Rothbard Graduate Seminar 2018

Rothbard Graduate Seminar 2018

06/11/2018Tho Bishop

Today was the first day of this year’s Rothbard Graduate Seminar. A total of 27 students from 13 countries have joined us in Auburn to dissect and discuss Murray Rothbard’s economic treatise Man, Economy, and State. RGS stands alone as the sole academic program in the world that applies the tradition of a great book seminar to Austrian economics. It has proved to be an invaluable asset in developing modern scholars in the Misesian tradition, and is possible thanks to the incredible generosity of  Alice Lillie.

Man, Economy, and State is a work deserving of the title "great book, it having played an important role in the history of Austrian economics. Dr. Joseph Salerno has credited the publishing of Rothbard’s masterpiece as being vital to the revival of the Austrian tradition in the United States. As he wrote in his paper, The Rebirth of Austrian Economics — in Light of Austrian Economics:

This handful of scattered contributions to Austrian economics forthcoming in the 1950s, however, would have defined the death throes of the school rather than the prelude to its rebirth were it not for the creative genius of Murray Rothbard, which came to fruition in the early 1960s. The revival of Austrian economics as a living scientific movement can be dated from the publication of Rothbard’s Man, Economy, and State in 1962, a contribution to Austrian economics and to pure economics in general that ranks as one of the most brilliant performances in the history of economic thought.

In his review of the book in 1962, Ludwig von Mises also identified Man, Economy, and State as an important contribution to economics that built upon the contributions of the Austrian school:

The main virtue of this book is that it is a comprehensive and methodical analysis of all activities commonly called economic. It looks upon these activities as human action, i.e., as conscious striving after chosen ends by resorting to appropriate means. This cognition exposes the fateful efforts of the mathematical treatment of economic problems…

In every chapter of his treatise, Dr. Rothbard, adopting the best of the teachings of his predecessors, and adding to them highly important observations, not only develops the correct theory but is no less anxious to refute all objections ever raised against these doctrines. He exposes the fallacies and contradictions of the popular interpretation of economic affairs.

Today’s RGS sessions focused on the first three chapters of Man, Economy, and State, with Dr. David Gordon lecturing on praxeology and Dr. Guido Hulsmann leading discussion on topics such as direct and indirect exchange.

Some photos from today’s sessions can be found below:

Salerno_RGS.JPG
Gordon_RGS.JPG
Students_RGS.JPG
Students2_RGS.JPG
Guido_RGS.JPG
Lukas_RGS.JPG

 

Facebook icon
LinkedIn icon
Twitter icon
When commenting, please post a concise, civil, and informative comment. Full comment policy here

What Hayek Said about the "Nobel Prize" in Economics

10/08/2018Jeff Deist

The Nobel Prize in Economic Sciences is a dubious thing at best.

First, it's not a "real" Nobel Prize in the sense the Nobel Foundation neither chooses nor pays the recipient(s). Technically, it's the "Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel." The award itself is of checkered provenance, created by Swedish central bankers hoping to bolster the scientific image of economics. It's chosen by committee members who purposely apply the same principles used to determine winners in medicine, physics, and chemistry, thereby hoping the public won't much notice its lack of connection to the late Alfred Nobel (or his surviving family, one of whom blasted the prize as a PR effort designed to improve the bad reputation of economists). 

More importantly, though, the "Nobel Prize confers on an individual an authority which in economics no man ought to possess," as none other than Friedrich Hayek exclaimed in his own remarkable acceptance speech upon receiving the award in 1974. 

In Hayek's view, the Prize threatened to create an aura of hard science certainty around the decidedly social science of economics. This veneer, he worried, would influence both government officials and the public to view economic theory more like laws of physics or properties of molecules. 

This was dangerous, in the view of a man who had seen Europe and Russia collapse under "scientific" socialism and written extensively about political economy in The Road to Serfdom and The Constitution of Liberty. He understood the deadly combination of hubris and certainty, and hoped to impress upon the audience that economics remained a discipline that studied humans, with all their irrationalities and frailties. In this sense he demonstrated the degree of respect he still had for the praxeological foundation of his then recently-departed old mentor Ludwig von Mises.

Murray Rothbard, writing in Human Events, had fulsome praise for Hayek as the surprise winner who eschewed the mathematical orientation of previous recipients:

The Nobel award comes as a surprise on two counts. Not only because all the previous Nobel Prizes in economics have gone to left-liberals and opponents of the free market, but also because they have gone uniformly to economists who have transformed the discipline into a supposed "science" filled with mathematical jargon and unrealistic "models" which are then used to criticize the free-enterprise system and to attempt to plan the economy by the central government.

F.A. Hayek is not only the leading free-market economist; he has also led the way in attacking the mathematical models and the planning pretensions of the would-be "scientists," and in integrating economics into a wider libertarian social philosophy. Both concepts have so far been anathema to the Nobel establishment.

Rothbard saw Hayek's achievement not only as a refutation of the Keynesian orthodoxy regarding stumulative monetary policy, but also as a demolition of the whole socialist political program flowing from Keynes's followers:

The political prescription that flows from the Hayekian theory is, of course, the diametric opposite of the Keynesian: stop the artificial inflationary boom, and allow the recession to proceed as fast as possible with its work of readjustment. Postponement and government attempts to stop or interfere with the recession process will only drag out and intensify the agony and lead to our current and probably future turmoil of inflation combined with lengthy recession and depression. The Mises-Hayek analysis is not only the only cogent theory of the business cycle; it is the only comprehensive free-market answer to the Keynesian morass of government planning and "fine tuning" that we are suffering from today.

But F.A. Hayek did not stop with this monumental contribution to economics. In the 1940s he widened his approach to the entire area of political economy. In his best-selling Road to Serfdom (1944) he challenged the prosocialist and pro-Communist intellectual climate of the day, showing how socialist planning must inevitably lead to totalitarianism, and demonstrating examples in the way in which the socialistic Weimar Republic paved the way for Hitler. He also showed how the "worst always get to the top" in a statist society.

So today let us celebrate Friedrich Hayek, the reluctant  and worthy Nobel winner—rather than an economist who once wrote this, in a textbook no less:

The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.

Facebook icon
LinkedIn icon
Twitter icon
When commenting, please post a concise, civil, and informative comment. Full comment policy here

The Kavanaugh Circus is the Result of the Politicization of the Supreme Court

Why is this nomination the subject of such rancor?

I have argued countless times that the federal government has grossly exceeded the limitations the Constitution imposes on it. Wherever you are as you read these words, look around you and try to find something in your line of sight that is not regulated by the federal government. It will be nearly impossible. Today the feds regulate not only our personal private behavior but also the states that created the federal government. More than half of each state’s budgetary expenditures are mandated by the feds.

And passing final judgment on all this — ratifying the Wilsonian view of the federal government (the feds may do whatever there is a political will to do, except that which the Constitution expressly prohibits) and eschewing the Madisonian view (the feds may do only what the Constitution expressly authorizes) — is the Supreme Court.

As the reach of federal power has expanded, the power of the Supreme Court to restrain or unleash that reach has expanded. Add to this the life tenure of Supreme Court justices and the mania for re-election of members of Congress and you can recognize the slow transfer of governmental power from the elected branches to the unelected one.

Should the right to life and the extent of the imperial presidency and whether the government is obligated to provide health care be decided by elected representatives or by the Supreme Court? From those who expect the high court to decide these issues — a court now evenly split, 4 to 4, along ideological lines — is it any wonder the Kavanaugh nomination is worth a bitter battle?

The Supreme Court should not be political. It is the anti-democratic branch of government. Its constitutional obligation is not to do the people’s will but to preserve personal liberty from the tyranny of the majority.

Excerpted from Treating the Court as a Political Branch
Facebook icon
LinkedIn icon
Twitter icon
When commenting, please post a concise, civil, and informative comment. Full comment policy here

Venezuela's Socialism...And Ours

10/03/2018Ron Paul

This week we witnessed the horrible spectacle of Nikki Haley, President Trump’s Ambassador to the United Nations, joining a protest outside the UN building and calling for the people of Venezuela to overthrow their government.

“We are going to fight for Venezuela,” she shouted through a megaphone, “we are going to continue doing it until Maduro is gone.”

This is the neocon mindset: that somehow the US has the authority to tell the rest of the world how to live and who may hold political power regardless of elections.

After more than a year of Washington being crippled by evidence-free claims that the Russians have influenced our elections, we have a senior US Administration official openly calling for the overturning of elections overseas.

Imagine if President Putin’s national security advisor had grabbed a megaphone in New York and called for the people of the United States to overthrow their government by force!

At the UN, Venezuela’s President Maduro accused the Western media of hyping up the crisis in his country to push the cause for another “humanitarian intervention.” Some may laugh at such a claim, but recent history shows that interventionists lie to push regime change, and the media goes right along with the lies.

Remember the lies about Gaddafi giving Viagra to his troops to help them rape their way through Libya? Remember the “babies thrown from incubators” and “mobile chemical labs” in Iraq? Judging from past practice, there is probably some truth in Maduro’s claims.

We know socialism does not work. It is an economic system based on the use of force rather than economic freedom of choice. But while many Americans seem to be in a panic over the failures of socialism in Venezuela, they don’t seem all that concerned that right here at home President Trump just signed a massive $1.3 trillion dollar spending bill that delivers socialism on a scale that Venezuelans couldn’t even imagine. In fact this one spending bill is three times Venezuela’s entire gross domestic product!

Did I miss all the Americans protesting this warfare-welfare state socialism?

Why all the neocon and humanitarian-interventionist “concern” for the people of Venezuela? One clue might be the fact that Venezuela happens to be sitting on the world’s largest oil reserves. More even than Saudi Arabia. There are plenty of countries pursuing dumb economic policies that result in plenty of suffering, but Nikki and the neocons are nowhere to be found when it comes to “concern” for these people. Might it be a bit about this oil?

Don’t believe this feigned interest in helping the Venezuelan people. If Washington really cared about Venezuelans they would not be plotting regime change for the country, considering that each such “liberation” elsewhere has ended with the people being worse off than before!

No, if Washington – and the rest of us - really cared about Venezuelans we would demand an end to the terrible US economic sanctions on the country - which only make a bad situation worse - and would push for far more engagement and trade. And maybe we’d even lead by example, by opposing the real, existing socialism here at home before seeking socialist monsters to slay abroad.
 
Facebook icon
LinkedIn icon
Twitter icon
When commenting, please post a concise, civil, and informative comment. Full comment policy here

No, a Ban on Dreadlocks is Not a Human Rights Violation

The “libertarian socialists” have struck again.

It began when a state Libertarian Party chapter posted a link to a court decision about an employer that did not allow its employees to have dreadlocks.

This was “discrimination,” the suit against it alleged.

Not so, said the court. The “race-neutral grooming policy,” it declared, was not discriminatory, since a hairstyle, unlike a racial identity, is not an “immutable physical characteristic.” Therefore, an employer is at liberty to enforce such a requirement.

Now that isn’t quite how a libertarian would argue the question, since the crux of the matter is that no contract should be entered into unless both sides agree to its terms, period. The employer may offer terms, and the employee may offer terms. If one side offers terms the other opposes, then they go their separate ways and find people willing to engage with them on terms they prefer.

This is also how we deal with the notorious “bake the cake” case. If the baker prefers not to bake the cake, that ends the discussion. Violently forcing him to bake the cake is out of the question. The Supreme Court may spend its time tying itself in knots analyzing whether cakes themselves are endorsements of relationships, or just the icing on them, or whether a cake is a form of expression, or whatever. We libertarians don’t need any of that nonsense.

All the same, the court reached the correct decision in the dreadlocks case from a libertarian point of view. Not a “right-wing libertarian” point of view, mind you, but a plain-vanilla libertarian one.

Now enter one of the two or three spokesmen for a group calling itself “libertarian socialists” that wants to get a foothold within the Libertarian Party.

He is not happy about this decision at all.

Let’s go one passage at a time.

“This is an affront to the principle of equal liberty. Using financial leverage to compel another human to change their [sic] hair is an initiation of coercive fraud, and the lie is that hair has anything to do with job performance whatsoever.”

Well, whatever “the principle of equal liberty” is, it sure ought to mean that every person is equally entitled to make offers to any other person. It surely cannot mean that any person must be compelled to accept another person’s offer, because that compulsion would violate the former’s “equal liberty.”

Next sentence: “Using financial leverage to compel another human to change their [sic] hair is an initiation of coercive fraud.” (As opposed to voluntary fraud?) By “financial leverage,” the libertarian socialist (we’ll call him LS) means that workers are helpless and without options, and employers wield a kind of coercion over them by threatening not to employ them. This is not really how libertarians view what happens on the market, though it is the way Marxists look at it.

Then LS insists that dreadlocks have no effect on job performance. Irrelevant, of course. People are free to make whatever offers they want, and other people are free to accept or reject those offers. That is the bottom line.

It is not reasonable to expect LS to be able to vet everybody’s job requirements to see if they win his approval. Some requirements have obvious connections to the work involved, and some have more obscure connections that may be more difficult to articulate. But even if the employer should demand that all employees wear a funny hat, that demand is perfectly compatible with libertarianism.

Then we read:

“Libertarians build our viewpoints around maximizing individual liberty, not who holds a magic piece of paper that purports to give them power over others in the name of state-sanctioned economic order. This is a gross violation of the individual and a racist one at that.”

Well, that’s nice: an employment contract is being sniffed at as a “magic piece of paper” that “purports to give [employers] power over others.” Oh, and by “a state-sanctioned economic order” (this is supposed to scare us because the word “state” appears) LS means the state’s occasional defense of private property. So private property and labor contracts are to be viewed as unnatural, and in upholding and defending them the state is violating the natural order (as opposed to doing what would occur anyway in the absence of the state, which is how libertarians look at it).

LS then says a condition for employment involving hair is “a gross violation of the individual.” Forcibly requiring the company to amend its employment requirements, however, would evidently not be a violation, since companies have no rights.

He concludes with this:

“I am sad and embarrassed, but not really surprised to see right-wing ‘libertarians’ celebrating white supremacy openly in the name of markets.”

(Man, what constitutes “white supremacy” sure has come down a few pegs, hasn’t it? It’s almost like hysterical people use the term to refer to just about anything.)

It isn’t “right-wing libertarians” who are “celebrating” this ruling. First, I think the ruling is too wimpy, so “celebrating” is too strong a word. More importantly, all libertarians believe in mutual consent, which means we are all free to offer whatever we like to anyone we’d like to offer it to, and that party is in turn at liberty to accept or reject our offer.

We do not favor threatening people with physical force just because we do not approve of the terms they are offering.

Unfortunately, this is the kind of confusion that so-called “libertarian socialists” are seeking to introduce into more or less everything.

And note well: the word property appears nowhere in the LS complaint. Probably not a coincidence.

Facebook icon
LinkedIn icon
Twitter icon
When commenting, please post a concise, civil, and informative comment. Full comment policy here

Don't Count on the FBI to Clear up the Kavanaugh-Ford Mess

10/02/2018James Bovard

After last week’s explosive congressional hearing, the Senate and the Trump administration agreed to reopen the FBI background check into Supreme Court nominee Brett Kavanaugh. Former FBI chief James Comey wrote Sunday that “the F.B.I. is up for this” because it is “full” of "people who just want to figure out what’s true." 

But truth has often been a scarce commodity in FBI investigations. Consider these cases stretching back decades:

Click here for the full article at USA Today. 

Facebook icon
LinkedIn icon
Twitter icon
When commenting, please post a concise, civil, and informative comment. Full comment policy here

Supporters Summit Photos Now Available Online!

10/01/2018Mises Institute

It was great to be able to spend this past weekend with so many friends in Auburn at this year's Supporters Summit!

Photos from the event are available here.

If you were unable to attend, videos from this year's talks will be available on our YouTube channel in the coming week. David Stockman's is available now.

Don’t forget to check your calendar for our upcoming events in New York City, Los Angeles, Texas, and Florida.

 

 

20180928-B78V1891_0.jpg
Facebook icon
LinkedIn icon
Twitter icon
When commenting, please post a concise, civil, and informative comment. Full comment policy here

Fed Raises Target Rate Again: Will It Have Time to Normalize Before the Next Recession?

09/26/2018Ryan McMaken

The Federal Reserve today raised the the Federal Funds Rate to a target/range of 2.0-2.25 percent:

funds_rate.PNG

According to Business Insider:

The Federal Reserve announced Wednesday, after a two-day policy meeting, that it would raise interest rates for the third time this year.

The decision, which had been widely expected, raised the federal funds rate by 25 basis points, to a range of 2% to 2.25%.

It was the eighth time the Federal Open Market Committee has raised borrowing costs since late 2015. It held rates near zero after the Great Recession to speed up the economic recovery.

Accordingly, the Fed removed language in its statement that had characterized its policy as "accommodative." Still, Fed Chairman Jerome Powell said at a press conference that the Fed did not have a precise estimate of where accommodation ends.

A look at rates over time shows that at 2.25 percent, the Federal Funds Rate has not been this high since January of 2005. At the time, however, the Fed still had more than two-and-a-half years before indications of an imminent recession led the Fed to begin cutting rates again in September of 2007. Rates peaked during the last cycle at 5.25 percent for 15 months.

It remains to be seen if the Fed will have a similarly broad period of time during which to "normalize" rates after more than seven years of a near-zero target rate. The Fed's pledge to "unwind" its extremely accommodative monetary policy is still a long way from coming to tuition. The Fed's balance sheet, after all, remains enormous by historical standards:

balancesheet.PNG

Moreover, if a recession begins within the next year, the Fed will find itself in a place where it will want to pursue "stimulus" by slashing the target rate, but will have to cut rates from a starting point of around 3 percent. That leave considerably less room to move than it had when the target rate was over five percent in 2007.

Given that most everyone expects the Fed to continue with its practice of buying up assets for stimulus purposes, it will then need to add "underpriced" assets to an existing portfolio of over 3 trillions dollars — even assuming the Fed manages to shed a sizable amount of its portfolio over the next year.

Such moves would be unprecedented in the history of American central banking, and we may get to find out what happens if the Fed tries it.

Note: for additional context, here's a longer time horizon on the federal funds rate levels. In recent years, the federal funds rate has been spending more and more time at rock-bottom levels, and with a result of arguably more anemic growth in real incomes.

funds_rate_2.PNG
Facebook icon
LinkedIn icon
Twitter icon
When commenting, please post a concise, civil, and informative comment. Full comment policy here

Tonight: Salerno on the 2008 Financial Crisis: “A 10-Year Retrospective”

09/25/2018Mises Institute

Tonight Joseph Salerno will join The Sabrin Center for Free Enterprise at Ramapo College of New Jersey for a panel looking back at the 2008 financial crisis. The event is focused on the questions "Why it happened, how it happened, could it happen again?" It will begin at 7 pm ET and will be streamed live. 

Other speakers will include:

Alan Blinder, the Gordon S. Rentschler Memorial Professor of Economics and Public Affairs at Princeton University and a Non-Resident Senior Fellow at the Brookings Institution. He is also Vice Chairman of the Promontory Interfinancial Network, and a regular columnist for The Wall Street Journal. Blinder served as Vice Chairman of the Board of Governors of the Federal Reserve System from June 1994 until January 1996. In this position, he represented the Fed at various international meetings, and was a member of the Board’s committees on Bank Supervision and Regulation, Consumer and Community Affairs, and Derivative Instruments.

Christine Cumming, who retired from the Federal Reserve Bank of New York in June 2015.

Patricia C. Mosser,a Senior Research Scholar and Senior Fellow at Columbia University’s School of International and Public Affairs and Director of the Initiative on Central Banking and Financial Policy. 

Richard Sylla, Professor Emeritus of Economics at the Stern School of Business, New York University.

Facebook icon
LinkedIn icon
Twitter icon
When commenting, please post a concise, civil, and informative comment. Full comment policy here

Help Translate 'Why Small States Are Better' Into English

09/21/2018Mises Institute

Last year, we told you about a new book from Andreas Marquart and  Philipp Bagus titled Wir schaffen das – alleine! (“We can do it – alone!”). The subtitle says: “Why small states are just better.” (Read an interview about the book here.)

Unfortunately for English-language readers, the book remains only available in German.

The authors, however, have now launched an Indiegogo campaign to fund the translation of the book into English.

The book is an important addition to the scholarship of decentralization and secession.

Facebook icon
LinkedIn icon
Twitter icon
When commenting, please post a concise, civil, and informative comment. Full comment policy here

August Building Permits Drop for First Time in Eight Years

09/21/2018Ryan McMaken

Building permits for private housing units in the US dropped by 5.5 percent in August, which was the largest drop recorded in more than two years. The last time housing permit activity dropped by a larger amount was during June of 2016 when permits fell by 12.3 percent.

The trend in all permits (seasonally adjusted):

permits_SA.PNG
 

The decline was driven by a drop in multifamily permits. In fact, single-family permit growth didn't drop below zero at all — although single-family permits grew at the weakest rate (2.1 percent) recorded since May of 2014.

The trend in single-family permits (seasonally adjusted):

permits1unit_SA.PNG
 

The general trend here, since early 2017, is one of stalling growth rates in permit activity.

If you're like me, though, you're not a huge fan of seasonally-adjusted numbers. So let's look at the non-adjusted permit totals.

Given that permit activity does tend to be highly seasonal, it's helpful to compare this past August with other Augusts. So, if we look at each month of August since 2005, we find that August 2018 was the first August in eight years during which permit activity (for all units) actually turned negative when compared to the previous August. August 2018's permit activity was down 5.9 percent, year over year.

Total permits reported for August of each year:

singlefam.PNG
 

As with the seasonally-adjusted data, the decline was driven largely by a drop in multifamily permits. Looking at permits for building with 5 or more units, we find that permit activity in August 2018 was down 21 percent from the previous August. To find a larger drop in August, we have to go back to 2009.

Multifamily permits reported for August of each year:

multifam.PNG
 

Meanwhile, single-family permits were up by 1.6 percent in the non-adjusted data, comparing August 2017 to August 2018. This was the smallest August increase in single-family permits in four years. Nevertheless, it was an increase.

In short, we're seeing a similar trend in the August non-adjusted data that we see in the adjusted data: single-family permits are more or less flat, and growing at a weak rate.

Unlike single-family permits, though, multifamily permits aren't growing at all, and in August, they dropped off by the largest amount seen since the last recession.

Why Might Permit Activity Be Dropping?

Given that permits tend to be an indicator of future building activity, these numbers suggest that builder confidence is slipping. This could be due to at least two factors. One factor is likely rising mortgage rates . In August, the average 30-year fixed rate was the highest it has been since 2011. That's likely to put downward pressure on demand for both single-family homes and condos in multifamily buildings.

Secondly, thanks to the Trump tariffs, the cost of both lumber and steel has risen, driving up construction costs. This means builders won't be able to deliver units at a prices that are likely to attract as many buyers as might have been the case without the tariffs.

On the other hand, it's possible that the weakness in the August numbers are a fluke and and that permit activity will bounce back. If both construction and borrowing costs continue to go up, though, sustaining demand will require greater growth in incomes.

Facebook icon
LinkedIn icon
Twitter icon
When commenting, please post a concise, civil, and informative comment. Full comment policy here
Shield icon power-market-v2