 Like most of you the only reason I'm here is because I couldn't get into Judge Napolitano's lecture So you know welcome to the remedial class Seriously, thank you all for coming. I really appreciate it. I have to say I'm extremely grateful to the Mises Institute for inviting me here I know you probably hear a lot of these sorts of stories throughout this week, but I'm gonna tell you mine as well I Was thinking about this the other day and I realized that it's been 11 years since I attended my first Mises University And for me that was a really Transformative experience. I was an undergrad at the time and I didn't really have a clear idea of what I wanted to do with my career But being here for this week and getting to listen to people like Joe Salerno and Peter Klein and Guido Hulsman talk about these ideas Instantly let me know what I wanted to do with my career So I have to say I'm very humbled and honored and grateful for the Mises Institute for inviting me back here to Contribute to this program that that had such a big impact on me Now today to talk about the economics of war I want to start just by observing that if you've looked at a previous Mises University schedule or if you've been to a previous Mises University you might know that there was a version of this talk that used to be given by Robert Higgs and If you know anything about Higgs and his work, and if you don't I highly highly commend it to you But if you know to think about Higgs, you'll know that he's basically forgotten more about this topic than most of us will ever know He's he's just a tremendous scholar And so I would very big shoes to fill if I were trying to simply do what he did Likewise another version of this talk has been given a few more years passed by the late Ralph Raco He used a lecture on the topic of war and liberalism and once again if if you don't know of those lectures I really encourage you to look them up because he was also a tremendous scholar He was just a great historian, and I'm sure he'd be you know totally horrified that I'm being allowed to give this talk in his place But in any case rather than try to sort of repeat previous performances I wanted to try to take a sort of a new approach to this and talk about a few slightly different topics than other Lecturers have discussed before at Mises University and basically what I hope to do is by doing that is tell you something new And if you're very lucky, I might even tell you something that you find interesting so Basically what we're doing here today is to talk about some of the ways that economics sheds light on War and on the process of war making In other words sort of how we make sense of war using economic reasoning or methods that are similar to economics And economics as we will discover It can tell us it can help us answer a wide range of questions about things like What makes war unique as a human activity? Why wars happen what motivates them how they're prosecuted? And Sometimes how they end right but just in general how war making might fit within a sort of a broader framework For thinking about human action Also, I'll say at the start that I do sometimes tend to go over time in my lectures But you don't need to worry about that. You just have to take a short of break. That's all Anyway, as a preamble to this I want to say something about where this topic fits again within Austrian economics generally and within sort of a system of maybe praxeology and to do that I will recall this comment from Mises this one's from human action but you can find many similar comments scattered throughout his work in the work of other Austrian economists as well and Mises says that economics until now has been the best developed part of praxeology and this sort of Invites a very obvious question. That is well, what are the other branches of praxeology? What might those look like? sometimes when people talk about the Praxeological method they tend to confuse those two things and sort of imply that economics praxeology is economics and economics just is praxeology, but rather As Mises and others have explained economics is really just one branch of this much broader system for thinking about human action So, yeah, we have this important question What are the other branches and then how would sort of war fit within within this this framework? And so one way to answer this is to look at a schema that was proposed By by Rothbard in an article he published in the American Economic Review And here he outlines a number of different fields and subfields within the logic of action Which includes economics and he starts with the theory of the isolated individual Which you've heard about already. I think this week and then goes on to Sort of economics proper sort of the theory of exchange And if you look at this you can see that you know as as Mises said Economics really is the best developed branch of praxeology so far It's very easy to look at this and see you know, so the different fields and subfields and so on, okay? However, what's it's important if you look to look at Right here on the to be Effects of violent intervention in the market. That's going to be where war primarily comes into economic analysis, right? Which makes sense because war of course involves a sort of a violent intervention in the market both Through the actual physical conflict, but also through domestic economic policies That's going to be a major theme in the discussion today Okay, and so this is where Mises for example would place the analysis of war And if for instance if you actually look at human action Mises has a dedicated chapter on the economics of war and that appears in the final section of the book which is on The hampered market economy, right? So that's how he thought of it But in addition to this There you can also think of sort of a theory of war as an independent topic within Praxeology and this is what Rothbard points out here You can think of war and war making as an an object of study That's maybe that's somewhat independent of economics as well as well as falling into the theory of intervention There's also the theory of games which is important to bring up here Lucas Engelhardt has talked about this at Mises University before so if you're interested you can look at his Previous lectures if you studied some economics at the university level probably you've been exposed to at least some game theory already Anyway, so you kind of know what this is about and I mentioned it here just because game theory is often used to model conflict situations And war making and things like that. I'm not going to talk about it too much just to point out that In the theory of war game theory often runs into some of the same problems that it runs into when it's applied to economics Namely that it you can involve Find yourself making some very unrealistic assumptions about the way that people behave And in addition to that you end up sort of modeling what are really very complex uncertain situations in a very mechanistic kind of way But I'll leave it at that And then finally there's sort of the great unknown in Praxeology here as well So this list it's not necessarily exhaustive Well, actually I guess in a way it is because Rothbard throws unknown in there right and that could mean anything But this is just one way to think about it But I think it's a useful schema for breaking down some of the the major parts of the investigation and I hope to draw on both the war as a part of the analysis of interventionism and also war is a sort of a distinct category Of investigation by itself, right, but I guess basically when you're thinking about this topic And how to sort of categorize war in the study of human action the basic question that you have to answer is To be or not to be I'll have you know that this entire lecture is structured around that one god-awful pun Okay But the point is Mises and Rothbard and many other Austrians have acknowledged that there are all these different topics that we can You as a you know in which we can use Praxeology we can bring it to bear To discuss some of these some of these issues Okay, so there are a few big questions that we could ask What is war? Where does it come from? Is it inevitable and things like that? So probably best to start by just talking about What war is from it in a sort of a social science context and the first point here? Is that a war isn't really a sort of a narrow Praxeological concept more of a historical or maybe an anthropological idea. It's just that we use economics to make sense of it, right and It does have a few vital characteristics though that social scientists and economists in particular can be interested in and the first one is that a war is purposeful and It's important to Bring this point to the to the front right from the beginning because for a lot of human history wars have been regarded as somehow beyond human control, right as as maybe inevitable That be and of course they did have purposes But oftentimes those purposes were concealed especially by the people who were making the wars, right? But it's vital to understand that war does have purpose that it is engaged in intentionally On the part of at least one of any participating belligerence, right? And so that immediately lets you see how this fits into a framework of human action, right? Because that's what action is it's purposeful behavior. So once we understand that wars are motivated by our Prosecuted because of human purposes. We start to see where this fits in sort of social science more broadly, right? Second we'll come back here A second the idea of organization, right? Again wars don't occur sort of randomly. They are the result of a plan They are a result of deliberate planning and the deliberate use Coordination of scarce human and physical resources, right? Someone somewhere has to organize a conflict if it is to become a true war, right? Obviously the most common example of this would be simply mobilizing the armed forces, right? That requires tremendous human resources and also scarce physical resources in order to Support the warm-making effort, right? Somebody somewhere has to do this organizing And then the third point is maybe the most important one and that relates to the state, right? Now it is important to note that Warfare in the modern era is not unique to states Right war can exist without without a state strictly speaking However wars do actually the states do have a very sort of special relationship with wars and what I mean by that is that Wars require, you know a tremendous amount of resources in order to prosecute. They require large-scale organizational efforts Usually much larger than what's going on in the in the private sector at the time And usually all this organization occurs without the consent of at least some of the people who are being organized And certainly without the consent of the people who are being targeted in this war and so historically The only sort of agent that's capable of doing that is something like a state, right? And you even have their sociologists people like Charles Tilly who argued that the modern state actually emerged when Rulers were looking for ways to finance increasingly expensive military adventures So one very effective way to do that. So they discovered was to establish this sort of Legal monopoly over the ability to levy taxes over a certain area which they controlled So as to create a steady stream of income that could then be used for things like war finance, okay? But in any case it's been recognized since antiquity that states have this special relationship with warfare because war is Simply the ultimate tool at a state's disposal for both defending itself from other states and for increasing its own influence Through aggressive war making right? Maybe you know the the famous line from Carl von Klausowitz that wars the continuation of politics by other means That's the sort of sentiment that we're talking about here Or in another way Sun Tzu summed it up quite well Warfare is the greatest affair of state the basis of life and death the Tao to survival or extinction of the state Now to talk about the economic causes of war Mises in particular. I think was very insightful about this issue He recognized that although each war has you know its own individual causes in some sense in the modern era At least there were some definite trends in terms of the causes of war and Mises is very emphatic About looking at ideology in particular as a cause of conflict and of war making right? So for me is this the central question about war is an economic one and that is will nations embrace a philosophy of Autarchy that is of economic self-sufficiency or will they embrace the international division of labor? I'm so as the classical liberals had argued the international division of labor is absolutely vital for ensuring peace And in fact peace and free trade mutually reinforce each other right and in fact extending the international division of labor can even be a very powerful check on war because The more specialized people in different regions become the more The more they grow to depend on each other and therefore the more vulnerable they are to disruptions in their market activities Right, so the more reason they have to cooperate with each other peacefully So with that in mind, you know the more people that real realize that they are mutually dependent on each other The more they attempt to extend these sorts of peaceful relations to as many corners of the world as they possibly can To bring as many people as possible within the scope of the international division of labor But war on the other hand is is rooted in Essentially the the rejection of the idea the ideals of of laissez-faire and laissez-pas say that the the classical liberals Accepted so rather than the Misesi and law of association, which you've heard about already this week Which explains how everybody benefits from peaceful exchange The philosophy and the policy of autarchy are based on the idea that group interests are inevitably going to conflict with each other and and it's this sort of Zero-sum Mercantilist type thinking that underlies protectionist policies of all different sorts and its protectionism actually The end and then the regulation of trade the disruption of the international division of labor Those are the things that actually create conflict both domestically and internationally By creating winners and losers in the marketplace, right? so on an international scale the goal of protection as public policy is to Make domestic producers winners by imposing tariffs and other kinds of regulations And to make basically everybody else, but especially foreign producers the losers That's what protectionism does. That's what its purpose is, right? So unsurprisingly this is going to create some hostility between the winners and the losers especially when Foreign producers and foreign workers who are the losers from this process In particular when their lives are destroyed as they routinely are by protectionism, right? So in this way domestic interventionism domestic economic policy tends to breed international tension And if that tension is allowed to foment sufficiently Eventually it can spill over and become an actual military conflict, right? Mises argues that this is exactly what was occurring prior to both of the World Wars in the 20th century and in particular the second world war As a side note I'll also mention that protectionism it doesn't just cause international strife But also domestic strife as well because it creates a conflict between privileged and non-privileged groups within a nation-state and it's important to to think of this too because this is Particularly relevant to the study of imperialism As you know if you may have studied some recent history Imperialist conflicts are often used as a way to sort of distract from domestic economic strife by Finding or in some cases inventing sort of foreign enemies Against whom wars can be waged as a way to distract from the problems of economic policy at home But that's just a side note in general What we're talking about what Mises is explaining here is how the consistent application of Illiberal and and anti-market ideology Can lead to war and for him especially in the 20th century This was sort of the key to understanding international conflict But the main point is that interventionism even at home can lead to conflict internationally And Mises puts it quite nicely here Economic nationalism the necessary complement of domestic interventionism hurts the interests of foreign peoples and thus creates international conflict so Whatever their purposes might be eventually wars are going to break out and when that happens a war sets in motion a whole chain of Economic events that have a pretty profound effect in society So the first one that we want to talk about is the problem of war finance I Mentioned before that wars are extremely expensive and that one of the oldest problems in politics is finding sufficient means to wage war You know even in ancient history Wars required mobilizing resources on a scale that was much larger than anything That was going on outside the political sphere at the time But governments finance their finance wars in the same way they finance basically all of their expenditures through a combination of taxation Barrowing and inflation. These are the three traditional methods of public finance For war we might add a fourth one in there as well, which would be confiscation That does happen in wartime, you know, sort of private wealth is confiscated in order to support the public war effort I won't talk too much about that though I'll focus more on the three more systematic types of finance, but it's it's worth mentioning as an aside And usually governments are engaged in sort of a complex combination of these three major methods of finance It's very rare in the modern era to find governments relying on one or even two of these methods exclusively usually they're they're using all three together and One important reason why it's important to talk about these different methods is to understand sort of the logic of public finance And how this plays out in wartime because as it turns out each of the major methods of finance creates its own types of problems and pushes governments to try the other methods right and then those methods in turn create their own problems and so Governments are constantly shifting their focus back and forth between these different methods So there's a logic to how this works and usually it starts with taxation right again This is true in peacetime and wartime taxation is just a defining characteristic of the modern state But taxation is also a very difficult method of war finance because it's very very unpopular Even when there's a sort of an extensive moral support for the war that's being waged As a general rule once people start feeling The effects of war on their own pocketbooks Their support for it and sort of national morale tends to plummet very very quickly Right So taxation it tends to be very very unpopular even if there's a more widespread support for the war effort and This explains by the way one reason why for instance in the US in 1943 the wage withholding tax was introduced Up to that point generally speaking when people pay taxes they would you know on March 15th every year They would just have to pony up whatever they owed the government that year and that means that throughout the previous year They had to be wary of their tax bill they had to have the money on hand right and that meant that on tax day Everybody really felt the pressure and everybody was you know kind of upset about having to fork over some of the hard-earned, right? But when the wage withholding tax was introduced Suddenly that problem went away because with the withholding tax you never actually get the money right? It's just a number that's on your paycheck, and so you don't actually Feel you don't end up getting as angry about it Because you feel like it was never really your money in the first place, and then when you get like a tax refund You actually feel like you've been given something But this is one reason why that particular form of tax was introduced because it provides a more effective way to Encourage people to accept higher and higher tax rates, okay? anyway the the point of this is that Any country's population is going to have some fairly strict limits on to the the ultimate amount of tax They're willing to accept and so governments are always on the lookout for alternative methods as well, right? so when taxation proves insufficient as it very often does very quickly a Government's turn to borrowing right which is a very obvious choice very popular choice among governments for the simple reason that Barrowing seems like it's costless to governments, right? Particularly if sort of maybe more long-term debt that current political parties might not have to repay themselves It feels like borrowing is just sort of like free money that you get, right? So governments turn to this very quickly, but of course borrowing has its own limitations, right? You can't just borrow Enormous amounts of money forever, right? Eventually they have to be repaid and there are all kinds of problems with debt repayment during wartime that countries can experience If you lose the war or if you're losing You become a very bad credit risk people don't want to lend to you If your tax base is destroyed by the conflict again, you become a poor credit risk And there are all kinds of other reasons as well the international division of labor comes in once again if for instance if the people who specialize in finance happen to be living within Bulligerent nations on the other side of the conflict obviously they're not going to lend money to you So by disrupting the international division of labor you also disrupt your ability To wage war things like this. Okay, so anyway borrowing has tons of limitations as well And so eventually governments turn to that time-tested method of war finance, which is inflation, right? Once again inflation tends to be very popular with governments because you don't see the negative effects of it right away They usually only emerge slowly over time as the prices adjust And I will talk about more more about this in some detail in a minute But for now I just want to point out that each of these methods has its limitations and each of these methods causes problems Right, especially in the public eye and that's what really matters in this situation Because governments have to keep their people happy. They have to keep morale high They have to keep people Supporting the war effort and they can't do that if any of these methods gets out of control and people really start to Realize that their their wealth is being eaten up by the conflict. Okay So governments are usually engaged in this very complicated dance Where they're trying to balance out each of these methods and not cause too much economic havoc on their own soil and As I said again, there is this logic as to how one problem leads to another, right? You become a bad credit risk so people don't want to lend to you So in response you try to raise taxes again to try and pay off some of the debt so that you can borrow more something like this And so you go from one method to the other, right? I think it was Yoda who was saying that you know taxation leads to borrowing and borrowing leads to inflation and inflation leads to suffering That's the sort of thing that we're talking about here. Okay So anyway, you can't you can't do this forever Nevertheless Wars do they are financed and they they do break out and once the the real conflict shows up countries need to mobilize right and war mobilization is it kind of at the heart of The the many many problems with the wartime economy, right? So war mobilization is going to mean that land labor and capital So all the factors of production are going to be redirected on mass from their ordinary peacetime uses to Production for to support the war effort. Okay, and there are two effects that are worth talking about here sort of one minor one major the minor one is that For more war mobilization to work You're gonna have a lot of factors of production in the lower stages of production, especially the lower stage capital goods Those are going to be shifted from producing consumer goods to producing war goods, right? And so other things equal, you know with a decline of Consumer goods production living standards are also going to fall, right? So this is one very short-term way that war mobilization can can bring about problems for ordinary consumers But there's a second and actually more profound effect that war has on the structure structure of production And that is that once warm mobilization sets in Resources are going to be systematically shifted away from those higher stages of production that tend to produce usually highly specialized capital goods and they're going to be moved more towards the lower stages that it that produce Again consumer goods and war goods and things that can can actually drive the war effort the reason for this systematic shift is that Mobilizing for war requires lots and lots of resources right now And it's that famous line that's attributed to Napoleon that the army marches on its stomach That's what we're sort of talking about here, right? Me this is a great line where he says war can only be waged with the present goods, right? And that's what we're doing here, right? You can't send soldiers into battle with you know future rifles or something like that, right? You need all of you know The arms and the ammunition and the tanks and guns and planes and so forth you need all of that right now, right? So war mobilization is going to cause a systematic shift toward the production of these kinds of present goods What's going on in the the structure of production further up is that? you're gonna have a couple of different types of capital goods and Some of those capital goods are going to be very highly specialized. So you for instance I'm very high up in the structure of production. You're gonna have capital goods that produce highly specialized Other highly specialized capital goods things like maybe drilling or mining equipment exploratory equipment Highly specialized very expensive goods that really don't have much use in supporting the war effort in particular Capital goods are heterogeneous as we've talked about and these kinds of capital goods are not going to be easily converted into You know assembly lines for making ammunition or something like that So these types of higher stage highly specialized capital goods are usually just sort of let left to rust While the the war effort is going on they tend to be underused and they tend not to be replaced, right? Because their ordinary peacetime uses just aren't They're not continued during the war effort and so they they can't justify the expense, okay? So that's the the inconvertible capital at the same time the more convertible capital goods the ones that are less specialized tend to be overused right rather than than underused overused and misused a Good example of this would be something like The American war economy during World War two when you had factories that were Normally producing consumer goods, but they were converted over to support the war effort and that were running on like double and triple shifts right sometimes running 24 hours a day producing all kinds of Goods that could be used, you know for the for the troops or you know tanks and planes and weapons and that sort of stuff Okay, so these kinds of Capital goods tend to be very overused and especially they tend not to be replaced Entrepreneurs in these war goods industries tend to put off Maintaining and repairing and replacing capital as long as they possibly could because they're so focused on this effort of getting Present goods into production right so they ignore The the market signals that would usually let them know it's time to to replace these worn-out machines Instead they just run the factories and the plant and equipment full blast for as long as the war effort goes on Good example of this would be basically all of the belligerent nations, but especially Germany and Austria-Hungary during the first World War After the war was ended they realized that The belligerent nations realized that they had actually consumed Almost all of their their capital stock during the war and and this this idea of capital consumption During the war effort is maybe I mean it's one of the most important factors for understanding how the wartime economy works and so systematic capital consumption is the major danger here and I think it's We've talked already this week a little bit about why that would be important because maintaining the capital stock Coordinating it is you know the single most important factor in terms of maintaining and increasing our standards of living Right so without that capital stock once it's not replaced Eventually standards of living are bound to fall as indeed they did during and after these wars And also I'll say that this is one It's good place to emphasize how important economics is as a lens through which to view some of these problems Because it's economics that allows us to see things like the dangers of capital Consumption during wartime its economics that lets us really assess all the costs of war the true costs of war Not just say I mean, you know, we know about the human costs of war. That's horrific enough We know the war is physically destructive But economics lets us see that it's also destructive Very profoundly very destructive effects on society as well And here's another couple of quotes But the most important one no country has ever profited from protracted warfare That's the punchline to this particular section Now to talk about the inflationary issues a little bit more because they're very important One obvious question that you could ask is okay So if capital is consumed in wartime if living standards are just going up to plummet How is it that wars ever happen to begin with right? Why isn't there just some sort of crisis that sets in once mobilization happens? Why don't people immediately just get sick of it or what you know What stops the economy from just sort of you know tanking right away in the conflict from ever getting started to begin with And this is where the inflationary issue comes back in Because inflation ends up explaining a lot of this much bigger economic and political process That war sets in motion and in particular plays a really important role In keeping conflicts going by creating the illusion of wartime prosperity I've already said before that you know taxation is a very limited method Of war finance because even under a system of very heavy taxation consumers and entrepreneurs They can still see fairly clearly what's happening in the economy right they know that they're being taxed They know that their wealth is declining They know that there's not much incentive to to keep up with the the peacetime production that they were engaging with And so they can if if governments tried to prosecute a war Based purely on taxation People would very quickly catch on realize that the economy was in trouble and would put a stop to it So governments are very keen on finding a way to disguise the costs of war And so this is where inflation comes in so I think you know most of this story you probably Have either heard or can guess We have already heard about how expansions in the money supply Do not cause an instantaneous rise in prices everywhere in the economy right likewise the purchasing power of money doesn't just fall You know like like a rock systematically throughout the economy when the money supply is increased There's a step-by-step process that takes place right and this step-by-step process explains How governments can use inflationary war finance to conceal the costs of war and to even convince people that war breeds prosperity rather than being A burden on the economy right So basically what happens is that New money is created it's spent on war goods which triggers a sort of a boom similar to the Austrian business cycle theory not exactly the same but similar And monetary expansion causes you know an increases an increase in all the the nominal Prices and profits and wages In the war industries and it usually gives a bit of a boost to the national stock market as well Right, so there's an appearance of prosperity But the war goods industries You know the so-called merchants of death they benefit from this monetary expansion in at least two ways first Of course, they give a massive increase in demand for their services because of all the government orders that they're filling for the tanks and the planes and the you know the Technology r&d and that sort of thing that the war effort requires But they benefit in a second and subtler way as well Which is the war goods industries end up being the first receivers of the new money that's being created So in other words they receive that new money before prices have had the time to rise elsewhere in the economy And what that means is that wealth is actually being redistributed to them from those late receivers, right? So that's a another Suttler unseen effect Of inflationary war finance, okay in any case Price these price changes eventually they sort of ripple upward through the economy Um through the structure of production. They give the illusion of prosperity Entrepreneurs are still using their older methods Of of capital accounting So they're not taking account of all these relative price changes that are that are going on this this inflationary process That's been set in motion And because of that they don't uh, they can't accurately depreciate their capital They don't understand they think it's increasing in value. Uh, whereas in fact, they're actually consuming it, right? So once again, we have inflationary finance concealing the the true costs of engaging in this conflict Um, and once again, uh, here's a nice one for me This one can say without exaggeration that inflation is an indispensable means of militarism without at the repercussions of war on welfare Become obvious much more quickly and penetratingly War weariness would set in much earlier, right? So you can see that this is a very powerful political tool For keeping not only a conflict going but also sort of national morale as well However The negative effects of war don't stop there There are also some broader political economic implications that are worth touching on quickly And the most important one of these is again this question of economic control or laissez-faire And it happens that in the wartime economy the longer a war wears on The greater the economic problems That a country experiences and also the greater the degree of government control over the economy becomes This happens through a again sort of a step-by-step process And mises describes this in a very nice short essay that you may have read called middle of the road policy leads to socialism if you want a very Sad real-world example of this process playing out exactly as mises described it You just have to look at venezuela for the past few years, which is currently experiencing this but what Just to sort of briefly summarize it There's a sort of a logic to economic policy failures right governments during in peacetime and wartime But especially in wartime are always trying to recover from the negative effects of their last round of economic controls They're constantly pushing themselves to Expand their control over the economy in order to to stop problems that their previous policies created right and The cumulative effect of all this is that if the war goes on long enough eventually you end up with a very wide ranging government control over the economy Particularly this happens through price controls because price controls cause shortages and they they drive out certain entrepreneurs from the market So governments want to keep those entrepreneurs in the market So in order to do that they establish new price controls and then the process just sort of repeats itself whereas And it's all part of an effort to basically keep prices from rising that that's the government's major policy goal during wartime Usually because prices will eventually have to rise due to shortages due to destruction from the actual conflict inflationary policy Prices are always They're bound to rise sooner or later So governments need to find a way To stop this and they do this through a you know an ever-increasing Range of price controls and so finally what you end up with is what mesis called socialism of the german pattern Or simply fascism for short or war socialism The idea that In order to support the war effort government eventually has to take control over almost all of the factors of production in the economy While leaving in place The sort of nominal system of property rights freedom of contract freedom of exchange and so forth right these are not abolished In fact, they're often invoked even more in wartime than they are in peacetime But they only exist on paper right and this is what happens again This is the story of both world wars And almost all of the belligerence in those conflicts, right? there's also a much Sort of a bigger picture view of government control That's captured in this idea of the ratchet effect, which is an idea that bob higgs talks about quite a lot in his book crisis in leviathan If you haven't read that it's an amazing book You must read it But what higgs talks about when he discusses the ratchet effect is this cumulative growth of government power That the warmaking process sets in motion because once wars start governments immediately Arrogate to themselves enormous wartime powers economic controls social controls and so forth and Usually these powers Decrease to some extent after the crisis is over government does hand some of them back But there's always some that remain even if they're just a little precedence for taking control over the economy during a time of crisis The damage has already been done So the cumulative effect of this is that government control over the economy tends to grow over time It grows by leaps and bounds during a crisis Especially during a war and then it comes back down afterwards even if it takes a few years But it never quite gets gets back down to that level that it was before the crisis So over time through many conflicts through many wars The power of you know the control of government has over the economy tends to increase right like a ratchet And you know, there are all kinds of implications for this sort of thing for For things like political philosophy as well I'm not going to talk about those But you can sum them up pretty much in that the the brilliant Saying of Randolph born that war is the health of the state, right? If you understand that then you understand most of the the philosophical implications of these kinds of conflicts Mises put it best as always in the long run war and the preservation of the market economy are incompatible Right governments always face this choice. They could always stop their control They could always take a step back return toward the market economy But doing that would acquaint people very rapidly with the true costs of war that are being paid Both domestically as well as on the battlefield, right and governments are loath to do this So almost inevitably Their decisions tend to go in the opposite direction toward increasing control, right? And the result is that the market economy simply cannot last Under wartime conditions so If we can talk if economics can tell us something about how wars are waged Can't tell us anything about how we could they could be stopped And how we might prevent them in the future. Again, I think the answer is yes But as mises would point out This is an ideological question and it's an institutional question But the basic point to make to return to what I was saying at the beginning is that war is purposeful So what that means is that in order to stop it we have to eliminate we have to Find its purposes its motivations and we need to eliminate them Or as mises said we need to eliminate the conditions that make war possible That make it sort of desirable and profitable for some of those people who engage in it, okay And ideologically speaking what that means is that we have to sort of replace an ideology of of war of autarky of nationalism With a philosophy of peace and of commercialism And this philosophy is exemplified in the work of people like richard cobden and john bright Who were the you know the leaders of the the most prominent manchester liberals Who mises himself, you know considered sort of forerunners of his own liberalism And what they recognized is that human beings just they have not yet developed a more effective way of encouraging social cooperation and avoiding conflict Then by peacefully exchanging with each other, right The active exchange Is uh An expression of mutual reliance and respect right in trade you acknowledge that somebody Benefits you and that you benefit another person and that everybody depends on this this mutual ability, right? Once you admit that Conflict sort of you know arbitrary Discrimination and conflict become very difficult if not impossible especially on the large scale that leads to war Uh bottom line is that trade builds social bonds So the key not just to liberalism, but just to at the economics of war in general is understanding that people The individuals are not inherently in conflict with each other our interests are powerfully aligned, right? This is something that economists have been teaching for uh for centuries, right? One person's success does not require another person's failure. Um, but it's it's the most warlike ideologies in history Um that have taught that right have denied the mutually beneficial nature of exchange and of human cooperation And tried to substitute for it some kind of philosophy of conflict, right? Whatever it might be whether it's mercantilism Or the Marxist variety of class theory or nationalism or racist ideologies or whatever It should come as no surprise that people who are under the sway of these ideologies tend to see conflict and war as inevitable Or even as very good things, right? But in sharp contrast it's it's it's the idea of mesis And the liberals that show us that war is not inevitable And that whatever else it might be it's certainly not a path to prosperity So with that I'll say thank you for your attention and I look forward to talking to you in office hours