reality, i.e., logic, math, geometry
Empiricism— must assume some sort of existence of cause and effect; must presume the constancy principle in order to proceed in its investigation, but the constancy principle (there are relationships to be found empirically) is not established, confirmed or falsified empirically, it is a given a priori; life proceeds on the basis of cause and effect; social engineering via empiricism is a giant contradiction
Discussion section:
Crony capitalism is the modern day equivalent of mercantilism
Old wine in new bottles, people can intellectually reject an idea like mercantilism as an historical phenomenon but if it is repackaged in a new brand they might adopt it as sensible
Are many of the distinctions of totalitarian regimes explained by the path to power? IE, Hitler came to power through the ballot box, Mao led a peasant rebellion, Lenin was elected by the army
Democracy is one of the most stable forms of the State; democracy involves participation of the population, and has a process for slowly implementing policies vs. unitary or limited participation and the ability to make drastic, sudden changes via emperor or dictatorship; democracy tends to hand out favors to large groups of people so it is hard to create an opposition coalition to overturn it
Mises’s three pre-conditions of the division of labor and economic specialization: private property in the means of production, free exchange (for price formation) and ???
1.) There seem to be an endless variety of “socialisms” reflecting the unique cultural and historical factors of each society that has suffered them; what are some UNIVERSAL elements of socialism that must be or always are present to be declared a socialist system?
2.) Does technological innovation and economic “evolution” allow for political change or does it work in the opposite order?
Lecture 9, Property Rights and the Public Sector, David Gordon
Ethics and economists— one of Rothbard’s most original contributions is his criticism of the way mainstream economists deal with normative issues; economists want economics to be value free, economics is a science, normative judgments are mere subjective preferences; Rothbard agrees that economics is value free, but he doesn’t think that ethical judgments are mere subjective preferences; mainstream economists are caught in a dilemma, they want to make normative judgments that do more than express their preferences, how can they do so?
Concealed value judgments— some economists think that they can escape the dilemma by endorsing a value-free statement that still leads to normative recommendations; if everybody prefers something, then it should be done (strong Pareto criterion), if at least one person favors something and it makes no one worse off, it should be done (weak Pareto criterion), these principles still involve value judgments; what if everyone has wrong views about what is desirable, or the starting point involves violating someone’s rights?
Unanimity principle— Rothbard thinks that the unanimity principle has had bad results in practice; because unanimous agreement can’t in practice be reached, Buchanan and Tullock settle for less than full unanimity
Rothbard on the State— it is a fundamental mistake to view the state as a voluntary organization; it is a parasitic, predatory gang that seizes resources from the productive; Rothbard follows Oppenheimer and Nock
Public sector— if the State is predatory, then the productivity of the public sector is problematic; the State takes resources by force, thus, its activities cannot be considered productive; government expenditures should be subtracted from, not added to, production statistics; Rothbard’s definition of productivity is intertwined with an understanding of demonstrated consumer preference on the market
Statistics— Rothbard is suspicious of statistics collection; they are not value neutral but are essential to government control
Utilitarianism and property rights— many economists take some version of utilitarianism for granted; it’s argued that recognition of property rights makes nearly everybody better off; this isn’t a value-free claim, but it’s defended as non-controversial; Rothbard objects that this position doesn’t consider the justice of property rights, any stable system of property rights is accepted;
Escape from the dilemma— Rothbard believes the dilemma of the economists can be escaped by developing an objective ethics based on natural law; self-ownership, Rothbard defends the concept by rejecting alternatives, slavery and a system where everyone owns part of everyone else; if you own yourself, then by mixing your labor with unowned resources you own them as well; once you own something you can exchange it and give it to anyone you want, including the right of bequest;
Discussion section:
[I did not take any notes during this section.]
1.) Can any philosophical principle be established simply by rejecting alternatives? (Last man standing philosophy?)
2.) What criteria are sufficient for “mixing labor” and taking ownership? If mixing labor with factors of production, why doesn’t this mean workers own them? What makes “mixing labor” effective in one circumstance and not effective in another?
3.) Walter Block claims that it’s okay for libertarians to take from the State, but no one else. Is there any logic to this?
4.) Maybe there is a Coaseian solution for the dismantling of the State— it doesn’t really matter HOW it is privatized, it just matters that it IS privatized?
5.) When your money is taxed, it is stolen, and your money is fungible and spent, so what legitimate claim do you have to fungible, disposed assets that can not be traced?
6.) What about when government functionaries in “marketable” positions are part of unions or agitate for State privilege?
Lecture 10, Current Debates and Critiques, Joe Salerno
[I did not take any notes during this section.]
Discussion section:
Is the term “Austrian” valuable as a marketing concept? “Capital Based Macro”, “Causal Realism”
You don’t want to be the kid at camp who picked their own nickname, names come from the outside
Is there rhetorical value in labeling opponents in sensational ways (“Friedman is a socialist”) or does that hurt your cause more than it communicates information?
1.) What might have happened to the Austrian school’s influence if WW2 had never occurred?
2.) What critical lessons have we learned (as a “movement”) from the Salerno/Hulsmann theory of the decline and rebirth of Austrian economics?
3.) Why aren’t there more applied economic works in the Austrian tradition? What would be some priority applications?
4.) What is “Austrian economics in a nutshell” or the Austrian elevator pitch? Why Austrian?

Books – Summer Reading Hit List (#reading #education #economics #philosophy #business)

The following is a list of books I’m trying to get through from now until Fall (July-September) in order of current priority. Strike through text indicates the book has been read and likely blogged:

  1. Becoming A Manager by Linda A. Hill
  2. Human Action by Ludwig von Mises
  3. The Great Deformation by David A. Stockman
  4. The Entrepreneurial Mindset by Rita Gunter McGrath
  5. Civilization & Capitalism, 15th-18th Century, vol. 1, The Structure of Everyday Life by Fernand Braudel
  6. Baby Catcher by Peggy Vincent
  7. The Six Pillars of Self-Esteem by Nathaniel Branden
  8. The Beginnings of Western Science by David C. Lindberg
  9. The Theory of Money and Credit by Ludwig von Mises
  10. An Introduction to Logic and Scientific Method by Morris R. Cohen
  11. The Generalissimo by Jay Taylor
  12. The Mystery of Capital by Hernando de Soto
  13. Max Stirner: His Life and His Work by John Henry Mackay
  14. Asian Godfathers by Joe Studwell

Book Blog – Real Food For Mother And Baby (#fertility, #nutrition)

Book Blogs are notes about books I’m reading, as I read them. They may or may not be followed up by wholesale reviews in traditional format.

Real Food For Mother And Baby, by Nina Planck published 2009 (buy on

For me, reading this book simply resulted in confirming a lot of biases I already have regarding ideal nutritional practices. Those confirmed biases could be reduced down to:
-make most of what you eat yourself
-when eating animals, use as much of the animal as you can (including bone, skin, organs, etc.)
-when eating fruits and vegetables, use what is in season when possible
-focus on organics and other traditionally raised and cultivated foods
-avoid eating things that were not regularly consumed 100 years ago
-avoid anything processed, “packaged” sweetened or artificially preserved
-eat more fat than you’re “supposed to” and don’t get your nutritional advice from headline news or the government

There’s more to it than that, but that’s a good start to revolutionizing the way most moderns/Americans eat in the West.

The book is essentially 200pgs of these broad outlines and a few more specific guidelines, along with basic scientific information on why this is the right way to eat and how various research agrees. The advice is good for women (and men) planning to conceive, women in pregnancy, nursing mothers and babies ready to eat things besides breast milk.

In other words, the “best” diet for fertility, childbirth and infancy, is also the best diet for children and adults in terms of achieving optimum health outcomes and maximizing genetic fitness and expression.

The weakest part of the book is the author’s condoning of various “cheats” and nutritional oversights based on the arbitrary logic of “a little poison now and then won’t kill you”, and it was a let down to learn that after following these nutritional practices she still ended up getting drugged out and giving birth by c-section during her own pregnancy.

Mothers to be will probably find the affirmative tone and validative diction of the book enjoyable. And for some this will be a revelation. For me, I didn’t get a lot new. It did get me to think about how hopeless health (and intelligence?) outcomes must be for generations of people in communities without the knowledge, incentives or resources to eat this way. It also got me thinking about how easy it is to overdo good nutrition, to obsess about it and give it undue consideration. It’s important, yet spending your life on feeding yourself doesn’t leave time for much else which to me is like luxurious primitivism.