 Thank you, this is a great full house. This is also perhaps the fourth, well, really the first, but in a sense, the fourth Austrian conference ever since old Austria. I'm not sure what conferences they had in Austria, as I'm leaving that aside. It was an Austrian conference in December of 1974, the famed Royalton College Conference, which took place in a fake college and fake law school. I'll go into that sometime and I'll have a beer. Anyway, that was the first, it was a charming conference. There was one in the summer of 1974, University of Hartford. 75, excuse me, University of Hartford, which is a real college. And in 1976, there was one in Windsor Castle, England. And after that, blank out, zip. So even though the Austrian movement has flourished and diversified and so forth and so on, there has been no Austrian week devoted just specifically to Austrian economics since then. Why this is true, who knows? We can again go over that, over beer and stuff. There's also some interesting byways and sorted whatever, sorted byway. Any rate, so it's great to have this. I think that I hope this is the first of many. The pre-Austrian, well, of course I could speak. I do speak for a whole term on this topic. So this has to be very condensed, sort of give little highlights of this. And that therein lies a story too, because there is a fantastic saga of pre-Austrians which are usually overlooked. So I want to start off by attacking, naturally. For those of you who know my general outlook. What's known as the Huyg theory of history, which I think is the key to most of the evil we have and most of the history of thought in lots of other areas. Before, by the way, in ancient Greece and Rome, and this, David Gordon would elucidate some of them like, because I could never understand it. In ancient Greece and Rome, apparently, the theory of history was everything comes around again all the time, the cyclical theory of history that whatever happens is going to be repeated, and that's it, endlessly. I can never understand how they arrived at it, so I'm just going to say this without trying to elucidate it. Just one of the, any right, this was superseded during the Christian and later periods, and we've been, since the middle of the 19th century approximately, we've had the Huyg theory of history, which is essentially, well, the ways are sort of lovable, English wigs, and the theory is not that outlandish considering they live in a fairly, in a good period, in human history. They look back and they saw everything that had been pretty crummy before that and had been getting better, getting freer, getting more prosperous, and science was progressing and knowledge and so forth and so on. So they keep, they established the theory of history or erected the theory of history to the effect that everything is always getting better and better. And so this is everybody standing, everybody has their shoulders, and so they have an inevitable march upward into the light. Of course, this is, even though this has been pretty, to hold this in 1987 after a series of wars and genocidal murders, et cetera, et cetera, it's very difficult, but it's still to be really basically held by, I think, most historians, certainly of economics, historians of thought, and the general establishment textbook sort of version. In the, in general, I think most, let's say, economic historians or wake theorists, you find, for example, that slavery was good. Why was slavery good? Because slavery was there. Since slavery was there, it must have performed an important function. And that was it. And then when slavery changed, say, to surf them, that was there, that must have performed important functions. So the change must have been correct. If you were dumb enough to be anti-slavery back in, whatever, 1700, obviously premature anti-slavery or not, who was not adjusted to his or her environment. And so the basic conclusion is that whatever is, is right in any given period. Whatever was, therefore, whatever was, was right in any given period in the past. Whatever was in 1880 was right. Whatever was in 1620 was right, et cetera, et cetera. And all changes were right. So this puts the imprimatur of alleged science, not only in the current status quo, but in all status quos in the past. And he changes in it. The, you get that by the way, this is not one of Walter Box and my old buddies once on discussing surf them, came to conclusion was perfectly legitimate because surf them was a product of an imperfect capital market or imperfect credit market. If you can believe that, you'll believe almost anything. So there was, and the Marxist, by the way, are a special variant of this. The Marxist also believe whatever is, whatever is coming is right. So you have a certain, each change of course is cataclysmic and revolutionary, but you have a progressive change which usher is in the next inevitable period and reactionaries will battle against it and so forth and so on. So once again, you essentially have the Marxist as another form of white theorists and so you have a whole bunch of people always addressing the past as if everything that happened was correct and every institution was correct and every kind of historical change to another institution was also correct almost by definition. And the history of, of course, I think this is nonsense and unfortunately, but it permeates history in general. If you can read anything in history, whatever happened, any biography of any important person in the past, the guy was great. Whatever he did perform an important function and the role was great and so forth and so on. I think all biographies have been positive except for the possible exception of Hitler and Stalin. In the case of Stalin, it's a little weak, it was shaky, but whether it's positive or not. When we get to the history of thought to get closer to our topic, the same thing applies. We have the weak theory of history of science and the history of development of thought. The typical textbook version up until fairly recently probably still is the textbook version is science progresses, Newton finds the apple falling in his forehead and all that. Everything progresses slowly and surely into the light. Each new theorist tests the previous, tests the theory very patiently, finds out if the assumptions are correct, if the assumptions are not correct, he discards them and so everybody sort of, the whole world marches into the future slowly and surely. And there's no conflict and nothing, there's no problem. I mean, theories are discarded, they're superseded by better, excuse me, theories and so forth and so on. Everybody plays the rightful proper role on this great march upward. Unfortunately, we have, even in the physical sciences where it's at least fairly plausible, Thomas Kuhn's famous work on the structure of scientific revolution is at least throwing a tremendous monkey wrench into this banal, sapirific approach. And we find that even in the physical sciences, which is really what all Kuhn talks about, we have tremendous problems and breakdowns in theory which is then replaced by other assumptions which are, and the people who hold the previous assumptions hold it to a bitter end. It's only because they die out and younger people come up and new theories are adopted. So there's no patient testing and all that sort of thing. So, but if this is true in the physical sciences, I'm not gonna take a stand one way or the other, it's certainly, in some cases, obviously is. Joseph Priestly, for example, was one of the co-discoverers of oxygen around 1780s or so of Wassier. He's denied until they die that they discovered oxygen. No, no, no. He stuck to the phlegiston theory. He only discovered some form of defligisticated air. It was not oxygen, damn it. So, now I guess oxygen has been accepted. I'm not gonna challenge that. But in the case where you don't have laboratory experiment or some hard-nosed kind of way of confronting this, in other words, the history of philosophy, economics, social thought, et cetera, et cetera, which we're getting into now. Hakuni in doctrine, it seems to me, holds beautifully. In other words, that there's no patient on the upper and upper marches in the light. Nobody ever refutes anything, more or less. Nobody tests anything in the first place. I mean, nobody tests their assumptions. And second of all, if one theory replaces another, it's not done because of refutation. It's done because of some other reason. Give an example, which I'll get back to later in the week. The monstrous, the dropping of Austrian business cycle theory for Keynesian theory back in the late 30s. Austrian theory was becoming dominant, and at least in England, partially in the United States, in the journals and in textbooks, et cetera. When Keynesian general theory came out, a year after that, first it was reviewed universally unfavorable reviews. By about a year or so after that, Keynesian theory swept the board, Austrian theory disappeared into the limbo of lost causes. Nobody refuted anything. Some of the Keynesian sat down and said, look, the Austrians are wrong because of X, Y, Z. Just disappeared, sort of like ladies' hemlines or something. It was it, just forgotten. A new fashion comes in. The Hula Hoop disappears and the Frisbee comes in, and the rest of it is forgotten. The old stuff is forgotten. Everybody embraces the new stuff. So it's much more like that, history of thought, seems to me, than it is in this, everybody sitting around patiently testing and refuting and discarding. Okay, so we have now, in the typical history of thought, economic thought textbook, this is to get down to the economic thought. The typical textbook is that everybody was great. Everybody, you go through a list of the theorists, theorists and writers, 17th century, 18th century, whatever, they're all great. They'll provide us something, they'll contribute to something, and even more on, contribute to something important, history of economic thought, okay? Coming down to the present, and that's it. And that's what I call the weak theory of history of economic thought. Obviously, I don't look very favorably upon this. The only one actually, who doesn't really fit the mold is Schumpeter, which in many ways is a marvelous book. Unfortunately, Schumpeter's history of economic analysis wasn't finished. He died before he finished it, it was disorganized, it was chaotically organized, et cetera. So it was very difficult to plow through it. And basically I sympathize with much of it. It was sort of a, I guess semi-Austrian, because even though he was of all racy, and he was also very anti-Smith Ricardo. And as a matter of fact, my own view is the whole book is a continuing attack, bitter attack on Ricardo for a very good reason. So at least you have, at least it breaks the mold of this constant celebration of every nut who comes into the, who talks about economics. Okay, so we then have a history, so what do we have in history of thought? I think history of philosophy and history of, I think Jonathan Barnes recently wrote a great journal, a great review of a certain book by Gatam, or anything. So the history of something like this, history of philosophy, history of constant battles between truth and falsehood, with truth sometimes winning out, was something like that. And it's much more, something like that. In other words, much more a series of ups and downs of a roller coaster effect. Sometimes correct stuff comes in, and other times correct stuff gets lost. So if correct stuff gets lost, if the paradigm, if the New Coonian paradigm replaces the old one, is worse. In many ways or in all ways in the previous one, it means that knowledge gets lost, instead of having the onward and upward knowledge into the light, the usual Whig theory. See the Whig theory means, say if you're in physics, if you're a physicist, you don't read anything before the latest journal article. You don't go back and read some physicists in 1948. What's the point? They're all wrong. All the good stuff has been incorporated in the latest textbook and latest journal articles. As a result, if you're into the physics, philosophy of physics mold, history of philosophy of physics mold, you're sort of a historical moron for, and willingly so. We're saying, I don't want to read these old guys if you're an antiquarian and want to find out what physicists said in 1938. Well, that's your bag, but you don't read it for knowledge. On the other hand, if you read, if you do that in economics, which unfortunately many or most economists do, most graduate students and economists only read the latest journal articles. God help them. And don't read anything before the latest journal article is textbooks. You're in terrible shape. You've lost an enormous amount of knowledge, which had been known in the past and now it's sunk into a lot of traits because knowledge has to be repeated and reviewed and kept in the public eye of the discipline. So you have, in other words, a loss of knowledge. I asked, by the way, I was used to teaching book on Pali, which one of its few virtues was in how history of science division. And I asked my history of science buddy, I said, well, anything when Cooney and Coon's book came out, I said, can you think of anything in science where you really lost knowledge? You see, there are many things in 18th century optics which we still don't know yet. We still haven't recaptured. So if you can do that with optics, you can certainly do it with economic thought, social philosophy, et cetera. So at any rate, the plea then is to go in and read some of these people, but for example, let's take money in banking textbook. Good example. If you take an average standard money in banking textbook of 1922, you get a lot more out of it, a lot more truth in your money in banking textbook right now, there's no comparison. They were great in 1922. Of course they didn't know the money supply figures from 1984, obviously. So if you want that, you go to the latest stuff. But for anything else, for principles, for insight, the older stuff was much, almost infinitely better. Okay, so we have in, so what do we have aside from these general, thanks a lot, Judy, aside from these general views about history of thought and the importance of reading them, what do we have in economics specifically? And what we have basically in economics is a, for an un-concern, is a throwing out of like standard doctrine of how economics originated. Standard doctrine which was taught in every textbook probably still is. Certainly when I was going to graduate school. Usually it's something like this. Aristotle said one or two things. You have a couple of pages there, I have to say something. Aquinas represents the so-called scholastics. And Aquinas believed that the just price was of course the production plus enough profit to keep everybody in their station of life. And then you go on to the mercantilists. That takes care about 1500 years of, 1400, 1900 years of thought, right, three or four pages. And you go to the mercantilists. The mercantilists are obviously, obviously a bunch of losers. I mean, from the standard portrayal of mercantilists, there were people who thought that you have to accumulate bullion. There's something great about bullion per se. So to look at it and you pass it through your finger and you say, it's wonderful. Finally, Adam Smith came along and said, hey, it's really important to spend the bullion. So economics begins with Adam Smith. Aristotle begins economics and begins laissez-faire thought to boot. So we have this double whammy here of Adam Smith creating the whole thing. All of the economic thought begins out of those foreheads like and seen out of the brow of Zeus. And the mercantilists become important as a foil for Smith because our mercantilists said, they said mercantilists said that you should never import anything, you should only export. You should pile up bullion and Smith said, now it's important to import and you should spend the money once in a while. Okay, this is obviously an oversimplified version. It's not that oversimplified. This is basically what you get. And so it became as the Schumpeter book came as a big chakaroo to most economists if they took it seriously. And I think Schumpeter had magnificent contempt for Smith essentially because he only called him A Smith. Demonstrate his existential contempt. Any rate, so what you had, and then began to happen, actually before Schumpeter's book came out in 1954, a year before that, and I should have put this in my reading list because I think it's two very important articles by Emil Kowder, K-A-U-D-E-R. Do I have one? Oh, I have a blackboard here, I'm gonna put this up. The more I read these articles, the more insights I get from them. This is called Genesis. One was called Genesis of the Marginal Utility Theory. And the other was called Retarded Acceptance, the Retarded Acceptance of the Marginal Utility Theory. And this is an economic journal for September 53. And this was the QJE for November 53. He also wrote a book on History of Marginal Utility Theory which I recommend, this sort of sets the history of thought paradigm, I think more clearly than the later books. So at any rate, these books coming out and then we start having one thing about cataractcy was. One of the problems in history of thought is nobody in the United States or England can read a foreign language, let's face it. I mean, we all take a foreign language exam, at least we're used to in the old days. Others mean we can read it, it's all a joke. So unless you're an expert in foreign, say in French history, you don't know French or in German history, I don't know in German, even there are rumors about, there's a rumor that one guy's a professor of Russian history at City College, doesn't know any Russian, it's possible. But anyway, so what happens is that the Scholastics, of course, wrote in Latin and they wrote in Latin, not only in the so-called Middle Ages, but down through the Spanish Scholastics of the 16th century and late 16th century. And it turns out that nobody reads Latin these days. And so historians of thought, when they dealt with the Scholastics, they didn't read Latin, of course, and they missed out on this whole Scholastic economics. Schumpeter did read Latin, I mean, he had a magnificent pre-World War I European education. And Couter Ditto and Raymond DeRuver, who was a great guy, who also did a lot of work in this period, late Raymond DeRuver, was Flemish and also read a lot of Latin. And they began to bring back the Scholastics. And so what do they actually say? And the whole world of Scholastic economics began to open up as a result of that. I've written stuff on this Scholastic, but I do not read Latin, I'm taking their word for it, even though this movement of course, trust no one is always a good motto. But they do read Latin, and the other guys don't. So I mean, let's say you already have a big advantage. One up on the standard historians of thought. Okay, basically, so what do we have then with this other paradigm now, which is the one I agree with, which does not have Adam Smith as the creator, as the fountain head and creator of all of economics and life and everything else. And let's say fair. What we have is a tradition of both free market and margin and utility, subjective utility theory, verging on the margin utility. It's not quite marginal, but it's almost that. Beginning with Aquinas and much more so with his followers, culminating in the Spanish Scholastics of 16th century University of Salamanca, the so-called School of Salamanca. And what you have is a very sophisticated development of all this, and developing, let's say, well basically, setting it forth that the value of goods is caused by subjective utility of consumers, what things that they need and want and desire, even more so. Monetary theory was born into the picture. The value of money was determined by supply and demand for it. And this whole scholastic analysis, there's none of this fissure stuff about where this somehow velocity of circulation disappears or whatever. The man for money is right in there as another determinant, never a lost sight of. And a concentration on even approaches toward marginal productivity theory of factors. Not quite, of course, but basically inside of the factors, the reason why people, businessmen demand factors or productions is because they factors or will bring them revenue from sales to the consumers. And so the productivity of the factors becomes a dominant point. And so the price of the factor gets is determined by the productivity of the factor. Again, aside from the marginal stuff, which technically doesn't come in until the 1870s, the rest of it is really set forth. And one of the reasons for this is because of the, and also I shouldn't say another thing, this is the value of paradox. This to me is the single most single, single kookiest thing in all of history of economic thought. There are a lot of cookie elements. The value of paradox was set forth way back by the early scholastics and refuted. And those were essentially what they said was, it's true that go say water or bread, whichever they want to use is a wonderful product as the staff of life. It's very important so far. It's philosophically, magnificently useful. And yet it has no value on the market, very little value on the market. It has a high use value and a low exchange value. Why is that? Because they said, and gold on the other hand has a, or diamonds seem to be a low philosophic use value yet, but a very high exchange value on the market. Why is that? It's because they said of the relative difference in scarcity. In other words, because diamonds are very scarce and water is all over the place or bread is all over the place. And therefore, they didn't quite say that each unit is valued differently, but it's almost that. It's virtually saying, therefore a loaf of bread is worth very little on the market and one carat of diamonds worth a lot. They have the whole thing, they've stayed in the value of paradox and solved it hundreds of years before Adam Smith. And not only do they all do that and do it very nicely, Francis Hutchison Smith's own teacher did it, said it and did it and solved the thing also very nicely. Not only that, but Smith himself solved it. 20 years or 12 years before the wealth of nations came out. This is one of the great mysteries. There's a lot of mysteries about Smith in many ways is one of the old time enigmas, a mystery rapid enigma shrouded in a riddle or whatever a Churchill said about Russia. And Smith's lectures, he's again, states the value of paradox and solves it. So he goes through the vaults of scarcity stuff. He's just repeating everything about Hutchison and the set and all the Spanish scholastics and Litholans, Hutchison and Carmichael, all these people, the whole hundreds of years tradition. And so why isn't the wealth of nations 12 years later, he sets forth a paradox and says it can't be solved. Therefore, there's no relationship he says between the use of the product and the exchange value. Therefore, you have to drop out the use and you have to look for some other explanation for exchange value or prices. And it can't be, it's not that he wrote the lectures and he knew that everybody would read the lectures and therefore sort of, this is sort of like a cata cell because nobody read the lectures. The lectures were unpublished until about 1910. So it's not that he had already said this. This was his published stuff. And there are many other instances like this of declines in thought, a loss of thought, a loss of knowledge and insight that part of Smith from his own stuff 15, 20 years before. And, well, there are many you can take, you can have psychological explanation. I distrust them anyway. I certainly distrust them with somebody we know very little about. So, but I think one thing is, might be a key to this. And that is that the, well, two things might be key to this. In other words, what as Couter says and the one is a very sweet comment. I'm gonna find the Couter comment here. He's lamenting about Smith's bringing back the value of paradox and not solving it. Well, I have it somewhere. And he says something like this, in one statement, Smith made waste and rubbish of 2,000 years of economic thought. That was a mournful and great statement. That really sums it up because after that, since everybody began to think that Smith invented economics, therefore stuck with the value of paradox. We can't use consumption or demand as an explanation for value, we gotta look for something else. What is that, what else? Well, what else is Karl Marx starts off and does copy tall, can't be consume consumption of course is forgotten by this time. So, why did two things exchange for the same amount? Why did bread, why does an ounce, why does the loaf of bread exchange for two candy bars, let's say? Can't be the weight, weight's not the same. Can't be the volume, volume's not the same. Must be the quantity of labor hours embodied in these two products. That's, then we're off to the races with Marx. But the point is all this really starts with Smith messing up, reintroducing the value of paradox after everybody had solved it including himself. Now, I think there's a horrible, I mean 100 years of economic thought were wasted. Not only that but it's still there was the cost of production theory is still there very much embodied in economic thought even right now. So I can think of only two explanations. The first place, the distinction between the scholastic theory which was then adopted by the French, I should say this, right now we have a French-Itanian continental tradition which starts with the scholastic Spanish, French-Itanian Spanish. Remember all in those days everybody read Latin. There's no difference what your nationality was. Everybody wrote in Latin, spoke in Latin, thought in it until we'll say the 17th century or even later. And then we have the French, the Spanish tradition of taking this up, the Italian tradition, and modern economics being essentially Cantillon and Turgo and Condolac. And what is the difference between their approach and the Smith approach? There are two basic differences. One is Smith only gets interested in low-run equilibrium. The other guys are interested in real market prices, the real world. They wanna analyze what's going on in the real world. What accounts for market price? So if you're looking at the real world you see for example that hula hoops are suddenly increasing in price, maybe it's because they're increasing in demand. In other words, consumer demand becomes an obvious, an obvious source of fluctuations in demand. And people, you know, the hemlines are going up now so the old hemlines are shot and that sort of stuff. So it's obvious that consumer demand is part of it. The key element. Well, Smith starts to concentrate on non-un... He's not interested in Ricardo of course or after that, Marx after that. He's not interested in day-to-day prices. Day prices are a frippery. It's long-run normal equilibrium accounts and only that, concentrating on long-run normal. Ain't no long-run normal. Consumption, the whole thing is fine because there's an attack on consumption. Hatred of consumers. And consumers guiding the market system. That's basically what it is. If you talk about long-run normal as the consumption is fluctuating, consumers are foolish sometimes and they're fluctuating. They don't know what they want. They change their minds and all that sort of stuff as real people do, okay? But in long-run normal, nobody changes their mind. Nobody acts, nobody does anything. It's all set forever. It's an equilibrium where nobody, there's no action. So the concentration is on that, the shift. And I think part of the shift, and this is one of my hobby horses in the last few years which is increasing as I learn more and read more about this stuff, was the hard shell Calvinism which dominated, which guided Smith. And we have, in other words, the continental economists from the, from the scholastics on now were Catholics. We're scholastics, not only scholastics but Catholics and scholastics, both. The emphasis on scholastics thought was on consumers, the end of production was the goal. The emphasis on happiness, albeit of course moderate happiness. You don't want to go half cocked on something. Drinking is okay in moderation. All these things, the consumer is sort of the God. It's the golden mean of Aristotle, all that sort of thing. All wise stuff. And when you get to Smith, you have a sea change here because, and by the way, Protestant scholastics adopted this more or less from Grosius and Holland and even with Hutchison and Scotland, even Hutchison. We get to Smith in a very different situation. Hard shell Calvinism begins to take over. And hard shell Calvinism means that only labor is important. Consumption, first of all, means enjoyment against enjoyment. The real thing which can provide value is hard, sweaty, miserable, grim labor. And that's what counts. And Smith, by the way, keeps saying this all throughout. Smith hates consumers. When he talks about the value of paradox, for example, he doesn't just say that diamonds are a fripper, they're not really as useful. Diamonds, he says, are of no use whatsoever. No use. He does that elsewhere. He wants to have high tax on carriages because the rich have carriages and a luxury item. He hates luxury items. He hates luxurious expenditure. This is not a laissez-faire person talking. This is a person who hates consumers. He hates the enjoyment of consumption. And one of the most telling parts of this is that Smith, I think I get this. Here, the one flaw in scholastic economics, we all know very well probably by this time, is the usury law, business. And the usury law, I've been looking at it hard and fast through this whole thing. There's no economic explanation, there's no rational explanation of the prohibition on usury. Prohibition on usury, unlike almost everything else got worse as time went on. In other words, the early Christian councils said almost nothing about, I think there's something like, by the way, I turned to the great book on this is by John T. Noonan, Jr. called Scholastic Analysis of Usury. And the early Christian fathers said, well, if you're a priest, you shouldn't, it's not nice to lend money at usury to your comrades or whatever, your colleagues. This is very simple. From this, and this gets escalated and blown up. By the high Middle Ages, the usury prohibition was just fanatic. They're just going out of their bird. And they keep finding different arguments. There's no argument on the Bible against usury. There's no, Luke says somewhere lend freely. Well, I mean, that's sort of like a, it's not saying it's evil or sinful or the mortal sin that can lend money. Just saying, well, it'd be nice to lend freely. I mean, if they're really consistent, they should have compulsory lending on part of people. They didn't do that. So there's no, I mean, it can't say it's because the church borrowed heavily, but the church also loaned a lot. I mean, the whole thing of just, it seems to be just sort of an irrationality of foot and it just got worse and worse and worse. Some of the most interesting aspects of this are San Bernardino of Siena, by the way, for example, the 1450s around there. A great, a top rigorous Dominican, great market analysts, great utility analysts, magnificent utility analysts, price of utility, loves market price, loves exchanges, loves merchants, hates unions because they're interfering in the market and stuff like that. I mean, I guess they usually just flips out. I mean, usually it's sin, sin, evil and then just on and on ranting. As a matter of fact, it was either here is his disciple, San Bernardino of Florence, who said that usually he's worse than murder because murder is a one shot thing. Usually he goes on and on forever. But usually, by the way, they meant any charge of interest at all. It doesn't mean like 100% a year. I mean, any interest rate charge whatsoever. So this thing, and this for its discredits, Scholastic economics among all things, but by about the end of the 15th century, actually early 15th century, the Scholastic opinion give it up and say, no, no, it's all nonsense. But actually, unfortunately, they gave it up and name and content, but not a name. So they kept the usury prohibition and gutted it with opportunity cost. They had everything, had opportunity cost and everything else and risk is important. It should be a payment for that. So by the time they got through the exceptions, usually it was okay, but by this time, the whole Scholastic method had been unfortunately discredited. So anyway, and of course, Turgall was running anti-usury law, for the whole thing's ridiculous. You're restricting credit to the poorest people. Smith brings it back. Smith is in favor of usury law, loved it. As a matter of fact, he wanted it even lower, I think than it was. I think, I forget what the usury law was in Britain at the time, it's either 5% or 3%, it's very low. He wanted it even lower. So one interesting thing, and this is Professor Garrison here is sort of an expert on this. Eddie West, who's an old friend of ours, is a Smith worshipper, Bob Smith, a autobiography of Smith and claims that Smith is a great laissez-faire theorist. So how do you get the usury law? You're sort of stumped. How can you be a laissez-faire theorist and be in favor of a severe usury law, outlawing anything above 3% interest or whatever? So West said, well, he just thinks there's a hole in his argument there because he just didn't realize that it causes a shortage of credit and so forth and so on. And Roger Garrison, I think that's absolutely true that he knew full well what he was doing. He wanted a shortage of credit to marginal borrowers. He wanted to take credit away from evil speculative marginal borrowers and consumers who might spend it on fripperies like carriages, things like that. He wanted, in other words, all the credit, all the savings to be channeled to the prime borrowers or the equivalent of IBM because they're sound and productive and thrifty and all that. In other words, he wanted to channel it only to a prime type, but he considered worthy savers and investors. So this was all part, it was a deliberate policy and part of Smith and not just sort of an aberration, you know exactly what he wanted. And it's true in general of many of the usury law people. The physiocrats who were also pro-usury law and also he wanted to channel all the credit of beloved farmers with a special object of the attention and care of the physiocrats. So it's that sort of distrust of the free market. In other words, Smith didn't like the free market allocation between consumer consumption and saving and investment. He thought there were too much being consumed, damn it, not enough being saved and invested. And so it's fine to be a favor of saving and investment. I'm certainly going to join him on that, but I'm not in favor of saying no, the market is too thriftless. We got to force these people to save, we got to stop them from saving and force them to stop them from consuming and force them to save and invest. That's essentially Smith's doctrine. Sounds a little bit like a supply sider, I don't know. So the, in addition to all that, we find out that the, that Smith, in addition to all these various aspects, was a, of Smith was also a very key member of the so-called moderate party and the Scottish Presbyterian Church. The name moderate is confusing, it's unfortunate. It's, they weren't, they're only moderate in a certain sense. The moderates took over in the church of, first of all, the church of Scotland was a established Presbyterian church. It was a typical English compromise. Instead of, after the union with Scotland and England, instead of imposing the Anglican Church on Scotland, where the English, I guess, felt there'd be a revolution in their hands, they established the Presbyterian Church, which then became the state church with orders transmitted from England to their agents and Scotland, the Scottish Church. So, you might think, you might say, well, Smith's being a libertarian or free market person must have been against the established church, right? Wrong. Smith and all of his pals, the moderate party, were the supreme defenders of the, was it with the Whig Presbyterian Church establishment in Scotland? And what they, there were also, they were not, it's not that they weren't Calvinists, although I guess some people here would challenge that. They were Calvinists of a sort. They were certainly were dedicated to thrifts and all the rest of it, hard work and all the rest of the Calvinist virtues. They didn't spend much time on scripture, that's true. They spent more time on moral argument, but basically they were Calvinists. They were, they saw no difficulty in subscribing in the Westminster Confession, but a big Calvinist doctrine. So, but what they were were more group, they didn't like sort of fanatical Calvinists. They didn't like Calvinists who spent a lot of time talking about religion. They wanted to take orders from the state. In other words, what their gig was, they wanted to have a situation where the state would appoint and the nobles would appoint church ministers. And the churchmen were not, you know, not very, not exactly hard-shelled Calvinists. It was the state rule of the church. Most of the hard-nosed Calvinists were against that. They wanted to have an independent church and the Smith and his pals were opposed to this. So what you have is very much of a defense of the establishment. This is the, this gets me, it brings me to the Scottish Enlightenment. I'm getting tired of the Scottish Enlightenment. I'll tell you that right now. There's been a big, there's been a big boom in the Scottish Enlightenment the last 10 years or so. I'm getting sick of it. The first Smith was a member of it. There are others, Adam Ferguson, there was David Hume. Although Hume was kind of a maverick since he was a Frank Atheist or deist. The others were Calvinists, but they were, see the hard-nosed Calvinists attacked the others for even talking to Hume, for being friendly with him. It was not considered de rigueur. But basically, the Ferguson and all these people blare and the Robertson and all these people amongst among whom Smith was a small select group. One of the things, for example, I'll show the Ferguson start of this slogan, which I'm getting really sick of, talking about the unintended consequences of human action or the consequences of human action, but not human design. It's the Ferguson statement, which Hayek has been repeating ad nauseam in the last 40 years. And as if this is the only thing to say about human action in general. Well, how did this thing start, the human action, not human design, not start with talking about the free market and how the merchants, the baker and all that sort of stuff, which we know was a good statement by Smith, if you're a baker, you're interested in maximizing your profit. You're not interested particularly in helping people get bread, but that's the unintended consequence. All right, you can make a case for that. However, this whole thing starts, Ferguson begins this thing, Ferguson and Blair, after the Red Revolution of 1745, the Jacobi Revolution in Scotland, the Highlanders, the followers of Bonnie Prince Charlie almost took over. In fact, they did capture Scotland, invaded Northern England and then push back. The Smith was in Oxford at the time, in college, all of his buddies were volunteers in the army out to crush the Jacobites by any means necessary. And after the Jacobites were crushed, they sat around in philosophical, by the way, all these people were Calvinist ministers, Ferguson and Blair and all these other people. And they were saying, why do we have to suffer these people? Why do we have to suffer these monstrous evil Jacobites? And it came to the conclusion it's God was God's punishment. In other words, the Jacobites, even though consciously evil devoted to evil ends, such as overthrowing the Whig Presbyterian establishment in Scotland, were really doing God's work because they were unconsciously doing God's work by getting the Scottish at lapsed in the apathy by pepping them up again by showing the importance of their own religion. In other words, even though they were consciously evil, they were forming good ends which they didn't know about. This is the origin of Ferguson's doctrine. It was not the free market at all. It was quite the contrary. Seemingly evil people were really doing good things by forcing everybody's attention on the issue because this is the one way to put it. And ever since then, the Ferguson, Smith, and all these people are very interested in militarism. I mean, the big pro-militarism, other peculiar doctrine for a leisurely group, allegedly a leisurely group to hold. They wanted to crush, first of all, they wanted to crush the Jacobites. They wanted to crush Anglicans. They wanted to crush almost anybody else with pop-up. And second of all, they wanted, they were so seared by the horrible Jacobite situation that they wanted to inspire the martial spirit and every Scotsman so they will always be ready to defend the state, defend the establishment when threatened. I was gonna say martial arts, but that's of course something else. Anyway, the martial spirit is one of the reasons, if you know, they go back to the wealth of nations and talk about, read his peculiar reviews on the factory, industrial division of labor and the factory system. On one hand, one place is for it. It's great stuff, it peps up intellectual, not only is of course important economically, but it inspires intellectual attainments and so forth and so on. It vivifies the human race. And a couple hundred pages later, he's attacking the division of labor for causing alienation, a good old word again, and the loss of the martial spirit. Because if you spend your time, whatever you're doing, organizing pins or screwing on the assembly line, screwing the bolt on the assembly line, not out there fighting, not out there crushing the enemy. And it was the loss of the martial spirit that was his major, Smith's major problem with industrial revolution. That's a little stems from the Jacobite, the dreaded Jacobite Rebellion of 45. Anyway, you have a group of people. The devotional laissez-faire, I think it was extremely limited to say the least, was partial, it was technical. In other words, it was the idea that you're better off by getting rid of many of the government regulations. Not all of them, many of them, many of them. And you're sort of, it's a strictly, utilitarian and partial view of increasingly productivity, possibly economy by this method. It's hardly any kind of deep philosophical commitment to laissez-faire, even if you have a French movement, which I maintain is just magnificent, had all the virtues, a utility theory and productivity theory and a concentration of market process and the money, concentration of the money theory and so forth and so on. What happens to it? Why does it die out? And what happened, basically what happened, the important historical problem here is why did Turgo, I guess if you've seen my book on Turgo, I think it's just fantastic. Why does his knowledge of his fantasticness die out virtually until Schumpeter? And the fact that he starts time preference, he really begins time preference theory, the Austrian theory of capital and interest, the law of diminishing returns is spelled out and great detail with Turgo. And he does this all off hand, sort of just zipping out, writing something out on a week. And devoting almost no time to it. So why does his whole knowledge drop out? And the best I can think of, makes me say about this, is that he was unfortunately caught in a situation. First of all, he was linked with a physiocrat, even though he was not a physiocrat, he was anti-physiocrat in economics. He thought that the idea of the agriculture being the only productive factor was ridiculous. And he was against the, in my fact Turgo was the one who attacked, physiocrats were pre-Kanesians. They had the multiplier theory, they had the leakage of savings, all the rest of the stuff, we were all too familiar with with Keynes. They had the whole thing and Turgo attacked them very neatly and invented or brought about the analysis of Sey's law, which basically, which Schumpeter calls the Turgo-Smith theory of capital and saving. Smith is the one thing that Smith takes from Turgo is the saving investment stuff. In other words, the knowledge is no such thing. There ain't no such thing as general overproduction. No such thing as savings leaking out. You don't have to worry about underspending and all the rest of it. The one good thing that Smith and Ricardo took over from Turgo. What happens after that? What happens after that is, first of all, he was linked by the physiocrats who were discredited for two reasons in France. One, because agriculture, the industrial revolution comes in. That's a doctrine which claims agriculture is the only important factor of production. It seems a little peculiar when you have industry going on. And second of all, the physiocrats were in favor of the absolute monarch. Their strategic vision was that, how do you bring about laissez-faire, which more or less they were in favor of? It's certainly an exception. How do you bring about property rights, natural rights and laissez-faire when you have an absolute monarch? And they had a shortcut view, sort of like the sort of people go to Washington trying to influence the latest legislation. You convinced the monarch, convinced the king. King's a reasonable person. You tell him it's in long run interest of the king to have laissez-faire. And you have to worry about any of the other stuff. You don't have to have a revolution and all the rest of it. So the physiocrats worked on the king. They worked on the king, sort of similarly, the first laissez-faire group in France, which were consciously laissez-faire, worked on the king was the Archbishop Fainé-Laurent, marvelous group in the Cola Burgundy Circle, around 1690, 1700. What they did is they got ahold of the king's top mistress. The Madame de Manton only converted her to laissez-faire. Archbishop Fainé-Laurent was her confessor and begins that way and sort of spreads. It was a laissez-faire position, it was pro-peace, anti-war, pro-la laissez-faire, the whole business. And then he gets the job of being the tutor to the Grand Dauphin, the grandson of Louis XIV. I remember everybody expected to become the king eventually because Louis XIV was getting very old and the sun was kind of sick by this time, so the grandson is gonna take over. They worked on the Grand Dauphin, started as a kid, they kept, and Fainé-Laurent brings all the top of laissez-faire intellectuals in France. There were a lot of historians and theologians, all the rest of it, and they thornful laissez-faire, great stuff, marvelous stuff, pure laissez-faire doctrine. And again, I'm converted, everything's all set. And then the Dauphin, his father dies, I think in 1714, they say, hey, this is great. Now the next step is for the Grand Dauphin to take over, now we win. And next year, the Grand Dauphin, his whole family dies in measles, and that's it. I mean, the whole strategy, a 20 year strategy shot the hell because of measles, right? So this is one of the problems of a strategy of converting the king. What happens if the king dies? Then you're back to square one. So what Kinne did, the founder of the physiocrat movement, Kinne was, of course, kind of a nut in general, and he was originally a physician, interested in the circulation of the blood, had written a lot of material on that, became the physician to the top mistress of the next king at that time, Madame the Pompadour. And so Madame the Pompadour got him into the court and so on. And he finally becomes the physician of the king. He's in great shape, of course, what then happens is he becomes, he gets interested in economics at the age of 60, I think, or something like that. And in Vincent's theory of laissez-faire, tableau, economique, and all the rest of them, a very mixed bag, and meets Marquis de Mirabeau, who had just written the best seller called A Friend of Man, which was written in the 17th century prose and therefore charmed every Frenchman, because it's just like somebody writing in 1840 prose now. And I had a best-seller, nothing to do, it was sort of a crackpot, and they two got together and bingo, we had a school of thought. One person is alone, not two people are ready to school of thought. Three, of course, is sweeping the country. So they start working on the king to convert him. They do very well, they have their own journals, they have their own book reviews and theoreticians and political theorists and all the rest of them. They do pretty well in converting other little kings over in different parts of Europe. And finally they get Togo, who was politically with them and free trade and laissez-faire, et cetera, and get him in his ministry of control or general ministry of economics. And he starts putting these reforms in, of course, in two years, they kick him out. The king, well, he's bested interest, started attacking him, this is monstrous, this is destabilizing whatever terms they use, and he gets kicked out in 1774, 1776. And when that happens, the whole thing is, you know, they figure that's it. And this is their big, they did convert the king and the sense they put Togo in and then they kicked Togo out and then now what? They had no strategy left. The French Revolution had arise, but at this time, all these guys have been discredited. Physiocrats considered absolute monarchists in the sense they were. And so it was unhealthy for any Frenchman to start praising either the physiocrats or even Togo, who was smeared tar with the same brush. So J.B. Say, who continues this tradition, then talks as if Adam Smith was a founded economics. It's one of the terrible things that he did. If you read, I would advise everybody, take Ricardo's principles of political economy on one hand and take Say's theory of political economy on the other hand and read both of them. It's like two different books. I mean, totally, they're absolutely, they both considered Smithians. They're both trying to refine us, chaotic Smithian canon, trying to figure out what Smith said, which is difficult to contradict himself every paragraph or so. And he wind up with totally different books. Ricardo was, first of all, Ricardo was unreadable, as you all know. Say is magnificently lucid, limpid prose, reflecting a clarity of thought. And Say is essentially a pre-Austrian. I use that phrase. Utility theorist, productivity theorist, factors of production, a hard money theorist, a supply and demand for money and a hard money theorist, all the rest of it. And Ricardo, of course, and Ricardo was as a cost of production or labor theory. I consider him a labor value theorist. That's the argument between Ricardians, I don't want to get involved in, but any rate. And essentially, Ricardo's methodology, I consider what I call verbal mathematics. In other words, as much as I dislike mathematical economics, it's better to have mathematical mathematics than to have verbal mathematics. We talk out the equations. If you're gonna have equations, you should at least have the symbol instead of describing them in words. Any rate, so we have two totally contrasting traditions. The only thing that Ricardo and say agreed on, of course, was Say's law, which basically Ricardo had taken over from Say. And the one thing which both schools of thought sound on, namely an attack on the people who worry about hoarding and spending and leakage of savings, that sort of thing. So before, yeah, I also want to talk a little bit about one of my favorite, I wouldn't say favorite people, I don't know the most interesting people in history of thought is James Mill, not John Stuart, the sort of, you know, the namby, pamby, eclectic, mush head. I'm talking about his father, he's really a great, tough character, rigorous, tough, a real cadre type. And you get James Mill, and first of all, how does Smith the sense through, Smith didn't have any followers particularly. First of all, both of nations was not a big hit at the very beginning despite the propaganda, it got tepid reviews, nobody paid much attention to it. Then about the early, about the mid 1780s, William Pitt, the younger, praised it in parliament, that was, I mean, he was going to be prime minister and he was a big shot, he said, it's great book. Then it becomes a fashion and then everybody starts talking about it. The only real Smithian disciples, Dougal Stuart, who taught at Edinburgh, and Stuart had a bunch of disciples around the 1700s. Stuart didn't, excuse me, 1800s. Stuart didn't write about economics or talk about it. In the 1790s, because there was a crackdown, those of you who think that England has always been a, Great Britain has always been a fountainhead of liberty, might get me in for a shock here. But England starts the war against France, which lasts for about 24 years or so. And a process cracks down on all the classical liberals and radicals who were considered pro-French. And so all these guys went to jail and so there was a reign of terror, white terror, not red terror in Britain. So it was unhealthy for Stuart to say anything about economics. Only about philosophy for about 10 years, which he was equipped to talk about. So in 1800, things began to loosen up and he starts writing about economics, but talking about Turgo even, and Smith and so on and so on. And then he gets a whole bunch of disciples around him from 1800, 1810. And a whole bunch of people then left for England, for reasons you'll see in a second. James Mill, Scottish, John Ramsey McCulloch, Scottish, Francis Horner, a whole bunch of them. The reason they left around 1810 is because Stuart retired before he died is because the climate became unhealthy for moderates, so cool. And Scotland by that time, the fundamentalists or the evangelicals took over the Scottish church at long last. They always been a majority, just they hadn't got the levers of power. They finally got it. In 1810 they purged all people who were not fundamentalist Calvinists and so or evangelicals. And so all these guys found to not find a spiritual or intellectual home in Scotland. They left for England. They became penalists, whatever. Mill became a freelance writer for many years, which is pretty difficult at best, certainly at that time. So James Mill comes to England and carries a Smithian doctrine, et cetera, and becomes extremely bright. And he first of all had no money. So he's trying to find rich people whom he will tell a real big shot and the greatest people of all time types. He finds two people. He finds Bentham, Jeremy Bentham, who was a wealthy elderly eccentric and one of the founders of Utilitarianism. He latches on to Bentham. Bentham had a whole slew of secretaries. Remember those days there was no Canon PC copier. So he was writing scribbling stuff and everybody had to transcribe it and to figure out what he said, all the secretaries. So Mill becomes a secretary and starts shaping him up. That's the whole interesting saga in itself. At any rate, because the two are intellectually temperamentally incompatible, Mill being extremely well organized so a person dictates, tells everybody what to do, you know, the type, tells his wife what to do, tells his kid what to do, tells his friends what to do, everybody else. And he's trying to tell Bentham what to do. Bentham was totally disorganized. You will finish this chapter tonight, that sort of thing. Bentham wants to write about something else as a young pop and that sort of stuff. Anyway, they continue this way for quite a while. Bentham proclaimed himself a Benthamite in economics. All he does, all he says in philosophy is to Bentham. It's not quite true because he convinces Bentham to become a pro-democracy instead of being a Tory. So then he finds another guy in economics. He's interested in economics. He's interested in everything, Mill. He wrote on every topic, almost under the sun. Psychology, logic, history, everything else, everything else. So he's interested in economics. He discovers a guy, wealthy, young retired bond dealer, David Ricardo, who had written some good stuff in monetary theory. He says, look, you're gonna be the great economist of the movement. You're my hero in economics. Write the economics book. And he starts forcing him, quote unquote, nagging out on the right, this economics book. And he writes, he keeps changing chapter. You know, Ricardo gives him the chapter, Mill rewrites it and stuff like that. So we now find more and more that much of the stuff in Ricardo, I should say, is really James Mill, fold it in. And Mill keeps saying, I'm only a Ricardian. I'm only a Benthamite. I think, again, I think the answer is monetary here because Mill had no money. These other two guys had a lot of it. So he was telling them, you're my guru. In the meantime, I'm really feeding them his doctrine. At any rate, so Mill was the one who discovered the theory of comparative advantage, even though Togo had some of it already, as a reason for international trade, basis for international trade. And Mill, I say, and also Mill was the one who, yeah, even though he really sort of pushed Ricardo into putting it in, Ricardo wasn't very interested. Mill, of course, discovered, says, well, that's all right, I mean, from say, and feeds it to Ricardo. And then he tells her, after Ricardo finally finishes the book, it's like, okay, now I'm gonna retire my country home. No, no, you're gonna be our hero in Parliament. You're gonna vote for Parliament, you're gonna go there, you're gonna be our radical leader, and so on and so on. At any rate, one of the important aspects of this is that when, the reason why Mill trained his kid in the famous ways which you all know about, is brainwashing a form of education. It's not because Mill wanted to test his psychological, his educational theory. Mill had a specific purpose in mind. He was the leader of the radical cadre of philosophical radicals. His kid was supposed to be a successor, like dynastic success, okay, kid, you're gonna be my successor. You're gonna be a benthamite in a recording, you're gonna be my parliamentary leader. And the kid, of course, buckled under the strain, as I guess anybody would. And the kid was then leading a double life. While his father, for example, while his father was still alive, he wrote a pro-bentham article signed by his regular name, John Stuart Mill. At the same time, he writes an anti-bentham article and they're suiting him. I mean, the guy's obviously cracking here. So, at any rate, John Stuart, the reason why John Stuart Mill becomes important is because by 1830, after Ricardo dies about 1823, by 1830, recordingism is shot. I mean, I don't know, it used to be thought that recordingism dominated British economics forever. It didn't. It died out by about 1830. It was riddled by pre-Austrians like Samuel Bailey, by other people. The whole system was in chaos by this point. And things were going pretty well because there were sort of pre-Austrian types, like Bailey, like the Anglo-Irish people at Trinity College Dublin doing some good utility stuff. So, John Stuart Mill writes his book on logic, I think 1843, Treatise on Logic. And Schumpeter points out, probably the only book on logic, whichever was a best-seller. I mean, it's pretty weird. I'm kind of thinking of it as a big best-seller. It was a big coffee table book. Sort of like the future shock is now. There was Mill's Treatise on Logic. So, by the time he wrote the Principles of Political Economy in 1848, he was a big shot intellectual. Very much like Keynes, as we'll see later in the week, was going to be a towering commanding figure. So, almost anything he said would be accepted by the scholarly public. And what he does is he brings back Ricardo. And he brings back, because it's a great homage to his father and to Ricardo and all the rest of it, works him back in. And from then on, after 1848, it becomes the big textbook. And the book press is very well-written. I have to give it to Mill. He's one of the few people in history who thought it was unsystematic and confused and much heady, but his style was very clear. I can't think of any, very many other examples of this. Anyway, so this is established as the economics now through Jevons and the rest of it. And that's not the end of it, because when Marshall and the Austrians finally come in and established Austrian economics, Marshall performs what I think is one of the most evil, not consciously evil, perhaps, but objectively evil pieces of work in history of thought. He allegedly integrates Austrian economics into British economics and does it by trivializing it. In other words, he says, well, yeah, the Austrian thing is pretty good for consumption and for mathematics and margin of utility and all that. And we shove it aside in some little appendix. But the rest of it, the really important, the term of the value, of course, is cost. It's the two blades of the scissors. Two big metaphors here, the two blades of the scissors, where one blade is the utility blade, which is really unimportant. And the really important blade is the cost blade, because why? Because that's the long run blade. See this short run fripper is unimportant. We're back to the whole Smith Riccardo stuff again. And also the other evil metaphor is the waves on the ocean, where the daily prices, the variation of prices is just, it's like waves on the ocean level. See, it's unimportant. Who cares about this little wave here? And the important thing is the actual level, which is sort of like the average or whatever it is. And so the important thing is the long run normal, which is supposed to be the real, underlined, basic reality. So with Marshall allegedly incorporating Austrian economics and trivializing it and really bringing back Riccardo, he sets then British economics from then on. When I was going to graduate school in 1940s, late 40s I asked my professor history of thought, I'm gonna show him Marie's Clark. I didn't know anything about Austrians at all, of course, at that point, I didn't realize I hadn't been enlightened yet. And so I said, should I read, should I read Jebens and the Austrian? No, no, you don't have to read them. They've already been incorporated. Anything good of them is incorporated in Marshall. And so that was the official doctrine, Marshall, everything good is in Marshall. And that's it. No need, young fellow, to trouble your head with other peripheral matters. So unfortunately, there's one thing that Marshall and Mill did not incorporate from Riccardo. I've already said that the one good thing that Smith and Riccardo had was the anti hoarding and worrying about leakage of savings and all that. Mill, unfortunately, didn't have that. Mill, even though Riccardo was definitely a currency school economist, in other words, believed that the cause of business cycles and inflation was an increase in money supply. Riccardo was trying to get the money supply so as to be like the gold standard, in other words, to try to eliminate the influence of paper credit, bank credit. Mill did not adopt, Mill adopted a banking school doctrine and was Mill's view was that business cycles were independent of money. Money is simply a passive element and was caused by speculation, by crisis of confidence, et cetera, et cetera, which of course pays the way for Keynes because Keynes, you know, animal spirits and speculation were the rest of it. So unfortunately, the one good thing that Marshall could have incorporated from, I mean, Mill could have incorporated from Riccardo, he didn't. And since Mill didn't incorporate, Marshall didn't either, since Marshall was simply reestablishing Mill. For any rate, we have then, we have then an history of thought, kind of, I hate to say this, kind of a mannequin view here. In other words, instead of a wig theory of history of thought with everything going on and turning it up into the light, with everybody contributing his or her might as Greg Marshall, truth, we have really two theories, two basic traditions, contrasting traditions. The scholastic, one of the scholastic French, Italian, Austrian tradition, which continues on, I should have said after say, it continues on in Boston on the other French economists who have been, have not gotten their really fair shake as theorists who are not that bad as theorists as they usually depict it. And they talked about demand and utility, they talked about services, intangible services as the key and not physical quantities of product. Anyway, that's one theory, which then gets incorporated into the Austrian tradition. And the other tradition is the British Calvinist, at least inspired Calvinist, Smith Riccardo, Marshall, and then on into Keynes. So these are two very contrasting kinds of traditions. So obviously I think the first one is correct, the second one is incorrect. If you want to, you can even go call them good and evil, but I will forswear that from any sensibilities about value of freedom here. So you have, so these are some, so you have clashes back and forth, you have ups and downs, and the contests or the influences of each school on another. And also I think another thing should be mentioned here about Calvinism and Catholicism, et cetera, is that one of the reasons why the Austrian, this has also been discovered and talked about in recent years particularly, first with Couter, and recently a very interesting book edited by Grommel and Grossel, excuse me, Grossel and Smith, called Austrian Economics, which is a badly titled because it's really Austrian philosophy and it's influenced in Austrian economics, how Austrian economics got started. And what they point out is that the, of course in Germany, which was essentially Hegelian from 1820s on, 1830s on, and therefore became a historical school approach, not interested in economic theory at all, but I would call it economic theory. And the English, at least originally interested influenced by Calvinism, and Marshall, by the way, if you're reading Marshall, you still have this evangelical Calvinist kind of attitude, even though he himself was by this time an agnostic, typical Victorian agnostic. If you read it, just filled with moralist moralizing constantly. At any rate, and the Austrians, however, were not Kantian, they were being Catholic. When they were Aristotelian, they read Aristotle through by 1900 or so in high schools and second law, high schools were sort of slightly different from our high schools now, as you can imagine. They also, one of the key figures who became the most important philosopher in Austria was Franz Brentano, who was an Aristotelian realist and originally a priest in South Germany and then moved to Austria and left the priesthood, but still continue to basically, basically Aristotelian realist tradition. So Brentano was a real big shot in Austria and everybody read him and he sort of infused the Austrian environment. What one of these guys, either Smith or Glossel does in that book, it's a series of articles, they take a quotation from Manger, Manger's Principles, which of course is the beginning of Austrian economics about epistemological quote about essences and so forth. And then they quote from Brentano, it's almost word for word. And it's a very similar kind of insight or analysis of the social action and so forth. So it's a very interesting portrayal. And once again, it sort of rounds out the picture of both religious thought and other kinds of thought permeating social and economic thought. But I think one of the problems in general, this has been my hobby horse for quite a while now because I got interested in this one, I was dealing with American history or history of American thought. And I found out that all the progressive theorists, progressive economists, from Elyon down, Richard T. Elyon down, a whole bunch of them, including Irving Fisher and Wesley C. Mitchell and I mean the whole gang, they're all born in rural New England or New England ancestor type homes. They're all post-millennial pietists, they're mothers, their daughters are preachers, they're strict sabbatarians and there was anything on Sunday except going to church or praying or reading the Bible was evil and sinful. And this whole approach permeates status thought, status of economics and status of social science in the late 19th, early 20th century. And there's reasons for this that sort of, we'll only go into here because it's kind of tangential. But the point is, the problem here is that modern historians tend to be secular, secularists, there's nothing wrong with that but if you're trying to interpret the past, past thought or past action or whatever, you don't realize that most people in the past were governed by religious values and religious doctrines, you totally lose the point. You don't understand what's going on. And I think until mid 20th century, America or England, most people have been deeply religious and this is influenced, a lot of this is influenced their social, thought, economic, thought, philosophy, et cetera. Even now, of course, now with Homania et cetera, we now of course realize that even the 20th century this is going on is important religious influences on doctrine and general and actions, social action in general. Okay, I think my voice seems to be collapsing, so I think I will, and now it's only a couple of minutes and we're gonna have questions or whatever. Thank you. Thank you. Yeah. Would you please comment on the validity of Sey's law? Well, I think it's certainly valid. Basically, I mean, first of all, when you have in Sey's law is that the, you say to not come to a point and say, this is my law, okay? This is, of course, a lot of more recent invention. A great book on this is William Hutt's book, The Reconsideration of Sey's Law, which points out that Keynes misstated it, whether they're liberally or not, this is saying, consider it. Keynes stated it as saying that the Sey's law is saying that every supply creates its own demand. Look at it that way, it looks like I'm totally idiotic. If somebody has a supply, increased supply of strawberries, this somehow creates a demand for strawberries. This course is not what he said, but basically what he said was every supply constitutes a demand, every supply, one thing constitutes a demand for something else. Now, one of the things you can demand, of course, is money. And Hutt, of course, goes into this at some, he's the preeminent theorist on this, an analyst on this, goes into this, and if you demand more money, okay, if you notice if your demand for money increases, well, so what? What happens then is a price is full and prices fall, and then what? What's supposed to matter with that? In other words, that means if prices fall more in consumer goods than in capital goods, and as a matter of fact, Kutugou went into this also, that it's possible prices fall more in capital goods than in consumer goods, and there's no problem at all. So if they fall more in consumer goods than in capital goods, it means that the businessmen have unwisely built up, bid up their costs or wage rates or whatever, too high for what the consumers are willing to pay. And the question is why do they forecast badly? In other words, then the question becomes, what's the, how is it that people who are trained for pretty good forecasters in general suddenly find they can't forecast, there's a sudden cluster of a bad forecast. So then you say, well, there's a reason for that, intervention on the market or whatever. I mean, in other words, if you save something, it's gonna be spent on something, either it's gonna be spent on investment, go to our own more, increase the cash balance. I think that the Austrian rule influenced by Aristotelian philosophy had no problem with that, especially when you hear Mises talking about human epistemology. It's also realistic to Rand's paraphrase. But at the same time in your chapter in Dolan on great theology, you didn't mention that Mises's concept of the logical structures of the human race was Kantian. Could you comment on that? Because I don't understand that at all. Well, I think it is, I think the idea of laws of thought, I don't think it's Mises as Kantian. And that's, one time I asked him this, whether he considers himself Kantian, he was very, anyway, nobody said he was really utilitarian, he was really a puristist. So you have to interpret one way or the other. I think he's Kantian on laws of thought that cause and effect our law of thought. You have to believe in it for that reason and so forth. I don't think there's too much of a problem with being Aristotelian, I think you can easily take that over and change it a little bit. So I'm not sure that Mises himself was influenced by Aristotelian philosophy. Certainly I'm sure the Manger was and Bumbabra was. By the time Mises came in, it was a later generation. And I'm not sure of the same sort of influence hell. Yeah, pretty. You didn't mention anything about Bentham's great idea about the apopticon that was this also influenced by the Calvinism or post-Lillian. No, no, I don't think Bentham was a bias. Now Bentham was just, I don't think Bentham was a Calvinist. The reason why Bentham was originally a Tory and then became a Democrat, Milo was able to talk him into being a Democrat was because Bentham's great plan in life, his great shtick, so to speak, which he wrote a lot on and spent a lot of energy on was the so-called panopticon. Bentham might apologize to a legion, claim, well, it was just an idea of prison reform where you can watch the guys, one warden can watch every prisoner through one way mirrors the warden sits in the center and that sort of stuff. That wasn't it at all, because there's a great book on this by Douglas Long called Bentham and Liberty, which goes into this whole thing. Bentham wanted to incarcerate most of the British nation. I mean, he changed his views from time to time. It was basically from a third to five, six of the British people, all the poor workers, the school kids, addition of prisoners, vagrants, almost everybody, right? So, and his idea was all these people would be forced to work at what he called this. This is really like utilitarianism run riot. That's a beautiful argument against utilitarianism. Just mentioned Bentham and what his view was because everybody'd be sitting there. They will be surveilled or surveyed, surveilled. And because everybody would be looked at through a one-way mirror and they'd never know when the warden was looking at him. But of course, it's always a subject of surveillance, which Bentham was an ideal form of life. But he always went under surveillance. And then you let the guy figure out what the maximum amount of work he can make, like forcing the work 18 hours a day, sleep six hours, he changed it. So he changed his other addition. He'd say, oh, I think it was six and a half or five and a half. Try to figure out the scientific minimum amount of sleeping and keep working the rest of the time. And then you're forcing the work, right? Everybody's forced to work. Where does the money go? Where does the product go? The product all goes to the warden. Who's the warden or the head of the Panopticon, which covers the whole country, eventually the whole world. The Panopticon is supposed to be owned by Bentham. That's the great, that's the final bottom line of this thing. Bentham is supposed to get the chartered or run everything. All factories, workshops, schools, and Bentham would get the product. Bentham would be the slave master. So a proprietary slave master of this whole bit. So he was peed because the Tory government wouldn't pass this, you see? And so Mill said, look, if Democrats under democracy are not getting any worse than this, right, okay, so we'll try democracy. It was basically the mechanism. Maybe democracy will go full for this. That was Bentham's big shtick. That was his great love of his life. I mean, real nut, let's face it. Yeah. I'd like to ask you about Mises' views of utilitarianism. There's a passage in Mises' theory and history book that always puzzled me. Mises speaks of utilitarian philosophy as being an individualist philosophy. That passage seems to speak very favorably about utilitarianism. But he doesn't really explain exactly what he means by utilitarian theories. To put the best face on it, okay. I think Mises can set himself a Bentham follower, utilitarian, in many ways. Put the best face on it. Everybody, each individual has goals he or she is trying to achieve. And they cooperate, the best way to achieve them is to cooperate with everybody else, and the vision of labor and all that sort of thing. And through that, and with property rights, and so each person will achieve the maximum standard of living and happiness. It's not, I mean, first, I see on one level, it's not so bad. It's only when you look in the utilitarianism a little bit further. You see there's a lot of holes in this argument. The greatest good for the greatest number, as Felix Adler said many years ago, suppose you remember the lesser number than what. So, but I mean, if you look at it on this very broad level that everybody's getting their utilities maximized, and if you don't interfere with everybody else, it's really better for everybody else. You can sort of pass through it if you don't concentrate on it very much. Mises was not a professional philosopher. He didn't really, he was an economist and a methodologist in economics. So he didn't really go into that much. But I think his solution eventually failed, of course. I mean, for example, I'll give you an idea of this. Once I had a discussion or debate with Mises in a seminar about price controls, his argument was, his argument against price controls was, he was not, he didn't want to impose his own values. He was just a scientist, verified scientist. But he's pointing out that if you have price controls, you'll create shortages and so forth to such an extent that everybody who now favors it will be against it. Now what you can point out is the economist becomes a technician, sort of a verified technician. Not that he was verified as a person, but as an economist, they can point out that everybody's goals will not be achieved and therefore they can all be against it. That was his argument, that was his value-free argument against price controls. So I raised the point, well look, supposing you know this, supposing you say, well, I don't care about the short, about the long run. I'm a short run type, I've got a high time preference. But how about the future, right? How would shortages, I'm on my mind now, or suppose that you're gonna be a member of the price control body, you have a brother-in-law who's gonna be the head of it, you're gonna be a big shot on it, okay? Or supposing you like shortages, supposing you're a Galbraith type who wants everybody to suffer, right? Thinks everybody, you and you out there are too damn affluent, we're gonna make you tighten your belt. So I raised this point at me and his answer was, kind of interesting answer as well, but in that case, you wouldn't be able to sell us the majority of the public, this kind of argument. Well, I mean, see, that's a different argument then, then he's not saying he's being value free, what he's saying is that if you use the argument, I want to crush affluence or whatever, you're not gonna convince the majority of the public, but you might be able to get a coalition if you take people who will be in the price control group and people who hate affluence, other people's affluence, and people who are whatever, short-term types, you might be able to get a coalition, but he wasn't reading it into the long lap. I mean, that's basically the difference. I don't think utilitarian arguments are enough because then you can go one step beyond that and then what, what standard to use for argument price control or whatever other policy you've got. Maybe, but it's tough to measure because me just believe you can't measure, you know, comparative measurement of utility, you can't compare one guy's utility and the other guy's disutility, so then what, you know? How does the majority of the argument enter in the price mechanism? What does majority have to do? Yeah, that's right. To pass the measure, to pass the price control measure. Let's say, as you say, he then shifted the argument to a legislative debate about who will win the election, so to speak, or win the Congress, which is really a different argument. Lots of things influence Congress or whatever. Okay.