 I'd like to talk to you a little bit about Austrian economics, a little bit about libertarianism, and a little bit about the history of how I met Murray Rothbard. It all started with Ayn Rand for me. I was a buddy of Bernie Sanders. We went to high school together. We were on the track team together. My views and his views were roughly the same on political economy. We were sort of pretty good friends, not bosom buddies, but good acquaintances, friends. We both graduated Madison High School in 59, and we went to Brooklyn College in 59 when we graduated high school. I was sort of a pinko commie like Bernie. Then Ayn Rand came to speak at Brooklyn College when I was, I don't know, I guess a junior in college. I came to Boo and Hissar because she favored free enterprise and everyone knows that free enterprise is horrible. It leads to poverty and starvation and misery. Then what happened is they announced that there would be a lunch in Her Honor and anyone could come even if you disagreed. I want to see if I can use my screen for one second. I want to draw you a picture of the lunch. It was a long, long table like this. Ayn Rand was sitting at the head of the table. Here's Ayn Rand. I'm going to make her not smiling. There she is. Nathania Brandon was sitting over here and Peacoff. This is Brandon and this is Peacoff and Ellen Greenspan here. Can everyone see this screen? Yes? Good. Okay. Boy, my handwriting is pretty crummy. In any case, I was relegated to the foot of the table over here and I'm smiling because I want to show that socialism is great. I turned to my neighbor and I said, socialism is great. Free enterprise is no good. He said, well, I don't really know that much about it, but the people at the other end of the table do. I went over here and I stuck my head in between Nathania Brandon and Ayn Rand. I said, hey, there's a socialist here who wants to debate someone on socialism and capitalism. They said, who is it? I said, me. I was maybe a junior in college and Brandon may be 35 and ran maybe 50 years old, but now let me get back to out of here. Brandon was very nice, very gentle and very generous. I said, look, there's no room at this end of the table to discuss these things, but I'll come to the other end of the table and talk to you about it under two conditions. What were the two conditions? First of all, I had to agree to not allow the conversation to lapse, but to keep going until we settled something and settled the issues. And secondly, I would read two books. And the two books he recommended were Atlas Shrugged and Economics and One Lesson by Henry Haslett. Well, I read the two books and I came to his house and to Ayn Rand's house. They lived in the downtown Manhattan in one of the high rises there. And I became converted. I was now a randroid or a randian or whatever you want to call me. I never really understood and wasn't really that interested in the philosophy or the metaphysics or epistemology or any of that stuff, and A is A sort of left me cold, but the economics I really liked. I was a Haslett fan. And Ayn Rand's Atlas Shrugged, too. Very good books. Well, then I went to the NBI, the Nathaniel Brandon Institute, and it was interesting, but it was sort of cultish. If you agreed with Ayn Rand that if you asked a question like on page 402 you said this, could you elaborate? Oh, that would be a great question. But if you said on page 402 of Atlas Shrugged you said this, but on page 789 you said that, how do you reconcile that? She would kick you out. It was the most amazing thing. So I had this sort of schizophrenic approach avoidance. These were the only free enterprise people I knew. So I'd go there and then I'd be disgusted with occultism and I'd be away for six months. And then I'd go back and then I was at Columbia University getting a PhD and Larry Moss was a fellow student of mine. He said, you must meet this guy, Murray Rothbard. He's an anarchist. And I said, what? An anarchist? I don't want to meet him. Anarchism is crazy. I was a Randian, remember? Now I have to show you my shirt where I'm coming from now, as you can see. I'm a Rothbardian in many ways. Finally, Jerry Wallows, Larry's roommate, and Larry ganged up on me. I remember we were standing on Broadway on 116th Street near Columbia. And finally they said, well, you've got to meet Murray. So I went and I met Murray. And that really changed my life. Murray was not a cultist. He would allow you to disagree with him. My big problem with Murray is stomach cramps. He was so funny. He would just keep you laughing for hours. And I'd go to his apartment and I would just laugh uproariously at his jokes. He was just so funny. And I remember when I first met him after, he converted me to anarchism in about 10 minutes, sort of using Haslitt against me. I mean, one of the essences of Haslitt is, well, competition makes a better product. The reason we have pretty good shirts and shoes is we have competition. And if you don't do a good job, you have to exit. And if you do a good job, you make profits and you can stay in the business. And I said, well, why doesn't that apply to, you know, you could see that it applies to the post office. Why can't you see that it applies to police or to courts or anything else? And in about 10 minutes, I was an anarchist. I had a lot more trouble with Austrianism because I was getting my PhD under Gary Becker and Jacob Mincer and they were neoclassical economists. And it was much more difficult for me to become an Austrian. And I'm going to talk about that in a little bit. But one problem I had with Murray was the stomach cramps from laughing. The other problem I had was when I first met him, I was reading a man economy in state. And man economy in state, as you I'm sure know, is one of the best books ever written. Way up there with human action. And I was sort of an insignificant little kid and Murray was this genius who just wanted to be my friend. And I couldn't wrap my mind around that because I sort of exalted him or, I don't know, I put him up on a pedestal and I wasn't able to be his friend, even though he wanted to be my friend. That only came many years later. Well, that's my introduction to how I met Murray. And now what I'd like to do is to talk just a little bit more about Murray and then talk a little bit about Austrian economics and libertarianism. Murray was not only an Austrian economist, he was also a libertarian. And putting those two together was something unique at the time. Nowadays maybe we don't appreciate it that much because we live in a Rothbardian world, at least at the Mies Institute. And not only that, but he also combined that with foreign policy. And Murray had sort of a left-wing foreign policy, namely non-interventionism like Ron Paul. And this was then seen as, well, you're contradicting yourself. If you favor free enterprise, you have to want to bomb the Russians or engage in imperialism. And also, what's this with legalizing drugs and legalizing prostitution? Those are left-wing kinds of things, and you're supposed to be a right-winger. And even nowadays we have the Federalist Society, which is sort of an amalgamation of libertarians and conservatives. And a lot of people think that we're just a branch of conservatives. And Murray was adamant that no, no, no, Austro-libertarianism is very different. We're not just a branch of conservatism. We're a unique, sui generis kind of operation. And even the word Austro-libertarianism is a little difficult because Austrianism is an economic discipline. It's a branch of economics or an economic philosophy, whereas libertarianism is not. Libertarianism is normative, whereas Austrianism is positive. So, yes, I think I would call myself an Austro-libertarian just for shorthand. But we always have to distinguish between the normative and the positive. And the normative is what's right and what's just, and that's libertarianism. Whereas the positive is what causes what? How do we understand the economy? How do we explain what's going on? So, let me just talk a little bit about libertarianism, and then I'll talk about Austrianism for most of the time, and then maybe have some questions or comments. Well, the way I see libertarianism, it's predicated on the non-aggression principle. You can do anything you want. Just keep your midst to yourself. Don't grab other people or their property against their will. You can grab other people and their property if you have their permission. For example, if we're in a boxing match and we agree and you punch me in the nose, I can't say, aha, assault and battery in it and want to put you in jail, because we've agreed to be, hit each other. Even say don't masochism would be okay between consenting adults. I have to tell you my SM joke, the masochist asks the sadist, beat me, and the sadist says, no. Well, maybe it's not that very funny. What do I know? I'm trying to channel Murray Rothbard and his humor, but I'm not doing as well as I could. The non-aggression principle, but the non-aggression principle is not enough, because suppose I grab one of your shirts. I just go over and grab one of the shirts that one of you guys are wearing. Have I violated the non-aggression principle? Well, it depends upon who owns the shirt. If you stole it from me yesterday, I'm just repossessing it, whereas I don't know those shirts from a hole in the wall. They're all your shirts. And if I grab them, I am initiating violence against you. But we need a theory of private property rights in order to determine who owns what. So the non-aggression principle is not enough. The other side of the coin of libertarianism is private property rights. And here, we go to John Locke and Murray Rothbard and Hans Hoppe and Stefan Kizella, who have done great work on the initiation of private property rights. That would be my overview of what libertarianism is. Since this is a Mises University on Austrian economics, let me talk a little bit about that. So what is Austrian economics? As you all know, it's got nothing to do with the economics of Austria. It's just that the people who started it, Manger, Bamberg, Mises, Hayek, all happen to live in Austria. It's similar to the Chicago School of Economics. It's got nothing to do with the economics of the city of Chicago. It's rather that Becker and Stigler and Friedman were all at the University of Chicago, and they had a distinctive school of economics. Okay, so what is Austrian economics? The way I see Austrian economics is that it is not an empirical science. It's rather a matter of logic. We don't really test hypotheses, and we have this thing called physics envy, where the physics people, what they do is they have a hypothesis, and then they test it. And if the hypothesis is not falsified, then they tentatively agree with it. The way I see Austrian economics, it's not like that at all. It's rather that we start off with basic principles and we deduce from there. So it's more of a branch of logic or a branch of mathematics than it is an empirical science. For example, I notice the guy in the front row on the right has got a blue shirt. Raise your hand, there he is. Okay, he's got a blue shirt. He paid 20 bucks for that blue shirt. I, as an Austrian economist, deduce from that fact that at the time he purchased the shirt, he valued it ex ante at more than 20 bucks, otherwise he wouldn't have bought it. And the guy who sold him that shirt, valued that shirt at less than 20 bucks, otherwise he wouldn't have sold him the shirt for 20 bucks. So we can deduce just from that fact that he bought that shirt, that ex ante, he benefited, and the sellers benefited. So there's mutual benefit from voluntary trade. Now, how are you going to test that? I mean, how can you falsify that? If you understand the English language or in any other language in which this is put, you know that when there's voluntary trade, there's mutual benefit on both sides, and it's untestable. This is guy, Brian Kaplan from George Mason, and somehow I got into a little bit of a debate with him, and I tried this on him, and he denied this, and he spoke eloquently, but I couldn't understand what he was talking about. It just seems so undeniable, and untestable, and unfalsifiable. The way logicians look at language, they say, well, there's either tautologies like bachelor's or unmarried men, which are absolutely true and undeniable, but say nothing about the real world, only say things about how we define terms, like a bachelor's and unmarried man. And then there are empirical statements like it's raining outside, or I'm wearing a black shirt or a Rothbard shirt, and this could be true and not true, so we don't know that it's apodifically necessarily true, but it certainly speaks about the real world. Well, Austrian economics believes in a thing called the synthetic a priori, namely there are statements that are necessarily true and also tell us about the real world. For example, voluntary trade benefits both people in the ex-ante sense, not necessarily exposed. You might have regretted buying that shirt, and maybe this shirt is out of style, or it phrased too early, or too quickly, or something like that, but other than that, we believe in praxeology, namely there are certain statements that are absolutely true and undeniable, and also say something about the real world. And this is seen by people like Gary Becker and James Buchanan as a cultish or religion, and they don't mean religion in the positive sense. I once invited James Buchanan to speak at Loyola, and he came, and I promised myself I wouldn't attack him because I'm his host, I have to be nice, and he just said, well, Austrian is a cult, and I lost it, and I went into a five, 10 minute diatribe, and I expected him to say something, and he just ignored me. Let me tell you my story about Gary Becker. I was doing my PhD dissertation with him on rent control, and I was doing a bunch of econometric equations, and the independent variable was how long did we have rent control for, and my thesis was that the more rent control, the more city, my observations with cities, the more the city had rent control, the worse housing would be holding everything else constant that I could think of, like I don't know the weather and crime rates and income and anything else that I could think of that would otherwise impact the housing quality, and most of the time I got good results. The sign of the independent variable presence or absence of rent control was appropriate, negative, namely the more rent control, the worse housing, and usually I would get statistical significance at the five percent level in all as well, but every once in a while I would get the wrong sign, and sometimes the wrong sign was significant, and this was horrible, and I went to Gary and I said, you know, look at this, and he said, you know, he was too polite to say, block you more, and go out and do it right, but that's what he was thinking, because he was a neoclassical economist, and but actually my thesis is that if you scratch a good neoclassical economist, a good one like Gary Becker, you're going to get an Austrian, because he didn't, he didn't say, oh, I've got this young genius, I was young at that time, getting my PhD, he didn't say I got this young genius, he's going to overturn everything we know about rent control, he's going to show that, you know, rent control is really helpful to housing quality, instead he said, go out and do it until you get it right. Well, what was testing what? Was my stupid empirical econometric or equation equations testing the apedictic necessity that when you have rent control, other things equal, center is parable, you'll have worse housing? No, it was the other way around, namely the praxeology was testing the empirical work, and finding the empirical work usually okay, but you know, sometimes wrong, so this is, so the way I see Austrian economics, this is the essence of Austrian economics, this is a, you know, a crucial part of Austrian economics, the quintessential part of Austrian economics, and yet there are people who are Austrians, I remember, I won't mention his name, I don't want to embarrass him, but I, he gave a speech on Austrian economics to a certain group, and then a month later I gave a speech to the same group, and he never mentioned this, and two Austrians are just talking about very different things, he was talking about other elements of Austrian economics, Austrian economics got many other things to say, and he talked about some of them, you know, theory of business cycles, and I don't know, interpersonal capacity, utility, stuff like that, but he didn't mention praxeology, and to me, praxeology is the very core, the essence of Austrian economics. Let me just give you a few more examples, which are unrefutable, synthetic, a priori statements, necessarily true, and yet tell us about how the real world of the real economic world actually works, for example, there's a tendency for profits to equalize in different industries, there's a tendency for profits to fall to zero, and they will be zero in the ERE, and we're never at the ERE equilibrium, but we're always turning in that direction. Any tendency of variable is unrefuted, because I say that there's a tendency for profits to equalize in all industries, and you point out, well, the industry A has got 50% profit, and industry B has got 40% profit, but that doesn't refute it, because it's a tendency, and all tendency claims are synthetic a prioris. Another one is minimum wage law creates an unemployment of people whose productivity is less than the level mandated by the minimum wage. That would be another example. Okay, let me now talk about a few other things about Austrian economics other than praxeology. I think praxeology is crucially important, but there are other elements of it, and I thought I sort of hit a few of the high spots as I see other elements of it. Another one is what's this thing? Transitivity. The way the mainstream people see transitivity, they see it this way. Whoops, I got to erase that. Clear it. Come on, clear all drawings. They see A is bigger than B, and B is bigger than C, and then they say therefore, or not bigger, preferable. I mean, if eight is bigger than seven, eight is bigger than six, and six is bigger than three, well, then it follows that eight is also bigger than three. My handwriting is a little bad. I hope everyone can see this. Is it seeable? Yes? Okay. So if we prefer apples to bananas and bananas to carrots, will we necessarily prefer apples to carrots? And the mainstream would say yes, because they have indifference curves, and this is part and parcel of indifference curves. And what I would say is, as an Austrian, well, A is preferred to B at time T1, and B is preferred to C at time T2, whereas we now make a choice between A and C at time T3, and we could change our tastes. There's nothing wrong with changing our tastes. Look, if team A beats team B, and team B beats team C, will it necessarily mean that team A beats team C? No, of course not. So transitivity is a problem. Okay. Another issue, another difference between the mainstream and us guys is a thing called cardinal and ordinal utility. Now, we believe in ordinal utility. Ordinal utility is fine. I like apples better than bananas, and I like bananas better than carrots, and if offered a choice between them, I'll pick apples first, and if I have all three, and a hoodlum comes up and steals demands that I give them one, I'll give them the carrots, because I don't like the carrots as much. So we Austrians have no problem with ordinal utility. But we have a problem with cardinal utility, because look, every time you have a downward sloping marginal utility curve, and here is margin utility of X, and here is X. Well, what do you think you have on this axis? What you have is, over here, utils. Boy, my U is not as good as it should be. Utils. Well, if you have utils, you're in, what do you call it? Cardinal utility. We're counting utils. We're saying apples have 10 utils, and bananas have five utils, and therefore we like apples twice as much as bananas. Well, you know, that's nonsense on a stick. So here would be another divergence between Austrians and neoclassicals, and now you have this thing, indifference curves. So here is apples, and here is bananas, and you have a budget line, and you have an indifference curve, and at this point, what is it? The marginal utility of apples over the price of apples is supposed to be the same as or equal to the marginal utility of bananas over the price of bananas. Well, once you're dividing marginal utility by a number, you're in cardinal utility. So this whole thing is nonsense, and we Austrians don't believe in indifference. We only believe in preference. Yes, yes, the word indifference has a perfectly good meaning in the English language. We're not denying that, but whenever you act, whenever you engage in acting, you are preferring this to that. If you buy that shirt, you prefer the shirt to the dollar, and if you're selling the shirt, you prefer the dollar to the shirt. So we Austrians are not real big fans of indifference curves and of cardinal utility, so that would be one more example. Let me, I think I'm supposed to go from 10 to 1045, so I'm going to stop in about a couple of minutes so we can have questions, discussion, dialogue. Let me just give you one more example where we Austrians diverge from the mainstream, and that's antitrust. I mean, you know, Milton Friedman is supposed, you know, the Chicago school is supposed to be the free enterprise school, but they all, they like antitrust, and how do they justify antitrust? The way they do it is they have this, this diagram here is price, and here is quantity, and here is a, what do you call it, an average cost curve, average cost. Here is a marginal cost curve, which intersects the average cost curve at the bottom point, and here is a, what do you call it, a demand curve. It's supposed to be a straight line, but what the heck? Doing my best, and here is a marginal revenue curve, which has got twice the slope, and it hits the marginal cost curve right here, so this is where the monopoly produces, this is a point M, and here is the point C for competition. In other words, here is where the monopoly will locate, and there's where the competitor will locate. Raise your hands if you're familiar with this curve. Okay, most, most people are familiar with this curve. Okay, so what's the indictment of monopoly? Well, the indictment of monopoly, well, you know, we shouldn't even call it monopoly because for the Austrian's monopoly means a, what do you call it, a government grant of privilege, you know, the salt monopoly, or the sugar monopoly, or the candlestick monopoly, where the government will not allow people to sell these things unless they get government permission. That's what Austrians think of this monopoly, but what these people think of monopoly is concentration. You know, if you have a four firm concentration ratio higher than some amount, some arbitrary amount, you have the monopolistic competition, and if you have a single seller, you have a monopoly, well, you know, on the single seller of multiple block services, a monopolist, the whole thing is crazy, but the indictment is that the price of the monopolist will be higher than the price of the competition, and the high prices are bad, don't ask why, and the quantity of the monopolist will be less than the quantity of the competitor, and that's also very bad, don't ask me why we want more quantity, rather than less quantity, it seems arbitrary to me, and then there's profit that can be earned, there's zero profits here, but where the profits here are, this box here is the profit box, because this box is the total revenue, whereas the total costs are this box here with the dots, so there's profit and profit is evil, and the worst, but these things aren't as bad, because if the monopoly is sold then you get another average cost curve up here, and they'll still be here, but now they'll be making zero profits, but the big thing over here is this thing called dead weight loss, this is horrible, that's why we have to have antitrust, but Milton Friedman and Stigler and Becker, they're very sophisticated, they don't say well therefore you have to have antitrust, what they say is antitrust costs something, and we should only have antitrust when the dead weight loss is greater than the cost of having antitrust, which is sort of a moderate position, but the whole thing is dead from the neck up, because this whole dead weight loss thing is an exercise in interpersonal comparisons of utility, I just ran into somebody on the Mises blog where he was favoring interpersonal comparisons of utility, I was trying to convince him that it's an invalid concept, what they're saying is that people value this amount of production here with the area under this curve, and it only costs the area under the marginal cost curve, and therefore we have a dead weight loss over here that is just a dead weight loss, you know that what the government has got to do now is one of three things, it's you got to break up the monopoly, in which case they'll locate instead of at the monopoly point, they'll locate at the competitive point, so one is break them up, another is nationalize them, and we know government can produce things very well, and the third is regulate them, namely tell them you've got to go with point C, so here is yet another area where Austrians and Neoclassicals diverge, and I'm a big fan of the Austrian, not the Neoclassical, well I aim to speak for about a half hour, and now we've got a little bit less than 15 minutes, so I'm hoping we can have a discussion, dialogue, please feel free to ask any questions or make any comments, so is there a microphone that you guys can- Yes, a student wanted to ask about your relationship with Carl Hess. Ah, okay, Carl Hess is an interesting character, when we first met him he was a right-winger, a Goldwater person, he was the one who came up with this brilliant thing that what is it extremism in defense of liberty is no vice, and moderation in defense of liberty is no virtue, I think I got the gist of that, he was really a right-wing type, a Goldwater type, you know, pretty good, but you know, and then he came under Murray's influence, and I was part of the Murray living room crowd, so Carl Hess was introduced, and a very amiable nice guy, and as the weeks and months went by he became more and more libertarian, and then he had this interview I think in Penthouse or Playboy or one of those, something like that, and he was really a Rothbardian, he was magnificent, very eloquent, a magnificent writer, a big boost to the Austro-Libiteran movement, to Rothbard, he was maybe second in command, or second in prestige, even to Murray, he was a great guy, but then he kept moving left and left and left, and you know, labor unions are great, and I don't know, hippies, and I don't mind that he kept dressing like a hippie, I don't care whether you're wearing a shirt and tie or, you know, work clothes or whatever, but his views then became more and more left, and you know, he sort of slid off the end of the earth, the earth is not round, it's a Cuban, he fell off the edge of the earth, well, the edge of the Austro-Libiteran movement, he was still a very nice guy, very amiable, a magnificent public speaker, but you know, I sort of tangled with him, I try to convert him out of his leftism, and also convert him out of his rightism, to you know, that's why they call me Walter moderate block, because I'm a moderate Rothbardian anarchist, so that would be my recollection of Carl Hess, a brilliant writer, a brilliant editor, very nice guy, and he just moved from right to correct Rothbardianism, and then he fell off the edge of the earth as a lefty. We have a student interested in your views on libertarian ethics and its connection with argumentation ethics of Dr. Hoppe. Oh, I'm a big fan of that, I think, let me get back to my share screen. So here's, whoops, boy, that's a mess. Here is my view of libertarianism. Libertarianism looks like an Indian teepee, and I hope I'm not going to get in trouble with anyone for talking about Indians, or Native persons, or whatever it is. Well, here is libertarianism. This is the essence of libertarianism, right where the sticks cross, and that's the non-aggression principle and private property rights. Well, what's this here, these are the implications of libertarianism. What's the libertarian view on minimum wage? What's the libertarian view on legalizing prostitution? What's the legalized libertarian view on, I don't know, whatever else? Well, what's this? What this is, is what's the justifications of libertarianism? Well, one of them is utilitarianism, another is, Einran would say, A is A. Laurie Rothbard, before he met Hans Hoppe, would say it's natural rights. Hans Hoppe came up with this thing from argumentation ethics, and it is just absolutely brilliant. What he says is the only way to get at the truth is through arguing, discussing. He's sort of channeling, what's his name, John Stuart Millen on liberty. The only way you can get to the truth is by allowing people to argue. So let's not have any cancel culture. I'm putting words in Hans's mouth, but then he says, well, what do you need in order to have argument? Well, you need private property and you need the non-aggression principle. So I think this is absolutely brilliant. And not only do I think that this is absolutely brilliant, I want to give Murray Rothbard a compliment. When Hans came over here, he was a young punk kid, pop, I don't know, 25, 28, and Murray was in his 50s, and Murray's view for the justification of libertarianism was natural rights. And Hans had a very different view. Look, if you try to pull, if a lieutenant that Hans was, and still is, of Murray, I mean that as a compliment, of course, if some lieutenant of Einran came up with a better way of discussing objectivism, she would have kicked them out of the movement. Murray instead embraced Hans and said, yes, this is great. This is better than my own view. So not only does Hans get credit for this, but Murray does too. So I'm a big, big fan of Hans's argumentation ethics. I'm a big fan of pretty much everything else he's written for that matter, but certainly the argumentation ethics is a magnificent way of justifying libertarianism. Thank you, Dr. Block, for your time this morning.