Mises Memo Winter 2002

8/7/2019 Mises Memo Winter 2002

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Mises MemoNews f rom t h e Ludwig v on M ises I n s t i t u t e • W i n te r 2002

A Sanc tua ry f o r Liber tybeen done fo r h im . I t would be a

center of learning, a place that per

mit ted f reedom-minded intellectu

als to research and teach. I t would

publish and disseminate ideas,

even i f t h es e i deas were considered

dangerous to existing political pri

orities.

In many ways, the Mises Insti

tute is already playing that role.

We give voice to people whowould otherwise not be heard, or

who would have to change their

tune in order to get along and get

by. Our journals make available

analysis and research that would

otherwise never see the light of

day. Yes, that makes the Mises

n 1934, Ludwig von Mises saw

the storm clouds gathering. He

was chief economis t fo r th e

Vienna Chamber of Commerce,

taught at the university, and con

ducted a fortnightly seminar with

some of the greatest intellectuals

on the continent. And yet the

totalitarian menace was rising all

around him. The en ti re academic

class in Vienna grew afraid, but

Mises had more reasons to worry

for his safety than most. As an

intransigent libertarian of Jewishheritage, he knew that he was

already on many enemy lists.

But then one day, a letter from

Geneva arrived. I t was from the

Graduate Ins t itu te o f International

Studies in a country that would be

neutral a nd t he re fo re safe should

war come. The insti tute offered

him a professorship. Though he

had to su r rende r two- th i rds o f hi s

salary to take it, heknew it was theright decision, for the sake of his

personal safety and his work. He

remained in Geneva from 1934

until 1940, during which time he

wrote the greatest economicsbook of our century,what became

Human Action.

When we think of his per

sonal heroism and example, we

do not often consider what might

have happened had there been no

politically independent institute

in Geneva that was in a position

to offer him sanctuarv. But th e

Iexistence o f this insti tute is crucial

to the storv. In politicallv difficult

times, we cannot count on the

state universities to stand firm, no r

even the private universities that

receive massive state subsidies.

There must be independent insti

tutions that provide support for

dissident intellectuals out o f favor

with the regime.

At the end of his life, Mises

wrote a private memo in which he

urged the founding of an institute

that wou ld d o for others what had

Ludwig von Mises



history, it is as engaging as any

thing Rothbard ever wrote. As

Joseph Salerno writes in the introduction, "One will learn much

more about monetary history

from reading this exciting storythan from poring over reams of

statistical analysis."

The question obviously arises

about the origin of the book.

Murray Rothbard died in 1995,leaving archives with many papers

that were unpublished and others

that had been published in low-

circulation venues. With the rights

to these manuscripts falling to the

Mises Institute, we went to work

to bring them to the light of day.

This is one of several such projects

the Mises Institute ha s under taken

since Rothbard ,s dea th .

A History ofMoney and Bank

ing in the United States consists of

five large essays:

1. "The History of Money and

Banking before theTwentiethCen

tury." This wasoriginally published

as an unsigned contribution to the

Minority Report of the U.S. Gold

Commission in 1982, a publication

which has long been out of print.

2. "Origins of the Federal

Reserve33 is a paper never pub

lished in its full form. It represents

the fruit o f Rothbard's most ambi

tious research effor ts on th e sub

ject, written in the mid-1980s.

3. "From H oover to Roo

sevelt: The Feder al Reser ve and

the Financial Elites." This is a pre

viously unpublished papera

model of libertarian power-elite

analysisalso written in the m id-

1980s .

4. "The Gold-Exchange Stan

dard in th e Interwar Years." A ver

sion of this appeared in a volume

edited by Kevin Dowd andRichard Timberlake (1998), but it

is published here for the first time

in its original version.

5. "The New Deal and th e

International Monetary System"

appeared in the 1976 book Water

shed of Empire (Leonard Liggio,

cd.), a volume that has also long

been out of print.

Hence, much of this volume is

new or so radically unfamiliar,

there is every reason to consider

the treatise new overall. What 's

remarkable is how nicely the essays

Winte r 2002 • News f rom th e l . rnuu; v on M is es Inst i tu te

Joseph T. Salerno

form a coherent story and unite in

an even pace. In his introduction,

Salerno compares it to other main

s tr eam book s on US mone ta ry hi s

tory and finds them far weaker by

comparison.

Reading through the history

helps identify certain patterns that

repeat themselves. For example,

the current hysteria against short-sellers, speculators, and Wall Street

moguls generallyunder a Repub

lican presidentrepeats in nearly

every detail Hoover's campaign

against finance from 1930-1932.

Denouncing falling stock prices

and attempting to jail people as

scapegoatsdidn't do any good

then, either.

Also, in Rothbard's account,

financial regulation, inflations,business cycles, and banking con

solidations of the past were not

just abstract economic forces at

work but involved interest groups

and struggles among groups. For

example, the battle between the

Morgans and Rockefellers is a key

part of 20th-century financial his

tory. Do such struggles exist



today? Of course, bu t to under

stand them requires background.

In Rothbard's hands, this his

tory comes to life as never before.Many economists have written

books on banking history that getthe history wrong. Many histori

ans have written books that get

the economics wrong. But here we

have brilliant, accurate history

informed by sound theorya rare

thing in this literatureand the

result is a mammo th contr ibut ion

to the literature that is going to

make a huge difference in the

world o f ideas. •

Epi s t emo log i ca l

Prob l ems

In the early 1930s, Mises

mrncd his attention to prob

lems o f economic method. Ever

since the battle between th e his-

toricists and the classicists, there

had been confusion over the precise status of economics as a scien

tific undertaking. It was Mises

who sorted ou t al l the i ss ue s i n a

series of scholarly articles that

became a book which representsthe most ambitious attempt by

any Austrian to put economics on

firm ground as a deductive scienceo f action.

Since die revival o f Austrian

economics 30 years ago, this trea

tise h as been an essential text for

graduate students seeking to

counter the influence of positivism

in die profession. But in recent

years, it has fallen out of print and

been hard to come by.

This is why the Mises Insti

tute, with the gracious permission

of Bettina Bien Greaves, decided

to publish a new and vastly

improved version of the book.

Originally translated by George

Reisman, this new edition features

a clear f orma t w it h footnotes at

the bottom of the page, and a

remarkable introduction by Jorg

Gu ido Hu lsmann .

The new edition of Epistcmo-

lojjical Problems ofEconomies should

be available after th e first of th e

year. •

O t ii f. r P u b l i s h inc.

Projects

The cause o f f reedom was

tripped up badly after 9-11,when even l ibertarians were at a

loss to explain how to mete out

justice and protect the homelandwithout resorting to vast increases

in state power. It is a striking factthat not a single modern book

exists that gives the case for theprivate production of security anddefense. This is why we are going

to print with TheMyth ofNationalDefense: Essays on the Theory and

History of Security Production,

edited by Hans-Hermann Hoppe.This collection explains how the

provision of defense against invasion is the proper domain of thefree market.

Two years ago, Jesus Huertade Soto wrote a huge book on thehistory of credit expansion and

Jesus Huerta dk Soto

Money,Bank Credit,

and Economic

CyclesIKANSl.A II l > I 1Y ML I. IN DA A . S TKOU r

fractional reserve banking, coveringeconomics and law, from the

ancient times to the present. More

than any existing treatise, it makes

th e case f or t he M i se si an -Ro thb ar -

dian view of bankingthat it

should operate like any other mar

ket institution: free from govern

ment intervention and adhering to

strict standards of property-rights

protection.

Only one problem: the treatiseappeared only in Spanish! Tomakeit available for English-speaking

audiences is th e reason the Mises

Institute is publ ish ing Money,

Bank Credit, and Economic Cycles.

The translation is wonderful , and

worked on at great length in coop

eration with Gabriel Calzada, a

Spanish-speaking visiting fellowfrom Juan Carlos University in

Madrid. This book has been rightlycalled the most important treatiseon money and banking since

Mises's in 1912so o f c ou rse w e

are pleased that the author chosethe Mises Institute as its publisher.

Man, Economy, and State is

Murray Rothbard 's treatise on eco

nomic theory, a companion treatiseto Human Action but extending

beyond it in many ways, and

NEWS I'KOM THE LlJOWIO VON MlSKS INSTITUTE Winter 2002



It includes an amazing new intro

duction constructed by Joseph

Strombcrg from the Rothbard

Archives, in which Rothbard him

self explains how the work devel

oped from an introductory textbook to a sem inal text in the

Austrian and l iber tarian tradi tion. •

organized in more step-by-step

fashion. Students of economicshave reported for decades that

thcv find it immensely useful infleshing out the technical details of

the Austrian system. It is also a

huge seller: the edition we have

kept in print continues to be

reprinted. But the Institute will

now come ou t with a scholar 's edition that unitesMan, Economy,

and State with Power and Market

as was intended by the author

from the very outset. An ex-Com-

munist succeeded in severing

them, but we have remedied that.

N

On l i n e Ed i t i o n s

ew editions of great books

have recently appeared on

Mises.org (the most popular site

in t he wo rl d for f ree-market schol

arship). From Rothbard, Mises.org

ha s two books: For A New Liberty

and The Pa?lie of 1819, as well as

five of hismost importantscholarlyarticles. From Mises, jMises.org

has On theManipulation ofMoney

and Credit and Economic Calcula

tion in the Socialist Commonwealth.

Thanks to support from Fred

erick L. Maier , the Miscs Institute

has established th e Frederick L.

Ludwiq von Mises Ins t i tute

Per iodicals Dally Articles • Coming Events • Resources • Audio • Membership

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Tuesday, October 0 8, 2 00 2

ONLIIff TEMTSK? BY

Annwersam

n,.

Dcnoldrtnip

OCTOBER 18-19.2002

LudW'g von M s ea Insbtula

Auburn. Alabama

Austrian

Communism in Capital Markets

It is hard t o under st and t he vague and ill-defined laws

Mar tha S tewa r t and Sam Waksal are accused o f

violating. Bu t th e premise of th e law is not hard to

divine: Competition in capi tal markets must proceed from

a level p laying field. All investors ar e entitled to th e

same information advantage irrespective of e ffor t and

abilities. In a word, socialism1. More...

Fo r c ed La bo r a n d th e Le f t

If someone is forced to engage in work that he

otherwise would no t do, and he is no t paid compensation

to which he agrees for that work, then we call this slave

labor. It cannot be defined by any other term, writes

William Anderson. Princeton's Paul Krugman and his

followers, howeve r , b e li eve tha t th e s t a t e shou ld f or ce

peopl e t o do it s bidding, even if it means they will not

r ece ive payment for their work. More...

Winte r 2002 News i-kom th e Ludwics von Mises Inst i tu te

Content

Market Update

ASC8 Pape r s

C a l e n d a r

20-Year Repo r t

Ab o u t Mi s e s

Ab o u t Ro t hba r d

STUDENTS

Library

Working Papers

Study Guide

Con f e r en ce s

Fellowships

ONL IN E BOOKS

Human Ac t ion

Mises Books an d

Essays

Ro t hba r d Book s

an d Essays

Founda t i on a l

Writings

Pa lm Book s



Maier Anti-Tax Archive, which

includes reprints of the best anti-

tax scholarship ever written. Fea

tures include the work of the great

American l iber ta rian Frank C ho -

dorov as well as Harvard economist

Frank Taussig's hard-to-find historyof tariffs in t he Un it ed States. This

library will continue to grow andgrow. •

The Econom i s t

Wrestles wi t h Au s t r i a n s

Earlier this year, the Interna

tionalMonetary Fund distributed a working paper on the Aus

trian theory of the business cycle

(which fingers central banking as

die culprit). More incredible thanits conclusions (that the Austrian

theory isn't entirely correct) wasthe veryfact of its appearance andwhat it says about the new status

of Misesian banking and capital

theory;

Something similar can be said

of the September 26, 2002, issue

of TheEconomist,which included a

large insert on the Austrian theory.

The famousmagazine sums up thetheory, "As a result of mutuallyreinforcing movements in credit,

investment and profits, each boom

contains th e seeds o f the su bse

quent recession and each recession

the seeds of the subsequent

boom." Fairenough, but of coursethe article ends up rejecting the

theory.

Economis t William Anderson

commented:

"Wha t amazes me is tha t th e

author lays out all of the pieces,

and even the half-baked Austrian

theory that he describes in his article, but still cannot put the pieces

together. Instead, he looks at thepieces and then tries to say there

are many different causes of busi

ness downturns and concludes

t ha t th e cent ra l b ank s mus t rescue

William L. Anderson

the var iou s e conomies . We have

the answers in front o f us on how

to get out of this mess, yet policy

makers and thei r mains t ream

economist allies continue to grope

around in the dark when the light

is available." •

L eF e v r e the Great

The late Rober t LeFevre had a

huge impact in building the

libertarian intellectual movemen t

through his Freedom School in the

1960s and other work. Al l these

years later, we often come across

people who attended his lectures

and came away astonished at their

Style and content. L ew Rockwell

heard h im, but the rest of us

though we had always known that

he was an outstanding thinker and

a passionate activist for liberty

never could have imagined how

compelling a lecture style he had

until we received a set of tapes as

part of the LeFevre Archive that

the Mises Institute now possesses,thanks to the work o f Ross Ander

son.

Together, the tapes make upwhat is essentially the greatest

audio course of freedom you will

ever find. Thanks to th e miracles

of the Web and MP3s, we worked

to produce editions that could be

made available to the world at no

charge. They are now up on

Mises.org. The day they appeared,we logged a new record of kilobyte downloads. LeFevre is once

again lecturing, but now to the

biggest audience he has ever had. •

S o n g s f r om the

M i s e s -K r e i s

From 1920 until 1934, Ludwig

von Mises conduc ted a for t

nightly private seminar in hisoffice, which could be attended

only by invitation. Participants

c alle d it th e Mises-Kre is o r Mises

Circle.Many of the greatest econo

mists, historians, and philosophers

oJhe ffiises--CftQiyer Rebate

ejedx (Kaufman

1have a point to make 1have some ideal typesThat you should hear for better We c a nno t d o w i th o ut

O f wh ic h on e c annot even Or else we're really crippled

Refute a single letter. 'Cause nothing else works out.

I am a libera l, Therefore 1 have a t va lu e s

But not of the old yore Only a remote glance,

For 1say all things differently Bu t he w ho thinks without them

Than those who wrote before . In my view has no chance.

A liberal anyone can turn, 1 state my values in black ink

But in Vienna alone (h e reasons learn. So e ac h o ne will k now wha t 1 think.

I know this 'cause marginal utility I say this 'cause marginal utility

Sheds the proper light on the econo ny. Sheds the pr oper light on the economy.

News from th e Ludwig vo n Mises In s t i t u t e Winter 2002



Dr. Anthony Carilli

of Europe would gather to discuss

problems and issues in a setting

where Mises h imse l f le d the dis

cussion as first among equals.

The formal meetings wouldbegin at 7:30 P.M. and last as late

as 10:00 P.M. Most of th e mem

berswould then gather for dinner

at the Anchora Verde, where the

discussion would continue bu t

grow lighter. Afterward, theywould continue to th e C afe Kiin-

stler, opposite the University of

Vienna, for coffee until 1:00 A.M.,

when M isc s u su ally left. Fri tz

Machlup reports, however, that

when he left a t 3 :00 a.m., he usu

ally had to say goodnight tophilosopher Alfred Schiitz!

Adding poetry and music tothe late-night gatherings at the

Cafe Kiinstler were the songs thatphilosopher Felix Kaufman wrote

fo r the seminar. Based on Austrian

folk melodies and popular songs,and written in Aus tr ian dialec t,

they featured clever references to

the contemporary debates and theinternal culture o f the Mises-

Kreis.

In the course of a magical

evening we heard these songsrevived and performed. The

melodies were obtained from a

Vienna archive, so as to be as

accurate as possible. The perform

ance i ncl ud ed th e movine sone

about Mises's departure for

Geneva, which brought to life the

d i ff icu l t t imes in which he lived.

This performance will be madeavailable onl ine. •

Mi s e s Institute

on nil- : March

Wh e n we originally put

together a program for our

20th anniversary, we consideredand rejected the usual approach of

hiring a big name, usually a politi

cian or big media figure, to come

in and speak. Conventional wis

dom has it that this is the only wayto at trac t at tendees.

And yet that is not what the

Inst i tu te is about . As we consid

ered this, we knew that the right

path would be to have the many

scholars with whom th e Institute

is associated to come and talk

about their work and how they

v iew t he ir role in th e overall mis

sion o f the Insti tu te. Wha t

emerged was a spectacular two

days of fascinating lectures andseminars reflecting the heart and

soul o f the Institute.

D id the lack o f a media star di s

courage attendance? Not at all. In

fact, attendance surpassed our highest expectations and, thankfully,

pushed our facilities to the maxi

mum. Members and scholars, we

all found ourselves invigorated,

and enjoyed plotting the course

Lubwig von Mises Institute

TWENTY YEARS OF

TEACHING FREEDOM 21

20th anniversary confe rence

OCTOBER 18-19,2002

AUBURN, ALABAMA

Winte r 2 0 0 2 News k rom th e Ludwig von Mises I n s h h t k

Dr. GaryG. Schlarbamn and

Mrs. Bettina Bien Greaves

ou r intel lectual revolut ion will

take over the next 20 years.

We heard more than 30 lec

tures, and the program was

attended by students and faculty

and member s from all over. On Fri

day afternoon, Mrs. Bettina Bien

Greaves received die Schlarbaum

Prize f or l ife time achievement in

liberty It was a glorious two daws,

filled with music, economics,

energy, and ideas. The camaraderiewas obvious, showing once again

that th e Mises Institute is more

than a think tank; it is a support

system for a global intellectual

movemen t tha t is on the march. •

Other N ew

Dev e l o pm e n t s

An art exhib it in New York, at

the D'Amelio Terres, featured

the work of John Morris in an

exhibit titled: "Drawings for theAustrianSchool." It is not the typeof art that would have been fullyappreciated by Mises, Hayek, and

Rothbardcultural traditionalists

allbut, still, the spirit is right.

Horizon Media Co . in Bei

jing will be translating and publishingAmerica '<r Great Depression.



Forbes Magazine has been

running frequent commentaries of

the Austrian School, includingSteve Hanke's article, "The Hayek

Hangover."

Transaction P ub li sh er s h as

released John Attariaifs SocialSecu

rity: False Consciousness and Crisis, a

longer version o t a s tudv the Miscs

Institute published last year.

Nicolai J. Foss and Peter G.

Klein are t he ed it or s o f a new vol

ume from Edward Elgar, Entrepre-ncurship and the Finn: Austrian

Perspectives on Economic Organiza

tion (2002).

The sales of Gene Callahan's

Economics for Real People arc doing

very well. On Amazon, it is ranked

very high, with people giving posi

tive reviews, and on Laisscz-Faire

Books, it has consistently stayed asthe number two best-seller.

The Mises I n st it u te luncheon

semina r series features talks and

papers on all aspects of liberty and

economics. It is attended by local

scholars and Members . The fall sea

son opened with JosephStromberg's

papers on total war, and continued

weekly with papers on American

banking history, methodology, and

more.

LcwRockwell.com, the web

site of the president of the Mises

Insti tute , continues to rise in rank

ings on Alexa. It is easily the most

trafficked libertarian site anywhere,

with contributions from such fig

ures in the l ibert a ri an in te l lec tua l

world as Robert Higgs, Hans

Hoppe, Butler Shaffer, and Paul

Can to r .

The newest issues ofThe Quarterly Journal of Austrian Economics

have featured the works o f Walter

Block, George Reisman, Ben Pow

ell, Robert Mulligan, William

Anderson, Mark Thornton, Guido

Hulsmann, and Richard Vedder

and Lowell Gallaway, among oth

ers. Major contributions have been

new translations of articles by F.A.

Hayek and Eugen von Bohm-

Bawerk. •

More Programs at the

M i se s Institute

Th i s past summer, we had far

more applications than we

could accept for our programs, but

particularly for the Mises Univer

sity, which was attended by out

standing students from all over theUnited S ta tes a nd t he wor ld . Nex t

summer, we are featuring a new

R ot hb ar d G ra du ate Seminar in

which outstanding students will

read the restored Man, Economy,

and State and discuss it with a top

faculty.

The Austr ian Scholars Confe r

ence is coming along nicely. To be

held March 13-15, 2003, this pro

gram has been extended by anentire day to accommodate th e

high level of interest. Just before

the conference begins, there will

be an academic symposium on

Man, Economy, and State, u

T h e Plage of I d e a s

In the great battle for liberty,

the state has all the guns, and

more money than any privateinstitute could possibly put

together. But the forces for liberty

have something that is ultimatelymore powerful: true ideas. This is

the way we fight. Our deepest

gratitude to our Members, who

have made our work possible for

the last 20 years. And thanks to

those who will contr ibute to make

the next 20 possible aswell. •

Mises Memo Winter 2002

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Transcript of Mises Memo Winter 2002