 It's a pleasure to be here to celebrate 30 years of the Mises Institute. This is a fabulous affair. Thank you for coming. Thirty years ago was a low point in my life. I was in the last semester as an economics major in college and I was passing all of my classes and then it hit me that I'm going to graduate, which means I'm going to have to leave college. And that realization was painful because I'm having such a good time at college and learning economics from some pretty good faculty, not Austrians, but pretty good. But to make matters worse, of course, the economy had experienced 10 years of stagflation, two years of depression with unemployment above 10%, interest rates at 20% and there were absolutely no jobs available in the American economy. So this was a problem because I had a pile of student debt and no job to pay for it. So I started thinking about that and looking for options and it turned out that my best available option was to go to a graduate program in economics in Alabama. And of course all my friends thought I was nuts to select that option. But I did and I decided well I'll double down on the government student loans, go down there and learn some economics and it was an Austrian friendly faculty at the time. And so I did it and things didn't turn out the way I planned. The faculty really wasn't all that friendly towards Austrian economics. One of my professors told me the first day I was there that there really wasn't anything like an Austrian school of economics, that there were very few Austrian economists left in the world. When they were older, none of them were teaching at a PhD granting institution. So the Austrian school was just something in history, something in encyclopedias, but it wasn't really an ongoing school of economic thought. And another one of my professors who was an eminent scholar type of an economist, very well respected macro economist, told me after I said that I was interested in Austrian economics, he told me that the Austrian theory of the business cycle, which was really what I was pumped up on at the time, was a grisly embarrassment. So that was not another good thing to learn, another discouraging thing to learn besides having to learn a lot of neoclassical economics at the same time. So as the year wore on I got more and more despondent about my choice to go to Alabama to get a master's degree. It was a master's degree only program in economics at Auburn University. And towards the end of the semester, one of my professors pulled me into his office, and he said, Auburn is getting a PhD program in economics, and I was like, really? And he said, yes. He said, and you have been accepted into the program. And I was surprised at that too. He said, a guy named Lou Rockwell is moving to Ludwig von Mises Institute to Auburn University. And I said, no way. And he said that that Lou was going to publish journals and books. And he was going to have conferences and he was going to bring all of the leading Austrian scholars to Auburn to give talks. I said, you're pulling my leg. He said, no. And he said, they're going to give you a fellowship to pay for your education. And I was like, no way. So it was like all downhill for most of my life. And then that one day, everything turned around. And everything's been much greater than I could have possibly imagined. The Institute did fund me through my graduate school. Through writing a dissertation. I've worked with them in many different respects. I was the editor of the Austrian economics newsletter, an editor for the free market newsletter. I've published in the quarterly Journal of Austrian Economics, the Review of Austrian Economics, the Journal of Libertarian Studies, and a lot of other things, including publishing a few books with the Institute itself. So these are things that I could have never imagined ever happening in my life. I never could have imagined being put into this position. And now I work full time at the Institute as a senior fellow. So it's really above and beyond any expectations I could have possibly dreamed up as a college student. And I want to thank everyone here and everybody who's supported the Institute over the last 30 years. And of course, most particularly, Mr. Lou Rockwell, who made all that possible. And you know, now that I work at the Institute full time and we have all these programs, the Mises University and the students coming in, and throughout the week they're asking questions constantly. One question after another about Austrian economics, about libertarianism, about markets, about how the Institute works, about what goes on here. And they find out that I have a full time job at the Institute doing all this kind of stuff. And inevitably the question turns to me and they say, how do you get a job like yours? I said, it's all luck. My talk today is on how Rhett Butler lost the Civil War, the fictional character, obviously, the blockade runner. The Civil War is a big issue in American history. There's probably no single event in American history that more books and journal articles, novels have been written about than the American Civil War. And there's all sorts of hypotheses about how that event turned out. Why did the Confederacy lose? Why did the Union win? There's probably well over a hundred different hypotheses to explain that particular result. Well, in my dissertation that I mentioned earlier, in one of the important chapters, which is on the economics of prohibition, in one of the chapters, there's a footnote to the conclusion of the chapter about the Civil War. The chapter itself explains why prohibition makes drugs more potent and more dangerous, and that the more you enforce it, the more dangerous they become. Well, the footnote expresses the idea that that's very similar to the Civil War Union blockade of the South, where the more they enforced it, the more they tended to import or to smuggle, I should say, high-valued luxury items rather than low-value necessities. And one of my professors said, you need to work on that one day, and so I have periodically over time. And when I first started collecting data and reading all the histories of this, I realized that there was an opportunity here to first apply Austrian economics to this big question about why did the Union defeat the Confederacy? Everybody more or less takes it for granted that that's the way it would have come out. The Union was bigger. It had more manufacturing. It had better diplomats. It had this. It had that. The South had all these drawbacks, and it was inevitable that it would have turned out that way. Well, I had already read that before the war, nobody thought the Union was going to win. Everybody thought that the Confederacy would win out because they had the same generals trained at the same institutions using the same tactics, and that if the Confederacy fought a defensive and guerrilla warfare, that the cost to the Union of making any kind of advances into the South, the cost would have been enormous, and they could have never subdued the Confederacy. So the Confederacy would have won by default, in other words. And so, again, as I started working in this literature, I realized that this was an opportunity to be the first person to really apply Austrian economic analysis to this question. So I started working on this idea of luxuries versus necessities and the Civil War blockade. Let me tell you about the blockade because it was more or less a stalemate as well. The blockade runners were entrepreneurs. They were free market entrepreneurs, and if they got through the blockade, they'd make a lot of money. If they got back out through the blockade, they'd be bringing out cotton, and again, they would make a lot of money. The crews themselves were not paid wages. They were just allowed to bring a trunk of their own stuff in and out of the Confederacy. So that's where their money, their money was due to success. And so if Austrians look at that, they say, well, if it's all profit motivation on the part of everybody, it's going to be pretty effective. And indeed, blockade runners and smugglers of every sort have always been successful in history. The Union, on the other hand, had a navy, a naval blockade, but it too was profit-motivated. If they stopped the ship, they got to sell all of the cargo and the boat and divvy up the money. So both sides were profit-motivated. And again, it should have been more or less a standoff in many respects with the blockade runners winning most of the contests. So in the first paper, we looked at this question of luxuries and necessities. And basically what we found is that the Union blockade became more and more effective over time. And the price of luxury goods went down as the price of necessities like food and salt, which are bulkier and heavier, go up in price. This wasn't really a problem for the Confederacy, which was still getting supplies, or the Southern economy, which was still receiving imported goods and also being able to export their cotton. However, it did create a demoralization in the South. OK. In the second paper, what we looked at is Confederate policy towards the blockade. Their first policy was a real brain surgeon approach. They decided to embargo other countries from importing cotton from the South. So their main source of income in world trade was selling cotton. The price of cotton was going up, so they decided in the first year or so not to export. The second policy that they implemented was impressment. And an impressment is where the government takes your stuff and pays you what it wants. They took all of the ocean-going ships from private owners in the South. They sunk a couple of them as ways of preventing union ships from getting into harbors. They used one for the Confederate Naval College. And the only one that actually did the South any good was one that was sold back to the private sector and became an effective blockade runner. They also adopted a very counterproductive policy which was trying to build their own Navy ships. The Confederacy was very innovative. They were the first to use an ironclad hull. They were the first ones to invent a submarine, but they were trying to do this building new ships when they didn't really have a ship building industry to begin with. And in order to get the steel in order to make these ships, you know what they did? They took railroad lines and they condemned them and used that steel to make the ships. So the one advantage that they did have was the railroads. And instead of using that, they decided to rip up railroads and to take away the inventory to build those ships. They also invoked all sorts of protectionism. They created tariffs. They created new taxes on imported goods and exported goods. They had a special tax on cotton. They had, you have a special permit that you had to buy to export cotton and all sorts of red tape in terms of exporting and importing goods. And then finally, in February of 1864, they came up with the brilliant legislation which banned all luxury imports, which was the sailor's main source of income. They created all sorts of prohibited items that could not be allowed into the South. And if you took one thing, one item that was on the banned list, you lost all of your cargo and your ship. And finally, they commandeered one half of all cargo space for use for the Confederate government. Naturally, these policies created havoc in the blockade running business. The diaries of the blockade runners clearly show that they think that that legislation at the end was the killer of the blockade running business and the ultimate demise of the Confederacy. Prices rapidly increased for both all sorts of categories of goods in the South in 1864, which was of course the crucial year. The number of runs of blockaders into the Confederacy fell by 50%, despite the fact that new government blockade running ships were coming online at the time. There was a general scarcity across the entire Northern Virginia area of the battle. Wilmington was the big blockade running port, and that fed in materials into Richmond and the Army of Northern Virginia. So this was a pretty stupid piece of legislation, and I decided to take a look at why they did that. Why would they be stupid enough to do that? Why who did this? I mean obviously to us, we realized that prohibitions, cargo space requirements, regulations and so forth are bad for the economy and therefore ultimately bad for the war effort. So we looked at the congressmen who voted on this, and we had their political party, whether they were for or against the session, if they owned slaves or not, what occupation they had, and whether or not their district was in the control of the Union or the Confederacy. And all of the other variables were insignificant. The only variable that was significant was whether or not the congressman's district was in Union control, which wouldn't be affected by the legislation because it was in Union control, or if it was under the control of the Confederate Army, and therefore subject to the impact that this legislation had. The congressmen who were from districts who were under Union control voted for this legislation knowing that it wouldn't impact their constituents. And the congressman from districts under Confederate control who knew that it would have that impact on their constituents voted against it. So the upshot of the story is the Confederacy died a death of democracy. Thank you very much.