 Earlier this week, I sat down with John O'Donnell, host of the Power Trading Radio show, to discuss not only the state of the economy, but also the state of economics, the profession itself. So if you enjoyed last week's show with Joe Salerno on this same topic, stay tuned for a great discussion with John O'Donnell on Power Trading Radio. Jeff, welcome to our show. Thanks so much, John. Good to talk to you. You know, I had the opportunity to set in on, listen in on your MISI's weekend show with Joe Salerno, and I thought you asked and brought up a very interesting topic I'd like to explore a bit today, which is, is economics broken? Why don't you take us through the theme of that topic that you all discovered, because I think it's very relevant in what seems to be going on in our world economy today. Yes, it's a huge topic. It's really one we could scarcely do justice to. But when I say economics is broken, I mean that the profession, you know, there was professional economists, academic economists are no longer doing what, in my opinion anyway, the profession ought to be doing. And as a result of that, laypeople like you and me who are interested in this stuff, especially as it affects our lives, or our job prospects, or our investments, or our purchasing power. We get led astray. We've been taught for, you know, several decades now, and this wasn't common 100 years ago, but for the last many decades, we've been taught that economics is a technocratic mathematical science that really is almost a form of physical sciences that requires creating hypotheses and testing them to see if they're true. And as a result of that, I think the average guy or gal, John, has become somewhat afraid of economics and said, well, gosh, I'm not really qualified to understand this. It's so complex, and global markets are so interconnected, and there's so many variables. How can I possibly piece all this together? And I better just listen to these really smart Ivy League-degreeed people who work at the Fed because, gee whiz, they study this stuff all day long, and I don't. I have a regular job. And I think that's been a very dangerous pattern, a very dangerous assumption for us that we have let economics become the purview of technocratic elites rather than a subject that's vital to all of us and can be and ought to be understood like other social sciences. So what I say economics is broken, I mean that professional economists have lost a lot of credibility in because all they've really got now as a shtick is predictions. We're using mathematical models to predict the future. Well, they didn't predict the housing crisis, they didn't predict the Lehman Brothers collapse, they didn't predict the tech stock bubble of 01, they didn't predict the crash of 08. And as a result, the profession has, from my view, as a Lehman, it has egg on its face. And when we get into academia, I think the profession is equally broken because academic economics has just become, like calculus, it's become this series of upper, very high-level math classes. American Econ PhD programs are increasingly filled with Asian students, by the way, who are adept at mastering these high-level mathematics courses and coming to the U.S. to join programs. And so it's really just teaching modeling and mathematics, which is almost a form of history, right? We're looking at data. Data is something that occurred in the past, by definition. So it's a very strange time. I don't think economists 100 years would really recognize the profession today. And I think that it's a profession that's really not serving humanity. It's not doing anything beneficial for the majority of us. And that seems like an odd thing to say, but there it is. That's how I see things right now. You know, there's that industry that has recently developed called Big Data, where dramatically large data sets around our behavior are being accumulated by lots of online sources. And it even drives us more to this economic phenomenon of taking excerpts of big data, putting it into long, complicated formulas, and then attempting to come to some kind of solution or prospective forecast. You know, I forget who it was, but it might have been Murray Rothbard, as far as I know. But someone announced one time, at least I recall, went along something like this. An economist spends the first half of his career learning how to make these long formulas and forecasts. And he spends the second half of his career justifying why they didn't come true. And I think that's the era that we're in. Is it even possible today to get a PhD in economics without being totally overrun with mathematics? It's very difficult. And I think anyone who's interested in becoming a PhD economist ought to be able to handle the math if for no other reason than to be able to refute the dominant modeling approach that is found in the universities today. So, you know, I don't think Austrians or free market economists should be anti-math. But, you know, economics is not mathematics. We cannot reduce human action in the economic realm to formulas. And we can't reduce it to hypotheses to be tested. So, it's very difficult. Now, in European and Asian econ programs, ironically, math is far less prevalent. And there's still a lot more emphasis on theory. But in the U.S. and in the West, well, in some of the West and in the U.S., math is really the dominant measure of whether you can obtain a PhD. And then once you've got one, whether you can publish, because publishing increasingly means doing studies, not writing an abstract paper based on theory. And what's so ironic here is that, you know, we've almost lost the ability to perform theoretical economics. That's almost a dying subject. And part of the reason for that is that young people today, well, first of all, John, they're turned off towards economics because of all this mathy-ness if that's a word. And second of all, they're obtaining PhDs with no understanding of their place in the history of economic thought. They don't study past economists. As I told just later, it's almost like we take young, bright young people, and drop them on an island, a PhD island. And they have no idea how they arrived there. They have no idea what historians or what economists thought in the 1700s, 1800s, 20th century. And so they live in this bubble of data, but they don't have any context. They don't have any historical context in which to place it. And I think that's really dangerous. I think that that's how bubbles happen. I think that's how a lot of companies and a lot of industries and a lot of stock markets get themselves in big trouble. Well, Mises Institute, with your leadership, has done an incredible job of identifying bright young people, bringing them to Auburn, being also for Mises weekends and learning experiences periodically through the year on a very, very affordable basis. And exposing them to the Austrian tradition with some of the masters that we have alive today that do such a great job of teaching these principles. But I've noticed recently that you've launched a new online learning division. And I want to compliment you and your team for making it very user friendly. I notice it's some of the same course where I've taken through Mises on other platforms, but you've really made it frictionless and affordable for any member of the general public that wants to learn about the Austrian tradition to do so. Can you tell us a little bit about the new program? Well, we found that a lot of people don't take economics at all in high school or undergraduate. And those who do, unless they're an econ major, it's generally some sort of micro and then some sort of macro class. And there's a textbook written by Paul Samuelson, which is still very widely assigned. And this textbook is full of errors and misconceptions, at least from our perspective. That's a matter of opinion, of course. And so we said, well, you know, there's a need for people who want to take online classes, but they don't want to do it through a regular university where they're going to get this sort of bolderized version of macro and micro that they need an actual rigorous grounding in Austrian economics. And so, you know, there's an audience out there for this. It's not everybody. A lot of people prefer to spend their free time on Facebook or playing sports or going to a bar or something like that. But for the people who really want to learn this stuff and want to do it for free, we decided to build out and make more robust our online learning platform. And it's tough because, as you know, I mean, you're deeply involved in this with your trading platforms. Online learning is really still in its infancy. And what worked in 2010 is completely out, you know, completely gone today. And what works in 2020, you know, will probably make today's platforms obsolete. So it's really an interesting exercise in finding what the market is. I mean, people clearly want to learn at home. They clearly want to learn on their own time at their own pace. They clearly don't want the traditional brick-and-mortar model of a 15-week semester and buying books and going and physically seeing a lecture, a one-directional lecture for an hour and then going home and doing their homework and taking a test. We know that the traditional model is broken and it doesn't serve the needs of people today because basically the same model that has been used for a thousand years, which is ironic. But beyond that, we're very much trying to figure out what people want. And some people would like to consume just a tiny amount of economics education. They just want to have maybe a Twitter feed and occasionally read an article that broadens their understanding. And some people want a whole lot of economics education. They'd like to come to the Institute and use our library and spend three months here as a fellow and then maybe go on and get a PhD in economics. So there's people on each extreme and there's a lot of more people in the middle. So we're trying to reach more of those people in the middle and we're trying to gauge where the interest is. But I will say this, a lot of young people are disillusioned or bored by the economics that they're taught in their undergraduate settings. So we want to be there as a non-traditional school, a 21st century school that's accessible to anybody. It's not just for young people, not just for traditional students, but really for anybody. So we're working on it and we're modernizing it and it's a work in progress. It's a lot of fun because, as you know, in the pre-digital age, all this stuff had to be done with physical books. And you had to know somebody or you had to have a professor who was good. And now, with a couple clicks, we can post something and 40 or 50,000 people can see it immediately. So it's a great leveler. I think it's very important and I think it's a great mission to educate all ages. As a matter of fact, as you know, we serve an investor-trader audience here at Power Trading Radio and Online Trading Academy. And we have a very substantial audience who come in here at all age groups who have virtually no economic grounding whatsoever. And we do our best to integrate Austrian economic principles into our teaching in our courses, both in our classrooms and in 40 markets across the world and online. We attempted to do the online education work, believe it or not, way back in 1998. And we were all geared to deliver online coaching, mentoring, but the problem was there was no bandwidth to the home. I mean, 56k modems were hardly out and the platforms were very expensive and not very stable. So we kind of abandoned that for several years. But it's now the biggest division and our online support division, both before classes and after class, to carry on a continuing experience and branding right into the home of our adult learner, is the most prolific experience in our education. So we like to blend the best practices of the physical classroom experience with online learning techniques. And I think it's 2 plus 2 equals 6. And I certainly, it's got a great future. Now they're coming out with software, I understand, where you can almost do foreign language translation on the fly. So can you imagine speaking into a camera in English and delivering your content and on the fly, your PowerPoint and voice is converted into Spanish or German or French? Well, it is amazing. We've never had more information so available to us at our fingertips. The problem is not a lack of information like 30, 40 years ago. The problem is too much. And it's cultivating it and sifting through it and figuring out what's important and what isn't. So we've got more information done and it seems like we have less wisdom in many ways. I know you're very close to Ron Paul and his organization with private education as well. Jeff, I'd like to get your opinion or thoughts on two very large for-profit education entities in the education space. Corinthian College and ITT just went out of business simply because they apparently were abusing or allegedly abusing college loans sponsored by the U.S. government. Do you have any thoughts on the state of the college finance programs that are going on out there? Yeah, those were sad because I very much like the idea of trade schools, schools that teach people practical, applicable skills. For those who don't necessarily want a broad liberal arts education and a bunch of mandatory classes that they have to take a four-year undergraduate setting. I applaud them for teaching direct skills. Now, unfortunately, they were provided with a very perverse incentive by the federal government, which is taxpayer-backed student loans that are easily obtainable, even by someone with little or no credit. In other words, no one's loaning 18-year-olds $60,000 to buy a Corvette, but lots of people will loan, lots of organizations will loan 18-year-olds $60,000 to go get a debt at college because it's backed by the federal government. In a sense, these colleges, although they may be on individual basis, they may be scammy, they may have a very hard sell, they may fudge their employment statistics, all kinds of things. I mean, I'm not here to say that they were angels, but the mother's milk of the problem is federally subsidized student loans. If it wasn't possible for students with little or no credit to so easily obtain these loans, then these schools would have to drop their tuition. It's just that simple. And you can say that at four-year schools as well. People respond to incentives. And when Uncle Sam creates incentives for people to spend much money now going to school, even when there's an uncertain outcome at the end, that's what people are going to do. And these schools either exploited or preyed on these young people as a result or they offered a market service that got out of hand. I guess you could look at it either way, but it really is a shame because I think technical education is something that America is sorely lacking. And I think this push that every kid has to go to college has just resulted in diluting the value on the standards of college. That's all it's done. So, some situation, and I got to tell you, moral hazard aside, as a 40-something, I do have some sympathy for the argument that we ought to forgive student loans. I think a lot of these millennials have really sold something. Now, they bear some responsibility. Don't get me wrong. But I do have some sympathy for that argument. It's a very tough situation to have all these young people starting out heavily in debt. It's a terrible way to start out in life. But it seems to me the government, I'm sure there were abuses, but on the other hand, it seems to me the government, as measured by the Department of Education, has really targeted the for profit space. They haven't seemed to take into task the potential abuses that very well of the same allegations may be taking place in the traditional state university. University of Alabama, or Auburn, or University of Georgia. Why is it that they seem to have taken on such a target on the back of the for profit space? Well, first of all, they hate for profit education. They view it as something like healthcare that ought to be provided by the state where it's not legitimate. They also want to promote their four-year universities for one. And there's lots of kids who have gone through those and come out with little or no job prospects. At least a lot of the for profit schools are shorter two-year degrees in culinary schools and art schools, heating and HVAC schools, that sort of thing. At least they're shorter in duration and you get a degree faster and it costs less. Auburn University, which sits across the street from my office, about $40,000 a year for in-state tuition. So that's quite a lot of money, potentially $160,000 to obtain an undergraduate bachelor's degree. If I was going to school under those kind of circumstances, I would hope, I'd hope as a young person I would have enough foresight to think long and hard about it. But I think you're right, I think that there's a bias against for profit schools and I think that's why the government, they're viewed as somehow predatory by their very nature. That anyone who makes money teaching kids how to do something is somehow immoral. That's absurd. You know, for profit education sounds to me like how education ought to operate. Well, our organization is a for profit education entity. It's unaccredited. But at the end of the day, our adult learners come here. We have our own self-financing program through third-party finance companies. But the student has a substantial down payment to make for the tuition. We have a broad menu of courseware that they can choose from, but they're not here to get a job. Most of them are here to learn a very specific skill to use our core strategy to time the market, take responsibility for their own pension plan, be self-directed to the market, and use our support, which is unending, lifetime support. So when somebody becomes a member of our family, we're committing to serve them for the rest of their life in giving them community to find entries and exits that will help them, you know, beat the market versus the traditional buy-and-hold S&P model, or take it away from Wall Street. We give them a lot of motivation and they aspire to take responsibility for their own financial affairs. But we don't take a nickels for the government money. As a matter of fact, we're net render of taxes to the government. We don't have any government support whatsoever for our students, nor do they necessarily need it. There are private sources of credit out there for credit-worthy individuals, especially if they have a significant down payment toward the full contract value. Absolutely, and your students are also probably not always 18 years old, and that's the twist here. Of course, 100 years ago, it would be considered absurd that an 18-year-old wasn't responsible for understanding the debt situation that he or she was getting himself into. But today, an 18-year-old's not the same thing as 100 years ago. So that kind of adds a twist. When these young people are told throughout their childhood, education is the key to a brighter future. Go to college, go to college, go to college. And then when they turn 18, well, they say, I don't have the money for college, my parents don't have the money. But here's Uncle Sam offering these loans, and all I have to do is sign. You can see how that's extremely enticing. Yes, it is. Jeff, I understand you're getting ready to launch your new funding campaign for Mises Institute. But you, through your leadership, have provided a terrific scorecard on beating the big DC think tanks. You run a very efficient operation out there. Why don't you tell our listeners a little bit about the Mises Institute? I'm a member of it. I love it. I can't think of what my day would be like if I didn't have Mises.org as a primary source of income for what's going on in the world economically. But how have you been so efficient in beating out some of these very well-capitalized think tanks in DC with on a relatively spartan budget there in Auburn? Well, I think the internet is the answer. The digital revolution has been, as I mentioned earlier, the great leveler. I mean, we operate on a few million dollars a year. We have about 23 or 24 staffers at any given time. There's a lot of organizations in Washington DC that have hundreds of employees and have bring in 50 or 75 or 100 million dollars a year in donations. Now, a lot of those donations are from corporations or larger donors, family foundations, et cetera, whereas our donations are virtually all individual. So we just use the internet. We put as much on our website as we can. We spend quite a bit of time with our outside vendor trying to fiddle with our website and make it a little more user-friendly. And we just generally try to make things available for free because we find that that actually... Like, for instance, when we sell a book in our bookstore, we also try to make an HTML or a PDF version available for free. And we find that that actually increases sales. It doesn't decrease them. So we try to be a free resource and use our status, use our website traffic and our social media traffic to convince people to give us donations, to convince them that what we're doing is worthwhile and that it's something out of sport. So while we have lots and lots of people who give us 10 or 20 or 50 or 100 dollars a year, and that's how we get by. And look, don't cry me a river. We have a great time. We love what we do. We're excited about our mission. And when the day comes that we're not, then we'll close up shop and go home. And I look forward to that day. I look forward to the day that Austrian economics is so accepted on Wall Street and in academia that we're not needed anymore. But until that day comes, we'll be here in some form or another. And hopefully that form is increasingly digital because that's the cheapest way to reach the most people quickest. Well, from your mouth to God's ear. I recall, matter of fact, last night I was reading an excerpt from one of your PDFs. I think it was Misi's talking about freedom and crisis or something like that. I believe it was the title. But any rate he was talking about how Keynes really gave before Keynes came about 1936 with his book. The Austrian approach was very well accepted and was then considered mainstream. And of course, that Britain had been running the equivalent of Keynesian policies before Keynes even wrote his book. And then what Keynes did was really give a license or a pass to the economists to fund deficit spending and create attempt to create demand. And he really gave the economists a pass and the politicians love this because they now had several PhDs endorse their deficit spending, demand creation, money manipulation, cheap liberal credit programs to the point that... And he even discredited Sey's law. I mean, he never disproved Sey's law. He just announced it that he discredited it. And all of a sudden mainstream economics moves to the forefront. Austrian economic type principles kind of moves to the back of the bus and it hadn't lost any momentum since. It just keeps getting bigger and bigger and bigger. And what a disservice this man did. He never disproved any of the Austrian principles that Mises and Hayek and so many others and Minger so well articulated. But the fact that the mainstream politicians, mainstream economists and the politicians in essence sold out. And it's that simple. But they never disproved the principles of Austrian economics. Would you say that's accurate? No, it is. And I would say modern economics operates not so much on a well-identified set of principles, but instead on a very murky set of principles that almost guide economists subconsciously. In other words, a lot of what Keynes said or believed, he actually changed later in life, but a lot of what he said or believed isn't so much followed today explicitly. It's followed implicitly. We have this sort of general sense and we can call it neoliberalism. This general sense, it is the role of government and the role of central banks to create demand. That that's the number one job of growing and sustaining an economy to create demand. Well, we all have infinite demand. We're human beings. We all have unlimited wants and desires. The question is not what we demand, it's what we can produce. That's the hallmark of a civilized society, of a society that's healthy and growing and creating for the next generation is how productive it is. Does a society consume more than it creates, or does it create more than it consumes? Because the whole history of human development is capital accumulation. Now, that might sound trite, but it's true that healthy societies accumulate capital. Unhealthy societies consume more capital than they accumulate. Unfortunately, modern economics pushes endless consumption, endless stimulus of demand, as the way to create a healthy economy. It just isn't true and we're seeing it. We have mountains of debt since 2008. We have mountains of QE and we don't have anything to show for it. We don't have any real substantive increases in GDP. We don't have new markets. We don't have real sustained growth in U.S. companies. What we mostly have is accounting gimmicks and stock buybacks and that sort of thing. It's getting very, very hard to fool reality. We have so much more debt around the world than we did in 2008. It's really pretty scary if you worry about that sort of thing because the next crisis could be far more painful than 08.