 This is Jeff Deist and you're listening to the Human Action Podcast. Ladies and gentlemen, welcome back once again to the Human Action Podcast. So happy to have all of you join us. And as you may know, we are working our way through another mighty tome, Murray Rothbard's opus, Man, Economy and State. For those of you who have been around the last three to six months, we've been going through a lot of really seminal works in the Austrian tradition and finally made it all the way through human action. In a series of podcasts took a one-week hiatus and now we've embarked on Man, Economy and State, which has already been fun. We're using the second edition published by the Mises Institute, which contains also the Power and Market chapters, which were originally intended by Rothbard to be in the full book and we sort of started out a couple weeks ago by giving people a little taste of the book and trying to argue why a lay reader should tackle this 1200 odd page exercise and we had our great friend Patrick Newman for that. Last week we did a show, I did a solo show actually, on the very first chapter of the book and trying to draw parallels between that book and part one of Human Action, which we read most recently, which is considered sort of the philosophical part of the book, which English majors like myself like and the economists not so much. But now we're getting actually into the meat of the book. We're going to work our way through chapters two, three and four, which are sort of Rothbard's treatment of exchange and prices with also some money thrown in. So it's really some nuts and bolts parts of the book and really if you just read what amounts to a little less than 300 pages, we're talking about page 79 to 317 in the second scholars edition of the book. You will know a heck of a lot more about money and prices and exchange and utility and barter than I hate to say it, most people out there walking around. And we've got a great friend in studio this week as our guest. It's Jonathan Newman. Many of you may know his name as a frequent writer for Mises.org, a professor of business and finance at Bryan College, which is not too too far from us in Tennessee and also former summer fellow a couple of different times here at the Mises Institute and a PhD economist, economics graduate from Auburn University right across the street. So all that said, Jonathan, great to see you in person. Thanks for having me. It's great to be here. And Jonathan is also one of our instructors at Mises University next week, which is our annual summer program for undergraduate students, which at the moment anyway is going ahead physically on our campus here without masks and we're excited about that. But Jonathan, I'm going to mention something to you. I guess to start here that I mentioned last week in the show, which is just when you start digging into man economy and state, this is an instructional book. This is text. This isn't flowery literature like human action. Yeah, you're right. It's very logical and step-by-step. And just to go back to something that you said in your previous show, you talked about how economics is splintered. You talked about how there are all of these different specializations within economics. So it's really refreshing to see Rothbard take something and build it from the ground up. So he starts from just nothing and he lays the foundation and he builds up this entire edifice of economics. And I think maybe the first chapter could be likened to like a foundation for a house. And then in these chapters that we're discussing today, it's sort of like framing it out. It's sort of building the structure of the house that's on top of the foundation. And you don't see that in economists these days. They're discussing health economics and labor economics and development economics and behavioral economics. And it goes on and on. And so it's really refreshing to see Rothbard building something from scratch like this. Do you think if a PhD wrote or attempted to write a treatise like this today, they'd get some grief for it? Yeah, probably so, especially if they're a fresh PhD. Just because this is something that only a mind like Rothbard or a mind like Mises can produce like a massive treatise like this. So even though Rothbard wrote this at a pretty young age, I wouldn't expect this of your typical graduate out of school. So chapter two is just called Direct Exchange. I guess we might call that barter. It introduces a bunch of concepts that Rothbard wants us to know like value, use value, exchange value, comparative advantage, price, specialization, division of labor, supply and demand, equilibrium. So I guess first of all, what's chapter two all about? What should a lay reader get out of it? Well, he starts off the chapter distinguishing between voluntary interpersonal action and interaction and violence or involuntary interaction. And so he makes this distinction and he says that what we're developing in main economy and state is all of the voluntary stuff. So what can we say about the way people interact with each other on a voluntary or contractual basis as opposed to if somebody wants to take something from you and they just bonk you on the head or that's what Hans Hoppe said in one lecture, hit you on the head and take what you have. So Rothbard is contrasting that sort of arrangement with peaceful cooperation and voluntary interaction. And that's where we see market prices emerging, where we see suppliers and demanders interacting and coming up with market prices, which he develops in chapters two, three and four. And the picture that he paints is actually it's a really beautiful one of a contractual society where we're all sort of interested in each other and what each other wants, what our fellow man wants, because we had to produce what somebody else wants so that we can benefit. And so we see this society being painted where it's peaceful and cooperative as opposed to the opposite. Yeah, it's interesting he starts with a violin and calls certain actions hegemonic. That's very Rothbardian. That's not what you'd get in your average text. Your average econ 101 textbook in the first chapter. Yeah, in the first chapter of your average econ textbook, you would see like these big 10 ideas where they, you know, they say incentives matter and then they'll leave in touch on some macro relationships like the Phillips Curve or something like that. But you never, you don't start with, you know, bare bones, you definitely don't start with, let's contrast, you know, voluntary interaction with slavery and see why these are different, that sort of thing. So he's talking about violence, you and I would apply that term to state action. But do you think Rothbard means here that violence lies outside of sort of praxeological analysis? Well, to an extent it does. But we can still say that people are acting with a purpose when they're committing an act of violence. So they're still, you know, using means and in fact Rothbard mentions this in this chapter. He mentions that for a slave owner, they're treating this other human being as a factor of production. And so you could still sort of, you know, parse through the means and ends, but, you know, it's in a constrained sort of limited way. You definitely can't develop, you know, this, this massive edifice of economic theory based on hegemonic relations. Well, you mentioned that he brings up social cooperation here. And of course that was a big, conceptually that was a big thing for Mises. He even considered calling human action social cooperation, titling the book that. And I, as I'm reading that, there's the idea which comes first, you know, do people want to cooperate so they create markets create cooperation. And my sense in reading through that, of course, is that a lot of our friends on the left would say that this is fantasy land thinking. Yeah, some authors say that the, there's this desire for us to be together in community. And that's what produces civilization. That's what produces, you know, people coming together and, and, you know, what we see today, which is, you know, cities and businesses where people are working, working together. Rothbard and Mises say that it's the opposite is that first we have this incentive. First we have this, this material benefit that we can earn by producing together by specializing in one job. Another person specializes in another job. And then we trade the output of our, of our production. And then that leads to, you know, more permanent lasting social relations between people. So it's the, it's the, it's the other way around for Rothbard and Mises. First we have this material and incentive and then we develop the social relations, you know, the, sort of the nice feelings that we have for, for one another. But of course, you know, there are plenty of people on the left and plenty of libertarians, in fact, who argue you have to eat, you have to have shelter, you have to have clothing. So these things, when you're out there in the marketplace, hopefully trading services for them or, or, you know, trading your, your efforts for money, that these things aren't so voluntary because you have to have them. So in effect, all the social cooperation that Rothbard and Mises are talking about takes place under some kind of duress. Yeah. That doesn't really make sense to me. It seems, it seems to me that it's, it's more plausible that people will engage in social cooperation. They'll trade with each other because there is this mutual benefit. And that's really, that's really where Rothbard starts. Because that at the very, you know, smallest thing that we can look at in the economy, which is one individual trade, there's mutual benefit for both parties. And so both parties expect to benefit as a result. And so they'll engage in this trade with one another. And then it's just a matter of expanding that, you know, to a larger and larger scale to where we see, you know, the big economy wide things that Rothbard discusses later. So I don't, I don't really see the basis for, you know, saying that all interaction between people has, you know, a little tinge of duress or something like that. It seems to me that it's, it's simpler to say there's, there are interactions between people that are, it's just clearly mutually beneficial. And we shouldn't, you know, try to prevent that as much as the state would like to. We mentioned that this conceptual land that Rothbard lays out here is beautiful. That sounds like an economist. I don't get a lot of beauty from this chapter reading it. So elaborate what you mean. Well, he's got this great quote from the second section of chapter two. He says, the distinguishing features of the contractual society of the unhampered market are self-responsibility, freedom from violence, full power to make one's own decisions and benefits for all participating individuals. And so that's just like a beautiful picture. And it follows directly from what he's saying about exchange and, you know, one person producing and another person producing, and then they trade the result of their production. So there's, you know, responsibility for what you've done. There's this, it's not a guarantee, but there's at least this expectation that there won't be violence. And it seems to me it paints a pretty picture of what society could look like. He takes a lot of pains to provide precise definitions in this chapter, which helps at the stage for the use of those terms later in the book. Again, is this something that you don't generally see in the context books? You know, we're talking about really what seems like simplistic definitions of things like price. You do see definitions given in mainstream economic textbooks, but there's not a lot of emphasis on making sure that we've excluded all other possibilities when we're making that definition. So like the goal of a definition is to be able to rule out all the things that aren't the thing that you're trying to define. And you, things get sort of fuzzy in mainstream textbooks, but things are not fuzzy at all in Rothbard and main economy in state because he takes great pains to make sure that he's clearly defining what he's trying to analyze. And that way that makes the analysis itself much clearer. Well, I'm stuck towards the end of this chapter. There's two little sections, 12 and 13, which really stood out to me. Starting with 12, he's talking about property, and by this he means real property, land, and the appropriation of it and how we develop original ownership of land. And, you know, in reading through that section, which is actually pretty short, I'm reminded the point that there's really nothing is unnatural in the material world. Everything we've got, even the most toxic chemical that we created, some plant somewhere or some bizarre nonbiodegradable plastic that's floating around in the ocean somewhere. I mean, everything's natural to Rothbard. Yeah. So, and it's actually interesting that ties back to the economics of the structure of production where everything can, all payments, all expenditures by producers go back to the original factors of production. They go back to land and labor. So it all goes back to what we start off with. What do we start off with, which is given to us by Earth? And so, yeah, you're absolutely right. So Rothbard says that whatever we have here on this Earth is sort of our starting point, and this is what we build our entire economy on. And part 13 is this discussion into property rights themselves, and it gets into a couple of areas that are kind of Walter Blockian. He gets into airwaves and water. And, you know, he talks about the property status of airwaves, for example, and actually, I just want to throw this out there to you. You're too young, but I'm old enough to have been a Randian when I was in my teens and 20s a little bit. And she actually wrote an essay called The Property Status of Airwaves, which I loved. It's included in her collected series called Capitalism, the Unknown Ideal. It's in that book along with that great Alan Greenspan article on gold, by the way. But in that article, which, you know, whenever I read it as a young guy, I thought was phenomenal. She says, look, airwaves are limited. They're finite, but so are diamonds, so are, you know, the number of acres on Earth. Everything's finite. That's not an argument for having the state control and having to pay the state for a license to use it. And so, rereading this section the other night, I went back and looked up her article. I realized I think she wrote it in about 64 for the Objectivist newsletter. So actually, she doesn't mention Rothbard. I'm not going to say that she borrowed from him or that she didn't. But, you know, just the idea of talking about property rights in this way. Really, I won't say it's a departure from the rest of the chapter, but it struck me as this is, you know, the kind of thing. Again, you wouldn't expect to see in a text. Since we're contrasting it with mainstream textbooks, yeah, you're right. This is not something that this sort of discussion is not something that you would see in a mainstream college textbook on economics. But you're right. It's also not a departure for Rothbard because it's an essential piece of the puzzle that he's putting together. You need property rights as a prerequisite for trade to happen. So in order for one person to trade with another person, they have to have, you know, ownership of the things that they're trading. So it's just another important piece of the puzzle that Rothbard is laying out here. It's not a departure at all. And if you're interested in defamation and the Rothbardian-Blockian argument against defamation, in that part 13 of chapter two, you'll find really an excellent couple of paragraphs on why you don't own your reputation because that consists of other people's feelings and thoughts and opinions about you. It really lays out the case. You can decide for yourself whether you agree against defamation. So, Jonathan, I don't want to spend too much time on chapter two because chapter three and four, we really get into a media discussion of especially money. So chapter three is the pattern of indirect exchange. Of course, indirect exchange requires to have something to trade that we don't necessarily want and that emerges money. So we really get a discussion of manger here, right, the emergence of money. Yeah, he talks about where money originated and he's relying definitely on manger's initial discussion of that. And he takes care to, you know, refute the circular fallacy or people were saying that the regression theorem is just a circular logic saying that the purchasing power of money determines the value of money today and it just keeps on going around and around. And Rothbard shows that no, we're going, there's a time element. So the purchasing power of money today is based on people's anticipation of being able to purchase things in the future. And people's anticipation of being able to purchase things in the future is based on, you know, what we were able to spend our money on today and yesterday. So it goes back in time. And there's also not the, he also, you know, gets rid of the infinite regress criticism that sometimes shows up. It's not infinite because we can go back to the first time that gold or some other commodity was used as money. So what struck me about his treatment here is that it makes hyperinflation sound so scary. And there's historical examples we can go back and read. And some of them are more recent than others about hyperinflation. And when we're talking about the purchasing power of money, we get used to it having a certain amount of purchasing power, at least that power roading slowly. And the idea that it could road quickly would throw all of our good intentions at planning out the window. Yeah, it is a scary sort of situation. There's a great article by Dr. Salerno on the sort of the psychological impact of living in a hyperinflation environment. I can't remember the title of it right now, but he talks through some of the things that were going through people's minds. What were they writing about? What were they doing in the hyperinflation in Germany? And it was scary stuff. People had made plans. People had set aside these resources so that they could live happy lives. And all of a sudden it's just gone. It just goes away. If your money doesn't have any purchasing power, then all of your saving goes away. And it just makes it extremely difficult to make plans, even from that point on, because prices continue to erode and the ability to make plans just goes to nothing. The over 65 population in America is set to double over the next few decades. And you reach a point in life where you're probably making less money. And when you think about that, when you think about purchasing power and people's plans for their future, I was reminded of a conversation I had with Professor Per Bieland in reading chapter three where we went back and Per had made the point that when Mises talked about calculating using money prices, you got to assign money prices to things to calculate mathematically or with a balance sheet, a ledger. And Rothbard talks about that here as well, that that actually had a profound impact on civilization itself. This monetary calculation is not just something for economists and accountants to think about. Yeah, you're absolutely right. So if we get rid of the ability to calculate net worth or to calculate profitability, if we give it to the entrepreneur's ability to try to figure out should I pay this much for this factor of production, then you totally erode the capital structure entirely. You totally erode the social relations that we were just talking about that Rothbard discussed in chapter two. Rothbard mentions this in chapter three, money helps us solve this economic calculation problem. So without a commonly accepted medium of exchange, businesses can't compare costs and revenues. So their costs would be like this, you know, strange arrangement of goods that they'd have to pay the owners of factors that they receive. And their revenues would also be this, you know, strange arrangement, the stockpile of goods that they would get from selling their output. And if you can't make that comparison, then you can't know if your business is doing well. You can't decide on whether you should purchase, you know, this factor of production, whether you should hire this worker. And if the ability to conduct business breaks down, then society itself is going to struggle. And aside from calculation, money also gives us the opportunity to have higher order goods. In other words, to not just buy and sell things that we sort of immediately need for consumption or immediately want to trade away for something else, but actually to put money in the bank and have a higher order goods, which are, of course, intimately linked to civilization itself. Yeah, so Rothbard mentions that he says that if we have money, that allows the division of labor to expand even more. To an extent where we have people specializing in specific stages of production, you mentioned the higher order goods. So if we have, you know, just direct exchange between people, then there's no opportunity for production to exist in multiple stages or for production to be elongated to any serious extent. But with money where you can pay somebody in an earlier stage of production some money so that they can get the things that they want, then it makes it possible for one person to specialize in, you know, getting raw resources out of the ground, and another person to specialize in chopping trees down, another person to specialize in farming the specific thing that they farm. So money allows the division of labor to expand to an enormous extent. It'd be extremely difficult to overstate the importance of this expansion in the division of labor and its impact on our material well-being today. Well, the other thing that struck me in chapter three here is Rothbard takes some paints to talk about cash balances, money balances, and what they are and why people have them. And it reminds me that there's a famous article by Hutt called The Yield from Money Held, and Hoppe wrote a little bit about this and why there actually is utility, so to speak, from holding money and why people do and why they should and that the desire to hold money increases with uncertainty. So of course, with the crash of 2020, which is still unfolding before our eyes, you know, we find that people have a lot more cash or trying to hold more cash in their balance sheets and that maybe airlines and some other industry should have held more cash in their balance sheets. So money has functions that maybe we don't think about day to day. Yeah, so in the sort of the end of chapter three, I have this quote where Rothbard says, every man must allocate his money resources in three and only three ways, in consumption spending, in investment expenditure, and in addition to his cash balance. So everybody is making choices as to whether they want to consume, whether they want to produce, and any money not used in those two is held in their cash balance. But that cash balance isn't necessarily just a remainder, because as you said, people want to hold on to cash for specific reasons. So they anticipate a certain level of uncertainty in the future. They anticipate either prices increasing or decreasing, and that's going to influence how much money they have in their cash balance that they don't use for those alternative uses, which are consumption and production. Sure. And of course, Dave Ramsey always starts with this in his personal finance discussions, have six months cash saved up. I mean, there's a psychic benefit to having cash, the most liquid form of cash money in the bank. So chapter four, prices and consumption. This is really a great chapter. I really enjoyed rereading this. It gets a little bit into, again, Mises's regression theorem. But this idea, which I think is still a little murky for some people, maybe it's still a little murky for me, is money prices as exchange ratios. What's an exchange ratio? Well, in barter, it's pretty easy. You can figure out how many chickens you'll take for a bushel of wheat or something. You've got problems with that, though, if you don't want what the other person has. But exchange ratios, whenever you go out and purchase a good or service, at least in the United States, you're receiving the good or service and you're paying a dollar or X dollars for it. So we tend to spend a lot of time looking at the quality of the good or service you're buying. You hear about a roofer in your town and you look up some reviews. Or you want to buy a new car, you check out that car, tons of reviews. But then does the seller of the car, Honda, how much time do they spend thinking about the quality of the dollars they're receiving? We have to assume that smart economists and lawyers at big corporations on some level, maybe subconsciously sort of factor in what the Fed and what Congress are doing when they set a price for, let's say, a Honda Accord. Yeah, it goes back to what we said about the regression theorem. So the purchasing power of money today is based on people's anticipations of being able to use it in the future. So when people are receiving money in exchange today, they've got to at least be thinking about what that money is going to do for them in the near future. So if they're expecting lots and lots of inflation, that means they might want to charge higher prices today for things. So I guess those sorts of anticipations that people will have about monetary policy, what the supply of money and prices are going to be in the future, I would say that those expectations are already priced into what people are paying today. Do you think they do that competently? I don't know. Only time will tell, I guess. I mean, I don't think too many business people think a lot about the Fed. Yeah, the Fed sort of hides behind this complexity, this sophistication. So they make their announcements and they use the big words and the sophisticated methods in their announcements. And so they sort of hide behind this era of sophistication. And it makes it difficult for your average small business person to make sense of what the Fed is doing. What does it mean for their bottom line when the Fed is increasing the supply of money astronomically? Well, you mentioned that people make exchanges because they feel better off as a result. Whether that's psychic or monetary, it doesn't really matter. That's the reason they make exchanges, not because they're exactly the same off. By definition, they feel like they're better off giving up the money in exchange for the good. So Rothbard takes pains to make the distinction again between ordinal and cardinal preferences. This is a very important feature of Austrian economics, the idea that we can't apply some sort of objective criteria to your subjective preferences. But what struck me, Jonathan, in reading this was the idea that the parties feel better off. And it just contrasts so strongly with the political tone of our day where everything is zero sum. Everything's about vanquishing the other side. Everything's about we're going to make those Trump people pay in the fall when Biden's president. It's sort of the anti-advertising. Advertising says, hey, come buy this. You'll feel better. You'll look better. You'll lose five pounds or something. And politics is sort of the opposite. It feels like everything is vote for our guy and we'll get them. The one thing about money is that it does make it make many more exchanges possible, and Rothbard mentions that in the text. But the other thing is it attaches a number to every single trade, every single exchange. So a lot of people, economists included, will get wrapped up in the numbers that they now have available to them so they can look at the world and people paying certain prices, and they can see certain people are earning certain amounts of profits. And so they latch onto these numbers, which are sort of easy to grasp and compare with each other. Rothbard takes great pains to say, no, we can't compare utility. We can't compare the subjective values between people. Money makes that fallacy much more attractive. One other thing to your point is that now that we have money and we can calculate our profits, or people can figure out what people's profits are, then there's this extra chance for people to get envious of how much other people are earning. So we see, you know, Bezos is raking in billions now, right? And so people get very envious of that. So if money has a drawback, maybe that's it where now we have this, you know, basis of comparison between people where that person has much more money than I do, therefore, you know, I'm going to call myself a victim. But even let's take the former Soviet Union, even when it was not easily or quickly measurable, like we talked about somebody's net worth, like Jeff Bezos has however many times more money than I do, you know, the average people in the former Soviet Union, they still knew when they looked at that party aberrationic that they had a better car or a better apartment or, you know, better meals or whatever. I mean, it's not like this goes away under socialism. Yeah, that's true. So envy is here no matter whether we have money or not. So even without market prices and the ability to see how much money people are making, that doesn't take away, you know, this propensity for us to be envious and covet what other people have. But if we're talking about economics largely as cooperation and trade and specialization using money, you know, scarcity choice, all these things that Austrian stress. I mean, again, it strikes me that maybe those of us who are very strong libertarians or ANCAPs, maybe we're sort of using the wrong language. In other words, it's economics versus politics instead of no state versus the state. In other words, economics, the way we conceive it takes place without compulsion, without force, without violence in a cooperative manner. And so a lot of what we get up and do every day in dealing with our fellow humans is a form of anarchy in that sense. You go into the restaurant and everyone's happy and they give you their food and you give them money, right? Whereas politics, there's always a loser. Someone's always mad. Someone's always trying to harm someone else. You know, nobody at the restaurant is trying to harm you. Yeah, so a lot of what we experience on a day-to-day basis is what Rothbard mentions in chapter two, which is that gains from trade that we get. So every single exchange, which many of us do many times a day, represents this mutually beneficial arrangement between two people. And just like what Rothbard contrasted that with, which is the violent interactions between people, we see that on a day-to-day basis through the actions of the state. You know, I would just suggest to people who are interested in this topic of economics versus state action and entrepreneurship versus state action to really check out Hunter Hastings podcast. He does for the Mises Institute called E for B, Economics for Business, because guests like Hunter himself, but also Per Bylin and Mark Packard and others, really talk about how entrepreneurship is the antidote to compulsion. And it's really a fascinating topic the more you think about it. And speaking of compulsion, John, in Rothbard's treatment of the diminishing marginal utility of money, and he obviously he goes into how Mises was the first person to apply not only marginal utility, but subjectivism to money, and that that was sort of Mises' big improvement over manger in the theory of money and credit. It struck me that there's a good reason why our progressive friends maybe don't so much mind high taxes, right? Because if you have $10 million, a tax bill matters far less to you than if your net worth is $10,000 or $20,000, because you're spending a lot more of your money on food and essentials and rent and that sort of thing if your net worth is $10,000. So when people say like, look, Warren Buffett says raise my taxes. Okay, but if you take away 90% of Warren Buffett's net worth, he is still a centimillionaire Uber elite in society. You take away 90% of everybody else's net worth and we're probably down at the food bank. Yeah, so the diminishing marginal utility of money works in both directions. So yeah, the additional dollar received is worth less. But like you said, it works the same in the other way. So if you take away somebody's last dollar, that's going to be worth less than the remaining cash balance that they have. So I had the opposite sort of interaction with a businessperson later. It's a local businessperson here in Auburn and he was just complaining about the level of taxes and he prepays his taxes on a quarterly basis. But even at the end of the year, he still had to make this massive payment. So yeah, we can find these examples like Warren Buffett saying tax me more. But if you poll or if you ask your average businessperson, they view it as a thorn in their side. They view it as something that's really inhibiting their ability to create value for consumers. So another bit of point of departure here by Rothbard is in his discussion of land labor and capital. Those are the three categories we often think of in traditional texts. And land labor and capital basically produce rent, wages and profit. And Rothbard says, well, that's not necessarily the case. It's not so clear and he has his own treatment of this. Yeah, so the typical way that this is presented is that labor earns wages and capital earns rent. But Rothbard says that there's no way for us to specifically parse out what's receiving what. And he says that all productive factors earn a combination of these things. So capitalists will earn interest by advancing the funds earlier on in the production process. And then there's productivity for labor and so there's income for that. So Rothbard says that it doesn't really make sense to say that this one sort of thing earns this one sort of income. It's really more of a blend because all of these things are happening at the same time. What did you think of his section on planning in this chapter? Not surprisingly for Rothbard attacks the idea that planning is going to produce better outcomes to the market process of prices and consumption. So did that feel like he was working his own normative concepts in there? Do you think it flowed? I don't know. I think it flowed at least it makes sense to me. So we can compare how a central planner might make decisions and how an entrepreneur makes decisions. And we can just see scientifically that you don't have to bring in any ethics to it. You can just see that an entrepreneur who's subject to the profit and loss mechanism of the market who is engaging in economic calculation trying to decide what factors to combine and what ways to produce things that consumers want. And there's this check. There's this loss possibility that prevents them from making incorrect decisions. So that sort of check at least to me shows that there's this rigorous scientific backing for saying that we should prefer or at least we can see the material benefit to entrepreneurs who are voluntarily combining factors of production as opposed to some bureaucratic central planner who's either using bad rules or they're just trying to repeat what was done in the economy before not taking into account potential changes. Well, it seems to me the honest way for a mainstream text to approach this would be to say something like, yes, while taxes and regulations make an economy overall less prosperous and do skew individual incentives and behavior. Many policymakers feel that they are justified to ensure that the, you know, that welfare and other inducements are available to the poorest people on the side. You could sort of present this in a neutral way in an honest way, but I don't think that's what textbooks do. I don't think that's what they say. Well, textbooks, yeah, they'll make excuses. They'll say that we can impose this tax on this market and yeah, you can see it. You can draw the deadweight loss triangle on the graph and you can see that there's this loss. But hey, there's this also this tax revenue rectangle and the government can use that to, you know, we can pay for roads and we can, you know, pay police officers to enforce laws and that sort of thing. So, so they, yeah, they'll pay lip service to the, you know, the small deadweight loss triangle, but then they'll try to revive the tax revenue portion, which, which they think in their minds that it's, you know, going towards something that's that more than offsets the negative of the deadweight loss and Rothbard would just have nothing of that. So he would say any extraction, that tax revenue, any extraction from the productive market economies is we can just, you know, chalk it up to waste. It's it's not something that's subject to the profit and loss tests of the unhampered market economy. There's there's no there's no saving graces here. There's there's nothing that we can revive out of, you know, the tax, the typical tax tax treatment. And of course, Mises would admit the loss, but also justify justify it on the grounds of whatever states necessary. Yeah, I know that that's a major point of difference between Mises and Rothbard. So Mises sort of saw that there were these cases where the government should, should or could at least be doing certain things in a beneficial way. But even then, if you read Mises, he always has like this asterisk, not a literal asterisk. But he says that in order for this to actually work out, citizens have to pay really close attention to make sure that the government's not wasting any money. So even I think even Mises saw that the money's being wasted. Perhaps he just didn't. He didn't have the benefit of, you know, Robert Murphy's books and Rothbard's treatment of, you know, what actually could the services that are typically offered by government look like on a on the private market. There's an interesting little piece towards the end of this chapter about some of the fallacies relating to utility. And I can recall from my own long time ago, undergraduate econ classes, you know, sort of these discussions of utiles and this and that. So it appears that Austrians have made some headway in in sort of pushing the idea of cardinal utility out of the the corpus of neoclassical economics today. So am I overly optimistic there or am I right? Perhaps. So I had discussions with my professors about this and the typical response was, yeah, the utility isn't cardinal. But that's the only way that we can, you know, draw the graphs that we draw. That's the only way that we can, you know, apply the equations and then come up with the other results. So it's like a, yeah, but sort of response that I've gotten. But I love the discussion that Rothbard has at the end of this of chapter four about a burden's ass, the indifference problem. So it's just it's just brilliant and something that you don't see anywhere else. So there's this this old paradox in in economics where there's an ass that's confronted with two equidistant bales of hay or or OACs of water, just depending on who's writing about it. And the point is that this donkey won't be able to prefer one over the other because they're exactly the same and they're the same distance apart from the from the donkey. So how could the donkey figure this out? And this is used as an example of of indifference for mainstream microeconomics and consumer choice. And Rothbard just says, no, if the if the donkey doesn't make a choice, if the donkey doesn't move towards either one of those, then that's the choice that it's made is decided to starve to death. And it's like only an ass would be able to do that sort of thing be stupid enough to do that. And he's he mentions that perhaps if somebody stuck in that sort of situation would use chance to figure out to go to A or B to go to one flip a coin. Yeah, yeah, it's a flip a coin. And Rothbard's point is that by flipping a coin and going to A instead of B, you're demonstrating a preference for A over B. So in Rothbard's ultimate point is that it's not the physical characteristics or the physical distance of one good to the person who might consume it that matters. What matters is how that good is subjectively perceived by the person. And so if the outcome of a coin flip is what it takes for somebody to go to choose one thing over something else, they're demonstrating a preference still. I actually got some feedback from last week's show. There's a little appendix on about praxeology at the end of chapter one in man economy and state. And Rothbard goes through some of the who, what, when, where, why type questions. And somebody said, well, if we prefer things sooner in time, all of the things being equal, we prefer whatever we'd prefer to have our dream house at age 40 rather than at age 90 because of the uncertainty of life. He asked the question, what about what about physical geographic proximity? All other things equal. Do we prefer closer physically than farther? I just listened to a Tom Woods show episode where Robert Murphy was discussing this with Tom Woods. And he actually likened it to the law of time preference. And he actually says that we don't need the universal law of time preference that economists could make do without a law saying that we prefer given satisfaction sooner as opposed to later. But we can still talk about that we do value sooner rather than later. We just don't need it for interest theories. And he actually brings up proximity. He says we don't need a law of proximity preference in the same way that we have a law of time preference. And the example that he gave is, yeah, so if I, if I'm considering two ham sandwiches, I would prefer the one that's closer as opposed to the one that's further away because I can enjoy, I can eat the one that's closer to me. But with a TV, for example, I don't want to, I don't want my nose up on the screen. I want it to be a certain distance away. So I thought that was an interesting discussion. And I'm not quite sure what I make of Murphy's argument, but it is interesting. Well, sometimes I have this sensation like maybe you'll be looking at an item in Walmart. And oftentimes it is made in China, not always, but, you know, generally not made in the United States, an inexpensive item. And I'll look at it and it'll be so cheap. You know, and I'll think about it had to come here on a ship from thousands and thousands of miles away and packed into a box with a bunch of other similar items and dispersed, distributed. So all the costs in getting that little knickknack to me in Auburn, Alabama from China. And I think how is that possible that this thing is a dollar or whatever? How is that possible? Just the fuel and the logistics and all that. And part of me, you know, I'm as much a free trader as anyone you'll find. But part of me sense that there's got to be government interference somewhere that makes this little knickknack easier to bring to me from 6,000 miles away on a cargo ship. Then from somewhere, you know, geographically closer. Do you know what I'm referring to here? Yeah, yeah, it is sort of, it's a spectacle if you think about it, how it's possible to provide, you know, people in Auburn, Auburn, Alabama with, you know, this massive variety of goods that were produced all over the world and at very cheap prices. But speaking of proximity preference in Walmart, one thing that I have is I don't like to grab the item that's right on the front, you know. And so the items are, you know, on a hanger or something on the shelf. I don't like to grab the one that's, you know, at the very front because I feel like people have walked by and they've breathed on it or they touched it or anything like that. And I guess I'm that much of a germaphobe where I'll go to the second one or the third one behind. But Rothbard would say that in that case I'm not valuing those goods offered for sale in the same way that those are actually two different goods. Because I'm subjectively, I'm thinking about the germs and how many people have touched that, the product that's at the very front. So I will reach, I'll go to the very back. But what if the last person thought that too? Yeah, that's, I haven't thought about that. So I got to think about the way other people are doing the same sort of thing. Well, I want to wrap the show up with a question I ask all of our guests. Obviously, you're not only a PhD economist, but also someone who's deeply, thoroughly read in the Austrian school. So in that sense, in two different senses, you are probably different than most of our lay audience listening today. But first of all, how did you come to know about and read Maniconomian State? That's question one. And number two is, would you or could you make a case that a lay person will actually benefit from giving up a lot of their free time to tackle this book? Well, I found Maniconomian State probably with my first visit to Mises University, which I think was 2009 was my first time coming. And I came to Mises University because I looked up the Mises Institute after I read Economics in One Lesson, which was recommended by Ron Paul in his book The Revolution. So I'm a Ron Paul convert. And so through that chain, Ron Paul to Economics in One Lesson to the Mises Institute, Mises University. And then I found Maniconomian State. And my encouragement to somebody who was thinking about reading this is it's just a real treat. For me, I teach Economics and I teach Economics to undergraduate students. And it's just a real treat to see Rothbard piece something together step by step, starting with, you know, very bare, like the just the bare minimum, which is, you know, starting with the action axiom. And then from that, he develops this entire edifice of economic theory in one in one book. It's just one is a one stop shop really for the entirety of economic theory. And the analogy that I think of is like an amateur guitarist at a rock concert. So when I'm reading this as an economics teacher, and I see him just, you know, clearly explaining these things and, and you know, starting at one level and then adding one more thing and then adding one more thing and adding one more thing until you get to, you know, a theory about the structure of production or about the benefits of the division of labor or also the the economic effects of of monetary expansion. So all of these things come from logic step by step. And it's just a it's a marvel. It's a real treat to see Rothbard develop that the fact that it's so clear. It's a it's a real encouragement to me as a as a teacher that such a thing can be done. We can, you know, clearly explain things in a step by step manner. So I mean, when I say, do you think laypeople should read this book? The answer has to be yes. I mean, we're doing a podcast here. So you got you got to say yes. Definitely. Yeah. It's it's something that anybody who there's a great quote by Rothbard saying that it's it's no crime to be ignorant of economics. But if you're going to have any sort of opinion about it, then you need to know about it. This is where you should go. If you want to have a more developed knowledge of what economics is and in the effects of public policy, then man economy state is it's your one stop shop. It's it's just an incredible treasure trove of knowledge. Well, there you have it, ladies and gentlemen, I encourage you to pick up this book. Again, if you go to mises.org, go to our store. You can find this book both in a beautiful hardcover for $20 with our code, which is HAPOD, or for just I think $10 in paperback with little tiny print using the code HAPOD. You can also just type man economy and state into your search box there at mises.org. And you can pull up a very beautiful searchable HTML version of that so you don't have to buy it if you don't care to. You can either just do it online or download it for free onto your machine and and you know, read along with us because you're going to enjoy it a lot more if you tackle it in smaller increments and smaller doses. And if you have some some of our economists friends joining us to help you work your way through this, I think you'll get a lot more out of it. So we're about to dive into the next few chapters of this book, which are really a place where Austrian shine, which is the whole concept of the structure of production, which is something in roundaboutness, which is something that is not very well thought out in what we think of as mainstream economics today. So you want to stay tuned for that and read ahead if you can. I want to thank Jonathan Newman for his time today and hope that all of you have a great weekend. 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