 during the planning stage of this conference, Murray Rothbard, and I discussed what the topics of my lectures should be. And his idea was to assign me to the task of dealing with the problems of the philosophical and methodological foundations of economics and economics in relation to other scientific disciplines. I gladly agree to do this since I'm convinced that such matters are of utmost importance, and that only if you understand these things correctly will one be ultimately prevented from producing nonsense. But it was also my wish to speak on one non-methodological subject, and this topic is socialism, the subject of my lecture today. However, since it is my role here to be the methodologist and philosopher, let me begin even this lecture with some methodological thoughts. They will emphasize once again how important it is to get things right fundamentally. That is, to have a correct epistemology and philosophy of one's discipline unless one wants to go astray and end in some sort of relativistic dogmatism. For every neutral observer, it should be obvious that the following statement is true and recognizable as such almost beyond the shadow of a doubt as an empirical statement. Life under full-blown socialism in countries like the Soviet Union, Eastern Europe, Cuba, China, and so on is miserable as compared to life in Western countries like the US, West Germany, Japan, Switzerland, and so on, which all have a sizable socialist sector too, but where socialism is still much less rampant. The difference is indeed so evident that these all-out socialist countries must resort to ruthless emigration restrictions in order to prevent a massive outflow of the population. West and East Germany illustrate this in the most dramatic way. In this case, where there are no natural language and culture barriers for immigrants and where there is no institutional problem of getting into West Germany because it has never had immigration restrictions vis-à-vis East Germany and automatically grants to West German citizenship to every East German, in this case, the outflow of population from the socialist East to the so-called soziale Marktwirtschaft or social market economy of the West took on such proportions that in 1961, East Germany literally had to be turned into a giant prisoner's camp. To keep the population in it, it had to build a system the likes of which the world had never seen before of walls, barbed wire, electrified fences, minefields, automatic shooting devices, watchtowers, dogs, and men almost 900 miles long for the sole purpose of preventing its people from running away from socialism. The empirical evidence then seems to be crystal clear. To everyone who is only faintly familiar with real socialism, who has traveled in such countries and engaged however limited in some everyday life activities, the cause of all this is equally clear. But almost everyone who is not completely brainwashed by the sophisticated confusion spread throughout the typical liberal university education in the Western countries notices is that there is almost no private ownership in means of production in these countries. Instead, almost all factors of production are commonly owned in precisely the same way as you all own the United States Postal Service and I own the Deutsche Bundespost in West Germany, the equivalent of the US Postal Service. Why is it then that there are still seemingly serious people who advocate socialism? Why are there still scores of social scientists who still want to put more and more factors of production under social instead of private control? For one thing, of course, they might be simply evil to use one of Murray's favorite terms. They might simply have nothing against misery, especially if it is only misery for others while they themselves are in charge of administering such misery and are well off while doing so. But I'm not so much interested in this group because a group which openly propagates lower standards of living in exchange for increasingly deprivatized social and economic life will hardly ever gain much popularity. Rather, I'm interested in that group of advocates for socialism which advocates socialism because it is allegedly more value productive than capitalism and who declares a contrary evidence that I have cited as being beside the point or as merely accidental. I guess I don't have to convince you that this is a more popular position among our socialist friends. One immediately senses that something is seriously wrong here, how can one deny that the Russian experience is decisive evidence against socialism? How can people get away with taking such an absurd stand? The answer, it seems to me, is that they have invented it to make use of a respectable sounding philosophy. And this philosophy is a philosophy of empiricism. Empiricism is what gives this absurd position the credibility that it still has. Thus, if one wants to attack socialism from an economic point of view, one must foremost attack empiricism because empiricism offers the intellectual means that make it possible to shield the idea of socialism as being a more efficient system of production from being refuted by the Russian experience once and for all. The Austrian critique of socialism is such a simultaneous attack on socialism and empiricism. It explains that the connection between socialism and lower living standards is a necessary one. Why the Russian experience is not accidental and why the empiricists attempt to make it appear so is based on straightforward intellectual errors. How can empiricism deny the decisiveness of the Russian experience? Recall what I said about the fundamental assumption of empiricism. First, one cannot know anything about reality with certainty, a priori. And because of this, secondly, an experience can neither prove that there definitely exists a relation between two or more events, nor that a relation definitely does not exist. Assuming this as a starting point for the moment, it is quite easy to see how one can get around the conclusion that socialism is empirically refuted as a superior social system. Of course, an empiricist socialist would not deny the facts. He would not argue that there is indeed a lower standard of living in Russia and Eastern Europe than in the US and in Western Europe. But within the framework of the empiricist belief system, he could easily deny that based on such experiences, a principled case against socialism could be formulated. Regarding the seemingly falsifying experience with Russia or any other experience that one might come up with, he could easily argue in the following way. Of course, the facts are deplorable, but their outcome has been produced only by some unfortunately neglected and uncontrolled circumstances which will be taken care of in the future and then the positive relationship between socialism and a higher standard of living will be revealed. Just wait. Even the seemingly striking evidence from the comparison between West and East Germany could thus be explained away. In arguing, for instance, that the higher standard of living in the West is not due to the fact that in the West significantly more means of production were and still are in private hands, but because of some other reason, because Marshall VIII had come into West Germany while East Germany had to pay reparations to the Soviet Union or by the fact that from the very beginning, East Germany encompassed Germany's less developed rural agricultural provinces and so never had the same starting point or that in the Eastern provinces, the tradition of serfdom had been discarded much later than in the Western ones and so the mentality of the people was indeed different in both East and West Germany and so on and so on. Not even the most perfectly controlled experiment and the German case is something like an experiment, evidently, could ever change this situation because it would never be possible to control all the variables that might conceivably have some influence on the variable to be explained. As a matter of fact, we cannot even know what all the variables are which make up this universe as this question is permanently open to newly discovered experiences. Thus, the just characterized immunization strategy would work without exception and unfailingly. Moreover, according to the empiricist doctrine, causal links between events cannot be observed. All that can be observed is that certain types of events follow or do not follow each other in time. In other words, there is no way, according to empiricism, that one might categorically rule out certain events as being possible causes for something else. Even the seemingly most absurd things can, provided they have taken place earlier in time, be possible causes and thus there is no number to the end of excuses, so to speak. No matter what the charges brought against socialism are, so long as they are based only on empirical evidence, the empiristically-minded socialists could always argue that there is no way of knowing in advance what the results of certain policies will be without actually trying them out and letting experience speak for itself. And whatever the observable results that may be, the original socialist idea, the hardcore of one's research program, as a neo-Paperian philosopher Lakatosch would have called it, can always be easily rescued by pointing out some here-to-forth neglected, more or less plausible variable whose non-control is hypothesized as being responsible for the negative result with the newly revised hypothesis, again needing to be tried out indefinitely. Experience only tells us that a particular socialist policy scheme did not reach the goal of producing more wealth, but it can never tell us if a slightly different one will produce any different results or if it is impossible to reach the goal of improving the production of wealth by any socialist policy at all. One realizes by this example how dogmatic the empiricist philosophy actually is, in spite of its alleged openness and its appeal to experience, empiricism is in fact an intellectual tool to completely immunize oneself against criticism and experience. To adopt it is, so to speak, the attempt to get away with murder. I do not want to engage in a critique of empiricism any longer here. However, the little excursion into methodology was merely intended to indicate how important it is to formulate a principled case against socialism if you want to formulate a case against it at all. And surely such a principled case must be based on praxeology. That is, it must be a case based on a priori argument and reasoning. What does this case look like? Recall that economics as an a priori science of action is based on the incontestable axiom of action and an understanding of the categories implied in action, such as ends, means, cost, profit. And a logical analysis then of the implications that follow if a state of affairs characterized in terms of such categories, it is changed in a specified way. Let me first describe in economic terms the difference between socialism and capitalism as the rest. That is, the judgment that socialism is by necessity, an inferior system of production follows essentially from this very description. The key concept for any understanding of socialism and in contrast of capitalism is the concept of property. Obviously, there would be no need for the idea of property if there was no scarcity of goods. If, due to a superabundance of goods, my present use and consumption of such goods would neither reduce my own future supply of these goods nor the present or the future supply of such goods for any other person, then the assignment of property rights to goods would be superfluous. To develop the idea of property rights then, it is necessary for goods to be scarce so that conflicts over the use of these goods can possibly arise. It is a function of property rights to avoid such possible clashes over the use of scarce resources by assigning rights of exclusive ownership or control. Property is just a normative concept, a concept designed to make a conflict-free interaction possible by stipulating mutually binding rules of conducts or norms regarding the use of scarce resources. Of course, conceptually, there are numerous ways to solve this problem. The capitalist mode of doing this, essentially formulated by John Locke, is this. In order to avoid otherwise inescapable conflicts over the use of scarce goods, it is determined that he who uses a good first before anyone else uses it becomes the good's owner. He decides what to do or not to do with it. And secondly, it is determined that once a good has been first appropriated or homesteaded by mixing once labor with it, this is the phrase that Locke employs, then ownership in such a good can only be acquired by means of a contractual transfer of property titles from a previous to a later owner. Aggression, on the other hand, is defined according to this idea of property rights in the following way. It is aggression if and only if a person uninvitedly changes the physical integrity of an appropriated good that is a homesteaded or a contractually acquired good, or if and only if a person restricts a range of uses to which the owner wishes to put such homesteaded or contractually acquired good. An owner can do whatever he wants with his good so long as he does not interfere or physically damage the goods owned by other persons. This is the idea of private property and the idea underlying the system of pure capitalism or of a market economy. As compared with this, the socialist way of defining property rights is the following one. With respect to consumption good, there exists private property as just defined. However, with respect to factors of production, that is those goods that are necessary to produce consumption goods, there is no such thing as private property. Rather, factors of production are socially owned, which is to say no one, no single person and no specific group of persons can acquire such goods and exclusively determine to what uses they should be put. And no one, and since no one owns these goods, then of course no one is allowed to sell them. Instead, they are owned collectively. Mankind, so to speak, is their owner, but no specific person or group of persons. The person actually using a factor of production first does not own it anymore than a person coming along later. And a person contracting with a previous user of such good does not own it anymore than a person who does not contractually agree with some previous owner or previous user. People are only allowed to use factors of production as caretakers or as trustees on behalf of the community of caretakers. And the use they make of such goods is at all times subject to the commands and decisions of this community of caretakers. Now, what does it imply to have such a caretaker economy? What in particular does it imply to change from a private property system to a system with socialized means of production or vice versa? There are four intimately related narrowly defined economic defects and one what I will call a sociological effect implied in adopting socialism rather than capitalism. All of these effects can be deduced as logically necessary consequences of adopting the socialist idea of property rights as just described. First, obviously, as compared with a system of private property, socialism implies a redistribution of property rights and hence of income. Property titles are redistributed away from actual users and producers of means of production and away from those who have acquired these means by mutually consent from previous users and producers and onto a community of caretakers in which at the very best, every person remains the caretaker of the things that he previously owned. But even in this case, each previous user-producer and each contractor would be heard in terms of income as he would no longer be able to sell the means of production nor would he be able to privately appropriate the profit from using them and hence, for him, the value of the means of production would fall. On the other hand, every non-user, non-producer and non-contractor of these means of production would be favored by being promoted to the rank of a caretaker of them with at least a partial say over resources which he had previously neither used, produced nor contracted to use and his income would rise. Moreover, there is a redistribution of income away from people who have foregone possible consumption and instead saved up funds in order to employ them productively. That is for the production of future consumption goods and who can no longer reap the fruits of such activity privately and onto non-savers who in adopting socialism gain a say, however partial, over the savers funds. Now, since socialism clearly favors the non-user, the non-producer and the non-contractor of means of production and Mutatis Mutandis raises the costs for users, producers and contractors, there will be fewer people acting in these latter roles. There will be less original appropriation of natural resources whose scarcity is realized. There will be less production of new and less maintenance of old factors of production and there will be less contracting. For all these activities involve costs and the costs of performing them have been raised and there are other alternative courses of action available such as leisure consumption activities which at the same time and by the same token have become relatively less costly and thus are more attractive to actors. Along the same line, because everyone's investment outlets have dried up as it is no longer permissible to convert private savings into private investment, there will therefore be less saving and more consuming, less work and more leisure. After all, you cannot become a capitalist anymore and so there is at least one less reason to save. Needless to say, the result of AUSIS will be a reduced output of exchangeable goods and a lowering of the standard of living in terms of such goods. And since these lowered living standards are forced upon people and are not the natural choice of consumers who have deliberately changed their relative evaluation of leisure as compared to exchangeable goods, that is, since it is experienced by them as an unwanted impoverishment, a tendency will evolve to compensate for such losses by going underground, by moonlighting and by creating black markets. So much for the first economic effect. Secondly, a policy of the socialization of means of production will result in a wasteful use of such means. That is, in a use which at best satisfies second rate needs and at worst satisfies no needs at all but exclusively increases costs. We owe this insight above all to Mises and his discovery that economic calculation is impossible under socialism. Essentially, the insight is a very simple one but that does not make it any less important. Since the means of production cannot be sold, there exists no market prices for means of production but then the caretaker producers of the socialized means of production can no longer establish the monetary costs involved in using the resources or in making any changes in the production structure. Nor can they compare these costs with their expected monetary income from sales in not being permitted to take any offers from other individuals who might see an alternative way of using some given means of production. The caretaker simply does not know what he is missing or what the foregone opportunities are and he is thus unable to assess the costs involved in doing with the resources whatever he happens to do with them. He cannot discover whether his way of using them or changing their use is worth the results in term of monetary returns or whether the costs involved are actually higher than the returns and so cause an absolute drop in the value of the output of consumer goods. Nor can he establish whether his way of producing for consumer demand is indeed the most efficient one compared to conceivable alternative ways of satisfying the most urgent consumer ones or if less urgent needs are satisfied at the expense of neglecting more urgent ones and thereby causing at least a relative drop in the value of goods produced. Without being able to resort unrestrictedly to the means of economic calculation, there is simply no way of knowing. In making it illegal for private persons to bid away means of production from the community of caretakers, a system of socialized production essentially prevents opportunities for improvement from being taken up to the full extent that they are perceived. And of course, the larger the consumer market one has to serve is and the more the knowledge regarding preferences of different groups of consumers, regarding special circumstances of time and place and regarding technological possibilities is dispersed among different individuals, the more likely it is that people would indeed perceive such opportunities for improvement. But by being restricted in taking them up, more misallocations of means of production with wastes and shortages as the two sides of the same coin must ensue. And it is hardly needed to point out that this too of course contributes to impoverishment. The third effect, socializing means of production causes an overutilization of such factors. It causes them to fall into disrepair and to become vandalized. A private owner who has the right to sell the factors of production and keep the receipts privately will because of this try to avoid any increase in production which occurs at the expense of the value of the capital employed. His objective is to maximize the value of the products produced plus that of the resources used in producing them because he owns both of them. The situation for a caretaker is entirely different. He faces an altogether different incentive structure because he cannot sell the means of production. His incentive not to produce at the expense of an excessive reduction in capital value is if not completely gone, at least reduced. Rather, the caretaker's inability to sell the means of production implies that for him the incentive is raised to increase the monetary or psychic income that can be received from using the factors of production in any given way at the expense of the value embodied in this capital. To the extent, for instance, that he sees his income dependent on the output of goods produced, his incentive will be raised to increase this output regardless of what this implies for the capital used. Or if the caretaker perceives opportunities of employing the means of production not for the official production purposes but for private purposes, the production of privately used or black market goods, he will be encouraged to increase this output at the expense of capital values. In any case, capital consumption and overuse of existing capital will occur and increased capital consumption once more, of course, implies relative impoverishment since the production of future exchange goods will as a consequence be reduced. The fourth effect. Socialism implies a reduction in the quality of the output of whatever it decides to produce. Under a system of capitalism, any ordinary business in which the means of production and the output produced with their help is privately owned and in which all employees perceive this to be the case and hence know that their salaries ultimately depend on the success of their firm, product quality is the firm's main concern. Since the firm can only maintain its position and possibly grow if it can sell its products at a price and in such quantity that costs are at least recovered and since the demand for the products or services produced depends either on their relative quality or their price, price being one criterion of quality, of course, the producers must be constantly concerned with product quality and the product quality they must be concerned with is not the quality as defined by some arbitrary technical or expert standard but rather the quality as defined and perceived by the voluntary buyers of one's product. Things are entirely different under socialism. Here, not only the means of production are socially owned but the output produced with the help of these factors of production is of course socially owned as well but this is nothing other than saying that the income assigned to the producers is either totally independent of or at least only rather loosely connected with the evaluations that consumers place on the goods and services which the producers happen to produce. Naturally, this fact is perceived by each and every producer. Yet why then undertake special efforts to improve product quality and give as much consideration to the consumers as a producer under capitalism is forced to do. Instead, producers under socialism will because of the very institutional setting in which they operate, tend to devote relatively less time and effort to producing according to the demands of consumers and more effort and time will go into doing what they, the producers but not necessarily what the consumers happen to like. Socialism in a word is a system that incites everyone to be lazy. Finally, socialism has an effect on the character structure of the society, the importance of which can hardly be exaggerated. I mentioned earlier that this effect might be more appropriately called a sociological rather than a narrow economic effect but in spite of this terminological classification it has as we will see dramatic economic implications as well. Socialism leads to a politicization of society and hardly anything can be worse for the production of wealth than a politicized society. Let me explain this. Socialism, at least its Marxist version with which I am concerned here is motivated by egalitarianism. Once you allow private property in means of production, you allow differences. If I own resource A, then you do not own it and hence our relations regarding this resources, this resource are different. By abolishing private property, everyone's position vis-a-vis means of production is equalized with one stroke or so it seems at least. Everyone becomes a co-owner of everything, reflecting everyone's equal standing as a human being. So much for the socialist ideology. Now, what about the truth of this claim? Obviously, declaring everyone a co-owner of everything only nominally solves the problem of differences in ownership. It does not solve the real underlying problem, the problem of differences in the power to control what is to be done with what. In an economy based on private ownership, the owner determines what should be done with the means of production. In a socialized economy, this can of course no longer happen as there is no longer any such owner. Nonetheless, the problem of determining what should be done with the means of production still exists and must be solved somehow, provided there is no miraculous harmony of interest and opinions among all people, in which case no problem whatsoever would exist anyway. But rather there is some degree of disagreement. Only one view as to what should be done can prevail in the end and others must Mutatis Mutandis be excluded. But then again there must by necessity be inequalities between people. Some once or some groups opinion must win over that of others. The difference between a private property economy and a socialized one is only how it is determined whose will prevails in cases of disagreement. Under capitalism, this is resolved by original appropriation and contract. That is, he who has acquired things first or who acquired them contractually from a previous owner determines. Under socialism too, differences between controllers and non-controllers necessarily exist. Only in the case of socialism, the position of those whose opinion wins or loses is not determined by previous user ownership and the existence of contractual, mutually agreeable exchange, but rather by superimposing one person's will upon that of another disagreeing one. That is by political instead of economic means. Now evidently, a person's position in the production structure has an immediate effect on his income. Be it in terms of exchangeable goods, psychic income, status or anything else. Accordingly, as people under socialism want to improve their income and want to move into more highly evaluated positions in the hierarchy of caretakers or increase their payments for their presently occupied position, they increasingly have to use their political talents. Depending on the intensity of the desire for higher incomes, people will have to spend less time and effort developing their productive skills and more time and effort improving their political talents. In other words, on the one hand, people will have to increasingly shift out of the role of user producers and contractors. And as time goes on, their personalities will be changed. A former ability to perceive and anticipate situations of scarcity, to take up productive opportunities, to be aware of technological possibilities, to anticipate changes in demand, to develop marketing strategies and to detect chances for mutually advantageous exchanges. In short, the ability to initiate, to work and to respond to other people's needs will, if it is not completely extinguished, be diminished. And along the same line, in response to the very same shift in the incentive structure affected by socialization, people will, on the other hand, increasingly shift into the role of non-users, non-producers and non-contractors and place increasing importance on the peculiar skills of a politician. They will make more and more attempts to develop personalities which can successfully manage to assemble public support for their own position and opinion through means of persuasion, demagoguery and intrigue, through promises, bribes and threats. And since different people have different degrees of productive and political skills and talents, different people will rise to the top under socialism than would under capitalism so that one finds increasing numbers of positional changes everywhere in the hierarchy of caretakers. All the way to the top, you will increasingly find people who are incompetent to do the jobs they are supposed to do. It is no hindrance in a caretaker politician's career for him to be dumb, indolent, inefficient and uncaring so long as he commands superior political skills and accordingly people like this will be found taking care of means of production everywhere. It is hardly worth mentioning that this too contributes to the economic impoverishment of society. The U.S. is certainly not as a socialist as a Soviet Union, but don't we see the disastrous effects of a politicalization of society, of an ever-increasing encroachment on the rights of private property owners by means of politics if we simply look at our own politicians? They give us a pretty good taste of what you can expect to be an all-pervasive feature of life in the East Bloc. And of course, apart from this point, the other impoverishment effects caused by socialism can be observed if only on a smaller scale in the U.S. or West Germany as well. Reduced levels of investment because of an ever-increasing socialized or quasi-socialized sector of the economy, the misallocation of resources going hand in hand with this and the over-utilization and vandalization of production factors within the sector as well as the inferior quality of products and services produced by it. Thank you. Answer Austrian criticisms of socialism. Like I know there is a place that has attempted to answer Bumbaverk's criticism of the exploitation theory. Like Bukhara. Bukhara. I'm not perfectly familiar with Bukhara's position. But of course, that would amount to the task of defending the labor theory of value, I assume. If you want to refute the Bumbaverkian criticism of Marx, you could only do that if you could somehow defend the labor theory of value. Now the labor theory of value, as far as I see, is hardly taken seriously by anyone anymore. That of course doesn't mean that it is false. But nonetheless, I mean, the simple counter-argument would be to point to certain products which evidently cannot be explained by referring to the amount of work that has gone into them. If you look at the Rembrandt painting and you want to explain how the price of this Rembrandt painting can be $1 million by counting the numbers of hours that Rembrandt needed in order to paint it, that seems quite evident. That is a pretty absurd stand. Now Marxist realized this, of course, and introduced the idea that there are different types of works. But in using this idea that there are different types of works, a Rembrandt hour is worth 1,000 hours of my work or whatever it is, then you have to of course explain the fact why is it worth 10,000 times of the value of my work and you would have to go again in order to explain this difference. You would have to introduce from the back a price theory based on value again in order to explain these differences. And indeed, this has been done by Marx himself. In the third volume of the capital, it has been noticed by almost everyone who read that carefully that he had plenty of deviations from the original labor theory of value that he was forced again and again to give up the labor theory of value in order to explain actual prices. The idea that they resorted to was then to say somehow we don't even want to explain actual prices anymore. We are only interested in explaining some sort of long-run thing that is happening around which the actual prices fluctuate. But as far as I can see, even in Marx's own writings, the refutation of the labor theory of value is already contained. Murray? I'd like to add something to that. Bukharan went to the Bambaric seminar, studied for a year there at least, in order to learn enough about Austrian economics to refute it. He then went back to Russia, wrote a book attacking Austrian economics, and participated in the communist revolution, led the way in communizing with Russia in 1919. And after the communist, the so-called war communism, which was really just communism, collapsed totally, and let him beat the path back to a mixed economy, quite not capitalism. Bukharan became a major theoretician of so-called right deviationism, which got essentially back to the free market. So I like this thing, of course, that was done like that by Stalin later. But I like the second Bukharan, the Bambaric, that got his final revenge. The Mrs. Lange debate. Because Lange said that Mrs. Kritik was OK, but only to the extent that it pointed out to the need to make socialism efficient. How would you refute this pro-socialist view? I think Mises pointed out that his recommendation amounted to saying that you can, of course, play capitalism. You can pretend that there is private property, but there is no real private property. And only if you have real private property, and not just private property, so to speak, as play money, then the results of, then you can match, indeed, the economic performance of capitalism. Yeah. You spoke of needing to defeat empiricism, to defeat socialism, but instead you corrected them. Because this hanging on of socialism depends on this inability to falsify socialism as an important theory. Can you not work that the other way that in socialism attempt to defeat capitalism, the reason against it it's proved itself a failure and so forth? Capitalism also non-falsifiable by the empiricist. So neither can reason the other out. And a follow-up, if you will, on that, let me come back. Go ahead with that one. There are two points that have to be made here. For one thing, of course, we have to realize that what Marxists criticize as the results of capitalism is normally the results of statism. It is not. Most of the things that Marxists have in mind when they criticize capitalism, unemployment, for instance, is not the result of the working of a free system. Of the working of a free capitalist economy, but is the result of minimum wage legislations and things like that. So they actually attack the wrong guy, so to speak. Now, with respect to the other argument, couldn't they try to refute some sort of a priori reasoning pointing out that capitalism is more efficient? There I can simply ask them to come forward with anything. I have not seen anything to this effect by any Marxists who could ever make a point like that. I think I'm saying that you say that the capitalists could never disprove socialism because they keep appealing to empiricism. There's no way to ultimately falsify it. That can be turned around so that the socialists can never argue against capitalism because there's no experiment that could disprove capitalism either. We're in a morass of indecidability. Yeah, I mean, you could argue that way as an empiricist. You could argue this way against a socialist who would attack capitalism. You could defend capitalism by pointing out, if we improve that this way, then, of course, maybe capitalism works better. But that only indicates, again, that we are in a completely relativistic morass. If we ever adopt these rules of discussing one side against the other side, each side can defend everything all the way. And there is never, ever any decisive argument that would prove either side right or wrong. So in any case, you would be forced somehow to develop arguments that are based on a different sort of reasoning than the typical reasoning allowed by empiricists. Let me grant at that stage, could we, and instead of being able to simply prove that this is falsifiable theory, could we, I promise, making a decision between the two, could we decide on the basis of probable results given the historical experience of the experiments? Maybe there were some minor adjustments, but on the basis, or the cost basis, probability sort of approach that if we have to bet on, which is right from our experience so far, we'd be better off betting on that. Now, that assumes that you can apply probability theory in the social sciences. And that is highly doubtful, because the probability theory assumes that you deal with homogeneous units. And with respect to human actions, you cannot presuppose that we deal with homogeneous units. People evidently do can learn, and I'm different tomorrow than I will be today. You cannot count on the fact that I will act on the same physical laws, the behavioral laws tomorrow as I do today. So if you cannot presuppose homogeneous units, the probability theory simply cannot be employed. So I think the reasonings like that would be out of the question. I just wanted to add on that point, on standard and purest, this view of probability. I say on the standard and purest of views of probability theory, since there aren't any connections between necessary connections in one event and another, the a priori probability of any theory is either zero or pretty close to zero, so it would be possible to proceed in that way. Chuck? I think that anybody would have to agree with you that the track record of the Soviet Union and the Eastern countries is quite clear for performance, low state of living. To that we could add the British case, which counts for some of the popularity of the snatcher. But one exception that is always thrown up in my face when I get into discussion based upon the track record is the Scandinavian experience, in particular Sweden. It's always identified as a country where pain, socialism, themes, and work. I think you can comment on that one, please. Everybody can do it. Perfect. I mean, I'm not an expert on the Swedish situation. Now, one thing I noticed is that people normally overestimate the standard of living in countries like Sweden. Sweden had profited from various other factors that other Western European countries who, in the meantime, have probably surpassed Sweden with respect to its standard of living. But according to my estimation, the West German standard of living is probably higher than the Swedish standard of living by now. That it took some while for the West German economy, for instance, to surpass Sweden was due to the fact that was Germany after the destruction of the war, had to start from a much lower level than the Swedes who stayed neutral in the war and actually made a lot of money on dealing, by dealing very extensively with the Nazis and providing them with steel and so on. So part of the socialist wealth of the Swedish economy is due to the fact that they were pretty close collaborators of national socialism. Oh, I like that one. I like that one. Robin Cochrane's got a question. Just one comment on yours, Chuck, is, yes, they are the model for socialism in that area, but they also have one of the highest suicide rates in the world. Another point is that Sweden is a small country and that's mostly foreign trade. It's not really a socialist or a sense of a large socialist area. So if you're a small country, depending on foreign trade, a lot of your prosperity is due to foreign trade for the next four or five years. Is there also not an age factor in their demographics? They don't breed much. I'm not familiar with the breeding policy. They're mating, but they're not breeding. It's probably a high standard of the world from the capital. And a great few people, and they have only oil. And the Amir and their relatives have most of the money. But looking at statistics, the typical kind of statistics, they have a high standard of the way for capital. I might add to that, if you look for other small countries who are clearly more capitalist than Sweden, Switzerland's standard of living is clearly higher than that of Sweden and Switzerland is one of the relatively most capitalist countries, I guess. There's also a point about this particular point. I don't think it's a point of semantic. Some people might say so, but I don't think so. If I understand correctly, if you actually look at the property ownership, the means of production in Sweden, something like 90 to 94% is actually within private hands. So there is, in some sense, still residual claimants for property. And I think colleagues of mine use the term welfare state to describe Sweden as opposed to social estate because it is not really a social estate in the classic sense of the term. Now, whether that's an important difference depends. The point is that 90% of the income, though, is confiscated by the state with the average tax rate being in excess of 80%. So the private property, if you can't enjoy the attention of this private property, I'm not sure how relevant this is. Well, it actually turns out that most of the big producers have big tax breaks. And very successful, like Volvo and those very successful importers actually don't pay them a price. Yeah, I guess we would probably need some expert on Sweden to inform us about these things. We can't do much more than just speculate out of the top of our heads here on this. The discussion sounds suspiciously empiricist. Oh, no, no. No, not at all. As a matter of fact, in order to assess the Swedish case, we would have to know, of course, what the institutional setup is in that country. I can only discuss what the economic consequences will be of what if I know what is what. If I don't know what the case is in Sweden, if I only have some very vague general ideas, they have high tax rates. The social democrats have been in power forever. If that is about it, what we, I guess, most of us know about it, then we are not in too good a position to make precise statements on why the standard of living in that country is as high or not higher than it is. Okay, you? Did you say that Karl Marx's theory of capital and in particular the labor theory of value was actually logical to be derived? I would say that Marx as all classical economists understood economics as some sort of deductive system that they wanted to derive economic laws in a more praxeological style than economists nowadays do this. Marx perfected Ricardo a little bit. I mean, he took most of his economic ideas directly from Ricardo, and Ricardo was a 95% labor theory of value theorist, and Marx realized these inconsistencies in Ricardo and went all the way and became 100% labor theory of value theorist. But indeed, Marx was not in this sense an empiricist in the sense, as we find empiricists in the economics profession nowadays. So then you flat-out had potential danger in the praxeology as a way of deriving? No, if you just don't think... Did you start with the correct axiom? Yeah, I mean, he just made simple mistakes. I mean, that would be the same as if you were to argue, a must-not mathematics be a dangerous discipline because they somehow want to derive at rigorous proofs of something. Evidently, somebody can claim to be able to provide a rigorous proof that person does not become a dangerous person as such. As a matter of fact, it is much easier to detect the errors of people who have such high claims, and that was essentially done by Birnbarwerk. He smashed Marx once and for all. I mean, as a theorist. Walter? I'd like to read Paul and this is really Murray and Hans on this. I think that she's absolutely right that this is an indication of a danger of praxeology. To the extent that he was a praxeologist, and I don't know if you've visited this, it just shows that when you start off with long premises, you go climbing off into the wrong direction. But this shows, I think, certainly to the benefit of praxeology, namely that it's not a religion. Namely that there are mistakes possible made when you use the praxeological method. Namely that you have to have rigorous logic. So there is a test of sword. It's not an altar or a religion or something that some people have accused of. So I think it's... I don't think I'm disagreeing with you anymore, principle, but I think she's having a very good point. I think that just because you're a praxeologist, you don't have to deduce the correct conclusion. You can make mistakes. I mean, then you could almost argue that it's dangerous to let people think at all, because they might end up with mistakes. No. I wanted to make another point also on a different subject. We haven't discussed the question of the voluntary solution. Everything that you said I agreed entirely as applied to coercive socialism, where we cannot have any demonstrated preference or real preference as to what's going on is what is according to what the consumer wants. However, there are institutions such as the heart rate community, the Swiss family Robinson, the German family. The commune, the co-op, there are many utopias, and there's one many co-opias. Those didn't last too long, but while they lasted a very long-lived kind of alteration. But even if the utopias do exist, but while they existed, we as praxeologists have to deduce that there was some sort of demonstrated preference going on. Now, the point I would offer is that your analysis does not apply to these voluntary groups because there is some sort of demonstrated preference that people can't pick up on. And you might say that it's really some sort of disguised property. Yeah, I would say that in that case it would be... Then you can say that the unit of a family is evidently not... still within the realm of private property, isn't it? I mean, it's a voluntary organization, and it's like some sort of contract and allows people to use things jointly. I don't claim that my analysis applies to your group, but I don't think that my analysis applies to your group. I don't think that my analysis applies to your cited cases of voluntary socialism. As a matter of fact, couldn't you also argue that a stock company is voluntary socialism if you pool your assets with other people? On the cat-taker question, I mean, in some communes it might be that you can't take one over-the-end of the property with you. In the case of the stock market, obviously you can quit by selling your share very easily. So I think it's a very complex kind of an issue. It also has a public relations implication as well. I think that many of our intellectual opponents are advocates of centralism. And if we make some distinction between the monetariness of socialism and just put socialism in one category, then we remove ourselves from the ability to communicate with them more effectively. I'm willing to make that distinction. I'm just making it a general point that there is a danger of pooling in socialism. I wish I could come up with a better word than the coercive socialism, but I myself use that as a designation of what this is proposing. But you see, the socialism I dealt with is that which was defined as socialism by all major socialist theoreticians. And it might be more advisable not to use the term socialism for the kind of arrangement that you have in mind and keep the terms as they are normally used and as Marxists, for instance, do understand these terms. Marie? I mean, I think it's such a question of common usage of language. We can call anything we want, you know, a company dump day. We can make anything and anything. But the point is, socialism means the modern world with concepts targeting the macros, but you call it coercive socialism, Marxism, and whatever. It doesn't mean the communities. I mean, to call that socialism means to mess things up, confuse the public. I mean, it's a full public relation. I'm confused with the answer that still seems to me that voluntary socialism is still more or less efficient. The question is, in maximizing psychic income, these people have chosen security or community over material well-being or whatever. But I don't see where that would upset your analysis of socialism as the inefficient means of production. Yeah, but they would, of course, maximize other goals than material goals. That is the case. And, of course, I could say my analysis applies even to those institutions, as in so far as I'm concerned with the production of material wealth. But if it comes now to this kind of somewhat tricky problem of maximizing social wealth, of which psychic wealth is a part, then, of course, I could not make an economic argument against that type of institution because they simply weigh non-material, non-exchangeable goods less highly as compared with the social benefits that they get from their communal living. Yeah. Yeah, I like to extend Walter's argument for voluntary socialism a little further in its implications on the Austrian calculation debate in that it's clear that display preferences does occur in voluntary socialism. So calculation then can be a part of socialism. The difference is calculation doesn't occur in coerced socialism. So what is it? It's not the socialism that poses the problem. What it is is the distinction between coercion and voluntarism. And what I'm wondering, Hans, is can we as praxeologists develop some method where we can place voluntarism on an upper hand other than using ethics? Can we, through praxeological means, place voluntarism as the obvious goal? No, as praxeologists, we cannot defend any kind of goal. As praxeologists, we are exclusively concerned with what are the means appropriate for achieving a given end. But with respect to the end, the praxeologists cannot say anything. So I can say as praxeologists, if you want to increase wealth, do this or that. If you want to have misery and people starved by the millions, then you choose this. Of course, it's still the problem that there might people like it if they die like the flies. And then you... And then... But as soon as you encounter a person like that, hopefully you might not meet very many of those, then the discussion will be over as soon as you point out what praxeology can do. Choose path A and then you will reach such and such a goal. But if you encounter a person like that, then that's the end for economics. That's the end for praxeology and then the task of ethics sets in. And then the problem is is there something like a rational ethics? Now, I claim there is something like that. I don't have my special feels, but I'm not here to talk about problems like that. I would be willing to do that over beer. Hopefully we get beer again tonight. Chuck, I'll come to you just a second. Do you think that the economic changes that have been appearing in China can be taken as a proof of the superior performance of capitalism as an economic system? Again, the problem is what do you consider a proof? I mean, I would say they clearly illustrate that capitalism is more efficient with but keeping in mind that an empiricist could always deny everything. But there are proof of this sort of cost all over the world. The Russians had to give up their war communism and introduce the new economic policy in 23, I think it was because people were simply starving to death and in order to prevent that they had to reintroduce elements of a market economy. You look at the case of Hungary that has now achieved one of the highest standard of livings within the east block mainly due to the fact that they introduced ever wider possibilities of creating quasi-private property that they allow firms, private firms to be established provided that the land is not larger than a certain acreage. So those socialist countries that allow more or give that allow more private property rights do better than those countries that don't. Tom? It's a key point here that the under socialism economic calculation is impossible and under capitalism provided by free market private property and voluntarily exchanges economic calculation is possible and that's a praxeological deduce truth and we don't really have to prove that on the one hand and then on the other hand I would argue with the that even if it's voluntary socialism isn't it economic calculation is impossible? Yeah, it is impossible but those people then of course choose not to calculate. Yeah, a chuck. I wanted to point out a hermeneutic significance from Walter Block's point where hermeneutics means what it really does mean is biblical interpretation in the debate about social policy in the church a debate in which I delight in participating it is frequently alleged that the story in the Acts of the Apostles about the early Christian community having everything in common is a biblical justification for socialist but it is precisely Walter's point that gives the lie to that intention because the primitive Christian community was a voluntary socialist community and that certainly is consistent with the whole Christian message spirit of the New Testament the significance of individual choice and the unethical nature of coercion in any form to reinforce your point about calculation in 1916 was the famous or infamous book by Norman Brown called I Can't Love Against Death and in there which is a psycho-babbled book of the highest nature, the lowest nature I mean right in there there's been the visible of the psycho-babbled first the Mises argument against social calculation and he says Mises was right in a terrible place where socialism went wrong they tried to counter and he was quite calculated the glory of socialism he says never to counter not to worry about economics everybody first will star in their community I just wanted to mention two things about the acts of the Apostles I know we may be getting away from the people it protects human action and others one is that you'll see that material to be distributed as alms is being collected from the members of the Christian community also at chronologically similar time as a supposed time that all of their possessions are being held in common so a number of biblical commentators has said this looks like a direct contradiction how could all their possession be held in common and yet things are being collected from seemingly as private owners to redistribute to others as alms and so what these commentators have suggested is that the supposed statement that the Christians live in common is actually a sort of a parable type statement in other words what it is is a statement about the friendship and communion of Christians that the kind of spiritual sharing that they held and that this material communism is just a metaphor that was never in fact an institution and there are actually books but I guess for that question don't necessarily let a pro-socialist Christian claim that this account satisfied is a clear historical example you can say no maybe we need to look further into what the evidence is what kind of institutions they had what the real meaning and purpose of having this account I guess we need a hermit nutrition to decide this issue one again another point we made about voluntary social groups is that it is a survival tactic like in the life of someone takes control of the theft that had been proved to get them to one point and another which is that a bad individual has freedom to say well and early Christian community was an example of a group that was being persecuted and they did share in common it might have only been for a short period of time but it's not the ideal way of doing it I have to be I'm sorry I can't just call on all of you at the same time I just have to make some choices here I think that you might have missed Meesey's essential point on socialism no I mean it might well be it is our goal to call economic calculation socialism remember that he defines socialism as the complete absence of market institutions no money, no prices no property he says that socialism defined that way is completely unworkable and throughout your lecture you talked about how socialism is inferior and it's not inferior it just won't work according to Meesey's for economic calculation there's no means for anyone to be able to distribute the means of production I made the point that economic calculation is impossible under socialism I don't think Meesey's claim more than that economic calculation is impossible under socialism by definition it is impossible socialism countries and interventionists usually the United States is interventionist and the Soviet Union is interventionist there are no socialist no I wouldn't agree with that what Meesey did when he made this statement about the impossibility of economic calculation under socialism he of course referred to to the original Marxist idea that you have a world socialism now the situation in world socialism where there are not other countries that have still some sort of capitalist or interventionist system where there are no such other countries the difficulty is indeed even much much greater than the difficulty that a single country going on socialism faces because countries like the Soviet Union where most of the means of production are socialized and where indeed with these means of production no calculation can be done can still somehow refer to world market prices they can still look what would this sort of stuff if I would have it in western countries what would this roughly cost if I use it now here in the Soviet Union for the same type of purpose so the fact that the Soviet Union is not much worse off than it already is is due to the fact that they have still capitalist countries or semi capitalist countries all around without that the standard of living in the Soviet Union would probably be much lower than it is at the present moment long as argument of using shadow prices or economic speculation he can have a socialist country and he can use say the United States as shadow prices for his country and that would work it works as good as shadow prices work but shadow prices are no prices I mean there still does not reflect the price that these things would have at the place where they are it is better to have that sort of information than to have to go without that too but nonetheless it is all wrong information that they get what I'm trying to make is like Sweden and these countries do use market institutions and that's why they exist at all the Soviet Union exists too it's not a socialist country it means it's defined as a conservative I have to read Mises from a mainstream institution I think I can make a point that relates to the mainstream economies respect for capitalism unfortunately longest market socially has been accepted by mainstream economies the technical term for that is the second fundamental theorem of welfare economics generally assigning a set of shadow prices you can attain a pareto optimal allocation so much for the commitment of neoclassics to the free market and capitalism one thing that is more common than the question is given all these tremendously bad things we're discovering all the problems we have which are just blatantly self-evident the question is too well if this is the case what are you just dumb are they blind or why are there so many sympathetic people in my understanding in reading of Marx and things socialism as he entered it applies perfectly to the family you're not a voluntary member of a family you grew up in it you can't, you don't have means yourself to decide to opt out and go somewhere else because you simply don't have enough knowledge to be a socialist unit in that sense it's very psychologically satisfying to have that unit and everybody who's grown up in a good family I mean enjoys that now to try to make this whole thing into a national family is, I mean this essentially as I see it as the goal of many socialists but the idea is that they are the fathers and the idea is to keep everybody else as kids they don't want you to throw up stay dependent keep them the money, keep them dependent don't teach them too much they're kids you know and the idea is that we'll just take care of them read Dostoevsky, The Grand Inquisitor this is the paradigm everybody else is the kids we are the father and that's what's best for them it turns out that's not what's best for them you don't want them to be kids over life Thank you I think I have an important element in your presentation perhaps it's some sort of price mechanism calculation that I'm not sure and that is the separation of ownership and control what can you comment on item two please comment on the statement I guess with regard to the Austrian socialism is political malinvestment based on ideological inflation is political malinvestment based on ideological inflation it might be alright to describe it that way I think I can't add anything to the second question but the first one with respect what is the difference between ownership and the right to control now if you assume there are scarce goods and people don't by accident agree on what to do or not to do with these scarce goods if God would have made us in that way that we always happen to agree with respect to everything evidently we wouldn't sit here and discuss how we should do things or do them differently because we were all automatically coordinated now as soon as there are conflicts we have to decide somehow who is the one who says we do this with that resource and who automatically cannot say it the two solutions that capitalism on the one hand and socialism on the other hand chooses capitalism uses economic means to decide this it points out that person in case of a conflict is the one who decides that who has acquired a thing before somebody else came along or who has acquired it contractually from a previous owner he decides and the other ones like it or not but that's how it is run socialism has to decide that of course too there is no way that you can get around this problem and it must be decided in any case now if you don't use this mechanism of homesteading and then contractual transfer of property titles how else can you do it you can only do it by just in case of a disagreement by one person winning out over the other now how can he win out he can only win out either by hitting him on the head or by establishing some sort of voting rights majority rule or basing it on the fact that somebody has a nicer face than somebody else or whatever it is but all of these methods in any case not contractual methods are called political means and socialism the various socialist countries differ in various respects how they organize the mechanism through which to find out who is the one who decides but all of them have in common the fact that they use political means in order to find out who is that one who does it and whose opinion will have to be ignored yeah you you said the group comes with Marxist or Praxeological economists there are at least 8 epistemological foundations for neo-Marxism today so that's not a question that's been clearly defined by the Marxist discipline the second one, the point that interested most about your discussion was the last, the sociological effects it seems to me the most important thing that the sociological effects of Marxism have is the time preferences and the effects it does when it turns man from economic man to political man in the effect that it's grab grab grab today and think about tomorrow I really didn't get a lot out of your discussion in the sociological part do you agree with that? yeah definitely I mean just to give you some sort of indication how that works in real life for a long time of course I mentioned this West German example because it it comes very close to some sort of social experimentation that you do and in spite of the fact that the East Germans of course make all sorts of efforts not to let people go to the West because they want to have some people working for the party you can of course go to the West as soon as you are retirement age because then they don't have to pay the pension or whatever it is that they have to pay then they are happy that they are gone nonetheless you have small numbers of people who come from the East to the West either because they escape or they are bought out or something like that now the difficulty is that these people have adapting to a different sort of life is quite tremendous frequently as a matter of fact that people return after a few years it's a small number of people most of them of course stay there is a small number of people that actually returns because they cannot deal with the situation where you have to make your own decisions where you have to where you have to just stand on your own feet and are not constantly told by various people what to do and what not to do the United States I hear you have the same sort of problem with Russian Jews coming to Russian Jews coming to the States again the overwhelming majority of these people stays but because of the deformation of the character that takes place in societies like the East block some people simply are unable to make it in a more competitive environment where productive skills and not political skills are in demand and return back to Russia because of that