Mises As Mentor an Interview with George Reisman

Mises as Mentor An Interview With George Reisman

Fall 2001 — Volume 21, Number 3 Front cover: Fritz Machlup and Ludwig von Mises.

THE AUSTRIAN ECONOMICS NEWSLETTER Fall 2001 — Volume 21, Number 3

The Austrian Economics Newsletter is published quarterly by the Ludwig von Mises Institute. An Interview With George Reisman

MISES AS MENTOR

AEN: How did you first come to find out that Mises was teaching in New York?

REISMAN: My economic opinions were pretty well formed by the time I entered graduate school. My introduction to economics came when I was eleven years old, way back in 1948. I saw a short documentary in a movie theater. It pointed out that the U.S. had 6 percent of the world’s population but produced 40 percent of the world’s wealth. I was impressed.

Meanwhile, I was reading some good newspapers: The Journal GEORGE REISMAN American carried Westbrook Pegler and George Sokolsky, who both provided a dissenting voice. I was developing political opinions, but I was also increasingly aware that I was in the George Reisman received his Ph.D. in 1963 under the direction minority. of Ludwig von Mises, and he currently teaches economics at AEN: So you weren’t getting this in school? Pepperdine University. REISMAN: I was in seventh grade at Joan of Arc Junior High, He is the author of The Govern- and my teacher told us that he regretted that he did not live in ment Against the Economy (1979), Capitalism: A Treatise on Economics the district represented by Vito Marcantonio, who was practi- (1996), and many monographs cally a communist. I recognized that I was being fed the left- on economic topics, and is the liberal line. I once made the point about American productivity translator of Mises’s Epistemological that I had seen in that film. He came back at me and said, yes, Problems of Economics (1976). but 10 percent of the population owns 90 percent of the wealth! As president of the Jefferson School, he writes frequently for the All my classmates were leftists. Our straw polls showed over- popular press on energy economics, whelming support for Democrats. At first I figured it was just environmentalism, and antitrust, the people that surrounded me, or maybe it was New York. But and has published several articles then I went to summer camp in Maine and was surrounded by in the Quarterly Journal of Austrian people from all over, and they all held leftist views. After that, I Economics. figured that practically everyone was leftist. The AEN interviewed Dr. Reisman while he was on the Mises Campus I recall being struck by a biography of Julius Caesar, written in for Mises University 2001. the nineteenth century, that I read that summer at camp. The author made a remark about how much Caesar’s government LUDWIG VON MISES INSTITUTE interfered with the lives of Roman That appeared to be just a statisti- wanted to read that because it citizens. But in this country, the cal analysis. I was looking for logi- sounded right up my alley. But it author went on, people realize that cal argumentation. turned out to be too expensive to no matter what the government purchase. But I did get Jevons’s can do for them, it can do twice as I used my birthday money to buy State in Relation to Labor, which is a much to them. That remark rein- Adam Smith’s The Wealth of Nations, good book. It had many good crit- forced my sense that there was a which was widely promoted as a icisms of labor unions. It put me in pro-freedom tradition somewhere. defense of capitalism. But it didn’t a position to answer my teachers. I I just had to find it. live up to expectations. I was then started his Theory of Political extremely disappointed. From the Economy and got my first exposure AEN: But at the age of eleven you Marxism I was picking up around to marginal utility and thus the encountered difficulties in finding me, and the preface by socialist answer to the labor theory of literature that seemed to back your Max Lerner, it seemed to me that value. intuitions. Smith, with his theory of value, was just preparing the ground for Then I went back to Mises, and REISMAN: Yes, but I kept looking. Marx. tried to tackle his book Socialism. At the age of thirteen I found This was in 1951, and it was a In the fall of 1950, I entered brand-new edition. But it was just a Stuyvesant High School. George bit beyond me at that point. But a READING Sokolsky had a Sunday night radio year later, I bought the book and I broadcast. In one of these broad- was able to read it. It fascinated me. SOCIALISM casts, he mentioned a magazine I recall reading on the sly during called The Freeman. I bought it, shop class, keeping it in my drawer WAS THE and in that issue was Mises’s article, and sneaking a look when I could. “Lord Keynes and Say’s Law.” Reading that book was the single SINGLE MOST That was my first exposure to most enlightening experience I had Mises’s writing. I could see for the up to that point. I became aware of ENLIGHTENING first time that here was someone one thing after another. It is a mas- EXPERIENCE who was arguing, very authorita- terful book. tively, in defense of capitalism. I HAD UP TO AEN: You were still reading The AEN: Who was next on your read- Freeman in those days? THAT POINT. IT ing list? REISMAN: Yes, and Henry Hazlitt IS A MASTERFUL REISMAN: I picked up a history of wrote much of their editorial mat- economic thought that described ter. So long as he was one of the BOOK. David Ricardo as a “harsh advocate editors, the quality was outstand- of laissez-faire.” I thought: “Well, I ing. I read it from cover to cover. will certainly have to give him a try!” Unfortunately, he had some dis- Joseph Schumpeter’s Capitalism, But again, I was disappointed and pute and left in 1953, and the qual- Socialism, and Democracy. He has a became bogged down in the open- ity never recovered. statement in there that socialism ing chapter on value, which seemed looks superior on paper but it to me to be pre-Marxian again. His By the spring of 1952, I had trans- doesn’t work out in practice. I was chapter on land rent was pretty ferred to the Bronx High School of astounded. If you say “on paper,” good, and there were some interest- Science, and we used to have mock that means as far as we can know and ing arguments. But it wasn’t enough. political debates. I was speaking on understand. I knew that couldn’t be behalf of Robert Taft, before the true. I also checked out Carl I learned that Jeremy Bentham had convention, imputing positions to Snyder’s Capitalism the Creator. written a defense of usury, so I him that we could only wish that he

4 AUSTRIAN ECONOMICS NEWSLETTER LUDWIG VON MISES INSTITUTE

[Mises] wrote it in my copy of Human Action. We had a long conversation with him, and he invited the two of us to his seminar, on the condition that we didn’t make noise.

AEN: Did he recognize you from the previous encounter?

REISMAN: Thankfully not.

AEN: You two must have been the youngest members of the Mises Seminar.

REISMAN: Yes, but there were others who were young by any standard. Murray Rothbard had just turned twenty-six in the Ph.D. had actually held. A little character in sell subscriptions to The Freeman. a tasseled hat came up to me. I was We hoped that would engage him MISES INVITED used to constant hostility and harass- and we could talk. ALPH AICO ment, so I greeted him with: “What’s R R on your small mind?” Well, I was So we walked up to his apartment AND ME TO amazed when it turned out that he and rang the doorbell. Mises was for Taft, too! He also turned out answered the door. He was prepar- HIS SEMINAR, ON to be the young Ralph Raico.* ing to go out to dinner in a tuxedo. He was standing there in his THE CONDITION Ralph and I made quite a team. We trousers, dress shirt, and sus- used to set up a table on the street penders. We announced that we THAT WE near the New York Public Library. were selling subscriptions to The We would invite crowds of people Freeman. He said: “I have The Free- DIDN’T MAKE to debate with us about politics. He man.” Then he closed the door! Of used to joke that one of us could course, we felt terrible. Mises must NOISE. take the place of the other in the have thought that the publication middle of a sentence. That was a had young kids going around the program at Columbia. Ralph, Mur- good experience, and a lot of fun. city bothering people to subscribe. ray, and I would go out after the seminar. I recall that once I entered AEN: You still hadn’t met Mises. AEN: So you had to figure out Columbia, I had to skip a few ses- some other way to meet him. sions because of my classwork. REISMAN: No, but he was living Murray called me on the phone to in New York. When I was fifteen, REISMAN: Yes, and some months ask where I was, and encouraged Ralph and I decided we would try later, we decided to do things the me to come back. I attended to meet him. We devised a plan. We right way. We went to the Founda- through 1960. would pose as solicitors trying to tion for Economic Education, and Ivan Bierly agreed to arrange a The seminar was attended by pro- *Both Reisman and Raico lectured at Mises meeting. The day was February 23, fessionals and businessmen of vari- University 2001.—Ed. 1953. I recall that date because he ous sorts, plus New York University

VOLUME 21, NO. 3 — FALL 2001 5 LUDWIG VON MISES INSTITUTE students, and our group, which we obvious why. He was the greatest called the Circle Bastiat. Along defender of capitalism in a time of with me and Murray and Ralph, rampant anticapitalism. Still, the ADDITIONAL there were Robert Hessen and injustice of it all is striking. Leonard Liggio, among others. Sometimes, Mises became very pes- RESOURCES: As for Mises himself, he was a great simistic. I recall a conversation we gentleman, unbelievably learned had in 1960 when I told him I BOOKS AND BOOK CHAPTERS: and erudite. I recall at the Gallatin thought we were increasing in num- House, I would come in a little ber. But he put it down to my just Capitalism: A Treatise on Economics early, and he would come down having gotten to know the others in (Ottawa, Ill.: Jameson Books, [1996] from the third floor. I would sit the movement. He wasn’t ready to 1998). several feet away from him. I was believe that we really were growing. I recall, too, the time that he “Classical Economics Versus The Exploitation Theory,” in The Political made some comment that his writ- Economy of Freedom, Essays in MISES WAS ings were like the Dead Sea Scrolls Honor of F.A. Hayek, Kurt R. Leube that someone would find a thou- and Albert H. Zlabinger, eds. A GREAT sand years from now. (Munich and Vienna: Philosophia Verlag, 1984), pp. 207–25.

GENTLEMAN, I just wasn’t conscious of his own “Education and the Racist Road to personal pain and suffering at that Barbarism,” in Do the Right Thing: A UNBELIEVABLY time. I recall that I had a discussion Philosophical Dialogue on the Moral with him once at a bus stop. I com- and Social Issues of Our Time, F.J. Beckwith, ed. (New York: Jones and LEARNED AND mented on how much I liked Plan- Bartlett, 1996), pp. 413–19. ning for Freedom. He said that it ERUDITE. probably needed to be updated, but The Government Against the Economy that most people seemed to be (Ottawa, Ill.: Caroline House Publish- I WAS IN THE more interested in what Lenin had ers, 1979). PRESENCE OF to say. Despite these bouts of sad- “The Toxicity of Environmentalism,” ness, he overcame them. For me, he in Rational Readings on Environmen- was the model teacher and person. tal Concerns, Jay H. Lehr, ed. (New ONE OF THE York: Van Nostrand Reinhold, 1992), pp. 819–41. GREATEST AEN: When Theory and History (1957) was being written, did he MINDS OF discuss the book in his seminar? JOURNAL ARTICLES:

ALL TIME. REISMAN: The seminar in those Comment: “Reisman on Capital- days was mostly devoted to episte- ism,” Quarterly Journal of Austrian mology, but he usually didn’t Economics 1, no. 3 (Fall 1998): 47–55. very conscious that I was in the promote his own work. He would presence of one of the greatest mention in passing that he was “The Goal of Monetary Reform,” minds of all time. working on a new book, but that Quarterly Journal of Austrian Econom- was about it. He would typically ics 3, no. 3 (Fall 2000): 3–19. AEN: Did it strike you at the time come in and lecture for about thirty “The Value of Final Products Counts minutes and open it up for ques- that he wasn’t being treated well? Only Itself: Today’s Gross Product Is tions and discussion. The classes Net Product,” American Journal of REISMAN: We all knew it was an began at 7:25 P.M. and ended at 9:10 Economics and Sociology (forthcom- outrage that he didn’t have a big- P.M. This was standard format at ing, 2002). ger academic position. But it was New York University.

6 AUSTRIAN ECONOMICS NEWSLETTER LUDWIG VON MISES INSTITUTE

AEN: Your master’s thesis was REISMAN: Yes, because in July of in English, but I didn’t particularly called “The Classical Economists 1959, I was suddenly able to answer like the translation. To revise the and the Austrians on Value and a whole series of questions that had dissertation to his satisfaction, I Costs.” accumulated. What triggered every- added thirty pages at the beginning thing was Hazlitt’s book, The Fail- and thirty pages at the end, and cut REISMAN: Yes, I submitted it in ure of the “New Economics.” In it he a large part of the rest. I made only the spring of 1959. I wrote it as a had a long quotation from John one terminological change: I response to the time I spent at Stuart Mill on why the demand for changed “originary interest” to Columbia. After having read commodities is not the demand for “profit.” Segal then came back and Mises, I felt I was able to answer all labor. It was then that I began to said it was fine—except for the first my Marxist high-school teachers. put everything together. thirty pages, and that he hadn’t But I wasn’t as well prepared to read the last thirty pages. Even deal with my college instructors. In the background here is a long- today, I have the original manu- That’s really what this was about. standing dispute I had with Murray script in a fireproof safe. about whether the rate of profit Now, my original plan was to go and interest had to fall as accumu- straight through to get my Ph.D. I lated capital grew. I was very did all my classwork in one year uncomfortable with the idea, which WAS and two summers. I took twenty I likened to the sun burning out. I I credits per semester. I had sixty was wondering what would be nec- SUDDENLY units of graduate work under my essary in order to have capital accu- belt by the fall of 1958. Then I got mulation without the rate of profit ABLE TO bogged down a bit, in particular by having to fall. I was able to con- a split with Murray. That episode struct a set of assumptions and a ANSWER A resulted in much personal pain for “model,” and changed my disserta- me, and for Murray too. tion topic from imputation to what WHOLE SERIES became “The Theory of Originary My original idea was to write my Interest.” OF QUESTIONS dissertation on imputation. Some- where along the line, I decided that AEN: How involved was Mises in THAT HAD I should pick some topic that would the process? require me to read only good ACCUMULATED. authors and deal with the material REISMAN: He wasn’t that involved. at length. I wanted to read the clas- I wrote the whole dissertation and sical economists again, including presented it in full. It was 640 pages. Smith and Ricardo and the others, On my committee were Mises, AEN: How did Mises respond to in addition to Menger and most of Joseph Keiper, William Peterson, this episode? Böhm-Bawerk. and Harvey Segal. Segal flatly rejected it. I was stunned. I had had REISMAN: Mises knew what was This was when I began to rethink delusions that after it came out, I going on, and he was cautioning the classical economists. Having would be elected president of the me to leave Segal a line of retreat. I read them all, I felt like I had American Economic Association. recall there was one time when learned a great deal, but I wasn’t Instead, it looked for a time like I Mises was trying to console me, prepared to say what at this point. wouldn’t get my Ph.D. and he said that soon I might It was like being intellectually become the editor of a new journal pregnant. One of the reasons that Segal gave and wouldn’t have to put up with was that I was quoting Böhm-Baw- this. For his part, Mises regarded AEN: And this was the beginning erk in German when it was avail- Segal as something of a Marxist. It of your work on profit. able in English. Now I knew it was was a difficult time, and for years I

VOLUME 21, NO. 3 — FALL 2001 7 LUDWIG VON MISES INSTITUTE was consumed with bitterness toward Segal. Murray, too, was treated very badly by Arthur Burns, who later became head of the Fed under Nixon.

I know that Mises must have had some disagreements with my theory, but a few years later I gave a lecture called “A Ricardian’s Cri- tique of the Exploitation Theory,” and Mises was very enthusiastic about it. Another spinoff from the dissertation was an article I wrote called “Production versus Con- sumption.” It was a modernized version of classical ideas. I sent it to Henry Hazlitt. He was extremely The Circle Bastiat, August 1955. enthusiastic about it, and anxious From left: Ralph Raico, Murray Rothbard, George Reisman, for it to be published in The Free- Robert Hessen, and Leonard Liggio. man. Mises liked it, too, which I

would often go back to Murray’s her position on value theory to be apartment. At one of these occa- very naive. But I was also becoming sions, he was telling us about his aware that I couldn’t overcome her. MISES LIKED meetings with Rand. She sounded She was constantly backing me into very interesting, but at the same corners where I didn’t want to go. MY ARTICLE IN time forbidding. We were all So I was profoundly impressed. But interested in meeting her. Murray some hostilities developed, and I THE FREEMAN, was reluctant to arrange anything didn’t see her again until after the because he somehow dreaded it. publication of her novel Atlas TOO, WHICH Shrugged. Meanwhile, others started Finally, we met her one Saturday attending meetings with Leonard I TOOK TO BE night in July of 1954. It was a long, Peikoff when he first started lectur- APPROVAL OF combative evening. Murray, Ralph ing on Objectivism. This must Raico, Leonard Liggio, and Ronald have been 1955–1957. MY GENERAL Hamowy were there. We discussed the theory of moral value, among Robert Hessen was working at a THESIS. other topics. I was the one doing bookstore at the time, and he was most of the arguing. Murray was in a position to order copies of finding this all very amusing Atlas in advance. We had about ten because he had been through the copies weeks before it hit the book- took to be approval of my general exact situation some time earlier. stores. I don’t think I did anything thesis. We were there until 5:00 A.M. else for three or four days but read Atlas. It was far and away the most AEN: How did you come to know AEN: When did you go back? exciting book of fiction that I had Ayn Rand? ever read. Murray and I were talk- REISMAN: She invited us all back ing about it constantly. Mises was REISMAN: I met her through for round two the following week. also impressed with it. It was a very Murray. After Mises’s seminar, we I found it very distasteful. I found exciting time, and the idea that a

8 AUSTRIAN ECONOMICS NEWSLETTER LUDWIG VON MISES INSTITUTE procapitalist book had a chance for production, just as the classical $20,000 car. In this case, the value popular success made us all brim economists said. But if you then ask of the car is not imputed back to a with optimism. what determines the cost, then we part that makes it run. You are only go back to marginal utility. It is not paying a price based on the cost of AEN: When did you begin to write true that in every case, the price of production of the belt. What your own treatise, Capitalism? the product determines the prices determines the cost of production of the factors of production. is the value of alternative marginal REISMAN: Some of the material is products elsewhere in the econ- from my dissertation, and from my AEN: Where does Böhm-Bawerk omy. first book, The Government Against explain this most fully? the Economy. I started consciously AEN: In Capitalism, you say that working on it in 1980. I wrote an REISMAN: Both in Capital and the determination of price by cost extensive outline, and starting writ- Interest and in his “Value, Cost, and ing the book in spring 1981. There Marginal Utility,” which I’m cur- was constant interaction between rently translating. I hope to present my writing, my teaching, and my a paper at the next Austrian Schol- I SEE THE MERIT Jefferson School lectures that I ars Conference on this topic. I will would give at conferences. These be applying Mises’s distinction IN TRYING TO conferences were on Objectivism, between esoteric and exoteric ver- and I would give the economics sions of doctrines, which are some- INTEGRATE lectures. I always made it my busi- times at odds. I think that is true ness to write out all the lectures, with regard to the Austrian view of THE AUSTRIAN and in doing that I was effectively cost. The typical version that goes writing the book. I finally had a fin- around—that the value of the TRADITION ished draft in 1990. Editing and product is always determined by rewriting was a tremendous amount supply and demand and never WITH SOME of work. directly by cost—is really that of Jevons, not Böhm-Bawerk, and not IDEAS FOUND IN AEN: Given the many lifetime Wieser. THE CLASSICAL influences on your thought, where do you see yourself in the Austrian AEN: Can you give an example? TRADITION. tradition? REISMAN: If you open up the REISMAN: I am a part of that tra- hood of an automobile, you see a dition, but I also see the merit in number of individual parts that dis- is just an instance of the law of mar- trying to integrate that tradition able the entire car if they are broken. ginal utility. with some ideas found in the classi- There’s a fan belt, a carburetor, a cal tradition as well. For example, starter, among many other items. REISMAN: It is. Marginal utility there’s some important work in There’s no way that you can derive determines the value of the things Böhm-Bawerk that represents the value of those items from the that constitute the cost, and then steps toward that. He was certainly value of the car, because you would the cost determines the value of the the foremost developer of Austrian have to attribute the entire value of supra-marginal products. It brings price theory, but he didn’t accept the car over and over again. it down to reflect the value of the one tenet that has come to define marginal product. Again and again the popular Austrian orthodoxy. When you go to the car-parts store in the market economy, you don’t to buy another fan belt, you only have to pay a price that comes up to He clearly states that there are pay a tiny fraction of the utility that your direct marginal utility. You many cases in which the direct you derive from it. You pay $20, pay a price that corresponds to the determinant of prices is the cost of but it restores the entire value of a much lower marginal utility of

VOLUME 21, NO. 3 — FALL 2001 9 LUDWIG VON MISES INSTITUTE other products produced by the This amounts to a repudiation of same means of production. As my the time-preference theory. very lengthy quotation from CALENDAR Böhm-Bawerk in Capitalism (pp. AEN: Do you regard time prefer- 414–16) shows, cost is what com- ence as the sole determinant of AUSTRIAN SCHOLARS municates to the narrow individual interest? CONFERENCE 8 market the state of supply and March 15–16, 2002 demand and marginal utility in the REISMAN: It is indirectly the most broader, factor markets. important determinant of the rate of HISTORY OF LIBERTY interest. But not in a direct fashion. May 26–31, 2002 AEN: Do you have a revisionist The usual view is that we start with view of Böhm-Bawerk’s inconsis- the value of consumers’ goods, and HUMAN ACTION SEMINAR tency concerning interest? then we apply a rate of discount to June 2–8, 2002 the value of these goods to arrive at the value of the factors of production. ROTHBARD GRADUATE SEMINAR: THE ETHICS OF LIBERTY I WAS I don’t think that is the way it hap- July 28–August 2, 2002 pens. Time preference is responsi- INSPIRED IN ble for causing the demand for MISES UNIVERSITY products to be greater than the August 4–10, 2002 IMPORTANT demand for the means of produc- WAYS BY tion. It causes more money to be MISES INSTITUTE spent buying products than in buy- 20TH ANNIVERSARY, ISES S VIEW ing means of production. That SCHLARBAUM PRIZE, AND M ’ establishes the higher price of “THE NEW DISSIDENTS” ON ORIGINARY products compared with the costs CONFERENCE of producing them. I call this the October 18–19, 2002 INTEREST. net-consumption theory.

I was inspired in important ways by Mises’s view on originary interest. REISMAN: In this case, there really There’s a passage in Human Action is a contradiction in Böhm-Bawerk. in which he poses this problem. After establishing that time prefer- Suppose people expect the end of ence is the explanation of interest, the world, as they did in A.D. 1000. he comes back to the very produc- They had no future, so all would tivity theory that he had already consume in the present without refuted. He actually abandons time limit. In those circumstances, preference in a footnote. Mises says, the rate of originary interest would rise beyond all At first he refers to the higher sub- measure. jective value of present goods. But For more information, then he says that for people who I agree with that, but also with a contact the Mises Institute have abundant wealth and are pro - slightly different formulation. 518 West Magnolia Avenue viding for the future, the marginal Suppose that people stopped buy- Auburn, Alabama 36832-4528 satisfaction they attach to provision ing factors of production because Phone 334-321-2100 Fax 734-448-8148 for the future exceeds the marginal they hoarded all their savings, and Email [email protected] satisfaction they attach to addi- the only spending was the buying Web site www.mises.org tional provision for the present. of consumers’ goods. Since there

10 AUSTRIAN ECONOMICS NEWSLETTER LUDWIG VON MISES INSTITUTE would be no expenditures for fac- AEN: Does your view of the busi- though I’m a little reluctant to tors of production to produce the ness cycle differ from Mises’s? impose it. It would actually be a consumers’ goods, their money very simple thing to manage all this cost would be zero. The entire REISMAN: Not in any fundamen- through contract. We just need to sales proceeds would be profit, and tal way. But I would say that to be clear about what is a loan and the rate of profit would be infinite. have a depression, it is not enough what is a checking deposit. This demolishes the Keynesian just to hav e made mistakes because “liquidity trap,” which posits infi- that would imply a contradiction of To establish a 100-percent reserve nite cash hoarding alongside a Say’s Law. Imbalances in the economy gold standard overnight is a diffi - minimal or zero rate of return. are not enough to create a general cult proposition. We could rede- depression. Malinvestment has to be fine the dollar in terms of gold, as The same thing would be true in a shown to be the cause of a general rise Rothbard suggests. But if we had society in which there were no cap- in the demand for money. More italists. Without capitalists, every- importantly, however, I agree that thing is profit; nothing is wages. without credit expansion, there can be I THINK IT IS A no business cycle. Hayek is right to say that it is the TRAGEDY THAT capitalists who enable people to live as wage earners. AEN: Is an Austrian-style cycle possible without a central bank? THE AUSTRIANS AEN: In your view, then, the classi- REISMAN: If you had commercial HAVE SO READILY cal view, rightly understood, can be banks expanding credit, then yes. used against the Marxian view. DISMISSED THE Whether or not they could, or to what extent they could, is subject to REISMAN: Yes, and I do think it is CLASSICALS debate. I think we can say that a tragedy that the Austrians have under free banking without a cen- so readily dismissed the classicals ON GROUNDS tral bank, there would be some on grounds that they lead straight check on credit expansion. The only to Marx. It can be made quite the THAT THEY thing that would keep the business opposite. When Mill’s proposition cycle completely at bay is 100-per- LEAD STRAIGHT that demand for commodities is cent reserves, under a gold standard. not demand for labor, that it is the TO MARX. capitalists who make the demand AEN: Do you see your views on for labor—when this is kept in 100-percent reserves as compatible free competition between gold and mind, then Ricardo’s proposition with Mises’s own? paper money, I am confident that that profits rise as wages fall, we would be taking a sizeable step implies that if there were no capi- REISMAN: He is explicitly sympa- in the right direction. talists, there would be no wages. thetic to this position in Human We would be back to the early and Action. He employs that quotation There are other lesser steps that rude stage of society and contrary from Cernuschi, in which he is can be taken. We should remove all to Smith and Marx, it would mean advocating free banking so that impediments to the ownership of zero wages and all profits. nobody will take banknotes. It gold, and that includes sales taxes. would be wonderful if it would There should be no reporting or On the other hand, the more and work that way. But I’m dubious. In identification. We need to have bigger the capitalists are, the Human Action he has a statement complete legalization of gold con- higher are wages and the lower are that could be taken as implying that tracts, and the courts must enforce profits. All this is implicit in it would be all right to impose 100- them. We should eliminate all taxes Ricardo and Mill when key ideas percent reserves. I agree with Mur- on gains that result from the rise in of the two are put together. ray that anything else is fraudulent, the price of gold. All these steps

VOLUME 21, NO. 3 — FALL 2001 11 LUDWIG VON MISES INSTITUTE might help bring about a parallel socialism. A social democrat won’t not only by cartoons but in school pricing system. This would be have the stomach for it. and in the culture at large. most effective under inflation. The rise in prices would take place AEN: On environmentalism, you What’s at issue here is a philosoph- entirely in paper. seem to go way beyond your ical problem. The movement is teacher. fundamentally antihuman. That is AEN: That wealth and freedom are what motivates it. This is a more linked is a theme that dominates REISMAN: Mises has some rele- widely occurring phenomenon your writings. vant discussions. For example, he than you might suppose. We know speaks about monopoly pricing of of serial killers, but every once in a REISMAN: The link is not acci- very scarce resources acting as a while similar mentalities gain polit- dental, because to acquire wealth means of conservation. But mostly, ical power, as happened with the requires the protection of property this political ideology we call envi- communists and the Nazis. There rights. The same way, it is not acci- ronmentalism began in the mid- is a lot of hatred and hostility in dental that socialism is totalitarian. 1960s. I remember that I was in San many people that is just looking for You might imagine that a socialist Francisco in 1967, reading a column something to attach itself to. by Eric Severeid. He predicted that environmentalism would be a lead- AEN: An attack on human life by SOCIALISTS USED ing political movement in the next another means. decade. I recall thinking: that’s pre- REISMAN: That is essentially TO MASQUERADE posterous. It seemed so ridiculous, I what environmentalism amounts couldn’t understand how anyone to. It is the political movement AS DEFENDERS could take it seriously. where the destructive impulse has parked itself today. First you have OF SCIENCE The whole movement seemed to the hatred, then you have a cultural grow out of Lady Bird Johnson’s vehicle, such as a totalitarian polit- AND REASON. objections to billboards on inter- ical movement or an insane reli- state highways. It began as a kind of NOW THEY ARE gion, that allows and encourages silly political program to get rid of the hatred to be expressed. OPENLY ANTI- junkyards because they were unsightly. I recall that Al Capp had Intellectually, environmentalism is SCIENCE AND a solution to the problem of junk- nothing more than the death rattle yards. He wanted Andy Warhol to of socialism and should be much TECHNOLOGY. put his signature on them and call easier to overcome. Socialists used them works of art. That was about to masquerade as defenders of sci- the level of answer the whole thing ence and reason, and now they are deserved. is democratically elected. But if he openly anti-science and technology, wants to establish socialism, the as we see with environmentalism. first thing he has to do is steal all AEN: But in time, the movement the property in the country. On the would grow. AEN: Also, they don’t promise to way, he will meet resistance, because better our lot. otherwise, people will be totally REISMAN: It is so large that it is wiped out. Then he must make a impossible to get away from. A stu- REISMAN: It’s true that the com- choice. Because anyone seriously dent told me that as a child he was munists always claimed that if they bent on establishing socialism must exposed to all sorts of cartoons fea- had control, they would improve the proceed as an armed robber prepared turing children who fight dirty cap- material lot of mankind. The envi- to commit murder. In other words, it italists who own sludge factories. ronmentalists don’t offer that; quite takes the communists to establish These kids are being indoctri nated, the opposite, they say that mankind

12 AUSTRIAN ECONOMICS NEWSLETTER LUDWIG VON MISES INSTITUTE

to the improvement in air quality. So is central heating in winter time, and modern ventilation sys- tems in kitchens and bathrooms. So is the automobile, which has eliminated the stench of horse manure and horse urine in the streets. So is the iron and steel industry, which made possible the low-cost pipe that enabled the streets to stop serving as sewers.

AEN: What other problems are they responsible for?

REISMAN: The waste involved in the forcible imposition of environ- mental regulations is incalculable. is too well off. They claim they want matter, in all of its elemental forms, collectivist control in order to avoid and energy, in all of its forms—pro- what they claim will be immense vided by nature. The useable, acces- THE MORE catastrophe. sible fraction of those resources can be progressively enlarged. KNOWLEDGE AND But their idea of success is thwarting human success. In their view, the Menger speaks to this issue. He PHYSICAL POWER environment is only destroyed by shows that we must create the goods- WE EXERCISE human beings. The caribou eat the character of any resource. If we do vegetation, and that’s okay. The not, it is not a good and has no value. OVER NATURE, wolves kill the caribou, and that’s The more knowledge and physical okay. Microbes are killing them power we exercise over nature, the THE LARGER both, and that’s okay. The only larger becomes the supply of useable, thing that’s not okay is if human accessible natural resources. THE SUPPLY OF beings attempt to do anything. Only then does the environment need Our use of nature’s resources—of the USEABLE, protection, in their view. We can chemical elements and energy pro- conclude from this that it is only vided by nature—does not reduce ACCESSIBLE human beings they are really after. their overall physical quantity. It merely improves their relationship to NATURAL AEN: What about the economic our well-being. It thereby improves RESOURCES arguments? the external material conditions of . our lives, which means: it improves REISMAN: We can distinguish our environment. But there are other problems between two types of natural besides these. Consider OPEC, for resources: what nature provides and Despite all the propaganda, the mar- example, which stands accused of the fraction of what nature provides ket has led to vast improvements in supporting terrorism. If we didn’t that man has become able to make such things as air quality. The fact have restrictions on oil production useable and accessible. The whole that I’m sitting in an air-conditioned there would be some significant physical world and universe consists room in August in Alabama and increase in the supply of oil. To of nothing but natural resources— not sweating is quite a testimonial keep the price high, OPEC would

VOLUME 21, NO. 3 — FALL 2001 13 LUDWIG VON MISES INSTITUTE have to reduce its production by AEN: You have written extensively become the next CEO of General that amount. on the California energy shortage. Motors, but those who do have the opportunity are those who have If we didn’t have restrictions on REISMAN: It is entirely artificial. worked their way up to a high level strip mining and nuclear power, In a market economy, it doesn’t of management. those are substitutes and they would matter how restricted the supply is, further drive down the price by a it does not cause a shortage if the What we need is the freedom of reduction in the demand for oil. The price is allowed to be high enough. opportunity, which allows every- environmentalists have brought There are few things as scarce as one to take advantage of whatever about a greater demand and smaller diamonds and gold, but there is no opportunities are open at the supply of oil. This means that they shortage of them. If we oppose moment. A minimum-wage law is a have done OPEC’s job for it, by shortages in energy we need higher good example of something that making oil scarcer and more retail prices. In California, we had restricts the freedom of opportu- expensive without OPEC even a bizarre situation in which the nity. In a free society, our fates are having to do anything. wholesale price could rise but the not determined. I was influenced in retail price was prohibited from this by a book I read as a child rising. Thus, there was no restraint called Lives of Poor Boys Who Became on the quantity demanded. Famous (Sarah K. Bolton [New WE HAVE TO BE York: Thomas Y. Cromwell, 1885]). This is what is called deregulation It was a great inspiration. EVER VIGILANT in California. It’s hard to believe they can get away with this. We AEN: What advice do you have for have to be ever vigilant against AGAINST THOSE students? those who abuse our language to WHO ABUSE advance policies that only expand REISMAN: Read Mises and Böhm- government control. Along these Bawerk and also read the classical OUR LANGUAGE lines, I recall that a California group economists. An awful lot began promoting educational vouchers with Carl Menger, but not every- TO ADVANCE wanted me to join their campaign as an adviser, but I wouldn’t do it. It thing. Men from the eighteenth and POLICIES THAT seemed to me that this would just nineteenth centuries rode around in end up expanding the government’s carriages and some wore powdered ONLY EXPAND reach into private schools. wigs, but they were thinking the thoughts that created modern GOVERNMENT AEN: One of the slogans used by industrial civilization. Today’s intel- CONTROL. this movement is “equality of lectuals fly around in jet planes, but opportunity.” they are thinking the thoughts that will destroy us. REISMAN: There is no way to The same thing is true with price have equality of opportunity, unless If you look back on the history of controls on oil. When you have a everyone had the same genetic science, if you were alive in the fif- cartel that controls half the indus- inheritance and was brought up teenth or sixteenth century, it was a try, when they raise the price, the under the same conditions. Even struggle to establish the propositions price control prevents its competi- then, you wouldn’t have it because of natural science. We see the con- tors from getting the benefit of the there is no equality in the will of clusions and results, but we don’t see higher price. Instead, all the profits people to use their inherent endow- that process. For good economics to flow to OPEC and not its competi- ment in their own interests. In real- prevail requires that individuals rec- tors, who are prevented from ity, people create their own oppor- ognize the truth for themselves and expanding. tunities. I have no opportunity to fight to uphold it. AEN

14 AUSTRIAN ECONOMICS NEWSLETTER About the Austrian Economics Newsletter

The Austrian Economics Newsletter was first published in the fall of 1977, under the auspices of the Center for Libertarian Studies, which was then located in New York City. The writers and editors were part of a small but growing contingent of graduate students in economics who had been influenced by Ludwig von Mises’s New York seminar and the writings and personal example of Mises’s students Murray N. Rothbard and Israel M. Kirzner, as well as Ludwig Lachmann. Their goal was to reinvigorate Austrian theory in a new generation as a means of combating mainstream trends in economic thought.

But for the Nobel Prize given to F.A. Hayek in 1974, academia then considered Austrian economics a closed chapter in the history of thought, supplanted by Keynesianism and the neoclassi- cal synthesis. The purpose of the AEN was to provide a forum for Austrian students and serve as a communications tool for the new movement. Among its most effective offerings was the interview, which provided students an inside look into the thinking, drawn out in an informal setting, of the best Austrian theorists.

At the request of the Center for Libertarian Studies, the Mises Institute assumed responsibility for the publication in 1984 and nurtured it to become the most closely read periodical in the world pertaining exclusively to the Austrian School. Two years later, Murray N. Rothbard founded the Review of Austrian Economics (later succeeded by the Quarterly Journal of Austrian Economics) to provide an outlet for scholarly articles, thereby relieving the AEN of this responsibility. The AEN began to emphasize reviews, topical pieces, and, most of all, the extended interview as an effective means of highlighting the newest contributions of Austrians to the literature. Today, interview subjects are now chosen from a variety of disciplines to reflect the full influence of the Austrian tradition.

Over the years, the AEN has interviewed a variety of scholars, including the following:

Dominick T. Armentano Israel M. Kirzner Walter Block Peter G. Klein James Buchanan Ludwig M. Lachmann Paul Cantor Fritz Machlup Thomas J. DiLorenzo Roberta Modugno Gene Epstein Hiroyuki Okon Roger W. Garrison Michael Prowse James Grant Murray N. Rothbard Bettina Bien Greaves Joseph T. Salerno Gottfried von Haberler G.L.S. Shackle Henry Hazlitt Karl Socher Jeffrey M. Herbener Leland B. Yeager Randall G. Holcombe Pascal Salin Hans-Hermann Hoppe Frank Shostak Jesús Huerta de Soto Mark Thornton George Koether Richard K. Vedder

Complete archives of these interviews are available at http://www.mises.org/journals.asp.

With the expansion and redesign of the AEN that begins with Volume 21, the AEN seeks to put on display the energy, creativity, and productivity of today’s Austrian thinkers, who work in many fields to bring the insights of the tradition to bear on new issues of the day. It is a sign of the health and vigor of the Austrian movement that the list of thinkers slated for interview in the future grows ever longer. LUDWIG VON MISES INSTITUTE 518 West Magnolia Avenue Auburn, Alabama 36832-4528 Phone 334-321-2100 Fax 334-321-2119 Email [email protected] Web site www.mises.org