Browsing the web, I came across the following claim by Lew Rockwell:
" Need I note, as this article indirectly indicates, that the whole world is reading Rothbard, but that Friedman is almost a nobody outside of mainstream academic economics?"
He provides no support for the claim—the link is to a collection of links on Rockwell's site to works by Rothbard—so I thought I would look for some data. I do not know where one would find figures on what books people read, but the most readily available source for books they buy is Amazon, which ranks books according to sales; rank 1 would be the best selling book on Amazon, rank 100,000 would be the hundred thousandth best book. So I searched Amazon.com for books authored by Murray Rothbard and books authored by Milton Friedman, in each case sorting by sales to find the ones that sold best.
Friedman, Money Mischief: Amazon Bestsellers Rank: #2,132 in Books
Friedman, Capitalism and Freedom: 40th Anniversary edition: Amazon Bestsellers Rank: #2,120 in Books
Friedman, Free to Choose: Amazon Bestsellers Rank: #3,719
Rothbard, A History of Money and Banking in the United States: The Colonial Era to World War II: Amazon Bestsellers Rank: #34,118 in Books
Rothbard, The Case Against the Fed: Amazon Bestsellers Rank: #22,316 in Books
Rothbard, The Mystery of Banking: Amazon Bestsellers Rank: #49,523
Rothbard, America's Great Depression: Amazon Bestsellers Rank: #63,960
Readers are welcome to check the numbers themselves—they will, of course, be a little different each time you check them, since Amazon updates rankings on the basis of current sales—or search for a Rothbard book with sales anywhere close to the top three I found for Friedman.
I do not usually waste my time defending my father, a job he did more than adequately for himself, but this seemed like a striking example of one prominent Austrian—Lew Rockwell founded the Mises Institute, which publishes several of the Rothbard books I listed—who appears to be living in a fantasy of his own invention.
He is, of course, more than welcome to post a comment here providing the data to support his claim.
A correspondent points me at data on relative online interest in Milton Friedman and Murray Rothbard.
[New Information]
A correspondent points me at data on relative online interest in Milton Friedman and Murray Rothbard.
In fact, according to Google AdWords, there are approximately 135,000 searches a month for your dad's name globally. That's in comparison to 8,100 for "murray rothbard" and 22,200 for just "rothbard". This is based on a 12-month average. Google Keywords
available at: https://adwords.google.com/select/KeywordToolExternal
Another metric to look at is Google Trends which puts this information into a graph over time, and allows keyword comparison. Take a look at:http://www.google.com/trends?q=milton+friedman%2C+Murray+Rothbard
213 comments:
1 – 200 of 213 Newer› Newest»I don't know about other people David but I read most of my Rothbard on the Mises or Rockwell sites. And I have every one of his books and articles as free PDF or eBook downloads. I suspect that most people who read Rothbard have similar approaches.
Now I do not mean to imply that I have not bought Friedman books. I own three. But I have to say that I find Rothbard far more logical and clear and prefer his view of the world, particularly when it comes to money.
I'm not sure why we must have a fight between these libertarian icons. I think both Rothbard and your father were great luminaries and both had a few flawed ideas. If I have to choose, I'd say I like Friedman better because he was so gracious and sweet, not caustic and adversarial like Rothbard. Another thing I'd like to mention is that I find your version of anarcho-capitalism more compelling than Rothbard's.
"I'm not sure why we must have a fight between these libertarian icons."
We don't have to; I think you will find that the fighting is mostly from the (extreme) Austrian side and has been for decades, with the post I responded to a recent example.
But when Rockwell makes a statement that, so far as I can tell, is flatly false, I think he ought to be called on it.
I agree with Vangel that the Amazon rankings don't tell the whole story, as Rockwell and his Mises Institute have made all of Rothbard's work available for free online. I wouldn't be so bold as to say "most people who read Rothbard" do so this way; that seems to me like the same sort of selection bias of which Rockwell is guilty (and, I think to some extent, Wilkinson in that Economist blog post). It's probably true that, in the online Austro-libertarian community, Rothbard is read more than Friedman and most read him via PDF and ePub. But there are a whole lot of people around the world who have not heard of the Mises Institute, or Rothbard, or Rockwell, or David Friedman, who know and read Milton Friedman.
It may also be worth mentioning that Friedman has higher view counts on Youtube than Rothbard and modern Rothbardians like Walter Block. I, frankly, have not read a whole lot of either economist, and though I am more 'Austrian,' it seems crazy to make light of Friedman's popularity and general appeal. I'm also not sure what it accomplishes.
I agree that the availability of Rothbard's work for free download adds something to the measure I offered, but it's hard to know how much. The fact that a book is free makes you more willing to download it than if you had to buy it, even if you aren't sure you will read it, so I think you have to take the downloads as an upper bound on an equivalent to books bought.
I emailed Rockwell the URL of my post when I made it, and he is free to offer figures on downloads. As far as I know, Amazon doesn't publish any detailed description of their calculations that one could use to translate rankings into sales, although I expect some sales data are available online somewhere.
But I think various people have tried to reverse engineer the Amazon ranking system, so one can probably get a rough idea of how many sales a ranking of 2000 corresponds to.
In any case, Rockwell made the claim so it's up to him to support it. Or not.
I agree that the availability of Rothbard's work for free download adds something to the measure I offered, but it's hard to know how much. The fact that a book is free makes you more willing to download it than if you had to buy it, even if you aren't sure you will read it, so I think you have to take the downloads as an upper bound on an equivalent to books bought.
I agree that we can't quantify the amount of material that is downloaded and accessed from the Mises site. But what I do know is that many of the comments that I read on various blogs provide links that lead directly to Rothbard and the Mises site. There isn't a week that passes that does not have me clicking on a link to a LVM commentary or an essay or book from one of the many Austrian School economists.
What I notice is that Rothbard is equally harsh on many within the Austrian School because he considers them statists. In Rothbard's opinion they do not go far enough and accept statist arguments that lead to the serfdom that he argued against. Milton Fridman gets hit because of his positivist leanings, probably because of his unwillingness to abandon the ideas of Frank Night.
Let me note that I am not an expert in economics. My training is as an engineer and most of my exposure to economic theory was the typical leftist drivel that is common in most North American universities. The first time I was really exposed to the Austrian School was in China where two Shaangxi government economists were using Rothbard and Mises as the foundation of their anti meddling arguments against the Americans who were praising the Canadian medical system.
What interests me David is what you disagree with in this commentary. I may be mistaken but in many ways I consider some of your potions to be much closer to Rothbard than to your father. And although I enjoyed many of your father's explanations, particularly when made on television against hostile audiences, I still think that Rothbard is on the right side of many of the arguments.
It may also be worth mentioning that Friedman has higher view counts on Youtube than Rothbard and modern Rothbardians like Walter Block. I, frankly, have not read a whole lot of either economist, and though I am more 'Austrian,' it seems crazy to make light of Friedman's popularity and general appeal. I'm also not sure what it accomplishes.
It is somewhat of a 'purity' test. Many of Milton's position are very tolerant of the sate that the Rotbarian thinkers feel is unnecessary and anti-liberty. This is particularly true in the monetary theory sphere, where they see Friedman as someone who approves of robbing savers of purchasing power and supporting a monopoly that benefits the financial system.
Wow, Milton is your dad? That must've been lots of fun.
I've always affectionately called him "Uncle Milt" among friends because he seemed (from interviews and books) so agreeable and likable. Like Becker. I was very sorry when he passed in 2006 and remain very grateful to him that I never got drafted, among other things.
Libertarianism isn't just a political philosophy, its a like an old Greek school of Skeptics, Stoics, or what have you, a school with forms of logic, ethics and religious views (consider what it takes on faith).
If true, our school should have a natural, instinctive aversion to producing a Nicean Creed, and fights over complicated membership requirements, over favored lineage and such. Our school should be very comfortable that people who think like us also don't think like us a lot.
(I'm not commenting on the specifics posted here, just an uneasiness in the growing pains we're witnessing as political libertarianism grows in popularity.)
Professor Friedman, I not add to this world the digital world, where thousands of Rothbards books and articles are available for free?
This could be some kind of mesuaremnt: http://siteanalytics.compete.com/daviddfriedman.blogspot.com+edchoice.org+lewrockwell.com/
Oy vey
My impression of the Rothbard Institute group, or at least a few of them, is that they are hyper-sensitive to criticism of their idols and insensitive in their criticism of all others.
If Friedman isn't anyone outside of mainstream economics, we've got to ask ourselves where that leaves Murray. He's no one inside of mainstream economics. Where is he someone? His most zealous fans appear to be twenty-something know-it-alls ("the grassroots") who have never read an economics text that wasn't a pdf on the Mises website.
I think Rockwell and co. really enjoy using "the kids like us more!" as a bludgeon in the war of egos they think they're having with the rest of the libertarian / academic world. Fortunately, the stick they're waving is more brittle than they believe. Kids grow up, after all.
I personally own more Rothbard books than Friedman (even if you combine both Friedmans). But let's face it: outside of hard core libertarians, no one's even heard of Rothbard. Milton Friedman, on the other hand. . .
@Rex Little
"But let's face it: outside of hard core libertarians, no one's even heard of Rothbard."
But just the Lew Rockwell website has alone a bigger audience than the economics universities, 500.000 unique visitors per DAY.
Rothbard is famous and will always be because he did not sell himself nor his believes to the "pragmatism". Those who did that will not survive the test of time.
David, why is the type in this post so much smaller than your default type? Can you please find the tag that makes it so, and fix it so that those of us with weaker eyes can read it without hitting control-plus two or three times?
"Milton Fridman gets hit because of his positivist leanings, probably because of his unwillingness to abandon the ideas of Frank Night. "
Let me take the liberty of being uncharitable but truthful.
Rothbard had a problem. He thought he was a great economist, but practically nobody within the profession agreed and most of them had never heard of him.
Rothbard had a solution. He was ignored because he held extreme pro-market views, which were ideologically unpopular in the academy.
Rothbard had a problem. Milton Friedman held extreme pro-market views--not as extreme as Rothbard's, but far enough from academic orthodoxy so that the same effect should have existed. But Milton Friedman not only wasn't ignored, he was viewed within the profession as a leading figure--despite his unpopular political views.
Rothbard had a solution--to persuade himself and his followers that Milton Friedman was really one of them instead of one of us, hence his acceptance by the profession didn't contradict Rothbard's view of the reason for Rothbard's non-acceptance.
Maintaining that claim was difficult--at one point I remember being told by a Rothbard supporter, explaining why he was not going to publish a letter of mine in his journal that contained quotes from my father inconsistent with Rothbard's account of my father's views, that if Rothbard and Friedman disagreed about what Friedman's views were, Rothbard was right.
That at least is my view of the motivations involved--a discussion of the actual content of disagreement would require a different post.
"What interests me David is what you disagree with in this commentary."
Other than the fact that most of its assertions about my father's views are unsupported? The fact that it discusses the negative income tax without mentioning that the proposal was to use it to replace all existing welfare?
Other than the fact that Rothbard's account of my father's monetary views ignores, perhaps because he never read it, the essay on the optimum behavior of the quantity of money--which shows why the optimal behavior is indeed a falling price level?
A central problem with the whole attack is that Rothbard is objecting to answers to a different question than Rothbard is asking. Rothbard wants to know what the ideal system would be. That's an interesting question. My father wants to know what changes that might be possible would improve the existing system. That's also an interesting question. But criticizing the answer to the second question as if it were proposed as an answer to the first--especially when there are multiple places where my father said it wasn't, such as his discussion of the state's role in schooling--is not a useful activity, assuming you care whether your criticism is true.
Go back to monetary policy. As best I recall, my father did not--and Rothbard did--object to free banking. It was Rothbard who insisted that willing parties should not be permitted to make a particular sort of contract with each other--and Lew Rockwell, as you can see by the piece of his I linked to, continues to take that position.
I pointed out to my father that, at least in a simplified model, the equilibrium of a free banking system was precisely the behavior of the money supply that my father had argued was optimal, and he did not disagree.
My father did not argue that a stable price level was an ethical ideal--like many of Rothbard's claims, that's his invention. He argued that it had some advantages in reducing transaction costs, and that it was a simple enough objective so that there was some hope of getting government actors to try to achieve it.
Let me offer a simple suggestion. Instead of discovering what Milton Friedman's views were by reading Murray Rothbard, do it by reading Milton Friedman. Start with _Capitalism and Freedom_, which is readable and non-technical. See if what you see fits the picture Rothbard is painting.
"Wow, Milton is your dad? That must've been lots of fun. "
Indeed it was.
http://www.youtube.com/watch?v=H9yO7TlCa7A&feature=player_embedded#!
http://www.c-spanvideo.org/program/85024-1
(my part starts about 22 minutes in)
Regardless of how accurately the Amazon numbers represent what "the whole world is reading" or what the fact that Rothbard's writings are available for free, the fact that there is some question about it reflects poorly upon anyone who would state, as a fact, that "the whole world is reading Rothbard".
...or what the fact that Rothbard's writings are available for free,...
should read:
...or what the fact that Rothbard's writings are available for free means for the relative rankings,...
or something, I don't feel like retyping the whole post, but I think the idea got across.
Milton Friedman's approach was technocratic - he wanted to make the existing system function more smoothly. But if you really think the system is fundamentally rotten, as Rothbard did, then you don't have any interest in making it function more smoothly, since that would only serve to strengthen it and make revolutionary change less likely.
Not that my nonrigorous and merely personal experience means a lot, but my impression was that Milton Friedman is ten times closer to being considered a household name than Murray Rothbard. Not that general fame and status translate is a top notch indicator for how much people read someone's work, but I have a hard time believing Lew Rockwell's claim.
I find it plausible that Lew Rockwell, after decades of heavily interacting with other Rothbard fans, now has a very skewed personal intuition about relative fame/readership/whatever between Milton and Murray. It is totally understandable and natural on Rockwell's part.
I spend a fair amount of time at reddit.com/r/libertarian, which has an active and significant anarcho-capitalist populace. I feel that my personal intuition about "the typical libertarian" gets more warped by the month.
bryan caplan on rothbard possibly intentionally arguing bad monetary econ:
"But the shoe fits: He admits his willingness to demagogue, and embraced some indefensible views about monetary economics despite his encyclopedic knowledge."
the url for that quote:
http://econlog.econlib.org/archives/2008/03/what_rothbard_m.html
and as you (david friedman that is) pointed out in a previous article in part about rothbard:
"His response was that that was all right; because Reagan was responsible for the inflation, it was appropriate to use it to make his performance look worse. Think that through and he was saying that it was all right to misrepresent the evidence to his fellow libertarians as long as the result was to make them think badly of someone they should think badly of, to lead them to the correct conclusion for the wrong reason."
the url for that quote:
http://daviddfriedman.blogspot.com/2011/06/murray-rothbard-on-me-and-vice-versa.html
two bits of evidence that seem to support the notion that rothbard might have intentionally played fast and loose with evidence, perhaps for strategic reasons.
Thanks for the reply and video. I liked the commentary on children, even if only for confirmation bias. Treating kids as little people instead of pets offers a rich benefit to parents of fun and interest, except at bed time when kids suffer from diminished capacity and get the pet treatment.
Let me add that I've enjoyed your public production very much even before I knew you had this blood credential.
His most zealous fans appear to be twenty-something know-it-alls ("the grassroots") who have never read an economics text that wasn't a pdf on the Mises website.
I think that this is nonsense. Rothbard advocated a particular logic and view of the world that many people find appealing. They do not believe in compromising on principle when those compromises violate the very principles that they profess to believe in. If you are a free market advocate you do not make side deals with regulators because that leaves you vulnerable to the charge that the economic failures are due to too little regulation. A perfect example of this is the Eliot Spitzer book, which claims that the past 30 years have been dominated by libertarian thinking and it was this thinking that was responsible for the market crash.
Rothbard understood the folly of working with the statists to expand government. He was the man who wrote, Don’t try to get Ronnie off the hook by blaming Congress. Like the general public – and all too many libertarians – Congress was merely a passive receptacle for Ronnie’s wishes. Congress passed the Reagan budgets with a few marginal adjustments here and there – and gave him virtually all the legislation, and ratified all the personnel, he wanted."
Whatever you think of Rothbard, he stuck to his principles and followed the logic wherever it might lead. That is a lot more that can be said for most people.
I personally own more Rothbard books than Friedman (even if you combine both Friedmans). But let's face it: outside of hard core libertarians, no one's even heard of Rothbard. Milton Friedman, on the other hand. . .
You may be right about the general public but among people interested in economics and liberty the internet has become a great tool for the Austrian School. It has managed to bypass the gatekeepers in the mainstream media and has taken the message directly to the readers. It does not hurt to have been so right on most occasions while the Monetarists and Keynesians have been so wrong.
The appealing thing about the Austrian school is the clarity of the argument and the logic. There is no playing around with the meaning of words, ambiguous equations and plug factors. People can understand what is said and are in a position to judge the outcomes.
Rothbard had a problem. He thought he was a great economist, but practically nobody within the profession agreed and most of them had never heard of him.
Why is this a surprise? The Austrian School was out of favour and most mainstream economists were statists who could not conceive of the type of arguments that Rothbard was making against the role of the sate.
Rothbard had a solution. He was ignored because he held extreme pro-market views, which were ideologically unpopular in the academy.
I would say that this would be a good argument. Up until recently very few of the Austrians were able to get positions in Academia. The economic profession is dominated by pro-government, top-down advocates.
Rothbard had a problem. Milton Friedman held extreme pro-market views--not as extreme as Rothbard's, but far enough from academic orthodoxy so that the same effect should have existed.
I do not believe that this is true. Milton was a very good economist but he could be seen as an apologist for central banking. Correct me if I am wrong but I do not believe that he had a problem with a monopoly on money creation. His main concern was about having an automatic increase in the money supply that was free from political interference and was relatively unconcerned with the effect on purchasing power on savings that the expansion would have.
But Milton Friedman not only wasn't ignored, he was viewed within the profession as a leading figure--despite his unpopular political views.
As he should have been for his position on a number of issues. But I do not believe that many of the pro-liberty advocates accepted his views on money and his opposition to a market based commodity money. In fact, some of my more extreme friends blame him for the failure of the US Gold Commission to come to the correct conclusions and for the mess that we find ourselves in today. They had no problem with an error in economics as much as they did with the failure to understand the ethical issues with fiat money.
VangelV
"I would say that this would be a good argument. Up until recently very few of the Austrians were able to get positions in Academia. The economic profession is dominated by pro-government, top-down advocates. "
A defective narrative is outlined, and you simply repeat it.
Could it be that Austrians have had trouble getting jobs in top departments because most economists think they're wrong and ideological?
I can say this because I am not Milton Friedman's son. I was a graduate student at Chicago, which may make me seem tainted by those inclined to make ad hominem arguments. He was one of the greatest intellectuals of the 20th century, as many have said. The fact that he dramatically influenced discourse about government and continues to do so is rather inconsistent with his being a non-entity.
Let me offer a simple suggestion. Instead of discovering what Milton Friedman's views were by reading Murray Rothbard, do it by reading Milton Friedman. Start with _Capitalism and Freedom_, which is readable and non-technical. See if what you see fits the picture Rothbard is painting.
I have Capitalism and Freedom and Free the Choose. (While I also own a copy of Monetary History of the United States, it is in storage and likely to remain there for some time.) And while I agree with much of what he writes I still have a problem that an advocate of the free market would defend a monopoly of the most important economic good of all, money.
I think that it was he, not Rothbard who got sucked in with the ideal because we all know that the monetary stability he was looking for could never be achieved in a human society where changing demands and values would always ensure a healthy dynamic that would be disrupted by the imposition of rules seeking to ensure a stability that could not exist. Eventually, the attempt to create stability where none were possible would lead to government meddling in voluntary activities and the use of the initiation of force.
I think that it is ironic that in many ways your own views and arguments remind me far more of Rothbard than your father.
Let me make it a point here to recommend Free to Choose. My thirteen-year old loved the TV series and has used many of the arguments to make fun of my lefty cousins who see people like Friedman and Rothbard as evil.
"Another thing I'd like to mention is that I find your version of anarcho-capitalism more compelling than Rothbard's."
Agreed. Beyond that however, I appreciate Rothbard's work as it moves the Overton window in the appropriate direction. Every Sierra Club needs their PETA, and every PETA needs their ELF and ALF.
So while I may disagree with Rothbard on many of his beliefs (his beliefs on interest and fraction reserve are absurd and self inconsistent) it doesn't bother me as much as it could.
That being said, you (and Heinlein) were the ones that brought me to libertarianism, not the Mises Austrians (which I would say are very different than the free banking Austrians like George Selgin)
Oh, btw, I liked your interview with Stephan on parenting.
The person who spoke about Austrians having trouble getting jobs: Its more a methodological problem than anything else. Methodological individualism + trying to avoid math makes it very very hard to make good explorations. There few people talented enough to do this... I already mentioned Selgin, but I can think of Larry White and four or five others.
Milton Friedman's approach was technocratic - he wanted to make the existing system function more smoothly. But if you really think the system is fundamentally rotten, as Rothbard did, then you don't have any interest in making it function more smoothly, since that would only serve to strengthen it and make revolutionary change less likely.
For what it is worth I think that this is the best argument. Rothbard and most other anarchocapitalists have no interest in making government be more efficient because they see the government as it is as an unnecessary evil.
bryan caplan on rothbard possibly intentionally arguing bad monetary econ:
"But the shoe fits: He admits his willingness to demagogue, and embraced some indefensible views about monetary economics despite his encyclopedic knowledge."
I do not believe that the shoe fits at all. Rothbard spoke about this a number of times and explained how the Old Right, which was branded as Hitler supporters by FDR and the leftist elite, went a bit overboard when taking revenge once the leftist ideas fell out of favour.
I do not accept Caplan's general statement about indefensible views about monetary economics. He would be better served if he identified what those views were and why they were wrong.
Could it be that Austrians have had trouble getting jobs in top departments because most economists think they're wrong and ideological?
Absolutely. Most economists are Keynesians and there is little doubt that they believe that the Austrians are wrong and ideological. But the record shows that the Austrians have been on the right side of the argument and identified problems that the Keynesians were creating before they became apparent to everyone else.
Let me note that his problems with Rothbard notwithstanding, Milton Friedman acknowledged the contributions of the Austrian School and that on many issues there would have been very little disagreement between him and most Austrian School economists.
The person who spoke about Austrians having trouble getting jobs: Its more a methodological problem than anything else. Methodological individualism + trying to avoid math makes it very very hard to make good explorations. There few people talented enough to do this... I already mentioned Selgin, but I can think of Larry White and four or five others.
I think that the claim that many Austrian School economists are not good at math is not valid. The problem is that you can't use mathematics to describe the dynamic, non-linear world of economics in the way that the other schools like to imagine. Models that cannot describe reality but are used to drive economic policy are a very bad idea. That is why the Austrian School tends to avoid them.
Oh boy,
The heavy math era of economics has been dead for a long time. Modern economics is increasingly based on evolutionary game theory which is used to model dynamic systems that are out of equilibrium. And guess what? Evolutionary game theory does not lead to Rothbard, or to anarch-capitalism. Go read some Herb Gintis and Vernon Smith for empirically driven and mathematically modeled economics - but only if you want to leave the echo chamber.
The Austrian economic methodology is ridiculous. If there were no people, there would be no economic laws. Economic laws only emerge when people interact, so economic laws cannot be deduced a priori but through experience
Scott, the methodology is based upon direct knowledge of the workings of human thought based upon our being human.
"All that is needed for the deduction of all praxeological theorems is knowledge of the essence of human action. It is a knowledge that is our own because we are men; no being of human descent that pathological conditions have not reduced to a merely vegetative existence lacks it. No special experience is needed in order to comprehend these theorems, and no experience, however rich, could disclose them to a being who did not know a priori what human action is." -Mises Chap 2 Sec 10 Human Action
Austrians do not start at a point of "no people". Their method is about human behavior as discovered through basic understanding. They are methodological individualists, so their response to the issue of interaction would be that they simply need to know how each relevant individual would respond. In any case, Mises' point is really quite valid, as without an intuitive understanding of human behavior, it'd be a very hard time to get even a rudimentary understanding.
It is true that Rothbard's books are now available at no cost on line. For the first time, in fact, readers are paying precisely what they are worth.
Face up to it:
• Milton Friedman is still world famous on the right and the left. Read any passing rant on neo-liberalism, the new right or whatever takes your fancy.
• Most people have never heard of Murray Rothbard.
The statement that “Friedman is almost a nobody outside of mainstream academic economics” has no foundation in fact.
Friedman had a TV series and many well-selling books.
Did Rothbard write every three weeks for Newsweek from 1966 to 1984 – and back when Newsweek was a global magazine of record!?
A Nobel Prize gets some notice too.
So does the bile from the Left about his brief private visit to Chile – bile that is still over-flowing 35 years later.
The professional Left does not waste their time throwing mud in the mass media at a ‘nobody outside of mainstream academic economics’.
What was the essay in JEL: Shleifer, Andrei. 2009. "The Age of Milton Friedman." Journal of Economic Literature, 47(1): 123–35.
Rothbard wrote a number of excellent books, and published in top journals in the 1950s and early 1960s. he was the lonely sword bearer for Austrian economics for several decades.
As for being out of favour, Hayek had enough trouble getting a paid academic job in the 1950s and 1960s in the USA. Imagine what is was like for rothbard, who did not have hayek's stellar reputation from the 1930s and 1930s.
Mises was offered paid academic jobs away from New York but he did not accept them. Mises was elected as an American Economic Association distinguished fellow in 1969 too along with Alexander Gerschenkron.
Friedman’s print and media obituaries ran all around the globe:
• “Milton Friedman, the grandmaster of free-market economic theory in the postwar era and a prime force in the movement of nations toward less government and greater reliance on individual responsibility, died today in San Francisco, where he lived” – New York Times
• “… it was Friedman who by 1980 supplanted Keynes as the world’s most influential economist.” Sunday times, London.
• “Milton Friedman, who has died aged 94, was one of the greatest economists of all time. He may come to be included in the same category of pre-eminent figures as Adam Smith, Ricardo, Marx and John Maynard Keynes.” – The Guardian
• “Milton Friedman was the father of monetarism and the prophet of laissez-faire economics. It was his debunking of the economics of John Maynard Keynes which was a major factor in leading to the free market revolutions in Britain and the United States. By his contribution to consumption theory, to the demand for money and to economics methodology, and to decision-making under uncertainty, he moved the economic consensus decisively to the right.” – The Independent, London
• “Milton Friedman, who has died aged 94, was the last of the great economists to combine possession of a household name with the highest professional credentials. In this respect he was often compared to John Maynard Keynes, whose work he always respected, even though he to some extent supplanted it. Moreover, in contrast to many leading economists, Friedman maintained a continuity between his Nobel-Prize winning academic contributions and his current journalism. The columns he contributed to Newsweek every third week between 1966 and 1984 were a model of how to use economic analysis to illuminate events.” – Financial Times, London
from the Economist obitury:
"IN 1946 two American economists published a pamphlet attacking rent controls. “It was”, recalled one of them many years later, “my first taste of public controversy.”
In the American Economic Review, no less, a critic dismissed “Roofs or Ceilings” as “a political tract”.
The same reviewer gave the pair a proper savaging in a newspaper: “Economists who sign their names to drivel of this sort do no service to the profession they represent.”
... championing the free market was deeply unfashionable, even (or especially) among economists.
Mr Friedman and kindred spirits—such as Friedrich von Hayek, author of “The Road to Serfdom”—were seen as cranks."
no major national publication reviewed captalism and freedom.
The Economist did and said in 1963:
"PROFESSOR FRIEDMAN has a wide international reputation as a brilliant economist and as an extreme liberal, in the nineteenth century sense. It therefore comes as no surprise that this tract should be so stimulating.
It makes ideal reading for politicians of either party in this country, not because it would convince them, but because it challenges the reader to sort out his own ideas more fundamentally."
"Milton Friedman's approach was technocratic - he wanted to make the existing system function more smoothly. "
Certainly Rothbard's claim.
What it misses is that, if you believe in free markets, the obvious way to make the system function more smoothly is to move it in the direction of free markets. In my father's case that included support for abolishing the draft, opposition to price control, opposition to fixed exchange rates--price fixing among currencies--opposition to a wide variety of government regulations of the market.
And, unlike Rothbard, he accomplished quite a lot of that, and in the process substantially changed the views of his fellow economists.
Suppose we translate the dispute to the medical context. Rothbard's argument amounts to opposing the use of antibiotics on the grounds that if only we didn't have them, and chemotherapy, and surgery, and any other medical improvement of recent centuries, we would have to develop full scale nanotech and cell repair machines and could then all live healthy lives forever. Make things bad enough and they magically turn good.
Do you find that version persuasive?
Vangel writes:
"Most economists are Keynesians"
True in the 1960's, but Keynesianism lost a lot of support since then. And the Austrians don't merely reject Keynesian economics, the more extreme, such as Rothbard, reject neo-classical economics more generally.
Mises argued for an extreme a priori approach to economics, a position that is, I think, very difficult to defend, since one can almost always specify some utility function that will lead to whatever behavior one wishes to predict--giving the theory no ability at all to predict or explain anything.
In my experience, the extreme Austrian critique of the more conventional approach involves misrepresenting it--treating Chicago methodology as simply deducing facts from statistics, rather than forming conjectures on the basis of theory and testing them against the evidence, a procedure necessary because the theory is insufficient to produce confident conclusions.
@VanglV:
"I think that the claim that many Austrian School economists are not good at math is not valid. The problem is that you can't use mathematics to describe the dynamic, non-linear world of economics in the way that the other schools like to imagine. Models that cannot describe reality but are used to drive economic policy are a very bad idea. That is why the Austrian School tends to avoid them."
I didn't say they were bad at math, I said that it makes it harder to play the economics journal game if you avoid math as much as possible. It takes a lot of talent to distill complicated things down into clear, concise words, without getting into nonsense and most people just don't have that. I would say, after having read David's price theory text, that our host here is talented in this way. However the Austrian methodology sort of forces someone to take this tack, and most people just don't have anything /that/ interesting to say when they actually try it.
"Milton was a very good economist but he could be seen as an apologist for central banking."
I don't recall his rejecting the idea of free banking--unlike Rothbard, who wanted to require money to consists of a commodity or a 100% reserve currency.
What is true is that he was interested mostly in understanding the institutions that actually existed and getting them to work better. Given that all major economies had government created currency, that meant figuring out what the central banks were doing wrong and persuading them not to do it.
Part of which consisted of arguing that various problems routinely attributed to the free market were actually a result of government interference in the market by central banks, inflation being the obvious example.
David, Austrian theory IS neoclassical. It just mostly rejects the always at equilibrium approach of the Chicago School. What it doesn't fit is Keynes's strawman of classical theory.
Note: While I am an ancap, I am not an Austrian. And while I think that the equilibrium approach has been incredibly useful, I'd like to explore some of the non-equilibrium approaches that the Austrian school developed, using more modern tools than they, to develop answers to some of the harder questions in economics.
Vangel writes:
"I think that it is ironic that in many ways your own views and arguments remind me far more of Rothbard than your father. "
Yes and no. Both Rothbard and I were interested in the question of how far one could carry the market approach to organizing human activity, and both of us argued that, at least under some circumstances (my qualification not his), you could carry it all the way to a system in which all useful government functions were replaced by the market. I think I went a little farther in that direction than he did, since in my version law itself was a market outcome, and I offered arguments to support the view that the market would tend to generate good law, at least in an economic sense.
But that was a question not of what our views were but of what question we were answering, a point I made earlier. My father never claimed that my position was wrong, although he was less sure it was right than I was. He was simply interested in answering a differing set of questions--scientific questions such as what caused the Great Depression or why inflation happened, and policy questions such as what changes in existing institutions would be improvements.
But so far as our approach to economics was concerned, my father and I were essentially the same. We both accepted the Chicago school approach to methodology, which was in part his creation. It consisted of creating conjectures on the basis of economic theory and then finding ways of testing them against available evidence.
My first published economics article was an economic theory of the size and shape of nations, an attempt to explain that feature of the history of Europe from the fall of the Roman Empire to the present. When I submitted it to the JPE, George Stigler rejected it on the grounds that I offered a theory but no empirical tests.
I solved that problem by finding predictions of the theory that I could and did test. In doing so I learned a very important lesson. Not only did making and testing the theory give me a little--not very much--evidence that it was right. It also forced me to think through more clearly than I had exactly what the theory was, because without doing so I couldn't make predictions to test.
stated simply:
1. Rothbard was a radical libertarian
2. Friedman was a classical liberal.
They disagreed a lot.
Milton Friedman was a harsh critic of austrian business cycle theory. see http://economistsview.typepad.com/economistsview/2006/01/milton_friedman.html
Rothbard was a harsh critic of Milton Friedman and the school of economics he represented.
the economics profession is a rough-house.
"Not only did making and testing the theory give me a little--not very much--evidence that it was right. It also forced me to think through more clearly than I had exactly what the theory was, because without doing so I couldn't make predictions to test."
Good point!
Milton Friedman introduced me and millions of others to an economics that was both accessible and profoundly pro-liberty. He is still a very live intellectual figure in mainstream economics. Scott Sumner, for example, has several times commented on what a tragedy his death was because, if he was still alive, he would have been an articulate advocate of much clearer thinking on present problems than much of the "economic right" has been able to manage.
Murray Rothbard is simply a much more marginal intellectual figure. I applaud your sensible and worthy defense of your father.
I respect Milton Friedman a lot, I think he was one of the brightest people of this century. He seemed to very open to an argument and not ideologically dogmatic like many Austrians.
Indeed, if it wasn't for your father, I would not be reading this blog or be interested in economics in the first place.
However I do respect Rothbard too. He seemed to have his flaws, but he always seemed kind of a Nietzchean knight trying to build up an ideal and philosophically consistent system of thought and society. Best attempt that I've known of. Even when I completely disagreed with him, he made think of things from more abstract point of view than other libertarians presented. I'm happy that he wrote the books he wrote, even if some of them advertize inconsistent ideas.
As for the substance, I think Lewrockwell.com and mises.org shows up on Alexa much higher than Friedman's websites or even CATO but then again Milton Friedman is definitely much more known among economists / common people. Very few outside libertarian thoughts even recognise Rothbard's name. No doubt Friedman's books are much more read than Rothbard's too.
However in terms of concrete results, Friedman(s) did more for liberty than any of the Austrians have ever done. The abolition of draft is just one among many. Maybe this will change in the future, who knows.
When it comes to free banking, I like L. White and G. Selgin much more than any others. They seem to neglect the 100% reserve nonsense, and seem less dogmatic in their approach than many Austrians.
But yeah I find this conflict unnecessary, and I probably would point much of the fault to the Austrian wing. I suppose some of this has happened because some Austrians are blamed for whatever policies Thatcher, Reagan etc. politicians made in name of "free-market" and they want to differentiate themselves, although sometimes in quite a rude way.
"Austrian theory IS neoclassical"
I would agree that a lot of it is--Menger, for example. But I think by the time you get to Mises, and perhaps still more Rothbard, Austrian methodology rejects enough of Marshallian economics so that it has become a different, although related, school.
And I'm not arguing that there is nothing of value in Austrian economics. I've never gotten seriously involved with macro, so am not in a position to offer an independent evaluation of Austrian business cycle theory; as best I can tell, my father's view was simply that its conclusions were inconsistent with the available evidence.
Well I don't know about ABCT since I'm definitely not a macroeconomist but I have read many kinds of papers about it.
I think the most fruitful part is that Austrians do not think interest rates are arbitrary, but that they actually mean something. Just like price for wheat, if the government tries to set the price of wheat by itself, there'll be adverse consequences, because of knowledge problem. They apply the same kind of logic to interest rates. They also believe the structure of production is also very sensitive to the rate of interest.
With a central bank, the government has monopolized interest rate.
If ABCT is relevant for any or even most of the modern business cycles, I wouldn't know.
"What it misses is that, if you believe in free markets, the obvious way to make the system function more smoothly is to move it in the direction of free markets."
Rothbard wasn't against incremental change in the direction of weaker government. But that's totally different from using knowledge of free markets to make government more effective. It's not that Rothbard had a "worse is better" philosophy, but that he viewed change that made government stronger (even if motivated by free market beliefs) as a change for the worse.
David,
That your son Patri is more Rothbardian than Miltonian is all you need to know.
"What it misses is that, if you believe in free markets, the obvious way to make the system function more smoothly is to move it in the direction of free markets. In my father's case that included..."
What about Milton's contribution to the emergence of the payroll withholding tax? This policy has been a huge blow to liberty and quite possibly outweighs all the positives listed. Is it really so obvious that we are "more free" as a net result of his work with governments?
"I think the most fruitful part is that Austrians do not think interest rates are arbitrary, but that they actually mean something."
Neither does anyone else in neoclassical economics.
Governments can manipulate the interest rate, just as they can and do manipulate farm prices. And some government policies, such as an inflationary monetary policy, affect interest rates. But the idea that the interest rate represents a real price is no more a special chracteristic of Austrian economics than the idea that the price of wheat represents a real price.
If you doubt that, take a look at Marshall's discussion. Or, for that matter, mine in my webbed Price Theory, available from my site.
It's risky to form your beliefs about what school X says based on criticism of school X by school Y.
"That your son Patri is more Rothbardian than Miltonian is all you need to know."
Perhaps you can quote Patri saying that?
I think you are making the same mistake I pointed out earlier in responding to a comparison between my views and Rothbard's.
My son is interested, as I am and as Rothbard was, in the possibility of a society without government. But his approach to that issue, like mine, is based on the same economic approach as my father's and, more narrowly, on the public choice approach to government, not on either Rothbard's ideas or Mises' ideas.
David,
Your point that Rothbard and your father held similar ideological positions antithetical to the mainstream, but that your father engaged the mainstream on their turf while Rothbard refused (or something to that effect) is exactly correct.
I've argued with some Austrians about why Hayek received far more recognition within the profession than did Mises. Mises was largely, if not completely, ignored among the profession while Hayek influenced many skeptics and won the Nobel prize. This was because Hayek (a former student of Mises) was willing to engage the profession on their turf while Mises refused.
As a consequence, like your father, Hayek had far more influence on the profession and in promoting a better understanding to a broader audience of the importance of free markets than did Mises. Your father contributed greatly to changing minds among the skeptics; Rothbard has influenced few.
This is not to denigrate the ideas of Rothbard, only to note that preaching to the choir changes no minds and teaches no new lessons, regardless of the ideological purity or the intent of the teacher.
When I was a callow college student I thought Rothbard was a brilliant defender of liberty. As I grew older and wiser I realized he was a delusional jerk who sabotaged the Libertarian Party in its infancy.
The axioms of Praxeology are crude approximations of human nature at best. To derive public policy prescriptions from them alone is akin to designing a GPS system without taking into account light pressure, general relativity or gravitational irregularities.
Looking back, I find particularly dishonest and irresponsible were his declarations that the Soviet Empire could not work and could be safely ignored. Somehow he neglected to look at the data: the Soviet economy was far better in the 70s than it was under Stalin. The Soviets chose to reform. And they probably did it because they could not keep up militarily with the Reagan build up without a bit more economic efficiency. Without that competition, the Soviet economy worked (after a fashion) and history clearly shows that unfree empires can last for centuries.
Then there are his many billious rants against his ever rotating list of freedom allies. Lew Rockwell simply won the game of musical chairs.
Go read some Herb Gintis and Vernon Smith for empirically driven and mathematically modeled economics - but only if you want to leave the echo chamber.
Sorry but the models are still a dead end and have no ability to predict the real world. You might try looking at Nassim Taleb for some clarification.
The Austrian economic methodology is ridiculous. If there were no people, there would be no economic laws. Economic laws only emerge when people interact, so economic laws cannot be deduced a priori but through experience
Try doing some reading. Austrian economics is based on human action. You seem to have missed that part.
Perhaps one addendum from someone living in Europe:
I do think there is something fundamentally different between Friedman and Rothbard. I will draw from my experience in engineering, which might help to illuminate the point I want to make.
Friedman and Rothbard are very different in their arguments and position and that comes from their view of how to go about libertarianism (classic liberals in Europe).
In engineering you have two options:
a) you can created an improved version of an existing product (evolution). Doing this has a higher rate of success and lower risk, but also doesn't have much of a result and might not even make a lasting impression on the "customers".
b) you can try something entirely new. High risk, high returns and probably a lower rate of success, but if it succeeds than it revolutionizes the sector and is probably lasting.
The category 'a' is Friedman. Category 'b' is Rothbard. Both have their merits, but I think that the movement and modern welfare economies (and that are all of the developed countries) are towards more and more state control until they default.
So all the incremental changes INSIDE the system might ultimately prove futile, but they allow to maximize your time preference, your preference for LIBERTY NOW (which I prefer to some uncertain future).
A Nobel Prize gets some notice too.
Perhaps. But as some critics have pointed out, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel is a big joke. After all, the work on portfolio theory and asset-pricing models produced awards even though the theories were nonsense and their application were responsible for the financial system crash that we experienced. Many of the economic models that have been selected for recognition are nothing more than pseudo-science and narrative, and are incapable of producing better results than random guessing.
“Milton Friedman was the father of monetarism and the prophet of laissez-faire economics.
Actually most Austrians agree with Friedman on many of the issues. But many critics (like Roghtbard) argue that while he was a champion of the free market in most areas he failed to argue for laissez-faire in others.
When Friedman makes a statement like, "I have no right to coerce someone else, because I cannot be sure that I am right and he is wrong," many libertarians go crazy because the statement implies that if we were certain that someone were wrong we have the right to use coercion to interfere with his/her choices. There is also the implication that what is right and wrong today may not be that way tomorrow. His critics argue that a principle based libertarian could not reach such conclusions and would certainly have serious issues with vouchers or negative income tax schemes because they still involve coercion.
In short, it is not most of the positions that Friedman takes that cause a problem for many libertarians, anarchists, and Austrian School economists. It is his methodology and willingness to support statism that they have a problem with. While I am hardly qualified to judge it seems to me that some of the criticisms are valid.
For those who are interested in the criticisms of some of the Austrians I suggest you look at this correspondence between Milton and Walter Block, where Friedman defends Hayek against Block's charges that the gave up far too much in his attempt to convince socialists to abandon socialism and by doing so provided a justification for socialism and central planning.
Are you still trying to argue? I would go further and say that Lew Rockwell himself is more read than Milton Friedman. 128000 searches in a month against 500.000 unique visitors per DAY rests the case.
That's just not to start mentioning the Rothbardian Ron Paul and Mises Institute(and it's schollars).
But that's not something to be sad about, since even you has more to do with rothbard than with Milton.
@Max: Rothbard was in category C: the crank inventor who claims he had a free energy device but doesn't allow anyone to test it.
Our host David Friedman explores anarchy but does so open to its potential problems. Even though I am no longer an anarchist, I continue to recommend "The Machinery of Freedom" to all and sundry, because it is a scientific look at the problems of government.
Rothbard simply hates government and demands its abolition, regardless of whether it results in anarchotopia or creating another Somalia. This is murderously irresponsible. The world has many examples of failed states that are worse places to live or do capitalist things than Denmark.
But with Rothbard's scholastic blinders on, you aren't allowed to rate amount of liberty. Who is to say that Somalia is worse than Denmark? How can we judge whether the slavery of the Confederate South was worse than the tariffs of the Union North? Rothbard's welfare maximum function is a point function which requires not only the elimination of the State but 100% of all private crime as well.
What it misses is that, if you believe in free markets, the obvious way to make the system function more smoothly is to move it in the direction of free markets. In my father's case that included support for abolishing the draft, opposition to price control, opposition to fixed exchange rates--price fixing among currencies--opposition to a wide variety of government regulations of the market.
But isn't it hard to be for free markets when you are supporting legal tender laws and fiat currency monopolies? And forgive me if I make this observation but are you not treating Rothbard in the same way as critics treated Chesterton, an author you claim to admire? They claimed that GKC was out of step with his time and held some very unpopular views, which is exactly the same charge against Rothbard. I suggest that Rothbard's critics are no more persuasive now than Chesterton's were then. They are very large in numbers because they reject the anarchocapitalism that Rothbard advocated.
Suppose we translate the dispute to the medical context. ...
Rothbard (as I read) him is very particular about principle. He believed that people owned their own bodies and that government had no business or right to meddle in voluntary transactions. These beliefs led to a number of conclusions which your dad opposed because he tried to be more effective in the current political reality.
Suppose we translate the dispute to the medical context. Rothbard's argument amounts to opposing the use of antibiotics on the grounds that if only we didn't have them, and chemotherapy, and surgery, and any other medical improvement of recent centuries, we would have to develop full scale nanotech and cell repair machines and could then all live healthy lives forever. Make things bad enough and they magically turn good.
Sorry but you lost me here. I am not smart enough to follow.
Mises argued for an extreme a priori approach to economics, a position that is, I think, very difficult to defend,...
I do not find it difficult to defend the Austrian school because it has been far more capable of predicting future events than the Keynesians or the Chicago School. Which premise do you have a problem with?
And it is hard to attack Mises' methodology when the school that you champion argues that, "The relevant question to ask about the "assumptions" of a theory is not whether they are descriptively "realistic," for they never are, but whether they are sufficiently good approximations for the purpose in hand. And this question can be answered only by seeing whether the theory works, which means whether it yields sufficiently accurate predictions."
Models that use false assumptions are not valid; the odd accurate predictions could be due to simple luck.
In my experience, the extreme Austrian critique of the more conventional approach involves misrepresenting it--treating Chicago methodology as simply deducing facts from statistics, rather than forming conjectures on the basis of theory and testing them against the evidence, a procedure necessary because the theory is insufficient to produce confident conclusions.
As I wrote before, I am an engineer, not an economist, and I know less about the subject than you do.
But it seems to me that the Chicago school is known for its belief in the EMH. This was one of the reason why the Chicago economists missed the housing bubble even as the Austrians were screaming about the danger. Recently we saw Chicago school economists blaming Bernanke for being too tight even as he was doing all he could to flood the system with liquidity.
And I remember the argument that your dad made, in which he said that if the link of the USD to gold
were cut prices would fall to around $18 or so, which was gold's use as a dental material. At the time the Austrians (who I was not familiar with) were saying that the price would explode because they only thing keeping the dollar stable in the face of money printing was its link to the dollar. Instead of falling by 50% gold went up by around 1,500% because the Chicago School did not really have a very good theory on money and credit. I am sorry David but the Chicago School does not seem to me to be all that much better than the Keynesians. Both are apologists for the state and justify the type of top-down planning that a free society would have to reject. Of course, that is exactly why they are so popular and dominate the field of economics. The political class rewards those that support the legitimacy of meddling even if they reject some of the programs that it has put into place. As I said, it is hard to be in favour of a free market when you are supporting legal tender laws and the central bank's monopoly on money creation.
I didn't say they were bad at math, I said that it makes it harder to play the economics journal game if you avoid math as much as possible. It takes a lot of talent to distill complicated things down into clear, concise words, without getting into nonsense and most people just don't have that. I would say, after having read David's price theory text, that our host here is talented in this way. However the Austrian methodology sort of forces someone to take this tack, and most people just don't have anything /that/ interesting to say when they actually try it.
Of all of the schools, the Austrians are the clearest to follow. The economics journals tend to prefer arguments that are not clear and language that can be very ambiguous. As Rothbard argued, muddled writing is only used to hide muddled thinking.
What is true is that he was interested mostly in understanding the institutions that actually existed and getting them to work better. Given that all major economies had government created currency, that meant figuring out what the central banks were doing wrong and persuading them not to do it.
But the institutions were little more than legal criminal organizations that should have been opposed by those who had the courage to stand up to them.
Your father could have been more persuasive by arguing for going back to a link to gold in 1982 but opposed that idea. I would argue that the harm done by staying on a fiat system has done a huge amount of damage to savers, investors, and producers as it encouraged the growth of the state.
Keep in mind that Dr. Paul used your parents' work to justify going back on the gold standard when he issued the Minority Report of the US Gold Commission.
I often defend your father against attacks from my leftist friends and relatives. I do so because I thought him to be a good man who meant well and who was excellent on many economic issues. But I still do not see him to be the champion of free market capitalism and see him well behind you and Rothbard. I simply believe that yours is the far more morally defensible position than your father's. That does not make him a bad man or a bad economist. But it does put him on the wrong statist side of the debate.
A brief note:
"Let me take the liberty of being uncharitable but truthful."
Although your narrative in that comment seems quite plausible, the fact is that none of us is in possession of a sure fire method for reading other people's minds, and especially not those of the dead.
For myself, I try to avoid discussing people's possible motivations in such contexts, even when there seems like a quite plausible hypothesis on them, simply because I prefer not to be uncharitable when I have no solid proof.
Of course, we must each choose our own way of dealing with such questions. I'm only noting my own.
"But isn't it hard to be for free markets when you are supporting legal tender laws and fiat currency monopolies?"
Perhaps you could point at where my father supported either of those?
As I have mentioned already, it was Rothbard who wanted to ban the private issue of fractional reserve currency. How can you be for free markets while prohibiting a voluntary contract between willing parties, by which one agrees to accept currency guaranteed by the other?
"Methodological individualism + trying to avoid math makes it very very hard to make good explorations. There few people talented enough to do this... I already mentioned Selgin, but I can think of Larry White and four or five others."
I don't think the critical point here is whether or not one is Austrian, however, and I don't see any connection between methodlogical individualism and avoiding math.
There has been an unfortunate fashion in economics for some decades for what Gordon Tullock describes as "ornamental mathematics." If you don't have anything very original to say, you provide the illusion of originality by using sophisticated mathematics to say it.
But it's been journals such as the JPE and the JLE that have, on the whole, held out against that trend--i.e. Chicago journals. It was a trend my father criticized. If you look at my published work, lots of which is on my web page, you will find some calculus and occasional statistics, but not a lot of either. I like to say that one advantage of having a doctorate in theoretical physics is that I can do non-mathematical economics without being accused of being afraid of math.
And let me add to your list Peter Leeson. I don't know if he considers himself an Austrian, but I don't remember any evidence that he did in the work of his I've read. What he is is an economist who uses economics to try to make sense of human behavior--as did Gary Becker, George Stigler, and a variety of other Chicago types.
"His critics argue that a principle based libertarian ..."
At which point they are not criticizing his economics, they are making claims in moral philosophy.
As best I can tell, neither Rothbard, Rand, nor anybody else has provided a demonstration that their moral views are correct, which raises some difficulties if you are going to claim that someone else's beliefs are wrong because they disagree with yours.
"What about Milton's contribution to the emergence of the payroll withholding tax?"
His view, repeatedly stated, was that the withholding tax was a bad thing, but might have been a price worth paying to win a war against worse things.
"but are you not treating Rothbard in the same way as critics treated Chesterton, an author you claim to admire? They claimed that GKC was out of step with his time and held some very unpopular views, which is exactly the same charge against Rothbard."
Except that it isn't--I hold some very unpopular views, as did my father. That goes back to my point about Rothbard's problem in explaining is own lack of influence.
It's true that being in favor of anarchy is a more extreme position than believing that minimum wage laws should be abolished, the draft abolished, that bad fed policy was largely responsible for macro problems and almost entirely for inflation, that wage and price controls were bad things, that medical licensing should be abolished, ... . But that list is sufficiently extreme, from the perspective of economists c. 1960, so that if having positions very unpopular with academic opinion was enough to destroy an academic's visibility Milton Friedman would not have been regarded as a serious academic. Yet he was.
Perhaps you can point to where I charge Rothbard with holding unpopular views? If you have followed my occasional past comments on Rothbard, what I charge him with is deliberate intellectual dishonesty--making arguments that he knew were false but that led to conclusions he liked. For examples, take a look at:
http://daviddfriedman.blogspot.com/2011/06/murray-rothbard-on-me-and-vice-versa.html
and material linked to that.
Suppose some future historian, in a book on the 20th century, commented that the Drug Policy Foundation was a supporter of the War on Drugs as demonstrated by their support for taxing Marijuana. This is for readers who will not know that marijuana was illegal and what was being proposed was that it be legalized and taxed.
Is it possible that he is an honest man? Yet that's what Rothbard did when he attacked Smith for advocating an export tax on wool without mentioning that the export of wool was at the time illegal, the ban enforced by ferocious penalties, and Smith was proposing legalizing it.
That's the sort of thing I attack Rothbard for, when I bother to attack him at all, not for holding unpopular views.
And, one more time, if I have been attacking him on the basis that his views were unpopular, please quote me doing so.
My wife bought me the original run of Free to Choose last Christmas. A few days ago we watched the episode, "What's Wrong With Our Schools?" During the debate, afterward, your father was confronted with representatives from teachers unions and the educational establishment. They proceeded to prattle off one fallacy after another, and your father was always patient and respectful.
I doubt very much that Rothbard could have sat in that room and debated those men. That is the difference between your father and Rothbard. Oh, and Milton was a better economist to boot, in my opinion.
You analogy regarding antibiotics is too charitable. A better analogy would be an environmentalists criticizing those who burn petrol instead of using zero point energy devices (I've met a few, BTW).
Rothbard and his followers criticize(d) those who advocated smaller/better government as horrible statists without accepting the burden of proof that anarchocapitalism would be better.
Unless we somehow abolish the food chain and genetically modify all humans into some kind of Randroids, we will have the initiation of force whether we have government or not. To advocate any and all cuts in government without addressing the side-effects is irresponsible and/or intellectually dishonest. Resorting to name-calling, etc. at those who do address the real world is churlish to say the least.
But that was a question not of what our views were but of what question we were answering, a point I made earlier. My father never claimed that my position was wrong, although he was less sure it was right than I was. He was simply interested in answering a differing set of questions--scientific questions such as what caused the Great Depression or why inflation happened, and policy questions such as what changes in existing institutions would be improvements.
I don't like to say this but I do not find his answers convincing. In fact, I agree more with Rothbard on those issues. The Great Depression was not caused because the Fed was too tight after the market crash but because it was too loose in the mid to late 1920s.
Inflation happened because of a system that allows central banks to create money out of thin air or because banks chose to engage in a reckless increase in the supply of credit.
I also think that you go much further in your willingness to gut existing institutions while your father seemed to be caught up in making them more efficient, even when they shouldn't exist.
But so far as our approach to economics was concerned, my father and I were essentially the same. We both accepted the Chicago school approach to methodology, which was in part his creation. It consisted of creating conjectures on the basis of economic theory and then finding ways of testing them against available evidence.
As I said before, I am just an engineer and can only comment on my limited reading and understanding. That said, I don't see how one can accept the Chicago School's reliance on the EMH. (I have seen Chicago School economists argue that there was no housing bubble even after it popped while their colleagues were blaming Bernanke for being too tight even when he was buying impaired paper from banks and brokers at face value. Chicago School economists were defending the stimulus and saying that it would do a lot of good. When the evidence did not support them they ignored it and came up with narratives about what if scenarios even as they pretended that the crisis was over.
My big problem is that the Chicago School has a very poor record at explaining the business cycle. Its economists keep talking about external shocks as drivers that cause some form of equilibrium response or other such nonsense. As someone with no particular axe to grind who came from being taught by the far left (and lived behind the Iron Curtain) I am not very impressed by the failure of the Chicago School but very impressed by the Austrian explanations and predictions. And I still see your ideas being closer to someone like Hoppe than your own father. Of course, I have not read enough and still have a long way to go so I may be wrong on these points.
I solved that problem by finding predictions of the theory that I could and did test. In doing so I learned a very important lesson. Not only did making and testing the theory give me a little--not very much--evidence that it was right. It also forced me to think through more clearly than I had exactly what the theory was, because without doing so I couldn't make predictions to test.
I remember a discussion at a banquet in China on this point. One of the economists argued that many claims were not really testable as they would be in the hard sciences. He gave the usual example of incentives and pointed out one of the young ladies at the next table. He said that her refusal of a payment of 500RMB for a roll in the hay would not prove that she did not respond to monetary incentives because she might say yes to 1,000RMB. What we chose to conclude was really determined by narrative, not truly reproducible scientific experiments because human society did not work that way and no economic models were very convincing on that front.
A perfect example that you can find today is in the field of climate 'science' where most of the AGW models and 'science' are unfalsifiable drivel that is not supported by empirical evidence. (Which is why the IPCC has not been able to cite a single paper that has used empirical data to show that CO2 emitted by human beings is a material driver of temperature change.)
Sorry David but on this issue I will side with my Chinese friends, Marc Faber, or Nassim Taleb. When the Chicago School missed the bubbles in tech and housing it showed that its predictive powers were not very good. If I wanted to protect my investment portfolio I would do much better by paying attention to the Austrians.
Scott Sumner, for example, has several times commented on what a tragedy his death was because, if he was still alive, he would have been an articulate advocate of much clearer thinking on present problems than much of the "economic right" has been able to manage.
Here is my other problem. Milton was very sensible in ways that Sumner isn't. Sumner has denied the existence of the housing bubble and has been arguing that the Fed is way too tight with its monetary policies even as it was flooding the system with liquidity. If he is an example of the average Chicago School economist it isn't a very good school.
Ah, Marc Faber. Wasn't he writing for that investment letter Strategic Investing for a while? I seem to recall his name on some of the columns in that letter which made one bad prediction after another.
Predicting a crash to happen a decade and a half before it happens isn't particularly useful. You can miss an awful lot of market gains in the interim.
As for ruling out global warming because we cannot do the test tube experiments, well, you are just a couple of steps away from screaming "SCIENTISM!" Observational science is more difficult than science where you can make controlled experiments, but it is still science -- albeit with some bigger error bars.
When it comes to free banking, I like L. White and G. Selgin much more than any others. They seem to neglect the 100% reserve nonsense, and seem less dogmatic in their approach than many Austrians.
Excuse me if I am wrong about this but aren't White and Selgin considered part of the Austrian School?
From what I remember of their lectures and commentary they have defended Mises and Rothbard even though they have disagreed with them on a number of issues. And rather than criticize the vigorous disagreements within the school, White has pointed out that the they are a healthy sign of intellectual progress.
I suppose some of this has happened because some Austrians are blamed for whatever policies Thatcher, Reagan etc. politicians made in name of "free-market" and they want to differentiate themselves, although sometimes in quite a rude way.
I don't see how they can be blamed.
Here is Rothbard (around 1984) on Reagan:
In the early years of the Reagan Administration, I was accused by some conservative-libertarians of not "giving Reagan a chance," and of not looking at spending and taxation in real terms, or in terms of rates of growth, or in terms of percentage of the GNP. So now Ronnie has had his "chance" (as if I could have ever deprived him of it!), and he suffers in every conceivable department. No matter how you slice it, Reagan is a far worse spender and taxer than his "big-spending" and much-reviled predecessor Jimmy Carter.
Everyone knows about the deficits. Reagan's deficit is enormous, astronomical, regardless how you look at it, and it bids fair to becoming permanent. The response of conservative Republicans who had denounced evil deficits all their lives? To adopt the insouciant attitude of liberal Keynesianism: who cares about the deficit anyway? Power indeed tends to corrupt.
The gold standard was buried by an "impartial" Commission stacked to the gunwales by bitterly anti-gold Keynesians and Friedmanites. As for deregulation, it has never gotten anywhere, except for those programs that the Carter Administration had already launched: deregulation of communications, airlines and trucking. Farm price supports are even worse than before, with the Reagan Administration "creatively coming up with the idea of the government giving the farmers back their own wheat and corn stored for years idly in warehouses, in return for the farmers agreeing to cut their acreage some more. Reagan, who obscenely calls himself the intellectual disciple of Bastiat and Mises, has raised tariffs and imposed import quotas like mad, including forcing the Japanese to "voluntarily" cut their export of automobiles, imposing a quota on the import of clothespins (presumably vital for national security), and summarily raising the import tariff on heavy motorcycles by 1000% in order to save the bacon of Harley-Davidson.
Foreign aid, at the expense of the U.S. taxpayer, continues to abound anywhere and everywhere, subsidizing U.S. export firms and fastening the shackles of various foreign states (mostly dictators) on the backs of their hapless subjects. In addition, the ostentatiously anti-Communist Reagan Administration bails out the Polish government for the benefit of Chase Manhattan Bank and other bank-creditors, and helps to reschedule such loans to keep propping up the heinous Polish regime.
The Austrians saw Reagan for what he was early in the game. They never bough into the myth of Reagan or advanced it because they knew that it would be used to defend the expansion of government, foreign meddling, regulatory expansion, tax increases, etc., by the same left that claims to have opposed his big-government schemes.
And I'm not arguing that there is nothing of value in Austrian economics. I've never gotten seriously involved with macro, so am not in a position to offer an independent evaluation of Austrian business cycle theory; as best I can tell, my father's view was simply that its conclusions were inconsistent with the available evidence.
That is not the way that I see it. The evidence supports the Austrian business cycle theory. It predicted and explained the Great Depression, the stagflation of the 1970s, and the 2007/2008 correction. The Austrians see the boom period as the problem (when it is caused by easy money policies and credit expansion). They point out that the damage is made when the party times cause malinvestments that cannot be supported by the real economy and have to be liquidated, not by a lack of liquidity once the contraction has been triggered. On the other hand, the Keynesians are totally lost while the Chicago School tends to be blinded to bubbles due to its reliance on the EMH.
From what I have seen, the popularity of the Keynesian and the Chicago schools does not come from their ability to predict or explain but from the justification of liquidity injections and government meddling in the economy.
Rothbard wasn't against incremental change in the direction of weaker government. But that's totally different from using knowledge of free markets to make government more effective. It's not that Rothbard had a "worse is better" philosophy, but that he viewed change that made government stronger (even if motivated by free market beliefs) as a change for the worse.
Rothbard stood on principle. He believed that people have property rights and that those defined rights are the basis of proper economic analysis. He would accept whatever conclusions logic and reason would come up with. That meant if he believed that taxation or government education policies were a form of theft the moral person would oppose them, not try to make them more efficient.
On the other hand many other people clearly thought such an attachment to objective principles to be naive and abandoned some of their own principles in order to advance other goals in the hope that society would be better off. History has not been on their side so far. I would argue that if enough people had the onions to stand up for what was right the statists would have little choice but to downsize the government. The power of the rulers depends on the consent of the ruled. Rothbard argued that withdrawing that consent would be a better approach than playing along in the hope that a few crumbs are thrown your way.
Sorry but the models are still a dead end and have no ability to predict the real world. You might try looking at Nassim Taleb for some clarification.
I'm familiar with Taleb and with Mandelbrot. And in fact, you can use fractals to model markets. Of course, they are highly sensitive to scaling constants, but even that can be explored.
But you are missing the larger point that there are many situations outside of finance that are robust to black swans and can be profitably modeled using evolutionary game theory and tested against evidence. A classica example is how the bourgeoics strategy can invade a population of hawks and doves depending on the relative payoffs and costs. Sure, you might get a black swan - the payoffs may change yor a new strategy may appear. But barring black swans, you can study how an out of equilibrium system reaches equilibrium using evolutionary game theory. You can't do that with praxeology. It is simply a limited tool.
I've argued with some Austrians about why Hayek received far more recognition within the profession than did Mises. Mises was largely, if not completely, ignored among the profession while Hayek influenced many skeptics and won the Nobel prize. This was because Hayek (a former student of Mises) was willing to engage the profession on their turf while Mises refused.
The profession is largely corrupt. Its dominant members are more interested in power and politics than they are in truth. The reason why Hayek got the recognition that should have been Mises' is because he was a conspirator who went along with the statists.
Rockwell once gave a great talk about Hans Mayer, who was the big man in economic academia in Vienna when Mises was being ignored by the establishment and denied a teaching position. Rockwell points out that one of the things that made Mises great was his courage to say what was true even though it may have been very unpopular.
Because he was right and had the courage to stand up for what he knew to be right, Mises is so respected around the world today and is better known today than he was at the time he died. And even though he was very powerful nobody today knows who Mayer was.
I suspect that as time passes history will be the judge of the works of our favourite economists. With the advent of the internet the power game has shifted and many of the opinion makers and gate keepers no longer have the influence that they once did. Only a few years after he was laughed at for arguing that the economy was in trouble and the Fed and the GSEs will cost taxpayers trillions Ron Paul has found great influence in the Republican Party. Instead of mocking him, most of the current crop of idiots running for president are claiming to have adopted many of his positions. And just a few decades after the Austrian School was written off as a historical footnote it has as much influence as it ever has. And if the monetary game plays out as expected its influence will become much stronger
even as the power of the failed schools wanes.
The category 'a' is Friedman. Category 'b' is Rothbard. Both have their merits, but I think that the movement and modern welfare economies (and that are all of the developed countries) are towards more and more state control until they default.
So all the incremental changes INSIDE the system might ultimately prove futile, but they allow to maximize your time preference, your preference for LIBERTY NOW (which I prefer to some uncertain future).
Actually, it is easy to live as a free individual even in a society that is not free. (Europe and the US come to mind.) Yes, you are not allowed to have toilet tanks that are too large, to use incandescent bulbs, or to have showers that provide too much water flow but you can still use the black market to install them if you wish. Yes, taxes are prohibitive but if you are smart it is easy to pay very little in taxes and be fully compliant with the laws.
Incremental improvements in a prison do not make you free. Choosing to live as a free man does.
David, thanks for the clarification. I think I misspoke about the interest rates though. What I understand, Austrians criticize a lot of economists because they advocate a monopoly on money and credit supply. This criticism is Hayekian, Austrians see that the profit opportunities push the price of interest toward its equilibrium, something that cannot properly happen under government monopoly matter how fancy models they have (this reminds me of linear programming and Soviet's plywood industry). Most Austrians haven't gone as far as to create explicit models to predict real macro effects from this alleged distortion, because, as what I understand, evidence seems to be very contradictory. Correct me if I'm wrong there.
"It's risky to form your beliefs about what school X says based on criticism of school X by school Y."
Well I agree but generally I'm going to take Hansonian approach and say its risky for anyone outside profession the to say anything about something of that profession.
Following that principles it could easily became apparent that nobody but economists should be allowed to talk about it but then again social science is a massive mess of economics and other things like moral philosophy. I'd reckon if most citizens knew the basics of econ, we'd probably have a lot less inefficient policies and politicians couldn't get away with the things they do.
Anyway, especially Chicago School and Austrians seem to disagree mostly on macro. I think one peaceful solution to overcome these belief arguments would be solved if monetary policy were dictated by a prediction market for example. That's probably a lot more to ask than is feasible, but I think prediction markets could overcome a lot of false beliefs people hold, not just on economics but pretty much everything that can be measured. I would very interested to see how Austrians or Chicago people would bet about the mechanics of macro if it was their money on the line, because I see a lot of bias there, both sides.
David, in probably the most rancorous discussion I've seen since I've read your blog, I want to say how much I appreciate your irenic, thoughtful tone. People talk incessantly about keeping an open mind. I have learned a whole lot by following yours as you explore opinions with which you disagree.
I'm grateful for your work, and Rockwell's. I think most of the younger generation are thankful that you both contribute to the conversation.
If youth can give me a closer view of history, these little controversies will fade leaving your incredible contributions intact. I look forward to living in a world of both your and Rockwell's making. (And yes, it is much the same place.)
There other are two things that I thought were worth commenting on.
First. I think the Austrian (?) invention of calling everyone who believes in government solutions to coordination problems is a statist, socialist or fascist, is if not childish then at least rude. Market is one instrument for coordination problems, and liberty is a good heuristic for efficiency but there's no need to resort to name-calling against those who believe otherwise.
Second. I must say I do not appreciate DIY climate science more than I appreciate DIY theoretical physics. This politically motivated scientism seems to be very popular. Sure, there might be some systematic belief errors in the profession but stating things outside the academic profession as obvious facts is, if not intellectually dishonest, then at least overconfident. Climate science is one thing that should have prediction market if not anything. I wouldn't be surprised if all these people stating GW is a scam, not putting their money where their mouth is. The amount of intellectual dishonesty I see there makes me very suspicious of how rational these people are in, um, anything.
These two are widely popular in Austrians circles, and most likely D. Friedman's claims about Rothbard's intellectual dishonesty are correct too. It wouldn't surprise me.
"Austrians criticize a lot of economists because they advocate a monopoly on money and credit supply."
Off hand, I cannot think of any non-socialist economist who advocates a monopoly on the credit supply, since that would mean shutting down all private banks, hedge funds, stock markets, and other non-governmental sources of capital. Perhaps you can offer an example of one?
Most modern economists take for granted a government monopoly of money, since that's the standard modern system and has been since before they were born. Probably most of them think they could, if necessary, come up with arguments in favor of that system—but very few are actually familiar with the history of free banking or the relevant arguments.
Similarly, most modern economists (and practically everyone else) take for granted a system in which the making and enforcing of law is a government monopoly—and that would include most economists who consider themselves Austrians, although obviously not Rothbard.
I find it particularly odd to identify the free banking position with Rothbard, since he opposed it, arguing that the institutions which were actually adopted by private money issuers such as the Scottish banks in the 18th century that Smith described--private fractional reserve issue--ought to be banned.
I do not think that is a position implied by Austrian economics. Larry White is, I suppose, the leading expert on free banking, and he considers himself at least influenced by Austrian theory. I am reasonably sure he does not think that private fractional reserve banking is a form of fraud and should be banned as such.
That's one of Rothbard's less defensible positions. Having been tactless enough in this discussion already, I will resist the temptation to speculate on why he found it necessary to defend it.
David, I am glad for you going to criticize Austrian method. I knew it needed to be defended at that point, but, I agree with your position more. I just don't think economics could work without economic theory, and that economic theory is broadly justified.(Even though some criticism is legitimate)
That being said, a short but direct criticism of many parts of Austrian economics are found in a small writing by Bryan Caplan: http://econfaculty.gmu.edu/bcaplan/whyaust.htm , this includes ABCT, and likely some data that David would point to as to why ABCT is flawed.
VangelV, even learning engineering, you were exposed to plenty of models with false assumptions. You likely continue to use them. The issue is that even though a model may break down, that doesn't justify assuming it has or will, and better models will break down less. The value of the model depends on what you want, but no reasonable modeler can include all data.
VangelV, actually, the success of the mainstream Neoclassical schools is because generally they do a lot of good research and thinking.(Not all economics is macro, so whether the ABCT is right really doesn't tell us everything. Particularly given that it's just one model in a large debate.)
In any case, trying to argue that the entire economics profession is really all just apologetics and scamming for the government is ridiculous. That's literally on the level of nonsensical conspiracy theories, and anybody still in reality knows that plenty of economists care and try, despite their current ideology. My favorite professor in econ in college was a guy shifting Keynesian, and a complete econ nerd. The idea that people like that, are just apologists, because they don't buy into the Austrian propaganda mill is ridiculous. Particularly given poor engagement by Austrian economists with the mainstream.
"Excuse me if I am wrong about this but aren't White and Selgin considered part of the Austrian School?"
Wikipedia, presumably quoting White, says:
"White has been influenced by and writes about the Austrian School of Economics and considers himself an “economist who values the Austrian tradition.”"
Which suggests something betwixt and between. But I'm planning to visit at GMU shortly, so perhaps I'll ask him.
Selgin describes himself as an Austrian.
One further point. Economists ought to be willing to apply their theories to themselves. Doing so suggests that what is represented as a deep philosophical disagreement might be better viewed as a form of product differentiation.
Milton Friedman is still la statist, no matter how many innocent minds have been manipulated with Milton's ballyhoo of the tyrannical constitution and praising inflation. Rothbard's article on Milton Friedman is spot on....Friedman is a statist way up the rear. His economics are crazy...
VangelV, the whole "standing on principle" thing doesn't appeal to me. I don't even likely think the principles make sense or can be universally grounded. This is despite the fact that I am not a raging socialist.
As for "having the onions". No, nothing would likely change because a very loud fringe is still a fringe. They'll get shouted down, and if they try to influence politics in a way that is too problematic for the system to swallow, they're more likely to destroy that system, and I am not in favor of outright destroying the system in which I live. It's like destroying a house while I live inside of it. Sure, we can remove pieces, and we can do so until there is nothing left, but if the house collapses, we're all hurt.
In any case, my concern isn't some abstract notion of "living as a free man". It's making sure that I an my descendants live good lives, and the best way to do that is just to earnestly seek the best, but not to drink from the Mises.org coolaid. That organization does some good, but, it likely also fosters an outright fundamentalism that is ultimately destructive.
Datapoint from the UK: I first heard of your father at about fourteen, via news media and books - when I was quite militantly uninterested in economics. He was not a difficult person to have heard of, though not until I actually read him many years later did I realize how many of the things I thought I knew about him were tosh.
I first heard of Murray Rothbard at about forty, from you, and on this blog.
VangelV: "I don't see how they can be blamed."
That was not my point.
VangelV: Excuse me if I am wrong about this but aren't White and Selgin considered part of the Austrian School?
I suppose but I meant this Rothbard-wing of Austrians in that context. I should have said it explicitly.
VangelV: As I wrote before, I am an engineer, not an economist, and I know less about the subject than you do.
Me neither and let me quote R. Hanson: "But if you plan to mostly ignore the experts and base your beliefs on your own analysis, you need to not only assume that ideological bias has so polluted the experts as to make them nearly worthless, but you also need to assume that you are mostly immune from such problems! .. After all, even if they know less than they think, they still know a lot more than you."
VangelV: Models that use false assumptions are not valid; the odd accurate predictions could be due to simple luck.
Newtonian mechanics are based on false assumptions because they did not take into account relativity, but they're good enough to predict the future when we're not dealing with extremes (although it starts to be must when dealing with things like GPS).
Look. Even if we used all the particles in the known universe to calculate the movements, of say, a bacterial cell, we would run out of them.
This means we have to use an abstraction to model phenomenon, and all abstractions leak some way. It takes a good scientific approach to make sure a theory operationalizes at the particular level of detail it is supposed to.
I think you are taking a lot of things for granted. Please don't take this personally since this is more of a criticism of average Austrian beliefs than anything.
Also David Friedman is right. There's no moral theory silver bullet, and there's a reason to be skeptical against those who think so.
Selgin isn't an Austrian anymore. I can't back it up in print, but we talked about it several times when I was a grad student at UGA.
"Off hand, I cannot think of any non-socialist economist who advocates a monopoly on the credit supply, since that would mean shutting down all private banks, hedge funds, stock markets, and other non-governmental sources of capital. Perhaps you can offer an example of one?"
I meant it only as a part of credit supply, since new money is borrowed into existence. That's a small part though. Perhaps stating money supply only would be more accurate.
"Most modern economists take for granted a government monopoly of money, since that's the standard modern system and has been since before they were born. Probably most of them think they could, if necessary, come up with arguments in favor of that system—but very few are actually familiar with the history of free banking or the relevant arguments."
Yeah definitely you can use anything from game theory to collective action problems to argue for such.
My point wasn't to defend ABCT (or free banking even though I support it), but rather than clarify their position because a few economist criticism I've read kind of misunderstand the Austrian position. I tried to understand it myself the wrong way first aswell.
I don't know, to who that criticism about Rothbard's FRB view was directed, but I certainly agree with you; Rothard's view on 100% reserves was weird, and George Selgin among many others has explained very well why.
To anonymous:
Yes, of course purists are always on the look out for heretics. Just like religion.
I think I have an idealized opinion about smart people. Like they should know what they are talking about.
Quote:
"Rothbard's argument amounts to opposing the use of antibiotics on the grounds that if only we didn't have them, and chemotherapy, and surgery, and any other medical improvement of recent centuries, we would have to develop full scale nanotech and cell repair machines and could then all live healthy lives forever. Make things bad enough and they magically turn good."
Rebutal:
"Are "transitional demands," steps toward liberty in practice, necessarily illegitimate? No, for this would fall into the other self-defeating strategic trap of "left-wing sectarianism." For while libertarians have too often been opportunists who lose sight of or undercut their ultimate goal, some have erred in the opposite direction: fearing and condemning any advances toward the idea as necessarily selling out the goal itself. The tragedy is that these sectarians, in condemning all
advances that fall short of the goal, serve to render vain and futile the cherished goal itself. For much as all of us would be overjoyed to arrive at total liberty at a single bound, the realistic prospects for such a mighty leap are limited."
There is a lot more, but I thought the quote is already to long.
The article from the Economist was funny: the FED has a tight policy, Selgin and White are sophisticated. So much for economic journalism these days.
I have some problems with this:
"My father did not argue that a stable price level was an ethical ideal--like many of Rothbard's claims, that's his invention. He argued that it had some advantages in reducing transaction costs, and that it was a simple enough objective so that there was some hope of getting government actors to try to achieve it."
If the price theory you endorse can support this kind of conclusion, you cannot have much in common with the Austrians at any level when it comes to economic theory. I happen to believe that it is also terribly wrong.
David,
You don't need to defend Milton Friedman's enormous achievements in economics and in influencing people and policies towards more rather than less personal freedom.
But you could acknowledge that Rothbard - for a long time a very obscure and marginalised figure - is now being more widely read than ever amongst the non-academic population.
In my view this can be attributed to two key things: 1)the tireless work of Lew Rockwell, 2) the behaviour of the US Government (President, Congress and Supreme Court) which seems to be determined to live up to Rothbards definition of government as "a gang of thieves writ large".
My n=1: A 20-something member of my family (an artist) asked if I had heard of Austrian economics, and what it had to say about the Fed, the crash and the recession. This did not spring from reading "Free to Choose" or "Road to Serfdom", it came from YouTube, Peter Schiff, Ron Paul, and Lew Rockwell.
someone said that
"Mises was largely, if not completely, ignored among the profession"
Mises was elected as an American Economic Association distinguished fellow in 1969
All of Rothbard's works can be downloaded for free in epub and pdf format.
Clearly this has nothing to do with why Rothbard's Amazon rank is lower than Friedman's.
There are two types of people who pay to read Rothbard.
Idiots.
And true believers.
I say that with the utmost respect, since I own hardbound Rothbard.
Leaving the issue of ordinary Google references and Rockwell's seemingly unfalsifiable claim that Rothbard is read by more people than Friedman, there is another possible test: Looking at how much the one or the other is mentioned in blogs. Anyone can make a blog, and while "mainstream economists" certainly can blog too, it is a fairly safe bet that there are many more non-"mainstream economists", who do so.
So let's go to Google's blog search (http://www.google.com/blogsearch):
Murray Rothbard: 267,000 hits
Milton Friedman: 1,560,000 hits
It may, of course, be that Rothbard is read by more regular folks than Friedman (although Rockwell still would need to provide evidence thereof), but if that is the case then it is certainly noteworthy that doing so seems to leave little imprint on the regular folks who read him ...;-)
Incidentally, I am not one of those. I have was personally influenced *a lot* by Rothbard's thinking & writings (and probably more than by Milton Friedman's). I like Rothbard a lot, although I have gradually come to do so less uncritically than I did when I was a teenager. But many contemporary Austrians (with some very noteworthy exceptions) seem to consistently portray themselves in the ridiculous ways mentioned by David Friedman and others here: As if they had the one and only Truth; as if they were all great minds and scholars unfairly persecuted; as if nobody outside "Austrian" circles do anything interesting; as if empirical research is a waste of time, etc., etc., etc. It leads to a narrow-mindedness where "Biblical exegesis" is preferred to doing new and interesting stuff.
Milton Friedman was so radically different from that--and rightly so.
***
On a different point--the one on how to judge gradualism versus non-gradualism--I experienced a truly amazing insight into the absurdities of some modern Austro-libertarians some 4-5 years ago, when I had a conversation about Friedman with an old acquaintance, who has been one of the leading Rothbard-pupils for decades. We discussed this with reference to M.F., whom the particular Austrian had often scorched. I said something like "But you know, after all, M.F. was instrumental in helping end the draft ..." and the reply was "Exactly! I hate him for that!". I went "Huh ...?". "Well, you know that just lowered resistance against the Vietnam war and the government." "So, a more oppressive government is preferable to a small government, so that it--perhaps--will lead to increasing anti-government sentiments?", and the reply was "Of course!".
'nuff said ...
Peter Kurrild-Klitgaard ,
As an aside on the draft, a friend of mine served as a lieutenant in Vietnam. He left campus to serve before the draft ended.
His group of lieutenants, on the way over, wrote letters to Nixon explaining their opposition to the war and then served their country honourable.
When my friend returned for graduate studies, he noticed that the peace movement had really quietened down on campus. this was about 1971.
The draft had either was abolished or no more draftees were posted to Vietnam.
My friend concluded that a lot of young people lost their personal driver to oppose the war: the draft.
Nixon was one of most cunning people to ever win the white house. He was on a par with FDR and Eisenhower.
Nixon abolished the draft as soon as he could, and tied to peace movement leaders up with malicious criminal prosecutions, to help him deliver peace by 1972.
You really ought to scale by time. A book released in the 70s has had a lot more time to clime the bestsellers list than one released in 2000....
Are the economic policy views of milton friedman and mises that far apart? both were classical liberals.
"A book released in the 70s has had a lot more time to clime the bestsellers list than one released in 2000...."
You have it backwards. As should have been obvious from my point about two dates a year apart, the list isn't defined by a cumulative total but by the current rate of sales. Book sales tend to decline over time, so by that measure the older a current best seller is, the more impressive the fact that it is (still) a best seller.
@Jim Rose: I have no trouble imagining that Nixon's abolition of the draft was done for less than freedom loving ideals, and I can easily see situations where liberalizing/deregaulating/privatizing something may actually take some of the wind out of a libertarian anti-government strategy.
BUT in this (and a number of similar instances) you have the choice between two things:
a) Abolition of a deeply perverse, tyrannical policy with all kinds of bad consequences, and
b) not doing so, in the hope that this may make government less acceptable in the long run, which perhaps--who knows?--may then lead more people to be opposed to a larger set of government activities.
As opposed to Rothbardians I do not think that there is a clear cut answer to every strategic question, but for my own part I would rather go with making more people more free now than gambling on what might happen in the long run by not doing so.
In fact, when you think of it, alternative b) should lead Rothbardians to demand still more government intervention ... ;-)
@Max: Rothbard was in category C: the crank inventor who claims he had a free energy device but doesn't allow anyone to test it.
As I wrote above, he would not sacrifice principle because implementation was difficult. There is no problem with that because by sticking to where the logic leads you remain true to your beliefs. Compromise is a slippery slope that often takes you to the dark side. He understood that. I guess that you don't.
Perhaps you could point at where my father supported either of those?
As I have mentioned already, it was Rothbard who wanted to ban the private issue of fractional reserve currency. How can you be for free markets while prohibiting a voluntary contract between willing parties, by which one agrees to accept currency guaranteed by the other?
I believe that your father wanted central banks to keep printing money out of thin air. His position was that as long as the counterfeiting was limited to 3% or so it was not a problem, moral or otherwise.
Rothbard argued that fractional reserve banking was a FRAUD and he was against fraud. Wanting to ban voluntary activities that were based on fraud is not being against individual liberty. For the record, I am agnostic on that issue. I have not yet had time to look at Larry White's argument in detail so I will reserve judgment until I have more facts at hand. That said, I note that many people are willing to jump to conclusions even when they are not all that familiar with the issues being discussed.
I don't think the critical point here is whether or not one is Austrian, however, and I don't see any connection between methodlogical individualism and avoiding math.
Here is my problem David. Math is a tool that can help us understand things better. But it can't help us when it is not applied properly or the values that are plugged into our equations are not known. Until the Chicago school can answer Rothbard's arguments that aggregation often leads to meaningless numbers and that assumptions of equilibrium in a dynamic, non-linear world leads to obvious errors the mainstream journals will be full of interesting but meaningless narratives written by people who cannot use the language all that well.
I think it is fair for Rockwell to make that statement. It isn't really accurate, but I think he is just trying to get the point across that Rothbard's work is gaining a lot of attention at the moment, especially thanks to individuals like Ron Paul and Peter Schiff, (who, by the way, both enthusiastically praise Friedman). This is a great post because it explains to those prone to dismiss Friedman based on the dusting of poor scholarship at mises, that it is indeed poor scholarship--though it is understandable because of Friedman's success. To not mistake Friedman's work would be to not make any mistakes at all, since his work dominates so much of the serious literature.
At which point they are not criticizing his economics, they are making claims in moral philosophy.
Morality matters. You do not sacrifice liberty for the sake of efficiency and do not trample on the right of the individual to improve the bureaucracy that runs the state.
As best I can tell, neither Rothbard, Rand, nor anybody else has provided a demonstration that their moral views are correct, which raises some difficulties if you are going to claim that someone else's beliefs are wrong because they disagree with yours.
I believe that individuals own their own bodies and can go from there to where Rothbard and the 'hard-core' libertarians take us. I believe that it is this belief that was the basis of the Nuremberg trials because there is no other way to justify the prosecution of the Nazi criminals in moral terms. If our rights are what the state claims they are then we have no right to our lives or our property and anything done to us in the name of the 'state' is valid. But if we have natural rights then there are many things that the state is not permitted to do to us. And no, helping the state lessen our burdens by reducing waste when it carries on its criminal functions is not being the champion of liberty.
You may not like this argument but essentially that is the one that Rothbard advances. And it is one that I feel very comfortable with because it was the one that I used against Bloom, Pangle and other lecturers when I was a young men trying to make sense of their lectures on Plato and modernity. That was a long time before I discovered Rothbard and Mises during my time in China.
Perhaps you can point to where I charge Rothbard with holding unpopular views?
I am sorry. English is not my first language and the time constraints sometimes (often) cause me to lose clarity when typing. The claim I made is that you criticise Rothbard just as critics did Chesterton because you think that he is out of step with his time. It seems to me that you believe that the time is one in which the Chicago School is better at explaining reality, which is why it stands alongside Keynesianism as the dominant economic institution. I disagree. I claim that just because Rothbard is not popular and is ignored by the political elite does not mean that he is wrong.
And no, I do not agree with everything that he has written because as someone who is not a specialist in a particular subset of economics I am not as familiar with all of the literature that I would have to look at to form a solid decision. But given his methodology, clarity of thought, and passion for liberty I am willing to give him the benefit of doubt while I form my decisions. For me much of the debate comes down to the moral position and to logic. In both cases Rothbard stands head and shoulders above the Chicago school and clearly way above the Keynesians. Rothbard has helped many people see the light and has clearly helped the anarchist movement take a huge step forward.
"I believe that your father wanted central banks to keep printing money out of thin air. His position was that as long as the counterfeiting was limited to 3% or so it was not a problem, moral or otherwise."
As long as nobody is compelled to accept the fiat money, why is it a moral problem? Indeed, why do you describe it as counterfeiting to print up pieces of paper that are precisely what they claim to be?
Contrary to what some people seem to claim, a legal tender law doesn't force you to use government currency. You can still make contracts in other forms--such as the gold clauses that were common before the New Deal. Where can you find my father arguing that doing so should be prohibited?
"Rothbard argued that fractional reserve banking was a FRAUD and he was against fraud."
That was indeed his claim, but it isn't a defensible one. It isn't fraud to make a contract knowing that there is some non-zero probability that you will be unable to fulfill it--if it were, all insurance contracts would be fraudulent, since there is some non-zero probability that all the insured houses will burn in the same year.
It especially isn't fraud if you tell the other party that the risk exists--and the Scottish banks sometimes included on their currency an option clause, stating the penalty they agreed to pay if, due to a run on the bank, they were unable to redeem their notes when the depositor brought them in.
No doubt Rothbard could argue that some fractional reserve issue at some times was fraudulent--and equally that some employment contracts, sales contracts, rental contracts, ... were fraudulent. But in order to maintain his position he has to argue that all of them of necessity are, and that's not a defensible position.
If you disagree, defend it. If not, recognize that it was Rothbard who rejected free banking.
"The claim I made is that you criticise Rothbard just as critics did Chesterton because you think that he is out of step with his time. "
That's your claim. Now support it by quoting me making that argument.
Rockwell made a factual claim about relative popularity; I offered evidence that his claim was false. That says nothing at all about whether being out of step with one's time is a good or bad thing.
"Are the economic policy views of milton friedman and mises that far apart?"
Mises, in Human Action, supported both the draft and state subsidy to opera. Off hand I can't think of other examples where the policy views were different, but I don't know that much detail about Mises' views on policy.
"And just a few decades after the Austrian School was written off as a historical footnote it has as much influence as it ever has."
I don't think that is correct. I'm not an expert on the relevant intellectual history, but I believe Menger, Böhm-Bawerk and von Wieser were taken a good deal more seriously by other economists in the late 19th century than Rothbard, or even Mises, is now. They were involved in ongoing academic disputes of interest to people outside their school, most obviously the methodenstreit.
David, for the record, I don't "describe myself as an Austrian," and haven't done so since graduate school. Indeed, I consider myself no less a fan of your dad's work than I am of work by Hayek and Mises. I think a good economists cannot concern himself or herself with belonging to any school, or being loyal to one. I'm pretty sure your dad would have said the same. It was others who labelled him a "Chicago" economist, while the only label he sought was "good" economist.
Rothbard, on the other hand, was only too determined to identify himself with the Austrian School and, more than that, to both take part in a personality cult, built around von Mises, and attract such a cult himself. One sign of the presence of such a cult is precisely the scorn its members heap on potential rivals to the cult figure.
As a monetary economist (I don't pretend to judge Rothbard's other economic contributions) Rothbard was mediocre to bad. His version of the Austrian business cycle theory was naive--in essence it equated behavior of M consistent with keeping interest rates at their "natural" levels with the elimination of fractional-reserve banking--an equation that holds only with the help of about a dozen auxilliary assumptions, all of which are patently false. He then went on to conjure up an equally false history of banking and of bank contracts designed to square his theory of the cycle, with its implied condemnation of fractional reserve banking, with his libertarian ethics.
Thanks to all this nonsense people like myself and Larry White (who does still call himself an Austrian) have to waste oodles of time debunking his ideas--we most certainly haven't simply "ignored" them--that we'd rather spend attackingcentral banker's shenanigans.
"I think a good economists cannot concern himself or herself with belonging to any school, or being loyal to one. I'm pretty sure your dad would have said the same."
That is correct. As best I recall, his usual response to the question of whether one was an Austrian economist was either that he was an American economist or that the relevant distinction wasn't between schools but between good economists and bad economists.
I remember his describing Abba Lerner, who was of course a socialist and whom I actually once met, as having a beautifully clear, logical mind, utterly uninterested in facts.
Thanks for clarifying your own position. As I suggested earlier in the thread--I don't know how much of it you have bothered to read--I think a good deal of what is going on is product differentiation.
George Selgin writes:
"He then went on to conjure up an equally false history of banking and of bank contracts designed to square his theory of the cycle, with its implied condemnation of fractional reserve banking, with his libertarian ethics"
That's the conjecture that I earlier declined to offer, on the grounds that I was already being sufficiently tactless. Rothbard wanted to believe that a libertarian society would not have macro problems. He believed macro problems stemmed, at least in part, from fractional reserve banking. So he needed some argument consistent with libertarian ethics for banning private fractional reserve banking.
Unfortunately, there aren't any good ones available.
Interesting that you came to the same conclusion.
I have read a lot of the scientific and popular works of Milton Friedman and Murray Rothbard.
I am increasingly impressed with the one, increasingly disappointed with the other.
One rightfully deserves his reputation as one of the 20th. Century's greatest economists, the other as a mediocre monetary economist who was preaching more than actually doing research.
Rothbard was more than willing to compromise on principle when it suited him. In the 1960s/1970s when he was trying to appeal to the anti-war left he wrote articles praising Che Guevara and celebrating the Communist takeover of South Vietnam. In the 1990s when he wanted to ally with Buchananite conservatives he embraced immigration restrictions, opposed free trade agreements, etc.
The differences between Friedman and Rothbard were that 1) Friedman was honest about his compromises while Rothbard pretended that his deviations were convoluted applications of principle, and 2) Friedman actually accomplished something via his compromises, while Rothbard never did.
Thanks for the clarification George Selgin. Its kind of sad that so much human capital is wasted on some bad ideas. There're LvMI-expansion popping out around the world, which is a good thing for liberty, but not necessarily for rational thinking.
By the way David, if I can call you that, I wonder if you have talked with Robin Hanson about prediction markets. I think his distinction about beliefs and values is a very good one, and prediction markets could be very efficient way to solve such disagreements in a peaceful way. A lot of people share a lot of same values, but very different beliefs of mechanics of society. Hansons' idea of outsourcing the belief thinking to prediction markets (and most likely experts) or some kind of other instrument is a very intriguing one, even with its flaws. Although there're certainly cases where beliefs cannot be separated from values. Should be a good topic if you see him in GMU.
I do believe a lot of libertarian ideas can be argued with rationality (and efficiency), and if that is the case, any nudge towards more rationality, should be a nudge towards libertarianism, although maybe not as much as some Austrians would hope for.
VengelIV writes: "Until the Chicago school can answer Rothbard's arguments that aggregation often leads to meaningless numbers and that assumptions of equilibrium in a dynamic, non-linear world leads to obvious errors"
You need to aggregate things, such as using supply and demand curves to make sense of the world. Sure, those are rough approximations of the real phenomena, but they don't lead to "meaningless numbers". What's the alternative anyway?
In physics, we also aggregate things like the friction dynamics from different materials as their static and kinetic coefficients. It's close enough for a lot of purposes.
Equilibrium economics are such things as saying price tends to be the result of supply and demand. But any decent text book will guide you through the dynamics of price emergence. And the field of macroeconomics is, for the most part, an attempt at understanding disequilibrium economics. If things like sticky prices and wages disturb your libertarian sensibilities, tough luck.
"By the way David, if I can call you that, I wonder if you have talked with Robin Hanson about prediction markets."
I've known and thought well of Robin for many years, and I discussed his idea of prediction markets with him back before he left NASA to go back to school at Cal Tech. He is one of several reasons that I'm planning to spend the fall at GMU.
Rothbard was more than willing to compromise on principle when it suited him.
Fair enough. Let us look at the actual evidence.
In the 1960s/1970s when he was trying to appeal to the anti-war left he wrote articles praising Che Guevara and celebrating the Communist takeover of South Vietnam.
Rothbard never praised Che's violence against innocents or his Communist leanings. (He made it clear that Che was a terrible administrator and had lousy ideas about economics.) Rothbard simply wrote that he admired Che's dedication to the idea of revolution.
At the time the danger in the United States came from the right, particularly the conservative rejection of the Old Right positions on the issue of interventionism in the affairs of others. Rothbard's appeal to the Left had to do with his opposition to the conservatives' obsession with the Cold War and their support for dictators that they wanted as allies in that war.
Keep in mind that at the time Rothbard was using the historical methodology of Albert Jay Nock and was focused on State action by looking at everything in terms of Who and What. That analysis led him to reject what the US was doing in South Vietnam. He certainly could not justify sending American soldiers to fight in support of a military dictatorship that had no support among the native population. And he certainly made it very clear that the draft was a violation of natural rights. An individual was free and in possession of his own body. The state could not justify the draft because it was a form of slavery.
And Rothbard cheered the deposition of the monstrous regime of Pol Pot by the Vietnamese. The US government and the US right wound up supporting that regime.
In the 1990s when he wanted to ally with Buchananite conservatives he embraced immigration restrictions, opposed free trade agreements, etc.
Rothbard was never against free trade. He argued that free trade agreements negotiated by governments are not required because they get in the way of free trade by protecting inefficient producers who were connected with the government. As he often pointed out the only thing that you need to have free trade is to open your borders to foreign goods.
The differences between Friedman and Rothbard were that 1) Friedman was honest about his compromises while Rothbard pretended that his deviations were convoluted applications of principle, and 2) Friedman actually accomplished something via his compromises, while Rothbard never did.
I do not know enough to reach a definitive conclusion but I have to say that I disagree.
There was nothing convoluted about Rothbard's logic. First, he took shots at both the Left and the Right when they wanted to limit the freedom of individuals. And let us not forget that he praised both the New Left and the Old Right on their positions on bureaucracy, education, and imperialism. Second, support for some positions on the Left or Right did not mean that Rothbard supported all of the positions on the left or right.
I believe that you mean well but I am fairly certain that you are not that familiar with Rothbard other than at a superficial level. One of the books that I recommend is Betrayal of the American Right, a book that deals with the corruption of American 'conservatism'. I think that it is the position that Rothbard took against the conservative movement that confuses many people who would otherwise tolerate most of his views and who actually agree with most of what he has to say.
2) Friedman actually accomplished something via his compromises, while Rothbard never did.
Sorry but I forgot to make my comment on this point.
With all due respect David, you live in a country in which you can be sent to jail for selling toilet tanks that are too big or showers that allow too much water to flow through them. There is very little in your life that isn't regulated and the state is bigger and less efficient than it has ever been. So I have no idea what you mean when you claim that your father 'accomplished something via his compromises.' With compromises like his and with the Chicago School advising the government who needs an external enemy?
Rothbard never praised Che's violence against innocents or his Communist leanings. (He made it clear that Che was a terrible administrator and had lousy ideas about economics.) Rothbard simply wrote that he admired Che's dedication to the idea of revolution.
Che's idea of revolution involved violence against innocents, so it's kind of hard to praise the former while rejecting the latter, unless you are an idiot (which Rothbard certainly was not). There is a paragraph in Rothbard's Che obit that criticizes Che's economic views and administrative skills (in language far milder than what he used to criticize, say, Milton Friedman). But I can't find any condemnation, or even acknowledgment, of the murders that Che committed or of the fact that his life's ambition was to subject people to Communist dictatorships.
Suppose Rothbard had written glowing essay about Hitler, saying that while he had some mistaken economic views and wasn't a great administer he still was heroic because he stood up to the U.S. war machine and showed how revolutionary action could be successful. I would hope that in such a case you would recognize the essay for what it was: a disgusting attempt to curry favor with whatever group Rothbard had decided to ally himself.
That analysis led him to reject what the US was doing in South Vietnam.
The issue isn't that he opposed the Vietnam war. The issue is talking about how exhilarated he was at watching the fall of South Vietnam, while basically ignoring the fact that South Vietnam was collapsing due to invasion by a Communist army.
Rothbard was never against free trade. He argued that free trade agreements negotiated by governments are not required
Rothbard didn't simply say that free trade agreements between governments aren't necessary. He said that they ought to be opposed, and it just so happens that he claim to this conclusion while courting the support of a politician who opposed free trade full stop. Likewise, it just so happens that Rothbard realized that he had been wrong all his life on immigration at the very point that he was allying with anti-immigration groups.
I believe that you mean well but I am fairly certain that you are not that familiar with Rothbard other than at a superficial level.
Your certainly is misplaced. I'm pretty familiar with Rothbard's work, including Betrayal of the American Right. Like many of the other people on this thread, I used to be really into Rothbard but the more I read by him and about him the less impressed I became.
With all due respect David, you live in a country in which you can be sent to jail for selling toilet tanks that are too big or showers that allow too much water to flow through them.
The comment you are responding to was by me, not David Friedman.
My reply is this: It's true that Milton Friedman's efforts on behalf of liberty haven't prevented us from living in a society with toilet regulations. Then again, Murray Rothbard's efforts haven't prevented this either.
On the other hand, Friedman's advocacy did play a role in eliminating the draft, wage and price controls, bringing down inflation, etc. What comparable results can you point to that Rothbard was responsible for?
I am a big fan of both Rothbard and Friedman, and I probably lean more towards the Rothbardian/Austrian aprioristic approach. I would never be delusional enough to believe that Rothbard is more widely read than M. Friedman, though. Friedman is a household name among many conservatives and libertarians, while Rothbard is pretty much constrained to the Austro-libertarian/anarchocapitalist sect. I'm often put off myself by some of the low blows taken at Friedman by some of the Austrians. He has done a lot to turn people on to libertarian ideas (the main weapon of libertarianism), and just because of some minor disagreements they lambast the guy.
The 'holier than thou' mentality of those at the mises.org site are the main reason I stopped visiting the site. If you're not a Rothbardian, they will dump all over you.
I quite enjoy both Milton and Murray. If not for Milton though, I would never have taken an interest in economics or libertarianism. No Milton = me never even knowing about Rothbard.
The pot shots taken by Lew and his ilk are discouraging. They can't see the forest for the trees.
Thanks for the clarification George Selgin. Its kind of sad that so much human capital is wasted on some bad ideas. There're LvMI-expansion popping out around the world, which is a good thing for liberty, but not necessarily for rational thinking.
Actually, the Austrians are all about rational thinking. I just don't know how you expect them to agree on anything. Do you really have all the information to make a proper judgment in the Selgin/Rothbard disagreement? I certainly do not. The thing to do is to get as much of the material and read it. Then go and try to come to a conclusion about who is right.
But I will tell you one thing. On the issue of money, credit, and business cycles Rothbard is a lot closer to the truth than the Keynesians and Chicago School economists who dominate the profession.
You need to aggregate things, such as using supply and demand curves to make sense of the world. Sure, those are rough approximations of the real phenomena, but they don't lead to "meaningless numbers". What's the alternative anyway?
The alternative is rational thinking. Using models in which you make approximations and assumptions that do not reflect reality and plugging in numbers that have no meaning in the real world only adds to the confusion. As an example, try to figure out how one would figure out the numbers to plug into the Quatity Theory of Money.
M*V=P*Q
You certainly can't measure V. How do you figure out what Q really is? or P? Do you really think that you can use some kind of aggregation to come up with an price level? How do you determine how much each good in an economy contributes to the total economic activity when you can't even figure out how much each component of a category contributes? And how do you handle non-monetary transactions or transactions that are not recorded or reported?
The ideas may be very useful but the attempt to quantify them are not all that useful in most cases most of the time.
In physics, we also aggregate things like the friction dynamics from different materials as their static and kinetic coefficients. It's close enough for a lot of purposes.
In physics you have much better measurements that actually mean something. It is easy to measure temperature or pressure and using experimental data you can come up wit a very good estimate for some things. But as I wrote above, there is a serious measurement and methodological problem in economics that cannot be overcome in the way that the mathematical economists assume.
Equilibrium economics are such things as saying price tends to be the result of supply and demand. But any decent text book will guide you through the dynamics of price emergence. And the field of macroeconomics is, for the most part, an attempt at understanding disequilibrium economics. If things like sticky prices and wages disturb your libertarian sensibilities, tough luck.
I am saying that they are mostly useless, not that they disturb me.
I would hope that in such a case you would recognize the essay for what it was: a disgusting attempt to curry favor with whatever group Rothbard had decided to ally himself.
You may be right but I am not at all certain that was what he had in mind. He was working on getting the Old Right and New Left together on issues on which they agreed. That was that the state should not trample on individual rights and that it should not send its citizens to fight wars in other countries.
Keep in mind that during the 1960s the Right was far more intolerant of Rothbard and the Austrians than the Left because it was the Right that wanted the United States to prop up dictators and to fight a Cold War that was totally unnecessary. The Austrians, who were as anti-communist as any group, understood that the calculation debate was over and that the USSR had nowhere to go but to the scrapheap of history. It was the leadership on the Right, which did not really believe in or support free market capitalism, that was afraid of the USSR. Their belief was that the Russians could use central planning to divert resources more effectively towards the production of military goods and be a genuine threat to the West. So instead of standing up for genuine liberty the leadership of the Republican and Democratic parties supported a wealth-destroying Cold War, a military draft, and propped up foreign dictators who had no popular support.
Rothbard understood that the greatest enemy to your liberty is your own state. On that he was right. It isn't foreigners who regulate how much water flows through your toilets, tax half your earned income away, tell you what kinds of light bulbs you must use, prop up foreign dictators, jail you for committing a victimless crime, or create new enemies by killing innocent foreign civilians in your name.
Rothbard didn't simply say that free trade agreements between governments aren't necessary. He said that they ought to be opposed, and it just so happens that he claim to this conclusion while courting the support of a politician who opposed free trade full stop. Likewise, it just so happens that Rothbard realized that he had been wrong all his life on immigration at the very point that he was allying with anti-immigration groups.
Where in the hundreds of pieces that he has written on trade has Rothbard ever argued against free trade?
And what exactly was he wrong about when he opposed to enticing immigrants by the offer of welfare and free goodies paid for by coercion via a tax on productive individuals? Was he wrong to argue that in an anarchocapitalist world there would be no 'open borders' because everything was owned and passage could only take place by permission of the owner? Was he wrong to argue against granting automatic citizenship to anyone born on American soil even if the parents were illegal immigrants who showed up exactly because of that practice?
I am not totally sympathetic to the Hoppe/Roghbard immigration arguments but I am certainly not very sympathetic to the other side either. I do not believe that taxpayers should subsidize immigrants without consent. Do you believe that is wrong? If you do then why? If you don't then you tend to agree with Hoppe/Rothbard.
The comment you are responding to was by me, not David Friedman.
I apologize for that.
My reply is this: It's true that Milton Friedman's efforts on behalf of liberty haven't prevented us from living in a society with toilet regulations. Then again, Murray Rothbard's efforts haven't prevented this either.
I never claimed that Rothbard was successful at stopping the growth of the state, only that he opposed it during his entire career.
The same is not true of Milton Friedman. Yes, he did make wonderful arguments (which I have my children watch) against the state. But he legitimized the government by working with it in the hope that he could make it more efficient.
I am saying that the evidence shows that the state has become much bigger. I also argue that had Milton Friedman and other good men been willing to put principle first and risk their status (as Rothbard did) the state could not expand as it did. Instead of marginalizing anarchists like Murray, Milton should have supported their anti-state positions more vigorously. That would have done more for freedom than going along and giving legitimacy to theft and oppression.
On the other hand, Friedman's advocacy did play a role in eliminating the draft, wage and price controls, bringing down inflation, etc. What comparable results can you point to that Rothbard was responsible for?
Why was Rothbard's advocacy against the draft any less important than Friedman's? Didn't Rothbard also argue against wage and price controls? And how does Friedman's acceptance of counterfeiting by the Fed lead to lower inflation? Rothbard was against the Fed and wanted a gold standard to constrain and neuter it. And when it came to the US Gold Commission, Rothbard took the side of Ron Paul while Friedman took the side of the majority. So instead of price stability we got constant inflation that has robbed savers and those on fixed incomes while it has enriched the thieves in the financial sector. But on this issue Rothbard has history on his side while Friedman does not. Eventually the currency will have to be linked to some commodity and the American central bank will be shut down just as the previous ones were shut down.
Sadly, in some ways Friedman reminds me of Greenspan. I only hope that history will treat him kinder because Milton was the much better man.
I would never be delusional enough to believe that Rothbard is more widely read than M. Friedman, though.
Why? The internet is a great equalizer. The LVM Institute and the Rockwell site get many more hits than the mainstream sites that advance the Chicago School views and a large number of the people who visit are more familiar with and read Rothbard commentaries than they do Friedman. Rothbard and the Austrians are much more clear in their writing and they do not hide behind incomprehensible mathematics, a flawed methodology, and muddled language. If people disagree with their conclusions at least they know why they disagree.
The mainstream economists remind me a lot about many of the 'classic' books. A lot of people know of them and have some superficial knowledge of them but few actually read them carefully enough (if at all) to really understand them. And while the elitists swear about the high artistic accomplishment of the authors of these 'classics' they are usually pretending to know much more than they know.
Those "Austrian" posters who identify Milton's thought with that of the modern "optimization implies continuously market clearing (Walrasian) prices" Chicago economists like Bob Lucas are revealing their ignorance of Milton's macroeconomics. As I claimed, and as David affirmed, Milton wasn't interested in being a "Chicago" economist at all; and to the extent that he couldn't help being a Chicago economist, he certainly wasn't that sort of Chicago economist!
It's also kinda funny to see Rothbardians picking on anyone for supposedly believing in perfectly flexible prices. After all, Rothbard himself really did believe that prices were perfectly flexible, though he believed that they were so only when it was a question of their having to adjust downward. Hence the goofy Rothbardian claim that there can never be a shortage of nominal money.
Friedman is a household name among many conservatives and libertarians, while Rothbard is pretty much constrained to the Austro-libertarian/anarchocapitalist sect.
First, many people who call themselves libertarians aren't. In fact they are much more damaging to the libertarian cause than the Marxist fools on the left. (Which is why Rothbard and some Austrians are much more vicious against the so-called conservatives and libertarians than against the left.) Second, most 'modern' conservatives abandoned the conservative principles of the Old Right. They are the types who supported Bush's government expansion and foreign wars and worship Reagan although Reagan betrayed the principles that he claimed to stand for.
I expect these groups to push back at Rothbard because Rothbard exposed them as the frauds that they were.
I'm often put off myself by some of the low blows taken at Friedman by some of the Austrians. He has done a lot to turn people on to libertarian ideas (the main weapon of libertarianism), and just because of some minor disagreements they lambast the guy.
I agree. As I said, I use his videos to help educate my young children about free markets. But as I said, let us not be under any delusions that his methodology was any good or that he was as much of a champion of freedom as we would have wanted him to be. Although we owe him a debt of gratitude for many of his actions there is also a betrayal because he gave the state far more legitimacy than it deserved.
And let me be clear. I am also disturbed by some of the arguments made by Rothbard. But as I said, I still have a lot to read and learn before I can make a clear conclusion to reject those views.
It still comes down to this. In the Home of the Brave and the Land of the Slave, a citizen is told how much water can be in his toilet tank. That can only happen when men support government meddling because they do not want to risk being seen as unpatriotic or as troublemakers. If more people were like Rothbard and spoke out against injustice and illegitimacy we would be a lot freer than we are. But if more try to make the system more efficient by arguing that somehow their presence at the side of the bureaucracy will make us freer the opposite will happen.
What worries me is that the Austrians are a very peaceful lot and as principled libertarians would not think about initiating force against others. But many of the rest in society are not and if there is some crisis I worry that they will initiate the use force. I wonder what happens a year or two down the road when the latest effort to kick the can down the road no longer satisfies the markets. Will Americans resort to violence and vandalism as Europeans usually do? And what happens when a lot of people with guns take advantage of those that do not have guns to protect themselves against aggression?
Rothbard certainly made his compromises as well. His ill-fated association with the Chronicles and John Randolph Club crowd was most bizarre and left old friends like Leonard Liggio(as pointed out in Radicals for Capitalism) scratching their heads. Some of the Chronicles crowd were not only racists but statists like Samuel Francis who called for American First trade, immigration and even culture policies. Compared to Sam Francis, Milton Friedman was a philosophical anarchist.
However, in Rothbard's defense his critiques of Friedman were written in the early 1970s before his association with the Buchanan and Chronicles cabal. And for an anrcho-capitalist like Rothbard, some of Murray's views on things like vouchers, negative income tax and his critique of a gold standard would smack of compromise.
make up your mind
is rothbard better known generally or is he just better known among true libertarians?
David, loving the discussion here... Your Dad was great but I like Murray a lot too.
In relation to Rothbard advocating a ban on fractional reserve banking, doesn't this really have to do with what the money in question is and what the contract with the bank is??
If the money is a commodity (say gold) and you contract a bank to store that money for you (giving you a receipt in return) wouldn't it be a violation of your property rights if they took your gold and gave it to someone else?
This is where I see Rothbard's point making sense.
Though if say google were issuing a digital currency (g$s) and you contract them to store the g$s. Then them adding extra g$s and loaning them out would not be a violation of your property rights
Thus I see both parties making sense it just depends on what the money is, what the contract with the banks is and what is given in receipt for the storage of it.
I have many books of Roth because they are all free in pdf... I'm reading all of them since two years ago...
He then went on to conjure up an equally false history of banking and of bank contracts designed to square his theory of the cycle, with its implied condemnation of fractional reserve banking, with his libertarian ethics.
As someone who is trying to get as much material as possible on this subject is there a reference to support these claims that I can look at? I would love to download a book or two that I can read while I am on my vacation so your help would be appreciated. I do have some of Rothbard's books on my Kindle, both in the Kindle and PDF formats. Perhaps I can look at the sections where Rothbard has created the false history that you refer to. Of course, I would like to see exactly where I can look at other material that shows that Rothbard's history is false so I can judge which version makes most sense.
And if you have direct evidence that Rothbard is a liar about history have you confronted supporters like Thomas Woods, who as a historian would be able to see just how wrong his support really is?
Mises, in Human Action, supported both the draft and state subsidy to opera. Off hand I can't think of other examples where the policy views were different, but I don't know that much detail about Mises' views on policy.
I am sorry but I am not all that familiar with Mises' promotion of the draft. But I am certainly familiar with his early criticism of it. From Interventionism: An Economic Analysis we get:
"The first step which led from the soldiers’ war back to total war was the introduction of compulsory military service. It gradually did away with the difference between soldiers and citizens." (Page 69)
and
"Compulsory military service thus leads to compulsory labor service of all citizens who are able to work, male and female. . . . Mobilization has become total; the nation and the state have been transformed into an army; war socialism has replaced the market economy."(Page 69)
There is no justification of conscription that I could find in the early editions of Human Action. But I do know that he was criticized by many Austrians because he made some additions to the text in which he may have justified conscription in later editions of Human Action.
The problem of course comes down to the logic that Mises has used. For Mises to accept clearly the justification of the draft he would have to reject most of his previous work, which he did not do.
I don't think that is correct. I'm not an expert on the relevant intellectual history, but I believe Menger, Böhm-Bawerk and von Wieser were taken a good deal more seriously by other economists in the late 19th century than Rothbard, or even Mises, is now. They were involved in ongoing academic disputes of interest to people outside their school, most obviously the methodenstreit.
If you are trying to say that the Austrian school was very influential you are clearly correct. But that influence waned when Keynes came around with his revolution and swept the defenders of the free market aside. By the late 1960s the Austrian School was largely forgotten and was only revived when the 1970s economic crisis came around and the intellectual bankruptcy of the Keynesian approach was exposed by events. Interest picked up after Hayek got the Nobel Prize but the Chicago School and Keynesian establishment economists still dominated the debates. Rothbard made it a point to expose the problems with both schools and did a very good job of it, even though he took things way too far and was too vicious at times.
I think that the increased popularity in recent years has been a shock to the establishment economists as you had people like Ron Paul use Austrian principles to attack the Federal Reserve, argue against the useless foreign wars, and oppose the attack on individual freedom. From what I can see, the US may be on a verge of a major crisis that will destroy the monopoly on power held by the mainstream parties. More and more people tend to describe themselves as independents and many of them are attracted to the idea of individual liberty and a neutered state.
As I wrote before, when you live in a society in which you can be fined and/or sent in jail because your toilet tank is too large you can't claim to live as a free man. I think that many Americans have had enough of the establishment economists and enablers of a larger state. Much of the productive class has certainly had enough and wants much more economic and social freedom than exists in the current system. This probably means some interesting battles during the next election cycle with the mainstream media and party elite on one side and freedom seeking voters on the other.
The title of your post should be "Lew's fantasy" instead of "Austrian fantasy"...
That's your claim. Now support it by quoting me making that argument.
Perhaps Pangle and Bloom have had more influence on me than I thought but that is the way I read your line of argument. Rothbard is some kind of kook who is out of step with his time and is rejected by the establishment while freedom loving economists who wanted to work within the system were accepted and influential.
Well, I point to the empirical evidence that is all around us. I live in a country that is far worse than the United States because insiders have worked within the party structure to limit individual liberty, particularly in the economic sphere. But as I look to the US I see a country in which the government regulates every aspect of its citizens lives and where those freedom loving economists did not stop the expansion of the state. They got paid, gave each other awards, and became popular even as they gave cover and legitimacy to the growth of government.
When it comes to the real world actions speak a lot louder than intent. While many of the establishment economists talked a good game when it came to freedom they helped the state to limit it. Frankly, I admire the 'kooks' who were rejected by the mainstream to the 'respectable' insiders who went along.
Of course, I could be reading into your words intent that you do not have. Do you not consider Rothbard as out of step with his time? Do you not consider him as a kook? Do you think that it is better for freedom to work with the state and make it more efficient or to deny it legitimacy by pointing out the things that it has no right or authority to do?
If you are not satisfied with my comments when I get back from my vacation I will be happy to pull out your comments and see if I have confused them with those made by a number of other commentators. If I have, I have no trouble admitting my error and apologizing.
Rockwell made a factual claim about relative popularity; I offered evidence that his claim was false. That says nothing at all about whether being out of step with one's time is a good or bad thing.
But you did not look at all of the evidence of the context. The LVM Institute and the Rothbard site get a lot of hits and many of the readers are voracious readers who take care to look at many of the Rothbard commentaries on a number of different issues. They download the free books, journals, and papers, and actually read them. I merely point out that you can't get a good comparison until you have looked at all the data, not just the Amazon book sales. As I pointed out, I have some of your father's books and the TV series because I enjoy much of what he wrote and said. But I have much more material by Rothbard because he was very prolific and wrote a great deal on a wide number of subjects.
Rockwell looks at the traffic, the downloads, and argues that Rothbard's influence in on the rise even as the failure of the Chicago School to predict the 2007 contraction and the intellectual bankruptcy of the Keynesians have their influence in decline. I would love to see all the data but I doubt that it is easy to get.
"Perhaps Pangle and Bloom have had more influence on me than I thought but that is the way I read your line of argument. Rothbard is some kind of kook who is out of step with his time and is rejected by the establishment while freedom loving economists who wanted to work within the system were accepted and influential. "
If I had said that, shouldn't you be able to find me saying it and quote me saying it? You seem to be simply repeating over and over again "I believe your position is X," while offering not a scrap of evidence in support of your belief.
If you form beliefs without evidence, why should other people take them seriously?
"Do you not consider Rothbard as out of step with his time?"
Rothbard was arguing for policies that seemed very unlikely to be adopted. So was my father. So was Ronald Coase. That's not a criticism of any of them.
The fact that some of my father's radical proposals and at least one of Coase's (auctioning spectrum) were implemented, in large part due to their efforts, and none of Rothbards were (so far as I know), is some evidence that they were more effective than he was.
But arguing for policies that are unlikely to be adopted in the near future, in order to put ideas out that may have later effects, isn't an unreasonable policy--I've been doing it for forty years or so now. So no, that isn't my criticism of Rothbard--and if it were you ought to be able to find examples of my making it.
"Do you not consider him as a kook?"
No. I consider him someone who weakened various of the causes he argued for by intellectual dishonesty, which I think I have detailed in at least one of my past blog posts (on economic history) that I already pointed at. What was fundamentally wrong with Rothbard, in my view, was that he was willing to make arguments he knew were wrong as long as they led to what he considered the right conclusion.
"Do you think that it is better for freedom to work with the state and make it more efficient or to deny it legitimacy by pointing out the things that it has no right or authority to do?"
That isn't an answerable question, any more than "is it better to use medicine or surgery against disease" is. Different tactics produce different effects in different circumstances.
And "more efficient" isn't clear. Suppose we ask "is it better to try to change state policy in area X in ways that will do less damage, or to try to persuade people that the state should not be involved in area X?" Surely the answer depends on how much damage can be prevented and how likely the persuasion is to work.
Is "reduce the damage done by the state" what you mean by "make the state more efficient?" The wording you chose strongly suggests "make the state more able to oppress people," but that doesn't describe the actual policy changes my father argued for.
"The LVM Institute and the Rockwell site get many more hits than the mainstream sites that advance the Chicago School views and a large number of the people who visit are more familiar with and read Rothbard commentaries than they do Friedman."
And what fraction of the U.S. population do you think visits the LVM site with any frequency? 1% would be about 3 million people--do their logs suggest that many readers? 300,000? If one person in a thousand gets exposed to Rothbard, while Friedman is someone who everyone who has ever taken a course in economics and many who have not has heard of, how do you compare their relative influence?
Or in other words, you are part of a tiny minority of enthusiasts, and are interpreting their behavior as if it represented some significant fraction of the population.
The institute's tactic of making lots of stuff available for free online is a fine idea--I do it too. But it isn't sufficient to make Rothbard more than a niche player in the intellectual marketplace.
David, contact me, please, about writing something for The Freeman: srichman@fee.org. Thanks.
Sheldon
"I am sorry but I am not all that familiar with Mises' promotion of the draft."
"He who inn our age opposes armaments and conscription is, perhaps unbeknown to himself, an abettor of those aiming at the enslavement of all."
Human Action, new revised edition, Yale University Press 1963, p. 282.
Mises is arguing that in a world where everyone played by the right rules conscription would be unnecessary, but that given the existence of aggressors, "If the government of a free country forces every citizen to cooperate fully in its designs to repel the aggressors and every able-bodied man to join the armed forces, it does not impose upon the individual a duty that would step beyond the tasks the praxeological law dictates."
That's pretty clear.
[Rothbard's Che obit] was working on getting the Old Right and New Left together on issues on which they agreed.
Yes, and in trying to forge an alliance between Old Right and New Left, Rothbard heaped praise on a totalitarian murder. If that's not compromising one's principles then what is?
Where in the hundreds of pieces that he has written on trade has Rothbard ever argued against free trade?
Rothbard never said he opposed free trade. He wasn't an idiot. What he did do, though, was oppose any effort to move towards free trade. Purportedly this was because such moves didn't go far enough, and it was just a coincidence his opposition happened while he was allying himself with anti-free trade Buchananites.
And what exactly was he wrong about when he opposed to enticing immigrants by the offer of welfare and free goodies paid for by coercion via a tax on productive individuals?
Either Rothbard was wrong throughout his entire career when he opposed immigration restrictions or he was wrong at the end when he supported them. What is notable about his change of heart is that it was very conveniently timed, politically.
[Friedman] legitimized the government by working with it in the hope that he could make it more efficient.
Suppose the government were to repeal the toilet regulations that so upset you. Would you say that this was bad for liberty because it made government more efficient?
Why was Rothbard's advocacy against the draft any less important than Friedman's?
Friedman played a key role in getting the draft repealed (see here for details). The same cannot be said for Rothbard.
I liken the Rothbardian assault on your father to its assault on Nozick. It strikes me as odd, as a hopeful future (libertarian/anarch) academic, the amount of Rothbardian ink spilt lambasting Nozick and Milton compared to that spent on the political philosophy of Rawls, Dworkin, Raz, Nagel, Scheffler, etc. Although I appreciate the need to flesh out one's own beliefs, and analyzing and criticizing the work of others with similar theories is essential to this process (as a legal positivist, I find myself constantly wrestling with the Raz and Hart), I also believe that it is equally important (if not more so) to heavily engage the work of those one is fundamentally opposed to (and this does not mean thinking about Rawls through the eyes of Nozick (or about Nozick through the eyes of Rothbard)). The critical focus on Nozick and Milton appears to be the mission of libertarian purity, and this is extremely troubling to me, especially considering the catalytic effect Rothbard had on me. Many political/philosophical libertarians, as opposed to economic “libertarians” (the scare quotes because I believe it is nonsensical to describe an economist as libertarian qua economist), rarely revisit their foundational beliefs, or are embarrassingly unfamiliar with (1) the arguments against those foundational beliefs, or (2) the arguments in support of beliefs in direct conflict with the libertarian axioms. This is unfortunate and often leads to stagnation in libertarian thought. I do not mean to imply that this is true of all libertarians (one need look no further than Gaus) or of all those associated with LvM, but it is closely associated with the Rothbardian approach to libertarian purity.
I also do not understand this approach from a libertarian strategic standpoint. Why commit so many pages to criticizing Nozick and Milton rather than engaging critically the positions of those influential contemporaries fundamentally opposed to your worldviews? From a libertarian policy standpoint, Nozick’s approach was far more successful in influencing the academy, and not just because he was a better philosopher but because he successfully engaged the arguments of those from fundamentally different positions. And by all the vehemence aimed at the “academic conspiracy,” it seems quite apparent the importance of filling the Ivory Tower with those sympathetic to libertarian argument.
Rothbard had a problem. He thought he was a great economist, but practically nobody within the profession agreed and most of them had never heard of him.
Rothbard had a solution. He was ignored because he held extreme pro-market views, which were ideologically unpopular in the academy.
Rothbard had a problem. Milton Friedman held extreme pro-market views--not as extreme as Rothbard's, but far enough from academic orthodoxy so that the same effect should have existed. But Milton Friedman not only wasn't ignored, he was viewed within the profession as a leading figure--despite his unpopular political views.
Rothbard had a solution--to persuade himself and his followers that Milton Friedman was really one of them instead of one of us, hence his acceptance by the profession didn't contradict Rothbard's view of the reason for Rothbard's non-acceptance.
>>I don't think this is correct. Rothbard certainly thought that he had made a major contribution to Austrian economics, and that mainstream economists didn't pay sufficient attention to the Austrians, but I very much doubt that he thought that mainstream economists ignored him because of his political views. I knew him very well and never recall him saying this or anything like it. I'd be most interested in learning the evidence for the train of thought you attribute to him.
david gordon,
You may have a good point if you cast it in Kuhn's structure of scientific revolutions.
On part of Kuhn’s theory is the incommensurability of different paradigms - it is not possible to understand one paradigm through the conceptual framework and terminology of another rival paradigm
There are three types of incommensurability in Kuhn's:
(1) methodological—there is no common measure because the methods of comparison and evaluation change;
(2) perceptual/observational - observational evidence cannot provide a common basis for theory comparison, since perceptual experience is theory-dependent;
(3) semantic—the fact that the languages of theories from different periods of normal science may not be inter-translatable presents an obstacle to the comparison of those theories
Kuhn found that once a central paradigm is selected, there is no testing or sifting, and tests of basic assumptions only take place after accumulated failures and anomalies in the ruling paradigm plunge the science into a crisis.
Rothbard and the dominant paradigm talked passed each other.
There is also Stigler’s point about economists whose skill or experience is convivial to special interests will become leaders of opinion while economists who skill or experience is not convivial to special interests become writers of letters to provincial newspapers.
David Gordon,
I should have added that Milton Friedman worked within the dominant paradigm methodologically and in terms of the quantity theory of money and empirical testing.
Engaging with Rothbard required a battle of the methods.
As an example, from time to time, I encounter the argument that economic analysis does not work because preferences are socially constructed.
You can suck the air out of any room for days arguing this point and change no minds. I prefer to let these closed minds use up their air time, and talk to others.
People who think preferences are socially constructed missed the 60s and 70s, and were watching the other channel when the Berlin wall was torn down brick by brick.
From http://wiki.mises.org/wiki/Milton_Friedman
“Over the course of his career, Friedman made a number of enduring contributions to the field of economics.
He became an articulate spokesman for free markets and free societies in an era when many social scientists disparaged market solutions to social problems.”
AND see Milton Friedman RIP - Walter Block - Mises Daily
"Milton was a beacon of light on issues such as the minimum wage law, free trade, and rent control. ... Milton's valiant, witty, wise, eloquent and yes, I'll say it, inspirational analysis on this issue must stand out as an example to us all.”
I cannot open http://mises.org/daily/4189/The-Other-Ludwig-von-Mises-EconomicPolicy-Advocate-in-an-Interventionist-World by Richard Ebeling
this provides a discussion by Ebeling of Mises’ policy advice to the old Austro-Hungarian empire and then the Austrian republic which replaced it, on the basis of “lost papers” of Mises recovered in 1996 and the 3 volume Selected Writings of Ludwig von Mises.
Professor Friedman,
You mentioned in an earlier comment "[Robin Hanson] is one of several reasons that I'm planning to spend the fall at GMU."
To clarify: Are you visiting GMU briefly for a seminar? Or will you be staying there for the whole fall? If the latter, will you be teaching any classes at GMU?
From http://wiki.mises.org/wiki/Milton_Friedman
“Over the course of his career, Friedman made a number of enduring contributions to the field of economics.
He became an articulate spokesman for free markets and free societies in an era when many social scientists disparaged market solutions to social problems.
... Other legacies include Friedman’s revival of a monetary approach to macroeconomics and his persistent critique of the Keynesian orthodoxy of his day”
AND see Milton Friedman RIP - Walter Block - Mises Daily
"Milton was a beacon of light on issues such as the minimum wage law, free trade, and rent control. ... Milton's valiant, witty, wise, eloquent and yes, I'll say it, inspirational analysis on this issue must stand out as an example to us all.”
I cannot open http://mises.org/daily/4189/The-Other-Ludwig-von-Mises-EconomicPolicy-Advocate-in-an-Interventionist-World by Richard Ebeling
this provides a discussion by Ebeling of Mises’ policy advice to the old Austro-Hungarian empire and then the Austrian republic which replaced it, on the basis of “lost papers” of Mises recovered in 1996 and the 3 volume Selected Writings of Ludwig von Mises.
"To clarify: Are you visiting GMU briefly for a seminar? Or will you be staying there for the whole fall? If the latter, will you be teaching any classes at GMU?"
My current plan is to visit for the whole quarter, giving a biweekly workshop on the book I'm working on (Legal Systems Very Different From Ours) and attending workshops. Mostly I plan to wander around talking with interesting people, such as Robin and Peter Leeson and ... . It's something I've been planning to do for years.
There is still some uncertainty, due to a medical issue that should be resolved shortly, but it looks as though the plan will go through.
"In relation to Rothbard advocating a ban on fractional reserve banking, doesn't this really have to do with what the money in question is and what the contract with the bank is??"
It should.
It's hard to think of any transaction that couldn't be set up in a fraudulent way. But Rothbard's claim was that all fractional reserve banking was fraudulent and should be banned. That would include a fractional reserve bank that made it explicit, as the Scottish banks did, that there was some risk that it would be unable to redeem its notes immediately due to a run on the bank.
By that standard, all insurance is fraudulent and pretty nearly all other contracts, since most contracts occur under conditions where there is some probability that one party or the other will be unable to fulfill his obligations.
David Gordon asks:
"I'd be most interested in learning the evidence for the train of thought you attribute to him."
It explains his behavior.
To sum up the hundred pages of comments:
M Friedman: Hero
Rothbard: Zero
And the strongest impression I get of Lew Rockwell is racism and dislike of the poor, the complete opposite of the very compassionate Friedman.
(P.S. VangelV, if your comments consume half the space of someone's blog that's not your own blog, you might want to think about being more concise and not needing to reply to EVERYTHING. Think about the value of your time and everyone else's.)
from The Other Ludwig vonMises: Economic Policy Advocate in an Interventionist world by Richard Ebeling:
From 1909 to 1934 (except during the First World War), Mises worked as an economic-policy analyst and advisor to the Vienna Chamber of Commerce.
As Ebeling notes:
“What comes out from reading Mises's policy writings from this period of his European career is that if you had asked him a fiscal, or monetary, or regulatory-policy question in the context of his role as analyst at the Chamber of Commerce, he would not have said, and did not simply say, "laissez-faire" — abolish the central bank, deregulate the economy, and eliminate taxes.
In the give-and-take of everyday Austrian politics and policy decision-making, Mises accepts that there are certain institutional "givens" that must be taken for granted, and in the context of which policy options and decisions must be worked out.”
Ebeling went on to note that Mises seemed to usually think with three policy horizons:
1. The most optimal institutional and policy arrangements in society for the fostering of the classical-liberal ideal of freedom and prosperity, based on the knowledge that he thought sound economic theory could provide;
2. the actual circumstances of the present, but focused on the intermediary goals that would be leading in the direction of that more distant, "optimal" horizon; and
3. current situation and the immediate future
In the 1970s, Rothbard once criticized Milton Friedman for advocating indexation of prices and wages as a method to reduce some of the negative effects from an ongoing inflation. In 1922, during the worsening Great Austrian Inflation, Mises proposed indexation of wages and prices.
Mises did not just say cut bureaucracy and its spider's web of regulatory controls. He explained
• what was inefficient and unnecessary in the three-tiered Austrian bureaucratic system of federal, provincial, and municipal regulators and taxing authorities;
• what specific reforms should be introduced, how they could be experimented with in smaller regions of Austria; and
• how best to overcome the resistance of those in the bureaucracy fearful of losing their jobs
Ebeling ends by saying:
• “Even as that uncompromising and principled proponent of individual liberty and the free market, Mises was called upon in his role as policy analyst and advocate to sometimes devise "second-" and "third-best" policy proposals in an imperfect world dominated by collectivist and interventionist ideas and practices.”
• “for those who have sometimes asked, "Well, but how do you apply Austrian Economics to the 'real world' of public policy?" here is the answer by the economist who has been considered the most original, thoroughgoing, and uncompromising member of the Austrian School over the last one hundred years! His policy analyses provide us with warning signs and guideposts to assist us in thinking about and designing better policies for our own time.”
Ironically, Mises was more like Friedman than Rothbard in a lot of ways. He tried to actually affect policy in a direction of increasing liberty. He was willing to take a "lesser of evils" approach. For example, on the draft, he's ideologically opposed, but in Europe, he was pretty obviously thinking, "Better a draft than to be conquered by Napoleon or Hitler." And he didn't ever, ever, ever praise any Communist for any reason.
David,
Anybody who is not brain dead knows that:
A) Milton Friedman is ridicilously well-known outside of economics - for an academic. Michael Sandel, Harvard's most popular (philosophy) professor, takes Milton's (along with Nozick's) arguments to represent THE Libertarian position he feels needs to be argued against. If he's not popular within the broad public, he's at least popular among non-economist academics.
B) Milton had a popular TV show. Whatever people think of it, it was watched by many and is very likely that it had and continues to have a large impact on American public discourse. In a sense, Milton did pop economics before Levitt, Hartford, etc.
C) Rothbard is largerly unknown outside of the US. Fact. Economists or non-economists, nobody knows about him. Not even libertarians in, for example, Europe (where I'm from) know about him. On the other hand, there's not a single libertarian, in either Europe or Africa, who doesn't know about Friedman.
Now all of the above are largerly unsupported claims. I don't have any data for them but I believe they are based on what is, I think, a very neutral assessment of both men. I like them both for different reasons and I am not biased in favour of either one. Though Rothbard's 'Mozart Was A Red' was pretty atrocious.
I should specify that in the comment above, I didn't mean to say that no Libertarian in Europe knows about Rothbard. I meant that there are Libertarians who don't know about Rothbard. Very few but they do exist.
The irony of course is that as Milton got older, the more he most closer to Rothbard and as Rothbard got older the more he was willing to make compromises.
Case in point. Frideman in an interview with the Financial Times in 2003 in essence agreed orthodox monetarism was a failure. And here is clip where he called for an end to the Federal Reserve
http://www.youtube.com/watch?v=JL3FT0O4kYg
Friedman came out also and gave endorsement of the Monetary Reform Act
http://www.themoneymasters.com/the-money-masters/milton-friedman-end-the-fed/
Rothbard later in life made an ill-advised compromise with the Buchanan Right
Granted Rothbard intellectually had his beef with Friedman on several issues like school vouchers, the negative income tax and his monetarism however, those are pail in comparison to the protectionism and cultural statism that Buchanan and the Chronicles magazine crowd were advocating.
From http://mises.org/daily/4189/The-Other-Ludwig-von-Mises-EconomicPolicy-Advocate-in-an-Interventionist-World by Richard Ebeling
From 1909 to 1934 (except during the First World War), Mises worked as an economic-policy analyst and advisor to the Vienna Chamber of Commerce.
As Ebeling notes:
“What comes out from reading Mises's policy writings from this period of his European career is that if you had asked him a fiscal, or monetary, or regulatory-policy question in the context of his role as analyst at the Chamber of Commerce, he would not have said, and did not simply say, "laissez-faire" — abolish the central bank, deregulate the economy, and eliminate taxes.
In the give-and-take of everyday Austrian politics and policy decision-making, Mises accepts that there are certain institutional "givens" that must be taken for granted, and in the context of which policy options and decisions must be worked out.”
Ebeling went on to note that Mises seemed to think in three policy horizons:
1. The most optimal institutional and policy arrangements in society for the fostering of the classical-liberal ideal of freedom and prosperity, based on the knowledge that he thought sound economic theory could provide;
2. the actual circumstances of the present, but focused on the intermediary goals that would be leading in the direction of that more distant, "optimal" horizon; and
3. current situation and the immediate future
In the 1970s, Rothbard criticized Milton Friedman for advocating indexation of prices and wages as a method to reduce some of the negative effects from an ongoing inflation. In 1922, during the worsening Great Austrian Inflation, Mises proposed indexation of wages and prices.
Mises did not just say cut bureaucracy and its spider's web of regulatory controls.
Ebeling explained Mises as follows:
• what was inefficient and unnecessary in the three-tiered Austrian bureaucratic system of federal, provincial, and municipal regulators and taxing authorities;
• what specific reforms should be introduced, how they could be experimented with in smaller regions of Austria; and
• how best to overcome the resistance of those in the bureaucracy fearful of losing their jobs
Ebeling ends by saying:
• “Even as that uncompromising and principled proponent of individual liberty and the free market, Mises was called upon in his role as policy analyst and advocate to sometimes devise "second-" and "third-best" policy proposals in an imperfect world dominated by collectivist and interventionist ideas and practices.”
Prof David Friedman: have you considered writing a post on the topic of methodologies?
Personally, I don't see any grand difference in methods between Austrians and mainstream econ. Austrians just like lots of verbiage, and never seem as honest about their arguments.
For instance, micro and macro textbooks also argue from a priori reasoning, and grow their models as they go. The only difference is that mainstream economists make their assumptions known, while Austrians refuse to even admit they are necessarily the real world. And, given that Austrians don't do empirical work, they can't even tell how important or unimportant those factors they are assuming away are.
In another instance, VangelIV writes: Using models in which you make approximations and assumptions that do not reflect reality and plugging in numbers that have no meaning in the real world only adds to the confusion.
I am sure I have seen articles over mises.org where they use numerical illustrations. They just prefer to muddle those in the form of verbiage rather than a clearer graph. It is my understanding, Mises was against even using graphs to illustrate supply and demand curves.
Austrians also seem to love arguing against strawmen. They say they are against equilibrium economics (even as they engage in it too), while ignoring the fact that mainstream economists also do desequilibrium economics (mainly under macro). I don't see how you can, for instance, analyse the stickyness of prices without having a theory about how prices behave in the long-run!
I wouldn't bother replying to most of what VangelIV wrote here. However, these methodological discussions seem very pervasive, and shedding some light on this might work in reducing some of these nonsensical discussions. Please invite another economist to blog (Steven Landsburg would be great), if you are unconfortable about the topic. It is long time to do away with this Austrian vs mainstream distinction.
Granted Rothbard intellectually had his beef with Friedman on several issues like
school vouchers: Milton Friedman was also against school vouchers: he argued that people were already literate before the state engaged in schooling. He just thought that school vouchers was an huge improvement over the current system. (see the correspondence published by Charles Murray)
the negative income tax: Milton Friedman defended the negative income tax as a way to get rid of the entire welfare artifice, not to perpuate it.
and his monetarism: Not sure what to say here: does anyone take seriously Rothbard on macroeconomics? It is my understanding, he refused to even acknowledge the existence of sticky prices at all. He didn't have an "intellectual beef" with Friedman on that, the "beef" was purely dogmatic: it was inconvenient for Rothbard to respond directly to Friedman (or Keynes), so he would just argue that the recession would never take place if blah, blah, blah, (insert non-sense here), when the topic was addressing the recession.
This is like those mises articles that make fun of "war (or natural disaster) can help the economy get out of a recession", without acknowledging Keynesians train of thought. Maybe Keynesians are wrong on that: but at least please engage in a honest battle, rather than assuming they are a bunch of fools. Sometimes, they just argue against the strawman "wars always help the economy" (whatever that means).
"Fractional reserve banking" can make 30 year loans using demand deposits. I think there will come a day when there are banks where all 2 year loans are backed by 2+ year deposits and 5 year loans by 5+ year deposits. These will be much safer banks, as these can never fail because of a run on the bank. Eventually I think this type of banking will come to dominate.
On micro-economics Milton Friedman was a fantastic defender of free markets. But he did not see gold as "honest money" and thought the depression could have been averted by printing more money. To me it seems clear the problem was the Fed's Ponzi Gold Standard. http://howfiatdies.blogspot.com/2010/11/feds-ponzi-gold-standard.html
Dr. Friedman,
Have you since this today?
Friedman vs. Hayek
Posted by Lew Rockwell on August 1, 2011 10:43 AM
How great to have had historian Ronald Hamowy as a distinguished visiting faculty member at Mises University last week. We did a fascinating and moving podcast about his teacher F.A. Hayek, and his close friends Murray Rothbard and Burt Blumert.
In his graduate seminar, reports David Gordan, Ronald confirmed that it was indeed Milton Friedman who blocked Hayek from the Chicago economics faculty. As a result of the Miltonian blackball, Hayek had to take an unpaid position at the university, and eventually returned to Austria. His American salary was paid by the heroic Volcker Fund, but there was no pension and certainly no tenure.
http://www.lewrockwell.com/blog/lewrw/archives/92213.html
And the strongest impression I get of Lew Rockwell is racism and dislike of the poor, the complete opposite of the very compassionate Friedman.
Racism? Dislike of the poor? Are you sure that you are reading Lew's material? Or are you trying to be ironic or sarcastic?
Friedman had no more regard for the poor than Rothbard. In fact, by supporting government expansion and being an insider he ensured that the number of poor would be larger than under a freer market and a smaller government.
(P.S. VangelV, if your comments consume half the space of someone's blog that's not your own blog, you might want to think about being more concise and not needing to reply to EVERYTHING. Think about the value of your time and everyone else's.)
I mostly reply to what I consider to be wrong, not everything. In this particular case, most of the commentary seems to be way off.
C) Rothbard is largerly unknown outside of the US. Fact. Economists or non-economists, nobody knows about him. Not even libertarians in, for example, Europe (where I'm from) know about him. On the other hand, there's not a single libertarian, in either Europe or Africa, who doesn't know about Friedman.
I imagine that in a place that has moved so far to the left a man like Milton Friedman can be considered to be a Libertarian. Well, I might be considered a giant in the Kalahari but that does not make me very tall in the real world.
Granted Rothbard intellectually had his beef with Friedman on several issues like school vouchers, the negative income tax and his monetarism however, those are pail in comparison to the protectionism and cultural statism that Buchanan and the Chronicles magazine crowd were advocating.
I am not as familiar with this as others may be but from what I gather Rothbard's biggest beef with Friedman was the use of a methodology that promoted statist ideas.
Personally, I don't see any grand difference in methods between Austrians and mainstream econ.
They could not be any different.
Austrians just like lots of verbiage, and never seem as honest about their arguments.
Try reading a bit. It isn't hard.
school vouchers: Milton Friedman was also against school vouchers: he argued that people were already literate before the state engaged in schooling. He just thought that school vouchers was an huge improvement over the current system. (see the correspondence published by Charles Murray)
You can't justify theft no matter the motivation being claimed for it. If theft it is wrong improving a system financed by theft is not being on the side of liberty.
the negative income tax: Milton Friedman defended the negative income tax as a way to get rid of the entire welfare artifice, not to perpuate it.
They are the same thing. You take money from those that earn it and give it to others who may have chosen not to work as hard or take as many chances. We are back to the theft issue again.
and his monetarism: Not sure what to say here: does anyone take seriously Rothbard on macroeconomics? It is my understanding, he refused to even acknowledge the existence of sticky prices at all.
Your understanding is wrong. He said that in a free market wages would adjust downward as they used to. You, and Rothbard's dishonest critics, are assuming he thought the same in a heavily regulated system. The two systems are not the same.
For the record, Friedman's monetarism is an absolute failure and cannot be justified morally because it is theft. By giving a privileged group of well connected insiders the right to print money out of thin air you rob savers and workers of purchasing power over time. Money is too important to leave it in the hands of central planners like the central bankers and their advisers. Milton never really got that. Rothbard did. That is why they were on opposite sides on the Gold Commission arguments.
He didn't have an "intellectual beef" with Friedman on that, the "beef" was purely dogmatic: it was inconvenient for Rothbard to respond directly to Friedman (or Keynes), so he would just argue that the recession would never take place if blah, blah, blah, (insert non-sense here), when the topic was addressing the recession.
Not only was it an intellectual disagreement it was also a moral one. And if you paid attention you would have noticed that the Austrians saw the bubbles that the Chicago School economists did not think were possible because of their attachment to the EMH. This is why the mainstream economists are up in arms against the Austrian School; the public figured out that the mainstream economists had no clue about the real world and that the Austrians got it right.
This is like those mises articles that make fun of "war (or natural disaster) can help the economy get out of a recession", without acknowledging Keynesians train of thought. Maybe Keynesians are wrong on that: but at least please engage in a honest battle, rather than assuming they are a bunch of fools. Sometimes, they just argue against the strawman "wars always help the economy" (whatever that means).
There is nothing honest about Keynesians using the broken window fallacy more than a century after it was exposed. Of course you could argue that honesty has nothing to do with anything because the problem is ignorance. But if that is the case why should we pay any attention to people who are ignorant of economics?
Dr. Friedman,
Have you since this today?
Friedman vs. Hayek
Posted by Lew Rockwell on August 1, 2011 10:43 AM
How great to have had historian Ronald Hamowy as a distinguished visiting faculty member at Mises University last week. We did a fascinating and moving podcast about his teacher F.A. Hayek, and his close friends Murray Rothbard and Burt Blumert.
In his graduate seminar, reports David Gordan, Ronald confirmed that it was indeed Milton Friedman who blocked Hayek from the Chicago economics faculty. As a result of the Miltonian blackball, Hayek had to take an unpaid position at the university, and eventually returned to Austria. His American salary was paid by the heroic Volcker Fund, but there was no pension and certainly no tenure.
http://www.lewrockwell.com/blog/lewrw/archives/92213
You didnt respond ?
If this is true, doesnt it show:
""I'm not sure why we must have a fight between these libertarian icons."
We don't have to; I think you will find that the fighting is mostly from the (extreme) Austrian side and has been for decades, with the post I responded to a recent example."
thats all bullshit ?
Look at VangelV simplifying Friedman's perspectives to fit the Rothbard Institute narrative. I wish I could filter out text written by anyone with "Mises.org" in their browser history. ; )
Hence the goofy Rothbardian claim that there can never be a shortage of nominal money
Could the author, or someone else, elaborate on this?
I think there will come a day when there are banks where all 2 year loans are backed by 2+ year deposits and 5 year loans by 5+ year deposits.
This is how I've always seen fractional reserve banking work in a free banking system, although I think some people view the concept of fractional reserve as only applying to demand deposits.
These will be much safer banks, as these can never fail because of a run on the bank.
Not sure about that. Some fraction of the loans will be payed early, which could lead to a similar fraction being non-secured reserve. But it would be much less than the +90% today.
This is how I've always seen fractional reserve banking work in a free banking system, although I think some people view the concept of fractional reserve as only applying to demand deposits.
You may be interested in a practical view of the problem that we face today. I am still on vacation and short of time so I will reference someone much smarter than me. Eric Sprott used his understanding of Austrian economics to become extremely wealthy by betting against the banking system and the fiat reserve currencies. He recently co-wrote a piece with David Baker, The Real
Banking Crisis. While the analysis is for Europe the same problem exists in the US banking system. Clearly the fractional reserve lending system has failed miserably and we are likely on our way to some kind of reset that will prove disastrous for savers and investors in debt instruments. At that time I expect the Chicago School and Keynesians to spin the, 'nobody could have seen it coming,' story and try to sweep under the rug the fact that the Austrians argued that it was inevitable.
nilskp asks elaboration on Selgin's comment that "Hence the goofy Rothbardian claim that there can never be a shortage of nominal money."
Given George Selgin is unlikely to be following-up on the discussion, here goes my 2 cents.
Here is modern macro in a nutshell. Money supply gets cut by half; in the long run, prices will be bid down to accommodate the smaller amount of money circulating. But in the short run, people are very reluctant to drop the price of their house, employees very much resent wage cuts, etc.
This is the standard explanation for why you've a recession after some economic shock. (If prices adjusted immediately, stuff like a stock market crash would only involve an immediate pain. Employers would just cut wages when demand dropped, and there would be no need for there to be unemployment.)
Given George Selgin is unlikely to be following-up on the discussion, here goes my 2 cents.
Thanks.
Here is modern macro in a nutshell. Money supply gets cut by half;
How does that happen? I mean, I can think up some scenario, but is that even remotely probable? In a free banking world (which I assume is Rothbard's hence Selgin's premise), I would expect money to be based on commodities and baskets of commodities.
But maybe I'm missing something?
in the long run, prices will be bid down to accommodate the smaller amount of money circulating. But in the short run, people are very reluctant to drop the price of their house, employees very much resent wage cuts, etc.
Isn't that viewed through the lens of inflationary money supply of the last 100 years? I mean, in a general price deflationary society, one would probably not buy a house for investment purposes, like many, erroneously, do today.
But yes, sudden gigantic shifts in the money supply in either direction is tremendously disruptive. Not sure that has much to do with Rothbard's claim. But I'm not aware of the context it was made so maybe it does.
This is the standard explanation for why you've a recession after some economic shock. (If prices adjusted immediately, stuff like a stock market crash would only involve an immediate pain. Employers would just cut wages when demand dropped, and there would be no need for there to be unemployment.)
Right, that makes a lot of sense. However, I would guess that the Austrian claim is, and it appears at least superficially correct, that the recessions that cause that kind of disruption is brought on by a rapid expansion in money supply, which inflate prices, not uniformly but excessively in isolated areas, such as stock market and housing, and only later people realize that the valuation is wrong (a bubble, because the excess money supply was non-uniformly distributed), which then leads to recessions because of loss aversion, effectively like lowering the nominal money supply for the area affected by the bubble.
But I don't know if that means there's a shortage of nominal money?
Darn, I'm going to have to start following this blog more carefully. When I was an undergraduate, I bought a book called The Machinery of Freedom which I read and re-read until it fell apart. I watched Milton Friedman's series, Free to Choose, but did not connect David Friedman to Milton. It was at least 25 years after I bought David's book that I learned that he was Milton's son. I'm finally reading Free to Choose, and I don't think I'll get around to reading any books by Rothbard until I've read a few more by Friedman.
How does that happen? [money supply dropping]
First of all, it's good to keep in mind the equation of exchange: Money x Velocity = Prices x Quantity
So, there is a downward exertion on prices as more stuff gets produced, or if the quantity of money drops (e.g. increased jewelry demand in a gold standard) or if people panic: consumers stop spending, and banks stop lending.
Usually, economists are more concerned about the velocity of money circulating which is why they measure consumer confidence in bad times, and why George Bush asked Americans to keep spending frivolously following 9/11.
And, again, unexpected deflation is generally considered as taking more time to process for psychology reasons and because of lending contracts.
In a related note: prof David Friedman has an interesting discussion on the future of money over his Future Imperfect book.
I was going to comment on the rest of your comment, but I prefer someone more savvy on the topic to take the discussion from here. I would just say that I don't think your housing point has much validity: there is not much inflation in America or Europe: inflation was not why you guys have gone through a housing bubble at all. And btw, you always had bubble like the tulip mania from the 17th century: it's possible the Fed played a role in the housing bubble, but you cannot blame central banks for every bubble that has ever existed.
First of all, it's good to keep in mind the equation of exchange: Money x Velocity = Prices x Quantity
A great start. Where exactly do the numbers that are plugged into the equation come from again?
First, you can't measure velocity. It is not an independent variable and must be calculated by dividing PQ by M. But how the hell do you come up with P or Q in any way that may be considered meaningful?
If you can't tell me what the average price of a tomato is or the relative contribution of the price of tomatoes to the aggregated P how can you come up with a number that aggregates everything in the economy, including all under the table activities or activities? And how do you come up with any meaningful number for Q given the impossibility of getting real data and a sound methodology?
This is one of the big problems that is faced by the Chicago School. Its practitioners play games of make believe and think that they are capable of doing things that are impossible. And this is why economics gets such a terrible rap among mathematicians and physical scientists. Many of its practitioners have a tendency to make astrologers look scientific in comparison.
VangelIV, I took both micro and macro 101 classes, but my degree is in CS. But I don't think the equation of exchange is used much in modern econ. I actually learned the equation of exchange from this introductory book to Austrian economics from the Mises Institute (page 147). LOL. Apparently, it was formulated by David Hume, and used by such economists as Ludwig von Mises and Milton Friedman to defend the quantity theory of money. The algebraic representation is from Fisher. (Obviously Hayek and Ludwing wouldn't be caught dead using such an instance of "scienticism": they preferred the verbiage. ahah)
It is an accounting identity. I think they are still useful as logical partitions (to mentally break the economy down), even if you cannot apply them directly. It doesn't tell you exactly what happens if, say, "people start spending money like drunken sailors", but looking at it you know something has to give: either production is being stimulated, or prices are rising, or the central bank is destroying money. It will take more information to know exactly which is which.
It is an accounting identity. I think they are still useful as logical partitions (to mentally break the economy down), even if you cannot apply them directly. It doesn't tell you exactly what happens if, say, "people start spending money like drunken sailors", but looking at it you know something has to give: either production is being stimulated, or prices are rising, or the central bank is destroying money. It will take more information to know exactly which is which.
That is my point. The equation presumes knowledge that is not available so we are back to its only real use as a way to advance a narrative. There is no science behind it even though the use of simple math makes it look as if there were to those not knowledgeable about the process.
Look at VangelV simplifying Friedman's perspectives to fit the Rothbard Institute narrative. I wish I could filter out text written by anyone with "Mises.org" in their browser history. ; )
How ironic. If you check your economic history that is what you will find; a filtering of the Austrian view in favour of the 'pragmatists' whose policies excused the growth of government to the point where a massive dislocation is necessary and our very freedoms are threatened.
From James Grat's review of, 'Bastiat: The Man and the Statesman,', (Via Maggies Farm) we get:
"Poor people!" he lamented of the duped French populace in the same tumultuous year. "How much disillusionment is in store for them! It would have been so simple and so just to ease their burden by decreasing their taxes; they want to achieve this through the plentiful bounty of the state and they cannot see that the whole mechanism consists in taking away ten to give it back eight, not to mention the true freedom that will be destroyed in the operation!"
I find this very appropriate in examining the impact of Friedman. He was a 'pragmatist' who accepted the activities of the state and attempted to improve efficiency. Instead of, "taking away ten to give it back eight," he thought that he can get government to give eight and a third. What he did not acknowledge (or realize) was that those efforts would do very little to prevent the destruction of freedom that he professed to care so much about. Because he was ultimately a moral relativist he failed to see that good men needed to take a stand based on principle instead of taking half measures that did not get in the way of career.
I don't think this is correct. Rothbard certainly thought that he had made a major contribution to Austrian economics, and that mainstream economists didn't pay sufficient attention to the Austrians, but I very much doubt that he thought that mainstream economists ignored him because of his political views.
I agree. Man, Economy & State is a far better work of economics than anything that I have read from Milton Friedman produced so Murray's contribution can not be underestimated. The way I read Murray may be oversimplified but I believe that he argued that the establishment would elevate and reward those economists who supported statism and went along with the government being a necessary evil when they criticized. While Milton was in favour of the free markets he was a moral relativist who could not take the type of positions that Murray knew to be true.
I knew him very well and never recall him saying this or anything like it. I'd be most interested in learning the evidence for the train of thought you attribute to him.
How do you respond to David's charge that Murray "weakened various of the causes he argued for by intellectual dishonesty," and, "What was fundamentally wrong with Rothbard, in my view, was that he was willing to make arguments he knew were wrong as long as they led to what he considered the right conclusion?"
I believe that this conclusion comes from a failure to understand what Murray was arguing for some of the time, particularly when he would take the same side of an argument as people that he would disagree with on most other issues. But I may be wrong so it is good to get the answer from someone who knew Rothbard well. Was he as intellectually dishonest as David claims?
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