 All right, I guess it's about 10, so let's get started. So thank you all for coming. I do have to apologize. I know I don't think I'm going to be able to put on as good a show as Judge Napolitano would. But hopefully, at least, I can tell you something interesting about what I think is one of the more intriguing problems in applied economics or applied Austrian economics. And that is the economics of war and of war-making. So this is actually a theme that has been studied repeatedly in Austrian economics over the years. Going back, particularly people like Mises and Lionel Robbins were very interested in it. But it's also not one of those topics that you see discussed very often in sort of conventional surveys of Austrian contributions to economics. But Austrians have been interested in this topic for a very long time. And so I'm going to show a little bit of that to you as we go through this lecture today. What I'm mainly going to be talking about is trying to give you a sort of survey of some distinctly Austrian insights into the economics of war. Because as I hope to show, Austrians do have some unique ways of looking at this problem and some unique ways of answering questions about things like what wars are, what makes wars possible, the economic causes of war, how wars are prosecuted, and hopefully something about how wars end and maybe could be prevented in the future. So there's a lot of Austrian writings on this topic, as I said, and I hope to get through those in the next few minutes. Another thing I do have to sort of maybe apologize for is that I am taking the most recent iteration of this lecture. In previous years, versions of this talk had been given by people like the late Ralph Raco and Robert Higgs, who are just terrific scholars and were real masters of this subject. Instead of trying to do a sort of a poor imitation of their work, I'm hoping to take a slightly different tack and talk about things, about the ideas of Mises and many of his students who are written on these subjects. So hopefully what I'll have to say will compliment their works and their talks. They've given it previous Mises universities. And if this is something that interests you, I really highly commend their, both their writings and their lectures to you because they're really fascinating and wonderful. In any case, I'm sticking mainly to the economics though and so I'm not gonna talk about some of the themes that others have focused on in the past, things like the relationship of war with civil liberties. This is obviously a very important topic, but it's outside the scope of what I'm gonna be discussing here. So I wanna begin by saying a little something about how this topic fits within this broader framework of Austrian economics. And to do that, I wanna draw your attention to this comment from Mises. This is from Human Action, but you can find many similar comments throughout his works. And Mises says that economics, at least until now, has been the best developed branch of praxeology, right? So you're familiar through your readings and through earlier lectures in this week with the idea of praxeology and with this Austrian interest in putting action at the center of economics and of social science. But when Mises puts it like this, he's raising a very, I think, an interesting question which is okay, so sure, economics is the best developed branch of praxeology, but what are the other branches, right? What do those look like exactly? What goes into them, right? Sometimes people use economics and praxeology sort of interchangeably, but they're not interchangeable, right? Economics is just one part of this broader method of approaching social science questions, right? So what else might be included within this broad framework? And here's one suggested schema from an old Rothbard article in the American Economic Review. And right away, you can see that from some of these things that what Mises says is correct, it does seem like this part B, the economic part, the specifically economic part of praxeology, this is the most, the best developed, right? It has the most sort of fields and subfields and we have a good idea of what goes in there. But then there are also some of these other categories that Rothbard suggests, including the theory of war, the theory of hostile action. So in addition to being a part of economic analysis, applied economic analysis, the study of war is also an independent type of investigation that we can do by thinking through the implications of action and social cooperation and conflict and so on, right? Note that for Mises's main interest was in the first type of studying war. If you look at human action, for instance, Mises has a chapter on the economics of war and that is in the last part of the book, the part that deals with interventionism, right? The hampered market economy, right? And of course you can see why that would be, you know, why this sort of large scale violence that's usually prosecuted by states, why, how that would relate to more conventional economic interventionism, right? So in any case, there are at least two ways that you can think about how warfare fits within a broader framework of Austrian economics and I'm gonna hope to draw on a little bit of both of those as we go through this. So the first big question is what is war? How do we define it from an economic perspective? And war is not, unlike some other concepts, it's not a narrow, praxeological concept. It's the idea of war isn't written into the idea of action, right? Instead it's something more anthropological or historical that is we observe these types of conflicts in the real world and we try to categorize them, you know, come up with common characteristics that we could use to identify them and that's how we get our sort of broad historical understanding of what warfare is and that's where we're gonna be, where I'm gonna be starting today. And in this view, we could come up with at least three important characteristics of warfare in the modern era. First, war is purposeful, right? This is why it fits within a framework of action, by the way, because that's what action is, it's purposeful behavior. But it's important to recognize a purpose behind war because historically many wars were treated as inevitable or as somehow outside the realm of human choice, right? Sometimes this was for devious purposes, other times it was simply mistaken ideologies, right? For instance, an ideology of class conflict that asserts that modern wars are just the logic of the capitalist system or of imperialism playing themselves out and therefore are to some extent inevitable and can't really be controlled. These would deny the purposeful element in war making, right? And these provide one good reason why we need to take note of this. Second, warfare is organized, right? Wars take place over a period of time, sometimes many, many years, and they require an enormous amount of resources in order to prosecute, right? And what this means is that there has to be some kind of organizing agency that's responsible for planning and allocating the use of scarce resources, right? This, by the way, is gonna hint a little bit at some socialist calculation problem, which maybe I'll mention a little bit more in a minute. But the basic point is that somebody needs to be doing the wartime planning, right? However troublesome or inefficient or irrational it might be, somebody is going to have to be doing this, right? And that hints then at the third characteristic of modern warfare, which is that it involves at least one state. Now, an important point to make is that warfare is not unique to states, right? It existed long before states did, and presumably will exist in some form long after the last state becomes dust, right? So it's not going away anytime soon, but nevertheless, states do have a very sort of special relationship with warfare, right? And the reason is that this purpose and this massive organization and allocation of resources, human and physical, this requires something like a state, right? It requires an extremely powerful agency to do all this organizing and planning, usually without the permission of many of the people who are being planned and organized, right? So it's very difficult to get anything like this, especially on a large scale going, without some kind of agency that looks something like a modern state, right? And if you look at works in sociology and works on sort of the origin of the modern states, you can see this special relationship between states and warm making, you know, you have sociologists like Charles Tilly, for example, who argue that warfare is actually the reason for the creation of the modern state, because for millennia, practically, rulers have been looking for ways to finance these extraordinarily expensive military adventures, and it is very difficult to do that unless you have, for instance, a strong, dependable tax base, right? So people like Tilly argue that the modern state emerged as a way for rulers to finance military expenditures, right? By creating this geographical political area that they could then systematically tax over time and develop a more consistent stream of revenue, okay? Carvan Klauswitz, who is a name that you might be familiar with, famously said that war is the continuation of politics by other means, and that's what he's kind of getting at with this. Again, this sort of special relationship between states and warm making. Again, this has been known since ancient times. In fact, some of the ancients put it even better. I think this sums it up really nicely. War's the greatest affair of state, the basis of life and death, the doubt of survival or extinction, right? This is the logic of states and warfare, right? Warfare is always the last resort of any state when it comes either to defense or for the expansion of its own political power, right? So moving on to talking about the economic causes of war. Of course, each individual historical war has its own particular causes, right? But we can create some groupings and some classifications in different types of cause of war, and among these are economic ones, right? And so, of course, naturally this is the type that people like Mises tended to focus most on. And for Mises, when thinking about the cause of international conflict, the basic question was economic, and it was ideological, right? Economically speaking, the major choice that states are always having to make is between what Mises called autarky or the international division of labor, right? Autarky is economic self-sufficiency. It is, in a sense, the policy of mercantilism, of economic nationalism, a policy of anti-free trade, essentially, right? And policies that are particularly opposed to the free movement of capital and labor, okay? So these types of policies and the ideologies behind them are for Mises not only deeply illiberal, but also opposed to economic common sense, right? Because autarky is a recipe, essentially, for poverty, whereas the international division of labor and embracing a global free market economy is the only reliable path to prosperity and also the only reliable path to peace, right? And I'm sure you can see how the logic of this plays out. When you have domestic protectionist policies that are designed to protect domestic producers at the expense of everyone else in the world, particularly foreign producers, it's only natural that this would create tensions and conflicts in the political realm that could grow and eventually boil over and become actual military conflicts, right? Protectionist policies promote the prosperity of a small number of privileged groups at home while directly damaging the prosperity of many other groups abroad, right? So for example, you can understand why if you were a poverty-stricken consumer in a foreign country unable to make a living because you can't sell your goods across borders, why that would gradually turn into, you know, a great deal of political dislike and eventually tension and outright military conflict, right? So for Mises, this is the central economic question, right? It's not a question of sort of broader class interests or something like that. It's really about economic privilege and the people who have it and the conflicts with the people who don't, right? This is a very nice quote from Mises on this topic when he says that economic nationalism and necessary complement of domestic interventionism hurts the interests of foreign peoples and thus creates international conflict. It does this through customs, migration barriers, foreign exchange controls, quantitative trade restrictions and expropriation of foreign investments, right? In other words, the myriad of different types of price and other economic controls that states have at their disposal, all of these go into creating a massive potential for global conflict, right? So this, for me, this is what's behind the economic causes of war. Now, once a war does break out, it sets in motion a chain of economic events that not only have a disastrous effect on the economy, but they create a whole range of problems that governments have to try to solve, right? About how they allocate resources and about how they continue the conflict and eventually try to win it, right? With win in quotation marks, right? So this gets us to the problem of war finance, right? And once again, as I said, this is an ancient problem. It goes back millennia. But essentially any government, whether in peacetime or wartime, has essentially three options for financing any particular venture, right? And those options are taxation, borrowing and inflation. And each of these plays an important part in the logic of war making and in the logic of war finance. And as you see, there's a sort of logic to the way that governments change their attitudes towards each of these methods as a conflict goes on. So typically, governments in peacetime and wartime start with taxation, right? Again, this is one of those fundamental characteristics of modern states. So it's no surprise that governments resort to them very quickly when they need some quick cash, right? And you will see, you know, if you look at wars in the last century or so, particularly major wars, when they break out, they are shortly followed by significant changes in taxes, right? Whether it's a question of who's being taxed or a question of increasing particular tax rates, governments use both, right? The trouble with taxation that governments always face is that it is extremely unpopular, right? Despite all the, you know, the jingoistic patriotic rhetoric that you might hear around the outbreak of wars, once people actually have to start paying money themselves, they get a lot more skeptical about the value of the war effort, right? The reason for this is simple, right? People, other things equal, prefer to keep their money, right? And people notice very quickly once their tax rates increase, right? Once you, you know, it's very easy to see if your income tax rates suddenly double, that you have less cash in your pocket to spend, right? And as a result, your standards of living are going to fall, right? So taxation tends to be quite unpopular. So even though governments resort to it very quickly and sometimes even invoke extreme increases in taxation during wartime, there are some pretty hard limits to what any particular population is going to accept in terms of taxation, right? So this is a big problem that governments are always facing, right? By the way, just as a side note, I don't know if you know this, but this is where either withholding tax was introduced in 1943 in the middle of World War II. Governments needed to get around this taxation problem and they had sort of tried out the withholding tax in some earlier context, but it wasn't very widely used. But then in World War II, they needed to find a way to increase tax rates, but they needed to get past this problem that people, you know, at that time were mainly paying their taxes in like little installments throughout the year. So when the tax bill came due, like any other bill, you had to have actually saved the money and you had to be prepared to fork it over, right? So that's what people were used to. And to get around that and around the very obvious increases in taxation, the withholding tax was introduced because once tax withholding happens, you never get the money to begin with, right? It's deducted from your paycheck before you ever see it. And so it sort of feels like it's not really your money and that you never really owned it. So you don't feel the loss of it as much, right? And that actually has a profound psychological effect because it means that people are willing to accept much higher tax rates than they normally would if you first handed them a pile of cash and then said, oh yeah, by the way, now I'm gonna take 50% of it back or whatever, right? Another important implication of that is that you'll notice that the withholding tax did not go away after the war was ended, right? You know, it's still with us today and in fact is still used in most developed countries in some form or other, right? This gets at what's sometimes called the ratchet effect of government intervention, which I'll talk about more as we go, right? Anyway, eventually taxation just isn't enough so governments need to find another way to finance the war, right? So very quickly they turn to borrowing and borrowing can be a very effective method for raising finance. In the Second World War, I think the United States raised something like $185 billion just from the sale of war bonds, mainly to the American general public. They were the people who were most buying them. So we're not talking trivial sums here, right? There's a lot of money in this. But of course borrowing has its limitations as well, right? You can only sell so many war bonds to people and war creates some particular circumstances that can make borrowing difficult, right? You know, you can become a bad credit risk very easily if the war isn't going your way or if the major centers of finance are geographically separated from you or if they're on the other side of the war, right? There are all kinds of different reasons why borrowing can become very difficult war time, right? And sometimes, you know, borrowing even continues long after countries are really viable credit risks anymore, right? If you think about in the First World War, which essentially bankrupted Great Britain in both world wars actually, the United States was a major lender to all of its allies and really helped keep them going and keep them in both of those wars, right? Even though they really knew that there wasn't a way for their allies to pay them back after the war was over. And that's one reason why very shortly, especially after the First World War, thoughts began to shift very quickly toward a restitution that could be gained from the opposing powers, right? One of the more interesting anecdotes about borrowing is a method of war finance that I've recently discovered. Because it's the centenary of the First World War right now, there's a lot of new research going on about it, including some really fascinating stuff coming out of the Bank of England about how Great Britain financed its entry into the First World War. And in particular, some of the researchers at the Bank of England have covered this very interesting story about a rather extraordinary deception that the British government and the Bank of England engaged in in order to keep their initial war effort going. So in 1914, as the sort of autumn and the winter begin to arrive, people start to realize that this war is not gonna be over in a couple of months like we thought, it's gonna drag out. So the British government set out on this campaign to raise an extraordinary amount of money through the sale of war bonds, about 350 million pounds worth in 1914 pounds. So an extraordinary amount of money. And the plan was for the British banks to pick up some of those bonds, sort of enough to get the ball rolling. And then the vast majority of the bond sales would be to the British general public, right? And they assumed that of course, people are very nationalistic and patriotic, so of course they're gonna pick up the tab for all of this. But the plan ended up being kind of a disaster, right? Because basically nobody bought the war bonds. There was very little interest in this among the general public. And what interest there was tended to come from things like groups like shipping companies who were suddenly booming because they were involved in the war industries, right? But the private interest that the government had hoped to provoke never really materialized, right? So they had this huge problem, right? They were sort of poised for disaster because they hadn't been able to sell all of these bonds and get the revenue from that. Not only would it have hampered the war effort, but it would have driven the prices of the outstanding bonds down because people would see there was no interest in them. It would have made them more difficult to raise money in the future. And just in general, it would have been a PR disaster, right? Because then the Germans would have been able to say, look, England, you might as well just quit now. It's obvious that your heart's not in it. You can't, you don't even wanna finance the war. So just step out and make a separate piece or something like that, right? So the government was poised for disaster and thus also the war effort. And so the Bank of England came up with this scheme to make it all work. So what they did was they essentially took a massive amount of their own money, a couple hundred million pounds worth, and they advanced it to two or three of the executives of the Bank of England, right? And then those executives went out and bought all of the war bonds in their own names, right? As private individuals, right? And in their own names so that nobody would know that they were actually being effectively bought by the bank, right? So they did this and then the bank just held the bonds on its own balance sheet, right, as its assets, but they didn't put them under the usual category of government bonds, right? Because again, people would have got wise. So they just put them over on some sort of like miscellaneous assets, you know, which suddenly increased by a couple of hundred million pounds, but nobody noticed, right? And then the British government was able to say, look at the extraordinary success of this bond sale. This is why, you know, like clearly everybody wants to be involved in this fight, right? So it ended up working out very well for them. Keynes, who was working in the Bank of England and you won't be surprised to learn was one of the people who was sort of in the know about this. He called this a masterly manipulation of public policy and public opinion, right? So anyway, I just found that story to be quite interesting. In any case, borrowing has its limitations. You can only do it for so long, right? So that gets us to the third factor in war finance, which is inflation. And I will come back and talk about this more specifically because it's sort of a topic in its own right. But again, as you can see in peacetime as in wartime, inflation is a very easy choice for governments, right? It seems like it's costless. Yes, people are sort of aware that over the long term, prices might rise and you might have some bad effects. But for politicians who are ramping up a war effort, these concerns seem to be very, very distant, right? It seems, this is something that somebody years down the road, they can worry about that. So governments very easily resort to inflation and there are many, many cases of this. The famous one I think that's in all the money in banking textbooks, the Continentals, right? The paper money issued during the American Revolution to try and finance that, right? It was very quickly inflated and became worthless. And there are many more cases that you can point to throughout history. So inflation, it seems like a really good idea at the time but it has these short and long term effects that can actually end up being kind of disastrous. In any case, none of these methods is really workable or is really a stable method for governments to finance a large scale war over a large period of time, right? They all have their limitations and so in wartime governments tend to be involved in this complicated dance where they're constantly trying to figure out which method they should lean on most right now, which is the least likely to lead to a collapse of the war effort because that is what happens if you try to lean on any one of these too much, right? And so governments are constantly shifting back and forth between emphasis on different one method and usually using some form of them all at the same time. So once governments figure out a way to finance the war, once the war actually gets going, they need to mobilize, right? Suddenly governments are in desperate need of a massive amount of physical and human resources that they can pour into the war effort, right? Troops need to be outfitted, armies need to be put into the field or whatever variation of that technologically, drone fleets need to be assembled or whatever people use these days. Defenses need to be strengthened, but the point is a massive infrastructure needs to be in place for a war effort to really get off the ground, okay? And because of this, it's the whole process of war planning is this big logistical nightmare, right? And it's a problem that is very much subject to the socialist calculation problem. As you probably know or you've figured out, the economic calculation problem isn't just about socialism, right? It's about any kind of resource allocation that occurs without access to a system of market prices, right? And so it's a very much a problem of ordinary public policy as well, including military operations, right? For which there aren't market, true market prices for any of the goods that are involved in these sorts of military operations, right? So that's a sort of background of this, but one of the distinctly Austrian ways that you can look at the way that wars operate is by looking at capital and by looking at the idea of the structure of production, that Austrians have been so interested in, right? This sort of delicate interweaving of all these heterogeneous capital goods that make up the whole structure of the economy, right? You won't be surprised to learn that war has some pretty profound effects on the structure of production, and it distorts it, even in some cases, destroys it in several different ways, okay? So in general, you could say that war is basically a massive diversion of resources away from the paths that they would have taken in peacetime, right? I mean, that's sort of definitionally true of warfare, but you can look at its effect on the structure of production in at least a couple of different ways. I'll call these a horizontal way, and a vertical way, right? So the first effect is horizontal, and this is a shift between different stages of production, right? So as soon as war breaks out, suddenly government needs a massive amount of war goods, right? You know, guns and ammunition and tanks and the various other goods that go into making up a war, right? So these need to be produced, but most economies aren't usually producing massive amounts of these goods, and that means the production has to be shifted, right? And it has to be shifted from ordinary consumer goods production into war industries, right? So this is a horizontal shift, right? The capital, the labor that usually produced just ordinary consumer products and consumer services suddenly shift over, right? The consumer production decreases or is totally eliminated, and everything gets pushed into war production, right? Again, you know, the sort of ordinary products of war, right? Guns and ammunition and the massive infrastructure and physical supplies and labor and so forth that militaries need to operate, right? So this priority of war over consumer production, the immediate effect of it is that living standards are going to fall, right? There are going to be shortages of consumer goods, and you know, all those things that make up sort of quality of life, right? So living standards are immediately going to fall for people, and this is going to happen over time as well, right? Because existing stocks of consumer goods will be shifted over to military use, and the production of future consumer goods is also going to decrease, right? So if you think about this in the case of the US during World War II, you had a massive, massive decrease in the productions of all things consumer, right? You know, a company like GM, for instance, completely stopped the production of civilian cars during the Second World War and only produced military vehicles, right? It only took a few months after Pearl Harbor, actually, for the entire civilian auto industry in the United States to essentially disappear and become just one massive war industry. By the time, by the end of the war, there was one Chevy factory that was producing all replacement cars for all automobiles in the United States, right? So that's one good. In 1942, the sale of vehicles to non-military personnel was actually outlawed completely, right? And it became illegal to store new cars outside, right? So you couldn't put your existing stock of cars outside, like in advertisement, you had to store them inside so that people wouldn't be buying them, right? So it wouldn't be invoking too much consumer demand, right? So this is the first very important effect that war has on the structure of production. This very simple switch from producing for consumers to producing for the war effort, right? And this one's a little simpler to see. But there's a more difficult, more sort of complicated, unseen to use Bastiat's word effect on the structure of production as well. And this is when production shifts from what we call the higher stages of production to the lower stages, right? So if you think about Menger's model of the structure of production where you have the lower stages, which are producing small scale capital goods and consumer goods, and then you have the higher stages, which are the really advanced capital goods and factors of production. The outbreak of war is gonna tend to shift the structure of production down toward those lower stages, right? Again, the reason for this is that war requires resources right now, right? Mises has a great line where he says war can't be waged with future goods, right? It has to be waged with present goods, right? So you need the guns and the ammunition and the tanks and the planes and all of this. You need it right now, right? Because it's not gonna do you any good in the future, right? So because of this, the entire economy becomes more sort of present oriented, right? And you have these very high stages, capital goods and the higher stages of production, goods that are producing complex mining equipment and very advanced plants and factories, very specialized goods. These aren't useful for the war effort, right? They can't be converted into assembly lines for ammunition and small arms and things like that. So they're either abandoned or they're simply just not replaced when eventually they wear out, right? They don't support the war effort so they're given a lot less focus, right? Instead, in those lower stages, every capital good that can be converted to war production is, right? Because you're gonna have, in the lower stages especially, goods that are a little bit more convertible, right? So you have the car factories and the aircraft factories that simply switch from civilian to military production, right? There's a cost associated with that, but it's smaller, right? And the conversion can be done, right? So everyone starts shifting towards these lower stages because that's where the resources are that are needed to keep the military effort going. The punchline of all this is capital consumption, right? So hopefully throughout this week you've already learned a little bit about how delicate the structure of production is and just how vital it is that human beings build capital and build a consistent, coordinated structure of production over time. That is the basis of prosperity, right? That is the explanation of how essentially development can happen and living standards can arise. So when you play with that and when you physically destroy it through the destruction of war and also destroy it economically by destroying the incentives for entrepreneurs to save and invest and build capital and giving a certain group of privileged producers the incentive to just massively increase their business by bidding for war contracts and things like that, the result is that the capital that ordinary people need in order to maintain the living standards this is going to be consumed, the living standards are going to fall, right? So it produces a war mobilization, produces a kind of crisis in the economy, if you will. That's not all that different from what you might see for instance in a business cycle, right? This is a different kind of example I wanted to give. Does anybody know who this is? No? It's Wilfred Owen. Well, it says it at the bottom I guess, so. Stupid question, huh? Owen is probably the most famous of the English war poets of the First World War and he has a very nice example. I take this from one of the stanzas of one of his poems. When he talks about the promise of cheap homes for everybody that we're going to get after the war is over but we can't build those right now, we don't need homes, we need aerodromes right now. And he's actually without knowing it talking about exactly the structure of production issue, right? The entire change of the economy to a war footing, right? The elimination of consumer goods, consumer durables, the shift of capital to produce these resources that are really only good for the war effort. So I happen to like this quite a bit. Again, here's another more ancient example of the same sort of thing. Punchline is that no country has ever profited from protracted warfare, right? So we've known this for millennia now. We just needed modern economics to come along and tell us why warfare is actually really a good thing. You just didn't realize it this whole time, right? Okay. In any case, so if the economic outlook of war is so bad, right? If it does produce a kind of crisis, how is it possible that wars ever happen let alone are carried on over a long period of time? How is it possible that anybody could stand for this? And the answer tends to focus on monetary inflation, right? I mentioned that I would come back to this before because it really is a sort of a topic in its own, right? Inflation is a time-tested method for not only continuing and supplying a war effort, but also for concealing its true costs from consumers. And this is the key element, right? Because people don't stand for this. As I said, no matter what your nominal ideology once you have to start paying the human and the monetary cost of a war, people's support for it tends to decrease quite quickly, right? So one effective way that you can conceal the costs of war is through various forms of monetary expansion, right? And in fact, if you expand the money supply, as countries very often do, right from the beginning of wars, you can not only preserve the illusion of prosperity, but you can actually make it seem as if the country is booming, right? This is one of the great myths, the myth of wartime prosperity. It's especially prevalent about the US during World War II. This is something, again, I'll reference Bob Higgs' work because he is the single economist who was the most to just completely demolish this myth that the US was really prosperous because of its entry into World War II and that World War II got America out of the depression and things like that. So it's simply not true. But monetary expansion is one reason why people have these wrong ideas about supposed wartime prosperity, right? I'll say also historically, one of the very first things governments do when war is declared is go off the gold standard, right? In the First World War, all the major belligerents did this immediately upon the outbreak of the war because they realized that, you know, without even the presence of, say, a gold standard or some other limit on the money monopoly, without that limit, or with that limit in place, it's very, very difficult to expand the money supply to the extent that governments need in order to finance their wars, right? So gold standard or monetary checks tend to be abolished right away as soon as the war breaks out. And then there are a couple of other ways that this monetary expansion has deleterious effects on the economy. The first, of course, is that they increase nominal prices and wages in the war goods industries. They tend to be the first receivers of new money. So they benefit from this simply because they have new demand for their products, right? So the merchants of death do really well from the outbreak of war. But there's also the more subtle Austrian-flavored part of the monetary expansion. And that is the Kantian effects, right? Because the issuing of new money also creates wealth redistribution, right? In this case, it's to the war goods industries, right? You know, the Lockheed Martins and so on of the world. And away from essentially consumers in the economy, right? People in other industries. And the further away your business is from the war industries, the worse the wealth redistribution is going to be for you, right? However, from an aggregate perspective, it can look like the economy is actually booming, right? Because many prices are rising. You know, businesses are gonna, especially in the war goods industries, they're going to be expanding, looking very, very prosperous. And as a general inflationary effect, even while the Kantian effects process is working out, there's still gonna be price rises in other areas of the economy as well. The stock market very often booms in response to these huge war goods orders and things like that. So again, it can all look on the surface like it's really good. But what's going on beneath the surface is of course there was just a monetary expansion, right? The real resources in the economy haven't changed. And in fact, they're actively being destroyed, right? As the capital structure is being eroded and being shifted into production of war goods that don't actually help consumers. Consumer goods themselves are being destroyed and their production is being severely curtailed and so on. So what's really going on is that real incomes, standards of living, and so on are falling. But the nominal picture, the superficial picture of the economy is it is actually doing pretty well. And this by the way is just one more reason why it's so vital to talk about all of the costs of war, right? Because at this point, I think people are pretty familiar with the human costs of war, right? We know about the loss of life and the loss of welfare from the direct destruction. But what we don't see, again, in St. Bastiat's Unseen, are some of these less obvious economic implications of how these wars are carried on, right? Once more, here's Mises. One can say without exaggeration that inflation is an indispensable means of militarism without the repercussions of war on welfare become obvious much more quickly and penetratingly. War weariness would set in much earlier. Okay. However, the negative effects of war on the economy don't just stop with some of these core issues. There's the broader implications as well, right? Again, as I was saying, Mises always stressing this fundamental choice that governments make, right? Is it protectionism? Is it economic nationalism and so forth? Or are you gonna pursue a policy of laissez-faire, right? And inevitably, if you choose the protectionist policy, policies of price controls, wartime controls over the economy, it sets in motion this other economic logic that Mises also analyzed, whereby government controls tend to accumulate over time. So if you know Mises' short essay, The Middle of the Road Policy Leads to Socialism, one of the examples that he gives in this essay are wartime economies, right? Which start out by trying to control just a few prices here or a few businesses there just to support the war effort. But then they rapidly run into shortages and all kinds of other economic problems. And so governments are faced with this constant choice, right? Do we try to, do we just take a step back, abolish the controls and move back toward freer markets? Or do we add controls to try and mitigate the effects of the first controls that we put on, right? And unfortunately, you'll be shocked to learn, governments tend to want to add on price controls, right? So control over the economy has this sort of cumulative effect, whereby over the course of the war, the problems get worse and worse, so governments are constantly struggling to find new controls, new regulations, new prohibitions, that they can put on consumer goods and on consumer-oriented production in order to support the war effort. And the result, what you get, is what's sometimes called war socialism, right? The wartime, the true war economy, whereby all production essentially you have a de facto system of central planning that exists with all production being directed toward the war effort, right? So this is actually what happened in all the major belligerent countries in both of the world wars, right? Even the ones that started out relatively free ended up with extensive systems of central planning by the time the conflicts came to an end, okay? What's interesting about war socialism is that usually the system of private property, free exchange, free contracting and so forth that existed in these countries before the war, nominally, all of that stays in place, right? There isn't a revolution, there isn't a new constitution written and a new era declared. Instead, this happens small, it happens a piecemeal, right? A little bit over time, it's cumulative and typically even though by the end of the war there's a de facto centralized control over the economy, nominally, all of these property rights and private enterprise and so forth tend to remain in place, right? And this is what Mises called socialism of the German pattern, right? De facto socialism, but with a sort of a nominal adherence to free markets, right? I also mentioned the ratchet effect. Again, this is something that Bob Higgs has written quite a bit about. I'm about this cumulative process of the buildup of government power and government control over the economy. The idea is that like a ratchet, wartime provides, gives governments a great excuse to increase its control over the economy and so governments take on massive war-planning powers and so forth. After the conflict is over, some of those powers get returned, right? And are abolished, but not all of them. There's always something that remains. So over time, government's control over the economy tends to increase, right? It has these huge upsurges and then it goes back down, but not quite to where it was before and then it goes up again and so forth. So the general trend over time is for government to become more and more involved in the economy, right? Again, Mises just puts it best, in the long run, war and the preservation of the market economy are incompatible, right? There is no way to preserve for any significant period of time these two demands, right? On the one hand, consumers for high standards of living and on the other hand, governments for war production for the military effort. Okay, so if we can say something a little bit about how wars, how they start, how they're prosecuted and so forth, what can we say about the end of war and what we could possibly do to sort of prevent wars in the future, right? So if we think back to one of the first things I said, which is the idea of purpose behind war, right? Mises put it pretty plainly, I think. He said, look, if war is purposeful, we know that there are war makers out there, right? If we wanna stop war, what we really need to do is eliminate the conditions that make war possible, right? We need to eliminate those motivations and those purposes that the war makers have. If we can do that, then we have a serious chance at peace in the long run. And for Mises, again, it's about ideology, it's about institutions, it's about embracing liberalism, the time-honored principles of laissez-faire and laissez-passe that allow for global peace, global economic cooperation, right? That's the key behind this entire thing. And as he said, the main thing to do is to discard the ideology that generates war, right? Ideologies of conflict, right? Whether it's classical Marxist class analysis or nationalist ideologies, racist ideologies, all of these different types of ideological views that hold conflict to be at the center of their analysis, right? Inevitable conflicts between human groups. The only thing we can do to prevent war really in the long run is to discard these ideologies and embrace a more thoroughgoing liberalism and a more philosophy of peace and of social cooperation and hopefully of prosperity because prosperity is the last thing that war ever actually creates. So, I think I'm out of time. So, thank you for your attention. Thank you.