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The following 8000+ word transcript from 1971 was difficult to make due to recording quality, tape deterioration and Rothbard’s speed. It is still a work in progress. The Mises Institute have an even more deteriorated recording and have put it online without transcribing

Transcript: Mr Rothbard’s contributions to creating a libertarian society, I think, are incalculable. His works, such as Man, Economy and State, its sequel Power and Market: Government and Economy, many of his writings on economics and in other areas, have been brilliant, and have provided many important contributions and helped pave the way for a great many people to truly understand some of the issues in the libertarian society. I consider the conference very fortunate to be able to have Mr Rothbard here in attendance.

Mr Rothbard is also the editor of the Libertarian Forum, one of the more stimulating and controversial publications in the libertarian movement. The topic of his speech for today’s session is going to be “Chicago economics versus Austrian economics”. The Chicago economics, most prominently known by Milton Friedman; Austrian economics, most prominently known by von Mises. At this point I’d like to turn the floor over to Mr Rothbard.

Mr Rothbard: Thank you very much. It’s a pleasure once again to attend a libertarian conference and to have so many people turn out for it.

I’m also kind of in a tough spot here, in a sense, personally, because I’m itching to get into the previous debate. It was obviously the climactic point of the conference, but I will refrain. Maybe I can sneak something in, in the course of an attack on the Chicago School.

The basic problem, I think, the fundamental basic problem with Chicago’s … well, first: You ask the average person, the average intellectual or reader of Time magazine, whatever, about free market economics: if he knows anything about it at all, he’ll identify it with Milton Friedman or other Chicago economists. So they have sort of pre-empted the field of free market economics in this country.

One way they’re able to do this: they have a very strong sectarian sense, which I don’t blame them for particularly, but they have it. And so they push each other into positions and get each other jobs, that sort of thing. So, they ensure Chicago solidarity.

The basic problem, I think, from the point of view of true freedom, liberty and justice, about the Chicago School … Well, there a couple of basic problems. One basic problem is their attitude towards the state: they regard the state as an equivalent arm of social action. In other words, you got the market out here, you got voluntary clubs out there, and you got the state over here, all have effects. There’s no moral distinction, no logical distinction, between the two or three of them.

So the Chicagoite is never against government action because its immoral, criminal, or whatever, he considers it another social tool by the government. Well, when you look at each situation ad hoc, should the government build steel plants? Well, we look at the situation, we examine the statistical correlations, etc, and we usually wind up with a conclusion that they shouldn’t because that it’s less efficient than the market doing it.

But you’ll never know from one ad hoc problem to the next, what the Chicagoites are going to come up with, because each area, each field, is a separate distinct field for investigation.

So the Chicagoite has, therefore, no general theory attacking the State or considering the State as even somehow different in any way from private action.

The corollary to this is the fact that Chicagoites have no theory of justice in property rights. In other words, they talk a lot about private property, at least the last few years, but their view of private property is purely instrumental. In other words, the government decides who should get this property.

They arrive at it from the point of view of “social efficiency” in quotes. I personally don’t think there is such a concept of social efficiency. They say: well, let’s see, it looks like it’s more efficient to assign property rights in this area than to have it communally owned. It doesn’t make any difference who we assign it to, because it all works out the same, it all comes out the same in the wash.

A famous example of this, is the problem with air pollution. For example, the railroad locomotive was chugging down the road and smoke is coming out of the smokestack and blanketing the orchard. And that orchard was the neighborhood farmers’. And the question is, who should pay who, or who holds the property? Should the railroads have to compensate the farmers for the damage? Or should the farmer have to pay the railroad to stop by paying them off, paying …

According to the Chicagoite, either one, it doesn’t make any difference whatsoever which one is done.

And my point of view, I think the Austrian point of view in general as well, is that it does make a difference. It’s a fundamental moral question: Who gets the property?

To my point of view, a farmer owned the property. They owned the orchard. The railroad should be stopped, or forced to pay damages or whatever for any invasion of that property.

And, in other words, what happens is that the Chicago School, starting off the idea of completely value-free economics, economics that is supposedly shorn of any kind of moral or ethical position, wants now, however, to take all sorts of political positions. All sorts of political statements. Presumably, also value-free. In other words, we have this leap from supposedly value-free science to a supposedly value-free politics, which I don’t think can exist. And it’s not a value of … State is some sort of neutral tool. And two, the concept of so-called social efficiency, in some way. It’s more efficient to have government do this such and such on what they have private in such and such.

From my point of view, if they really want to be value-free, they should make no statements about politics at all. They should shut up about politics. But of course they don’t.

A particularly glaring example of this is the question of taxes, which of course is the key element in government operations. I have to say here to my fellow Austrians: the Austrians are very weak on tax theory also. They have very little to say about theory of taxes. And, as a matter of fact, this is true for limited government types in general. If a limited government person favours taxes, which most of them do. I’m exempting objectivists in this discussion. Most of them are government people who, of course, favour taxes. Another question is, how do you raise your, taxes, and which taxes and so forth and so on and what are the justifications for this or that? And it gets pretty dicey … usually the Austrian position on taxes is that they would like have as low a tax structure as possible, which I go along with.

And two is that it should not be progressive. The income taxes should not be progressive, for example. And three, they should somehow be neutral in respect to the market, which is of course really impossible. But this is just about as far as Austrians will go in tax theory.

But at least most Austrians aren’t really enamoured of taxes. They don’t think that taxes are somehow a lovable instrument. Whereas Chicagoites really do. [They think] taxes really are more efficient in this particular area. So if you turn to the Chicago writings on taxation, there’s a big yearning for taxes in many ways.

For example, a few years ago, in a meeting of the Mont Pelerin Society, which is a group of international free market, semi-free market, and one-tenth free market economists and social philosophers and journalists and businessmen.

And they gather every year at a pleasant summer resort. And one year, three Chicagoans zeroed in Belgium, where the meeting was held … and then independently arrived at this magnificent theory of a new kind of tax. I don’t know if they’ve ever published this. But at any rate, they arrive at this, and great minds working independently on problems will arrive at the same solutions.

They always did this. Is hollow, which I think is indicative of the Chicago-wide mentality, or Chicago-wide attitude toward property in general.

It went something like this. Here’s what we do: We get everybody to assess his own property. In other words, if I have set of books, you have a house, or a factory or whatever it is, each guy puts out his own assessment. That’s pretty good, because if each guy is allowed to put his own assessment down, then it doesn’t come down to gestapo investigations … usual evaluation of something like half a penny. And then you pay your rate on it.

But there’s a clinker here, which Chicago people worked out. You are forced by the government to sell this particular property to anybody who comes along at that rate. So this is somehow the answer to the tax question. See, it’s more efficient, you don’t have to have a big arm of excessive investigating millions …

So assess it himself. And then whatever schmo down the block comes along, you can say okay. You say you have one half of fat here is worth half a penny. And you’re forced to sell it to him at that rate.

And at this meeting poor Friedrich Hayek, distinguished free market Austrian economist, was very concerned about this. I think he had distinguished book collection, and he said, well, my God, this means that if I value my books. The going price, let’s say $15, it means I would be forced to sell it to just anybody, and this means, of course, if I value the books very highly, I’d have to put an enormous assessment on it.

So in other words, especially if you know that some people are out to get you. You know, they wanna destroy your books. You have to put an assessment of $10 billion for your book collection, which means I would have to pay $100,000 a year, or whatever, the property tax will be, which you might not have.

What about my books, Hayek said. The Chicagoite answer was, tough on your books.

So, I think this really sums up the Chicago position on taxes. It’s the position of brutal indifference to genuine property rights, and a desire to clean up the state. In other words, make the state as efficient as possible. See the thing is, the Chicago people look, for example, the notorious Friedman negative income tax which I don’t want to go to at length, but at any rate … welfare system.

It’s a big mess, right, no question about that. Okay, nobody would argue about this. Every city, every state, every region, has some crazy system, etc, etc. And it’s inefficient, and there are all sorts of bureaucrats, who get papers lost and things of that sort. And there’s a lot of red tape to get into it.

So the theory is you make it more efficient. In making the system more efficient, you have a guaranteed minimum income, is what it amounts to. And you pay the guy through the taxes of income tax form. So you can send it in … I’m simplifying this, of course, a great deal, but in essence, this is what it is.

If the minimum is set at $2,000 a year, your income happens to be $500 a year, you submit your form to the IRS. And you get back 1500. Now, of course, Friedman will make certain adjustments to try to weaken some of the disincentive effects, which is pretty obvious in this thing.

But basically this is what happens, so in other words, everybody gets an automatic claim on production. Instead of having to shuffle through a large welfare bureaucracy, and get stepped on by arrogant welfare workers and that sort of thing. You simply submit your form and you get the money.

This might be more efficient in the sense of lower cost, greater uniformity and … It also means an automatic claim on production instead of this shuffling inefficient claim. Which I think has a much more disastrous effect, an enormous shift from production from the welfare to the negative income tax goal.

Milton Friedman was very proud of the fact that he was one of the people most instrumental in pushing through the withholding tax system in this country. He was working for the US Treasury Department during the War, and came up with this brilliant idea of a withholding tax. You see, the problem is if you didn’t have a withholding tax, the whole income tax structure would collapse. I mean before the war, it worked fairly well because taxes were pretty low. If you try to extract 20%, 30%, 70% income tax from a person, and you say, well, it’s due on April 15th, period, he’s not going diligently save up over the year, and then hand it to the government. I mean, it’s a tremendous headache of enforcement, the thing would break down.

So Friedman and a colleague come up with a brilliant idea that extracting it painlessly every day from his paycheck using the employer as the unpaid agents, in this resort. So you see this makes the income taxes much more efficient. It allows the growth of an enormous, Leviathan State. Enormous income tax burden and criminality, etc.

And it’s done in the name of efficiency. And in fact it is more efficient. But when it comes to the State operation, in my view, the less efficiency the better.

It’s like talking about the operations of a criminal gang, you don’t want them to be efficient. You don’t want them to know exactly where the bank safe is and how to … You want them to be bumblers like you find in comedies.

As a matter of fact, there’s a great story of that, I don’t know if it’s apocryphal or not, it’s a great story anyway, about Charles F Kettering, the distinguished free market industrialist. He was trying to cheer up a friend of his who was in the hospital.

The friend, of course, as Kettering was, was complaining about the local government and how terrible it was and so on and so forth. Finally Kettering said, cheer up, “thank God that we don’t get as much government as we pay for.”

Which I think sums up the question of efficiency.

If you’re going to have to have the tax burden and stuff, at least let the tax money leak out along the way, so you don’t have an efficient juggernaut coming to oppress you.

And, this is essentially what the Chicagoite position does. The Chicagoite is a technician.

It’s an economic technician. “Society”, in quotes, sets the ends for which he’s working. And that means the state, and so forth, representative society sets the ends. And the Chicagoite is a technical advisor. How do you? Something like these Rand Corporation types who are trying to decide where’s the most efficient place to place the A-bomb, or whatever.

One of the most efficient way to pin-point, how do you fix the state up so it’s more efficient in it’s job of taxing and governing, and subsidising, and whatever.

And, I think that’s essentially what the Chicagoite position amounts to.

Aside from that, aside from the factor of efficiency, we have another problem with the Chicago position, which is the original founding father of Chicago School, Henry C. Simons. I think there’s a very instructive assignment, everybody, you go and read Simons’ famous book, A Positive Program for Laissez Faire, which came out, I think, in 1934. And because, you see, everybody before him, before the Laissez Faire was essentially negative; in other words, you tell the government leave us alone. And the government’s not supposed to do much. And Simons said, no, not from my view of government, the government’s out there doing a hell of a lot. It’s a positive program. The positive program was essentially three things, I think.

One is a very very drastic egalitarian productive income tax. You smash the rich, you take jobs, and you take, almost supposed to be egalitarian. You smash the rich … You tax everybody above a certain amount. You pay the money to everybody below a certain amount. Now we see in this … that one of the problems here is that, of course, with what Simons and the Chicago School believe, that you can do this without affecting incentives at all.

… because the guy will still be working to maximize his profit, and income, etc. And then you see the money come in, you give it to somebody else, it’s not supposed to affect the matter. These two, sort of different isolated compartments, which we now know in … economics, unfortunately, is micro and macro.

We have micro over here where you have free market, and supply and demand …. Then we have macro, the government’s out there, taxing, and regulating, and spending money, and all the rest of it. And the twain never meet … the macro and the micro.

And this is one of the problems with Chicago living. Chicago has taken this over from orthodox economics. And so, you have this very rapid, productive income tax set up. The present Chicago school happily weakened this …. They’ve given up. They’ve gone. They’ve retreated a great deal from the finance position.

There still was trail of glory we get from Henry C Simon and the negative income tax of Friedman is an example of this, where you tax everybody above a certain amount, pay out money that goes below it. Friedman without advocating a progressive income tax, but this is essentially what it amounts to, at least progressive in the sense that the guy below is not paying anything.

Also come up with from time to time. For example Chicago position now favored local government subsidies of factories. You induce factories to come into the say the SOuth. Southern rural areas or whatever and factories come in there so legitimate for local government to subsidize.

Then there’s another position they came up with. I think Professor Buchanan, who might have shifted over from Chicago to a year or so ago. But this was in a Chicago incarnation. You can’t always worry about the external again poor neighborhood effect of crowding and noise all that Los Angeles. I think you can see the argument when he was a visiting professor at UCLA.

You gotta worry about urban growth and noise, congestion before that he was in Charlottesville, Virginia, where he didn’t have much of that problem.

And he said, well, let’s see, the three rights of homeowners. One is you can enforce property rights, that is you can enforce the property right against noise invasion of your property or against air pollution against your lungs.

And he clearly dismissed that. Utopian. He dismissed that very quickly. That’s out. The second thing you can do is ideal solution. To set up a migration barrier in California not permitting any outline to move to California from the Midwest or whatever. Immigration barriers in New York.

Then he sighed that that’s unconstitutional, probably wouldn’t be able to amend the constitution to put immigration barriers within the country. So for the third best approximation he comes from the idea of taxing the people in Chicago more … than the people of New York, and using that money to subsidise Appalachia and other rural areas in order to keep them there, so they wouldn’t create headaches by migrating to the city.

That’s a typical Chicagoite solution. Whatever it is, whatever we may say about it, it has nothing to do with the free market. That’s pretty clear.

There are other examples of this point of view towards taxes and ad hoc solutions.

The Friedman position, for example, about air pollution, water pollution. I don’t wanna get into the technicalities of that whole pollution question here, but the point is that their solution to it, is the typical ad hoc utilitarian thing: Well, we balance, we, meaning the government force, we decide how much pollution we want as opposed to how much industrial progress we want. How much we vow to factories as exemption lung cancer and. And we get some kind of a measure of social cost versus social benefit. And we the industries up to the pollution optimal levels. So we make sure they only pollute certain amounts and not more than the social cost outweighing the social benefit. But the Austrian position is there’s no such thing as social cost and social benefit, only individual costs and benefits, which you can’t measure out in the field. But at any rate, this is, again, a typical situation. … live them and the thought of its value which is supposed to represent the public as a whole in some way, some obscure manner, and then this is imposed upon everybody in a society through the tax subsidy adjustment.

There’s also a whole lot. I thought I’d mention Simons’ three great positive functions for government.

One of them was the smash of everybody making over 5,000 or 10,000 per year.

Another one was extreme out unlimited fanatical trust-busting, so that every corporation above the sign of a small blacksmith shop, that level, broken up. Yeah, … And you can easily write this … you got … against … not corporation be broken, everybody’s broken. Yeah.

And this, too, has morphed right out of Chicago school; they are not as fanatical trust-busters as they used to be.

But the theory is still rare. Now there’s a theoretical framework. Chicago economic school says that pure competition, quote, is better than impure, imperfect competition. Imperfect competition means real-world competition. There is no other … loaded term, that’s part of the whole problem. Anyway, they still have a theory that pure competition is better than impure.

And even though they say in practice, government is the main source of monopoly, and therefore, we have to zero in on repealing government privileges and so forth and so on. But still the theory is actually sort of a canker, no bigger than a man’s hand, which once in a while pops out. For example, it wasn’t too many years ago when Professor George Stigler, number two man on the Chicago hierarchy, advocating before the Committee of Congress for breaking up of US Steel being monopolistic But the …. So every once in a while, the old trust-busting element will pop up in the Chicago world.

I’ll get to the sign of the third later.

But there’s also the Chicago argument for neighbourhood effects. There’s not only a Chicago one, this is a general orthodox current economic argument. Which is one of the reasons one of the things I have against Chicago is essentially, they’re not too different from regular economics.

This is one of the reasons why they’re so popular in economic professions. I mean, it’s one of the reasons why …

In other words, accepted anything that you … effective right next to you, affects somebody else in society. Of course, my point is, they … any time … of anything you do affects somebody somewhere.

If I read Human Action, I find more wisdom and advancements than other people who come in contact with him. Therefore, internalise the costs and all that sort of thing, they should be taxed to pay me a.

In other words, you’re not capturing not intel but cost.

And therefore somebody’s got to do it for you. The government’s got to step in and correct the so-called defect of a market. If I’m enjoying, well, it could be anything. If I’m enjoying, but used to using a client which is used to be pretty effective before women’s come around with miniskirts essentially all-male schools more effective

mini skirt, you’re getting a psychic benefit from this. … Chicago position, you should be taxed to subsidise … miniskirts …

That’s capturing what the, and I’m capturing the cost, the benefit, I’m getting a free benefit of this thing. I’m a free-rider of this situation. This permeates, again I think it’s Friedman himself who limits this argument to two things basically.

One is urban parks. For some reason, he’s very worried about places like Central Park because if Central Park were private, my God, somebody on Columbus Avenue might look at Central Park and be able to enjoy at least the tall trees.

And you’re not capturing that benefit. You’re not making you pay for it. I’m not really concerned with making people pay for stuff, that’s not my shtick, I don’t see why this is particularly better, I can see all the reasons why source free system. Certainly, if I don’t have a membership at Central, I don’t have an annual member of a private park, I might be able to watch the trees, and nobody’s going to, the Friedman gestapo, doing it.

But we won’t be able to get in the park, still … enjoy the park itself. … really bother Chicago. It makes them pay if it does so happens with the same market, I wouldn’t make them pass. And I … there’s two things … basically. One is urban parks so you recognize the Yellowstone to keep people out, imagine that.

You can enjoy Yellowstone Park really well, perhaps they’re not bad. But another thing is education, which of course was another big deviation for Friedman, in favor of government subsidies for payment for education of little kids, not necessarily in public schools, but payment for the tax system, because one kid is educated, I’m being benefited, he’s a better kid. I mean, to put it simpler, he’s more productive. If I want him to be more productive, in my view, let him pay for it.

Or his parents. Or if I really fall for the Friedman view … which I think is a lot of nonsense, anyway.

But if I believe that I can voluntarily subsidize a kid. I mean a free society, free to do this. But this is not enough for the neighborhood effect position, you have to be forced to “subsidise” his education. But he would limit it. Friedman would essentially limit this to urban parks, and education, but you can fly with anything.

You can fly anywhere all the way down the line, subsidising many skirts, anything. Reading newspapers, I read a ton. Going to learn something. But they’re going to tax to pay me to read it, and so on and so on. Interesting enough, if you challenge a Chicagoite with this argument, they will say, yes, yes. Logically you’re correct, but who’s going to apply it to this case? Which is an interesting commentary of the consistency of the general eyewitness and the actual standards that are around a place culture.

I hope that the president, and Congress right now is a left-right coalition. Against the family systems plan, as they call it, I guess. Essentially, Friedman … Lots of them wanted to go further, right-wingers didn’t want to go that far, and this coalition was able to block the thing last year.

I don’t know if it’ll have the same affect this year. Anyway, I foresee a fantastic disincentive effect of enormous proportions. Very briefly. Where will you set the floor? Let’s say you set the floor at 2,000. That means that I guy making 2100 a year is … edge about the whole set up.

But we are paying taxes, support old lady bumbling down the block … And now getting two thousand from the government. And his marginal return, over and above the guide on the goal, is $100 per year. He’s working 40 hours a week, whatever, he’s getting a net return of 100 from his work, I think there’s sure advice of him to drop out. And receive the 2000. And he drops out. This is with people making, 2100, 2200, 2800, 3000, etc. And these are … on the people still working will keep going up. And there’s more people working and going on the bill, vicious circle. Now the estimates of Friedman and other people have given about how much this thing will amount to per year, seemed pretty reasonable, $10 billion or whatever it is. Because the budget goes up about $20 billion every year anyway, might as well devote 10 billion to this. But all these will keep working on the same intensity and degree that they do now, which is of course is the clinker in the whole argument. It’s the question-begging of the clinker.

But what is the working?

There’d be no stigma attached to it. It’s one of the things the Friedmanites are concerned with remove the stigma of being on welfare. Okay, the stigma’s removed, everybody gets on it! Which is of course is the real point, which is really forgotten now.

Because Friedman and Chicago people consider themselves the heirs of the 19th century liberals. They’re not, really, because 19th century liberals were much better than that. These are why 19th century liberals were in favor of the stigma and crummy workhouses and ceilings falling down every once in awhile, things of that sort.

But something where I’ve got a strong negative incentive for people not to go on welfare. And so, this is the real point. This has been forgotten in the present so called free market people. So and as it happened sold and the interest so finally you wind up with a condition that everybody nobody working.

And then the government would be hard-pressed to come up with any kind goods and services pay out at all. which everybody realises is that $2000 does not stay $2000 for long. Political pressures come in, it should be 3,000 … $3,000, sort of like a magic figure. It’s got to be three times.

I don’t know have a 70% increase of living every year every year prices go up 7%. So the thing that started escalating and the floor would keep escalating in addition to everything else. So I foresee disaster if the negative income tax guarantees income goes through. So that’s one big area, area of a free market solution, or a Libertarian solution, of the welfare question, of course is that, well, and it’s several steps.

One is that free market capitalism is the thing which eliminates poverty, which has brought us up from the caves to the present system. Which is created in the Industrial Revolution and so forth.

And secondly we learn can be aided by voluntary effort, either self help, short term programs in our community, health programs or whatever.

All of which, voluntary agencies will not have the unlimited funds that the state has … idea of helping people help themselves, we get them on their feet, which is, again, … the 19th century view of charity, voluntary charity. And of course … values of the public, the value of those groups on welfare come in here.

…people … The New York Times, I think, a year ago, about the Albanian population in New York City. I didn’t know there were any Albanians here, but there are. And they just set up their first Albanian church. Anywhere in the world, … church without … Albanian. So-

And so the Albanians are really really poor. There are no wealthy Albanians in New York, they’re probably not as wealthy I mean as anywhere.

Anyway, I settled down in New York and Albania is very poor and they have millions of spokesman will say I wanna millions on welfare period.

Our is a very poor group. But obviously, no, they being a welfare. Begging on the street and they refuse to beg, period. And they manage it so they never get on welfare.

So cultural values, the social attitude and stuff enter the equation.

Anyway, going on to the third big sign of Chicago deviation from the free market, there’s the whole money government spending area.

Essentially, one of the, somebody said recently in an article about the Chicago school, the reason why they didn’t become Keynesian is that they were Keynesian before Keynes ever wrote. So they didn’t fall under the sway of the Keynesian Revolution. During the early 1930s, they were considered lumpish, radical, socialistic by the scholar school, by luck of their profession.

And so they advocated public works during these sessions and stationary credits, going off the gold standard, and so on and so on. And we looked at these people and these correct, they were socialistic in a sense, but what happened of course of … profession, is moved much more closer to … free marketeers …

But their position still remains basically the same. And that is that the government, the government in the first place is supposed to have absolute control over the monetary system, absolute dictation over money. The way to absolute dictation of our money is to abolish gold altogether or silver or any other commodity and makes money the legal ticket for half of the government by the treasury.

The treasury puts out a ticket … But that … $1 or $10 and make that money and nothing else. So this … another of market economists such as a important commodity or element in the economy. Money participates in every exchange that you ever make in the system. This means if you allow government the total control of money, you allow government really total control of the whole system.

You’ve given up before you’ve even started. And this is what the Chicagoites advocate doing. Chicago’s position on money is to cut all even. Right now I have a very tenuous and ridiculous actual. It would cut it completely and freely fluctuating exchange rates between the Dollar and other currencies. Which puts the absolute control of money completely in the hands of without even a battle for payment check.

And now at least what they want about the payments crisis is put the limit upon government inflation of money. But the Chicago School there will be no limit. The only limit will be Milton Friedman telling them, please, don’t inflate more than 2 or 3% per year, money supply.

In other words Friedman telling admonishing Hector and for their systems. Now you’re paying too much, now you’re paying too little. Don’t inflate … keeps changing the figures. It was something like 3 or 4% per year and what is there or compel or impel systems to do this. Nothing. Just Friedman.

It’s scheme. There’s no word to allow you to give all power to the central government, all power going one way and then you tell them one of the things inflation we don’t want too much. And I think this is a ridiculous way to proceed, but it’s another way of being consistent with the Chicago position of being sort of technically advisers to the state.

Give all power to the state And your no you shouldn’t do that because it’s inefficient here and there. Please don’t do that. I feel like the adviser for the court of Caligula. I don’t mean … gross national product. Whatever the, this, the fact that we write backwards.

My prediction. Interested in social prediction some of the key to truth. I mean, eventually … not going to work, and it hasn’t. The reason why Friedman wants the 2 to 3% per year inflation. I guess we can get all technical if we want to get into that. But basically, it’s the old Chicago fireman’s position of stabilising the fight level.

The fight level should remain constant. This became sort of a mystical idea, literally, as the Chicago school somehow a constant fight level of reselling, of losing money and performing measuring functions and so on and so on. So if I was to say on this, an almost too weak free market, unhampered by government inflation and government banking and government money, prices generally tend to fall, fall considerably as the supply of business services and productivity increases.

Prices fall, just like the price of TV sets has fallen from $2,000 for a crummy set from 20 years ago, to $60 or $100 for a very good set now. Because generally what happens with prices on a free market. For some reason, Chicago people hate this idea and they want the value of the.

And this leads them to the idea of 3% inflation and the balance increases the determinants of the sector.

There’s also a difference in business cycle theory, but again, it gets a little technical and I don’t want to go into that. Again. I just want to say that there’s a bit of confusion among some people because both Friedman and the Austrians agreed that the Federal Reserve system was responsible for the 1929 depression.

So consider they really … completely the opposite. In other words, the Austrian view is that … Federal Reserve board expansion of the money supply during the 1920’s and even later, which brought about a situation which caused the Depression Inflation … The FEMA position is that … That they held back for the … inflation offset foreign prices, or whatever.

So, the Friedman positions and the Austrian position are exactly the opposite. Both zero in on the Federal Reserve system, that’s true. But each one has a completely different view. The Chicago position is that they should have inflated more, the Austrian position is they shouldn’t have inflated at all, a slight difference.

I think that more or less sums up the political economy …

Critiques that they make in Chicago’s school, I think they’re worse in … than they are in politics. That’s a whole other a whole other realm. The few things, of course, again … was trying to say about theories properties and justice and so forth.

To sum it up, I think what the problem is would be the “free markets” in quotes, which would exist under a Chicago system would be only under the sufferance of the central government is advisor, technical advisors.

And the point of the free market of quote “not efficient” unquote of another scheme, they would abandon the. In Chicago, we have no question whatsoever. Thank you.

Dr Rothbard will be taking a few questions.


When you referred to the distinguishing characteristics of the Austrian school …

… it’s a complex situation … before something like 1938.

And well, it’s been coming up in one month and one minute, certainly the Austrian stock trade, the Austrian secret approach starts with the individual, and we’re talking, nothing with the individual, starts with the individual analyzes his actions from a formal, logical point of view.

>> And then reduces the application of that.

In other words, if a logical theory starting to turn basic … and going on that and almost structure of propositions which are true but the … is true or the logic is correct.

The Chicago position is completely different. It deals with aggregates, with groups, with statistical correlations, and so forth.

Well, the earliest … that’s a development on top of the early Austrian school. For one thing, the early Austrian school never really implied Austrianism to money, which was one of Mises’s accomplishments to apply it to money.

Apply marginal utility theory to money and so forth. Also … theory of the business cycle…. Then there’s money and capital theory and business cycle theory in one big edifice. They’re not too laissez faire. They were generally free-market, but they weren’t really interested in the political applications of the theory, the … which Mises and Hayek have been.

So let’s … at all …. an example would be … that help us with problems. He said that the key thing about any law, the thing that makes it good in essence, it has to be uniform and predictable. Predictable and uniformly applied to everybody and written down. That’s the criterion.

But my opinion on that is, supposing we have a law saying everybody made your claim filed to be tortured for 20 days, whatever. … predictable … completely certain. And applied to everybody, male, female, …, whatever. … problems with the rule of law.

The three Chicagoans who

Maybe it was two

… great ideas they achieved independently did not originate the idea. The ancient Romans used it to assess property during one of the reviews.

Very good. They originated independently at least, or they realised it was ancient Romans.

seemed so angry at

I wouldn’t say angry, maybe bitter is more.

… one difference between Milton Friedman

It means that we’ve got the union activity and government deregulation.

More like, you have to separate Goldberg and Samuelson is definitely in the mainstream of

… is much more sophisticated than that, and I think Samuel, I don’t think there’s really too much different between Samuelson and Friedman really. Obviously, a certain specific thing. See, I think that Chicago people … I certainly … articles.

An example of what being how, how could a radio TV system be privately owned? Which they have done. How can water be privately owned? … specific tasks or how they actually … nothing at the … specific tasks. They often do pretty well, especially when dealing with government regulation.

But we can’t trust them, for the larger matters. … the stuff they have done which has been good, in overall … theme and colour. Or Friedman Samuelson on television about what to do in the present situation, there’s not much difference between them.

What about labor unions?

See what happened about labor unions. It’s quite interesting about labor unions. I’m glad you asked, because the about labor unions is professions is they’re pretty crummy. In other words, the old Liberals, are not really too pro union anymore. They’ve sort of given up a little bit. Cripple will only come without its knowledge, and the Union is not way to raise their rates, the overall wage rates that’s generally acknowledged.

Also generally acknowledged, which the Chicago people probably need the only acknowledged, during the inflation union wages glide behind non union wage rates, because collective bargaining is essentially a pain in the neck. Slowing down process, it’s a gear in the a fan in the gear.


So it was all of these wage rates non union wage rates will tend to go up … fashion but it kinda lagged in my heart. The other … had a real problem is we … properly … But during the inflation, which is what we generally have in our course, too

You don’t have much economic power. They were power specific in certain areas, like the glass flow, building cranes, a localised field.

But again, a monopoly of field and entry of other groups, of non relatives. You can’t be all efficient, unless you’re the son, not even the nephew of … to get in, existing electrician. Then they can raise the wage rates, but the point is that overall, haven’t got much economic power, generally admit it.

On the other hand, the Friedman position is sort of because of this. The old fashioned position would have to smash unions, because they’re getting all this power The Friedman people say wow, they don’t really have much power, why worry about them? So there’s been a sort of a coming together on unions, the right of the liberal and conservatives, they’re both sort of dismissed as a pain in the neck.

But not too important.

I can prove to me I wouldn’t be against this. For a meaning of a situation, where you say it and have the money on hand, redeem somebody’s property, I could fraction observe backing of the equivalent of a warehouse, which you deposit your furniture for the summer.

The guy takes the furniture for an income and rents it out. I mean that’s just as illegal. This is embezzlement, or whatever you want to call it, conversion is the legal term. And we … And so I consider myself … of that.

See, one thing is that the … claim that while people really know down deep that they’re lending the money for a certain period of time to the bank.

Well, in that case, then say so certificate of deposit banks. Perfectly admirable institution, say all right, you’re going to borrow a million dollars from General Motors, the bank for six months or nine months and that’s it. Fine, no quarrel with that at all.

In fact, I’d like to see loans sneaking up in that way, instead of the fractional reserve technique.

Murray, I really can’t resist pointing out …

I don’t mean to try to cut it down too much, but you’ve made several points and I’d like Dr Rothbard to answer a few of them and then perhaps go on to another question. Well, let him handle a few of them.

Can’t win them all.

In the first place, it’s true. Frank Knight was the co-founder of Chicago School, along with Henry Simon. However, Frank Knight was not really political, the hard-nosed political theorist of the group, was really Simon. Although Knight did have several reviews and articles which he viciously attacked Mises and even Hayek for being “anarchists” end quote.

In other words, Knight’s … free market was pretty limited. And Simon was even worse. Simon was really the political hammer … Chicago, the early Chicago school. I didn’t say that people … because I feel like specifically … advocated it. But the negative income tax is kind of a holdover on it in the sense that people below a certain income get paid and other people pay for it, it’s progressive only in that sense, that’s enough I think, but anyway.

I’m not saying they want to tax the rich more than people making over 6,000 a year but the, it will be … if people make under $3,000 or whatever the floor might be. I don’t guess whether point I’m trying to make was if inflation 2-3% or whatever the figure is.

I pulled out of stationary, by the way. It had a business cycle effect, which is another story I don’t wanna get into at this point. It had a boom bust effect. But aside from that, the whole point of … Friedman would grant us absolute power … Limit them to two … per year.

They don’t have to listen to them, that’s the point.

First, you centralize the power. Give everybody a big gun so to speak, certainly, after the power controls your life and you say please limited it to 2-3%. But the interesting point, what was really interesting in your statement was your question about that the wagering lobbies versus the welfare lobbies.

It makes an interesting point, because I think it betrays an ignorance of the way political power really is as exercise. Really pressures operate. The whole point of this thing is there really wouldn’t be any power upon, there wouldn’t be any quotas on textiles then. If you poll the average person, there are a lot more of them, millions more, of course, consumers … manufacturer.

… Manufacturer is able … Outrageous … Quota in order to strip production and raise the price. How are they able to do it? They are able to do it, for various reasons. One is that they’re full primers. They’re professionals. Their whole life is wrapped up in the textile business.

My whole life is not wrapped up in the textile, but neither are any of your lives at all is wrapped up.

So therefore, they can maneuver for themselves a special privilege in Congress. This is what’s wrong with the so called representative republic we’re supposed to have, isn’t it? It’s really the special interests. Special interests are down there all the time and it’s their rational interest … to do this. They’re full primers their whole life and of the state. As for the consumer, all right the price of clothes goes up $10 a suit or something.

We’re not going to go to the barricades for that individual $10. And so it, there’s a … any kind of a … buyer … special privileged and galloping state of … collective … And, and you will see … welfare lobby will be a lot more. A lot more important than whatever … The taxpayers have to pay for this, unfortunately this is what happened before.

It’s what’s gonna happen again.

Somebody else, I hope? Over there?

Would you please comment on the following …

No it’s a …


I am just wondering what your take on it was.

… since they are usually derived from the use of …

Do you agree with that? And if so, why or why not?

I think in some cases, it’s obviously true and other cases it isn’t. I don’t think there’s a general rule. A rule profit from the system or index of exploitation.

I think it’s pretty obvious dynamics profits index their core expectations. It’s not true, we make a profit here, this meeting would not be an example of exploitation. I don’t think you can make a general rule on that. So I would disagree with the statement of the general rule if it’s meant that way.

Thank you Dr Rothbard.

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