 Good morning ladies and gentlemen. You're all looking bright after three days of the conference, and I'm glad to see you here this morning so early. I'm not a morning person myself, so whenever I find myself scheduled for the first talk of the day, I shudder. But I'm trying to be a good soldier, so to speak, so here I am doing what I'm scheduled to do, which this morning is to talk about how war leads to big government. This is a subject I've been talking about for a long time and have written about extensively. All of my books, except for my little book on the Food and Drug Administration, for the past 30 years have dealt, to some extent, with this topic, and it has many dimensions, so there's plenty of opportunity remaining for those of you who would like to continue research in this general area. Lots of interesting subjects could still be researched that have never been done properly or never been done deeply, so I certainly urge you to consider if you are someone who's going to go on and get involved in research to consider doing something in this area. It is vitally important, I know many of you are Libertarians, and nothing is more important for the sake of freedom than understanding how war contributes to the diminution of freedom, so I exhort you, I urge you to never lose sight of how important this subject is, how vital it is to everything that we hold dear. Probably my best-known writing is a book called Crisis in Leviathan that was published in 1987 and the subtitle is Critical Episodes in the Growth of American Government, and it deals with the growth of particularly the federal government from the late 19th century to the late 20th century and concentrates on some national emergency periods, especially the World Wars and the Great Depression, and that is where I developed many of my basic ideas I've been using ever since, but I have continued to work in the area and a later book of mine called Depression War and Cold War, published in 2006, is a kind of sequel to Crisis in Leviathan, and so you'll find there certain topics related to war developed in much greater depth. I think lectures are wonderful. It's good to hear someone who's studied a topic, expound them, but there's really no substitute for reading, for getting into the real nitty-gritty of the research that lies behind the generalities and abstractions that one is almost confined to in giving a talk, at least a talk to a general audience, so I urge you, if you have an interest in these topics, to think about reading these two books of mine, and they will guide you to a much greater literature that exists. Now the idea that war promotes the growth of government and the reduction of liberty is certainly not an idea I invented. Indeed, it's been recognized, to some extent, I suspect for thousands of years, but in the way we think about war and big government nowadays, we can certainly trace it back to the 18th century. We're all familiar with the Randolph-Born's statement, war is the health of the state. This statement comes from a work he was writing in 1918, he never completed it because he died that year, but you can Google war is the health of the state and find a full version of this chapter or paper by that title, and I urge you to look it up and read it. It's well worth reading. Born was one of those interesting characters who was in that gray area between the old or classical liberals of the 19th century and the new progressive leftish liberals of the 20th century and he had a lot of insightful things to say about the effects of war, which he had was witnessing at the time during World War One, which was in many ways the most egregious example of some of these dire effects of war on liberty that we know about in American history. But long before Randolph-Born wrote about these things, other people certainly thought about them and talked about them and had something to say. In a letter written in 1795, James Madison said, of all the enemies to public liberty, war is perhaps the most to be dreaded because it comprises and develops the germ of every other. War is the parent of armies from these proceed debts and taxes, and armies, debts, and taxes are the known instruments for bringing the many under the domination of the few. No nation could preserve its freedom in the midst of continual warfare. I'd like you to think about that last sentence. No nation could preserve its freedom in the midst of continual warfare and now consider that the United States has been at war almost without interruption in one way or another since 1940. That's 74 years. That's my entire lifetime and then some, a time in which the United States has in some way hot, cold, limited, all out, in some way been at war and I would certainly maintain that one consequence of this sustained warfare has been a diminution of our liberties in vitally important ways. Madison also wrote in 1798 in a different letter. Perhaps it is a universal truth that the loss of liberty at home is to be charged against the provisions against danger real or pretended from abroad. That I think is an idea that American conservatives do not understand. I have myself a lot of difficulty taking seriously conservatives claim that they love liberty when at the same time they manifestly love war, any war, any time, anywhere waged by the United States. That is perhaps the worst possible position to take if one truly loves liberty. Finally, let me give you a brief statement by Bruce Porter taken from his book War and the Rise of the State, published 20 years ago. A book I recommend. Porter was not an Austrian, actually not even a historian. He was political scientist, but this book is historical and surveys the history of the Western nations, Western Europe, and their overseas offshoots over a period of more than five centuries, looking at wars and their consequences. And Porter concluded, a government at war is a juggernaut of centralization, determined to crush any internal opposition that impedes the mobilization of militarily vital resources. This centralizing tendency of war has made the rise of the state throughout much of history a disaster for human liberty and rights. What I want to do with you this morning is not simply to reassert this connection that many people have noticed in the past, but to look a little more deeply into it and try to identify why the connection exists. Why is it that war and the loss of liberty go hand-in-hand? Why is it that the growth of the state in size, scope, and power is promoted by war more than it is promoted by anything else? And there are a number of dimensions of this problem. First of all, unless a war is small and a government has already prepared for it, by stockpiling military resources and building up its military forces, any large war requires that the government quickly divert a large volume of resources from their current uses to military uses. In other words, war requires a quick adjustment in the economy's allocation of resources, how it uses its capital stock, how its labor force is employed, what kinds of goods and services it produces. All of these things have to be altered substantially and quickly if the government is to successfully prosecute a large war. So the question is how is the government going to carry out this required for its purposes, required reallocation of resources? Well, it could simply ask people to help out. It could make an announcement. We're going to war, citizens, and I'm sure you'll all wish to do your part. So we need you to donate resources, money, time, your own personal services, whatever it is you can best do to help us carry out the war. Our door is open. Come forward with your donations. There's a reason why governments don't do much of that. And the short answer is it doesn't work very well. Now it works a little bit because when a war is about to begin or has just begun, it is sometimes the case that people are whipped up by the spirit of the occasion and by ideas that somehow the prosecution of this war serves their interests in some fashion. That men actually come forward and voluntarily enlist in the armed forces. That's happened whenever the United States has gone to war to some extent. So people will join, but never is the number of volunteers sufficient to satisfy the government's demands. Never. And so some other measures must be taken. Now the way that government normally gets control of resources is by purchasing them in markets, the same way anyone else would get control of resources. But in order to make more purchases than usual, it has to have more revenue than usual. And so the question is how will it go about getting that additional revenue? And the first resort is practically always to raise taxes that are already being collected, increase the tax rates, and to impose new kinds of taxes so that things that were not taxed at all previously will now be taxed. If you've ever studied fiscal history through the centuries, you'll discover that the entire history of fiscal innovation is almost one in the same as the history of war. Wars are the occasions for governments to get creative about how they get money coercively from their citizens. Now, of course, that's not a perfect way because people don't like to pay more taxes. Even when people supposedly are in favor of the war the government is prosecuting, they still don't like to pay more taxes. And so there's a certain amount of tax evasion and avoidance, and that reduces the government's ability to achieve its objective by raising taxes and imposing new taxes. So to get more revenue than it can get without stirring up too much resistance by taxing the government normally borrows money. And in fact in U.S. history the great bulk of war revenues have been obtained by borrowing. All the great wars were like that, all the large wars were like that. So government sets about trying to sell its bonds. And as it increases the supply of bonds in the market it lowers the price of bonds and that means that the effective yield on those bonds rises, that is interest rates go up. And because securities are to some extent substitutes for one another all interest rates tend to rise in the market when the government floods the market with its own bonds. Well that's not a good development for the government because it means with interest rates higher the effective financing costs of the war are higher and that's unpleasant for the government. In order to pay off those higher interest payments it's got to get more revenue than before. So it's already as it were taken in action that has created a secondary problem for it. And indeed this is a theme that pervades everything I'm going to talk about this morning. The Misesian theory of intervention from which we learned that when government intervenes in the market order it may attain its primary objective but in doing so it invariably creates other problems. Which then have to be dealt with by the government and being dealt with create other problems. And so any government intervention in the market order sets in motion a train or sequence of consequences each being dealt with by an extension of government power. And the ultimate end of this of course is a complete government destruction of the market order and a substitution of its own power where voluntary transactions previously prevailed. Now a government with a central bank can help itself, help itself sell its bonds. And in both of the world wars in U.S. history since the Federal Reserve System already existed after 1913 the Fed was a vital assistant as it were to the Treasury. It didn't always do this in the same way. In the first world war the Federal Reserve lent to the commercial banks on very easy terms and thereby allowed them to increase the amount of funds they had available to make commercial loans. And in doing so they increased the money stock and with a larger money stock in circulation in the economy many of the people who came into the possession of the additional money allocated some of it for the purchase of government bonds rather than just holding cash or using it for commercial purposes. And in addition the law was changed that allowed the Fed to make these loans to commercial banks with the security of government bonds. In the original Federal Reserve Act Federal Reserve banks were authorized to make loans only on the security of commercial paper short term private collateral. But once the United States became engaged in the war the rules were changed so that U.S. government bonds could be used as collateral for borrowing something akin to a perpetual motion machine. Using government bonds the banks could borrow, make new loans, increase the money stock. Some of the money would be used to buy government bonds. Bonds would be used as collateral for borrowing further from the Fed and the banks and the Fed were chasing each other's tail in this way right up to the point where between 1915 and 1920 the U.S. money stock doubled. And as luck would have it in that case the quantity theory of money worked to perfection because most price indexes show that between 1915 and 1920 the price level exactly doubled. So it's an excellent illustration in that case of the quantity theory but it also shows that inflation is one of the taxes the government imposes on the holders of monetary assets in the prosecution of a war financed by borrowing. Something similar was done in the Second World War but more importantly in that case the Federal Reserve engaged in open market operations itself going into the market for existing U.S. government bonds and increasing the demand for them so greatly that the interest rates were kept extraordinarily low. Very, very low and that meant that the financing cost for the government's borrowing which it used to pay for the majority of its war expenses during World War II were kept very low. And also in World War II to a lesser extent the Fed actually purchased outright new U.S. government bonds and at that time that hadn't been done before and had not been permitted before by the Federal Reserve Act either. So the central bank always serves directly or indirectly in some way to assist the government in borrowing funds which it will then use to make purchases to prosecute the war. Sometimes even these monetary actions seem inadequate to the government planners and so they resort in addition to control of capital markets. They may forbid certain kinds of lending. In World War II for example they almost forbade all forms of consumer installment credit which had become a very common way for consumers to finance large purchases in the 1920s and 30s. The Fed actually imposed a rule that almost outlawed consumer installment lending in the war. During World War I the government created something called the Capital Issues Committee which attempted to bring pressure to bear on lenders so that lending would be diverted from places where the government thought it would not serve their war purposes to loans where it would help to build up industrial capacity in areas related to the war. So there are many direct and indirect ways by which the government's prosecution of the war with borrowed money leads to distortions of the capital markets, rigging of the capital markets and similar measures. Now again every time the government takes any kind of action to assist itself in getting resources for war by making rules operate differently it sets in motion evasion and avoidance and creates as it were a resistance that's working against what it's trying to do. And this again is the theme of everything I'm talking about this morning. Resistance. None of these things works to perfection. None of them works in a way that pleases everybody. In short when government goes to war no matter how popular this war is said to be it is basically trying to do something that people do not want to do. If you understand nothing else this morning, understand that. A lot of these details as important as they are are covering up the basic fact that war is something the state imposes on people. Now every history book you read will tell you World War II was completely popular. There was hardly any resistance at all. And in some ways that's true. There weren't demonstrations in the streets against World War II. There weren't a lot of people relative to the population even expressing opposition to that war. Nonetheless, in a multitude of ways people were taking actions that demonstrated that they did not want to do what the state was trying to get them to do by its war controls. Black markets flourished for example. Many many goods had black markets during World War II in order to evade the government's price controls. All kinds of illegal actions were taken. In these ways people demonstrated that they did not want to do what the government wanted them to do in support of the war. Labor unions went on strike even when the government had imposed a no-strike rule. In the case of the bituminous coal miners, John L. Lewis fought a virtual war with President Roosevelt. Coal was such a vitally important resource in World War II providing fuel for the steel industry and other important war industries that the coal absolutely had to be obtained and Lewis knew that. And he also knew that only the members of his union could get the coal out of the ground in the quantities required. So he actually stood up to the President of the United States to such a degree that on two separate occasions the coal mines were nationalized. But what did that mean? You couldn't send soldiers to dig out the coal, they didn't know how. The coal miners still had to do the job. So basically Lewis and his union members had the President of the United States over a barrel. And the President hated it and he used to express the desire that Lewis would die as it turned out Lewis outlived the President by about 25 years. So I suppose you could say he had the last laugh. But he also managed during the war to get large wage increases for his union members much above the government standard. So this sort of activity is just one example among many of the fact that the government is trying to carry out a war. It's trying to do what people do not want to do. Very often the government has aided its cause of war mobilization by rigging prices and markets in other ways. Setting priorities for the delivery of goods to different classes of purchasers, always giving government contractors top priority, always giving the government itself top priority. Allocating resources directly in some cases, especially in World War II, an extensive system of direct physical allocation of resources was put in place and midway through the war the government had finally arrived at something called the Control Materials Plan, which was a way of allocating in physical units steel, copper and aluminum to different users starting with giving certain amounts to the War Department, the Navy Department, the War Shipping Administration and then allowing these government purchasing organizations in turn to give physical allocations of these vital materials to their contractors and below that the subcontractors of the contractors and so on down the line. This was a plan that resembled in many ways the kind of planning that was being carried out in the Soviet Union under Stalin's five-year plans. Now, immediately when wars get started and the government starts increasing its purchases for certain kinds of goods and services, the prices are driven up by that action and that threatens the government's program because it means there's that much more money that has to be obtained somehow in order to pay those higher prices. So the government wants to stop the prices from rising at the same time that it's increasing the demand for particular goods and services. It wants to have it both ways and it does that by imposing price controls. In World War I, the price controls were selective and they were put on all about 80, as I recall, industrial commodities that were in especially high demand for government production programs for war, things like copper, leather, cement, steel. In World War I, the government did not impose general price controls. It did not attempt to control consumer good prices. In World War II, on the other hand, government directly controlled about 40% of all the prices through its own contracting because it would set the prices it would pay for contractors when it made deals for them to provide either materials or services to the war program and, of course, eventually more than 12 million people's wages and salaries were set because they were members of the armed forces. So, of course, they had no control over their pay either. And wage controls were imposed on almost everybody else in the whole economy. Rent controls and price controls over almost all consumer goods as well. And these controls were developed slowly, piece by piece as problems arose. And what you can see if you follow their history is the Missesean theory of intervention working itself out. Control one price, you create a problem somewhere else. Control that price, you create a problem somewhere else. And eventually the only solution will be comprehensive price control, completely setting aside the price system. Now, there are a lot of important consequences of the states having done that. And one is that some of the standard statistics that we use to measure what is going on in the economy become meaningless. Most economists, mainstream economists believed that World War II saw some kind of a gigantic miracle of production. It was a huge burst of output. So great that it raised output far above the measured capacity of the economy. And apart from the curiosity of that phenomenon, I mean, how can you produce more than your capacity? It has obviously been nothing but an artifact. That is the prices used to measure GDP during World War II are not market prices. And so they're really meaningless. And a GDP measured with meaningless prices is itself meaningless. So the great output bulge of World War II is an artifact of mis-measurement, period. It didn't happen. Now, it's clear that many forms of production did increase during the war. There's no doubt that steel output went up and copper output went up. And the production of various particular goods went up. But that's not the same as saying the whole economy was flourishing, because what we were seeing there was basically a substitution, guns for butter. Guns for butter. And we were also seeing a substitution that took resources away from the production of goods that either satisfied consumers immediately or were used by private investors in ways that would later satisfy private consumers into uses that served only one purpose, which was the death and destruction of enemies. Now, you may think that was a grand in-purpose in the circumstances or not, but in either event, one thing it was not was something valued by consumers. In their usual way. So talking about war prosperity during World War II and to a lesser extent even during World War I is simply a mistake. It's a product of allowing oneself to be ruled by the conventions of mainstream economics about how we measure economic output and the success of an economy. A final way to get resources is just take them. And the government did quite a lot of that. It condemned land and turned it to its own uses, building shipyards, military bases of all kinds. And most important, it took labor services by conscripting men. In World War I, over 70% of the entire U.S. military forces consisted of conscripts. The draft was put into effect immediately after the United States declaration of war in April 1917, but the army had already formulated its plans for drafting people long before the war even began. So the soldiers' labor was drafted and in this sense it's accurate to say that both of these wars were fought primarily with slave labor. You had a choice, of course. You could submit to the draft or you could go to prison. And people who were sent to prison for draft evasion or avoidance fared very badly in prison. In various ways I've already alluded to, the government's war program elicits resistance. And resistance is problematic for the state. If resistance gets out of hand as the government feared it was getting in World War I, especially, it is inclined to simply crack down on the ways in which resistance is expressed. And that includes through speech, through publication, through the conduct of meetings, and through all sorts of exhortation that resistors may make to keep other people from helping out with the war program, whether by entering the army or by lending money to the government or in any other way. The government simply will not tolerate this kind of resistance when it's waging a major war. And so it cracks down on it. So there are suppressions of rights of free speech, the press, petition for redress of grievances, and all the rest of those things that people think are guaranteed by the First Amendment to the U.S. Constitution. They're not. The Constitution is, even in normal times, worth precious little, and during a major war it isn't worth a damn thing. And in my book, Crisis and Leviathan, I spend quite a bit of time showing how the Supreme Court ruled on various challenges to government actions during the World Wars. And the short answer is that in practically every case, in fact in every case of any consequence, it ruled in favor of the government's actions. However unconstitutional on the face of them they were. So there was no protection on that stage. The government also tries to persuade people that everything it's doing is for the good. So it engages in massive propaganda efforts. In World War I it elicited the assistance of celebrities of all kinds, entertainers, movie actors, popular people in the arts. And it got them to go out and harangue people on the streets of cities giving patriotic speeches for three minutes. They were called the three-minute men. But it also censored the press, shut down hundreds of newspapers, forbade the circulation of newspapers in some cases through the mail, which in those days many newspapers were sent through the mail, particularly foreign language newspapers that were abundant in those days. The country was full of recent immigrants from many many parts of Europe especially and they'd all develop news media of their own and the government just clamped down on all these things and imposed a rule that before they could publish anything they had to translate it into English and get the approval of the government's censor. Well that basically raised costs so high and created such delays that it put many of these publications out of business entirely, which was the government's objective all along. What the government can't understand it doesn't want to exist. In all cases the government's police apparatus was bulked up. In World War II the number of FBI special agents was increased four or five fold and they were investigating everybody including President Roosevelt's personal political opponents. So they arrested a lot of people, prosecuted people, and even deported hundreds and hundreds of people during World War I. Many of the deportees were sent back to places they knew nothing about. Some of them had been brought from the Russian Empire as children and so now they're sent back to Russia in 1918 and some of them didn't even speak Russian, knew nothing about Russia. This was certainly cruel and unusual to these people. Naturally the government floods the country with informants, tries to make everybody spy on and report to everybody else. If some of these things are starting to sound familiar there's a reason for that because since 2001 the government has ramped up its activities in all these ways, particularly of surveillance, spying, cultivation of informants and other ways of infringing on our liberties. And at the same time that the government wants to know everything about the people, it wants the people to know nothing about it. So there's always this asymmetric relationship between the government's efforts to see all and be seen by none. Now the actions that the government takes during the major war produced what I call a ratchet effect and schematically if you had some measure of the government's power on the vertical axis here and you were just following that measure over time, you might see that before the emergency began at time T1 the government was growing. It was collecting more revenue or borrowing more money or employing more people or exerting more regulatory control or whatever the measure happened to be. It was growing already but with the onset of the emergency suddenly the government's actions create a marked lurch and the size, scope and power of government and your measure jumps up may move around a little bit as the government continually revises its war programs during the emergency. When the war ends or the other emergency ends the government normally retrenched somewhat certainly after the world wars the level of government spending failed drastically and the government stopped borrowing money and after World War I actually began to repay the national debt for a decade or so but the thrust of the ratchet effect is that the retrenchment after the emergency is incomplete. It does not bring the government back to where it was before the emergency and in fact it doesn't even bring it back to where it would have been had its pre-crisis rate of growth continued. There's still a gap there between point E and point E prime in my graph and so that is in effect a displacement of the long-term trend growth of the state and every crisis like this ratchets that trajectory up to a higher level and if you have one crisis after another as the United States had in the 20th century you eventually find yourself at a much higher level of state power than you would have had had these crises not occurred. So this is an important phenomenon. Now it takes various forms one of them is fiscal the government increases its expenditure during a major war greatly increases its taxation goes into a lot of debt and when the war is over there's a displacement the government's expenditure after the war is at a higher level much higher level it doesn't fall back all the way to where it was or to where it would have been had the pre-war growth rate continued. Taxes tend to stay put particularly after World War II during that war the government created the modern tax system which is to say a tax system in which practically everybody has his income taxed and at relatively high rates compared to income tax rates before World War II even for middle class people. So this is the modern revenue machine that the government is used to finance the welfare state for the past 60 years or more and it was created in wartime overwhelmingly. Of course there are always little changes being made practically every year in Congress in the way the tax laws are made up but nonetheless the essential features of the modern tax system are the product of wars especially World War II in this country. In addition to fiscal ratchets there are institutional ratchets and that means that laws passed during war are not repealed when the war is over organizations created during the war to carry out government war mobilization are not disbanded after the war. Presidents are set actions that were first taken during the war and then serve as rationales or excuses for the government to take similar actions afterward even in non-emergency periods. Third there are ideological ratchets and as I'm working down the list here I'd like to emphasize that we're moving to more important kinds of ratchets when I've talked about my ideas over the years many of my colleagues and economics have wanted to concentrate on one measure like government spending or government taxing or something and they would dredge up some data that seemed to refute the ratchet phenomenon but the ratchet phenomenon is multi-dimensional. It doesn't always operate in a way that every dimension of it moves identically and so in all the major emergencies of the past century some important aspects of the state have moved in accordance with the ratchet effect even if not every time every single one moved that way. Government can to some extent substitute one type of action for another type of action and of course which action it will take is dictated by the political expediency of the moment. So the ideological ratchets have been vitally important because these great wars accommodated people to governments taking extraordinary actions particularly extraordinary actions to control the economy and to suppress civil and personal liberties. Now of course many people didn't like these as I've said many people actually resisted overtly or covertly nonetheless anytime you expose the whole population to a way of being treated for years on end to some extent they are broken to it they get used to it it no longer comes as a complete shock to them if it's imposed on them they've been there before and what that means is that people's thinking is altered the American people's thinking was altered over the past century by the pounding they took during wartime at the hands of their own government and as a result they're now pulp like sheep where a hundred years ago many more people were jealous of their liberties were suspicious of the government were unwilling to tolerate certain government actions very few people now take that attitude toward extraordinary government actions our history has made us a different people and that's a very very sad development in our case here's just one example I can show you of an element of the ratchet phenomenon this chart shows federal outlays relative to GDP and goes way back in our history if you go back to the early years of the United States you see that the federal government was fiscally a tiny participant in the economy in this way it didn't have the means to collect a lot of taxes and the dominant ideology of the day would have resisted its attempt to collect a great deal of tax anyhow that pre-war period before the war between the states was dominated to a large extent by kind of Jeffersonian preference for small government even though there were opponents to that point of view the bulk of the population subscribed to it to some extent and so the government was reined in in that way but as you see the war between the states caused a gigantic jump in the federal government's fiscal dimensions it then retrenched after the war and almost came back to where it had been by the time we get up to world war one but world war one then causes an even bigger spike upward there's not a complete retrenchment as you see world war one there is a ratchet there even by this measure then the onset of the great depression creates another large upward world war two of course is the by far the largest of any such large never before or since was the state such a dominant actor in the economy and in the society for that matter so again there's a ratchet effect even in spending and with the onset of the cold war there's another ratchet upward and then recently there's been a substantial jump up as a result of the recession yes sir this chart is only for federal but you can see some ratchets at other levels of government not so much in fiscal measures as in things like measures of government authority for example during world war one while the government set out to to prosecute people for sedition for criticism of the government of the armed forces of the flag of everything there was a statute passed in 1917 called the espionage act and it was amended in 1918 by something called the sedition act the sedition act was probably the most tyrannical piece of legislation in our entire history it forbade any form of opposition to or criticism of everything the government was doing and its emblems the flag the uniform of the armed forces you name it and many many people were sentenced to long prison terms for violating the sedition act every state passed a sedition act of its own at the same time and that set a precedent for later state actions and in some cases these these statutes at the state level were kept they were not repealed yes sir yes not in any comprehensive way Hugh Rockoff a friend of mine who teaches economic history at Rutgers University has written about the price control program and talks a lot about the black markets particularly in world war two and others have written about those as well but no one has ever been able to pull together anything like an estimate of the black markets effect and there's a reason for that because you know this doesn't leave any evidence or paper trail of the kind that historians can analyze so there are ways of getting at it ways of getting at it and in one way is through some of the attempts made by economists to re-estimate what their actual price level was during war time particularly during world war two when the controls caused the official price index is to be greatly understated and Milton Friedman and Anna Schwartz in their book on monetary trends in the United States and the United Kingdom have an interesting way of trying to estimate what the actual price level was during the war that moves us in the right direction we can begin to get some idea the order of magnitudes and what they arrive at is the prices for the whole economy as they estimate were understated by 1944 by maybe 9 or 10 percent I think that's not enough and I think they probably would agree with me if they were here today they didn't make great claims for what they had done they only were trying to do as much as they could with the data that they could get their hands on so there are good books on the black market but they still don't give us the idea of magnitudes that we'd like to have do we have any more questions we're almost out of time but we have a few minutes yes sir I don't think it's war propaganda and even in that article Tyler goes out of his way to say he's not proposing that we go to war to promote technological change and I don't think it's economic illiteracy either I think Tyler likes to do things like that because they have a kind of superficial cleverness and they seem to go against what anyone would think including a well-trained professional so that's just Tyler don't take it seriously yes sir I'm skeptical that there was any kind of grand understanding like that after both of these wars many people were sincerely appalled by the carnage and some people sincerely believed that the outbreak of future wars could be prevented or at least reduced by international cooperation for collective defense purposes now in retrospect that obviously has not worked and we can think of a lot of reasons why we should have known it wouldn't work all along but although anything that's done like that on a large scale for international agreement impacts opportunists who have their own purposes in mind I give some credit to the sincerity of people who believe that collective defense would help to prevent future world wars and I guess we would have to say that for whatever reason we have had nothing comparable to world war two since 1945 we've had all kinds of horrible wars going on in the world and they're going on right now but they're certainly not to be compared with what happened during world war two yes sir well this again I don't believe in warfare so much as I believe that there are a lot of people with their interests at stake and they're trying to use whatever powers they can grasp to serve their purposes in the case of the whole business of financing the world petroleum trade obviously people have very differing interests and so their conflicts of interests they're intrinsic to what's being done there and I would just be astonished if people could ever come to any kind of agreement about what they want to do about it obviously many big financial institutions are interested in retaining the dollar as the unit for financing the world petroleum trade and others are interested in dispensing with the dollar but you know whether the dollar opponents will ultimately prevail perhaps because the dollar becomes a less reliable medium of exchange or for other reasons I don't know but I just see a variety of interests at stake jockeying with one another there and I can't pretend to know how this is going to work out it depends on so many different things including wars in the Middle East particularly but also depending on financial developments in Europe and the United States in Japan China whenever we talk about anything on a global scale like that there are just so many dimensions so many things that need to be taken into account it's very difficult to reach a conclusion with any certainty yes ma'am well the question of whether war can be avoided is really a question of whether people can ever become aware of the true nature of the state whether they can ever realize that the state that rules them is really not acting in their interests but only in the interests of the people who control the state and clearly when war comes many people almost instinctively go to the assistance of their own states and there are a lot of reasons for that I don't know whether people can ever be led to go beyond that kind of feeling of attachment to the place and the people they know best but I have a dream