The art of Economics consists in looking not merely at the
immediate, but at the longer effects of any actor policy, it
consists in tracing the consequences of that policy, not
merely for one group, but for all groups, welcome to Keith's
night. Don't try to on anyone.
And the libertarian Institute today.
I have Walter block professor of Economics at Loyola University.
Professor block. Thank you for coming on my
pleasure, good to be with you. What is a priori knowledge?
You're a nasty person, starting off with rough questions.
Just I'm going to getting a priori knowledge, is something
that is necessarily true. For example, old Bachelors are
unmarried, men is necessarily true.
It's a probably RI people say, it's just a tautology in the
sense that it doesn't tell us anything about the real world,
and usually you, You contrast this with stuff.
That is a posterior RI. Not a priori namely stuff about
the world. Like you have a very dark blue
shirt. I have a light blue shirt.
It's raining outside. It's now five o'clock Central
Time. These are all statements about
reality, but they're not necessarily true.
I could be lying about the color of your shirt or mistaken or
whatever. Whereas Bachelors are unmarried
men is it doesn't have much to do with the real world.
Just how we use words. So, the big Austrian criticism
or the big Austrian contribution, I should say, is,
is there such a thing as a synthetic, a priori namely, a
statement, or a bunch of statements that are necessarily
A pathetically true. And yet have something to do
with the real world. And only austrians believe that
where is The Logical positivists of which virtually all
mainstream economists adhere to would say know that there's no
such thing. I mean, if you're going to have
an empirical statement, something about the real world,
you have to test it. You have to see if it's true and
it may be true and maybe it's true some of the time and not
always but we austrians are sometimes dismissed as a cult
because we believe that there are some statement not every
statement, but many statements about a nest.
Early, true, and applauded the world.
For example. When you bought that shirt for
20 bucks, you valued that shirt at more than 20 bucks, at the
time. You bought it.
So you gain X on teh and the guy who sold you, that shirt valued
it at less than 20 bucks. Maybe he validated 15 and you
value it at 30. So you made a ten dollar profit
and he made a five dollar profit, but we know that Exxon
tell you both made a profit. Otherwise, why would you have
done it now exposed, you know, you might regret buying the
shirt or he might said, Wish. I had that shirt back.
I could sell it for more now, but, you know, so we can say as
an empirical generalization that all trade makes people both
parties better off ex-post. But there are exceptions.
But usually, you know, you buy a newspaper.
Do you regret buying the newspaper?
Because it was no good news or something.
I don't know. Yeah.
It's part of par for the course, although sometimes you can say,
boy. I wish I didn't find this
newspaper, but you can't say, well, when I bought the
newspaper, I valued it more than a dollar.
No, I didn't value it more than a dollar and it cost me a dollar
you had to go. Even it more than is all you
necessarily had to. Because all of you have, an
action is an attempt to substitute a lesser valued
future for a greater value future and you thought that
you'd be better off buying the newspaper, at the time, you
bought it. So you gain difference to you
between having and not having the newspaper and having the
dollar. Now Samuel Samuel konkin took
this idea of trade that we have, you know, people have different
values. And so they trade if everyone
had the same values they wouldn't trade.
So he said that this is the weak point in Marxism and socialism
because people voluntarily trade to seek, their subjective ends,
and anytime, someone stops them from making voluntary contracts
or says, there is an objective. Of value that we can find in
labor that you necessarily destroy wealth.
Do you think this is why? There's so much overlap between
Austrian economists and Libertarians.
Well, that's one reason, but let me just correct.
One thing where I think maybe I, maybe I misheard maybe Conchas
wrong and he said, if we all had the same taste that be no trade.
I believe, I believe that was his point in the section titled
value in an agarose primer. I don't think that's right.
Not only if we all had the same taste, but I would say even if
we have the same skills and the same taste we'd still tray.
Why you might ask because look. We're both equally good at
fishing you. And I We're both equally good at
hunting you and I, and we're what is it?
Friday and Robinson Crusoe on the same island.
Yeah, and however, if you specialize in fishing, you're
going to get better at fishing and if I specialize in hunting,
I'm going to get better at hunting so together we can
produce more if we specialize. So even though we might have the
same taste half fish and half meat.
That's our plus vegetables or whatever our mother said.
Have to have your vegetables. So, you know will have
vegetables, but in terms of non vegetable stuff, we each one
half fish and half me. So we have the same taste and we
each have the exact same skills in terms of fishing and hunting.
However, if you specialize in fishing, you'll get better at it
eventually. And if I specialize in hunting,
I'll get better at it. So if we each specialized will
have more both. Right.
Yeah. Yeah, that's that.
That definitely makes sense. I think his point is just to
just to make sure our monitoring improperly here.
He said, the second two people engage in an exchange.
The only way this is possible is if two people value things
differently, because if we both valued the thing the same, well,
why would you spend the opportunity cost of the couple
minutes trading, go there? I agree with you and I even said
that in terms of your shirt. Yes.
Okay. The newspapers, all I agree with
that statement, but I don't agree with the other thing that
mean they're two different statements on the table.
So to speak. Yes, I certainly agree with what
you just said, but I don't agree with and I think Murray rothbard
got that wrong or somebody got that wrong other than stem
conch. And then I wrote a paper on
that. I think it was I wrote so many
papers. I can't remember everyone, but I
think I was co-authored with Peter Klein and some student at
the time and if you want. Yeah, I can dig it out and send
it to you. And the idea was even if we have
the same exact taste and the same exact skills.
It still pays to specialize in have division of labor, because
we'll get better at whatever it is that we're, we're focusing on
assuming. So, why should someone take the
Austrian approach to say? Let's just say, monopolies or
the minimum wage or protectionism any example you
want to use? Why should we take the Austrian
route? As opposed to the what are the
experts say? And let's read the peer-reviewed
studies to come to a conclusion. Well, before I get to that, you
asked me. Why are so why is this, there?
Is this overlap between Austrian is and libertarianism.
So let's do that one first since yes, that friends.
Thank you, and that will get to the other.
Well, first of all, not all Libertarians are austrians.
Because in order to be an austere, you have to be an
economist is the Australian business is whatever one phase
of Economics or Branch. I'm not a branch or a phase.
What's the word? I'm looking for a Viewpoint in
economics. And if you're a psychologist or
a plumber, or a lawyer, or a physicist, and you're not an
economist. Well, then you can't be an
Austrian because Austin is part of economics and you're not part
of Economics. So then the question is, why are
virtually all austrians Libertarians?
Right? And as it happens nowadays, I
don't know of any any Austrian who's not a Libertarian.
However, in the past when Austrian first started in 1870
with my anger or 1878, I forget when he was sorted it but he was
our founder. Well, during the Nazi period
they were Austrian Economist who were Nazis, right?
I mean, you know, the Germans and the austrians had economic.
And some and then we're Nazis. And, you know, they were
probably pretty good economists. But, you know, Nazism, it's a
little weak on on libertarianism.
But nowadays. I don't know of any any counter
examples. Every every Austrian Economist,
I know is also a Libertarian. Now, they might not all be
anarcho-capitalist, but they're all Libertarians.
Why is this? Well, it's probably Murray
rothbard. Barnes fault because he wielded
a magnificent important influence on the whole group and
he was obviously a Libertarian and an Austrian Economist.
So that's one possibility. Another possibility is
Drawstring Economist is no such thing as market failure.
And here we get into your other question about the Monopoly and
public goods and externalities and all these market failures.
Well, if you don't believe in Market values, this inclines you
toward the market. Whereas the mainstream Economist
who might be good Economist say, on the minimum wage Lauren free
trade, they all here to the market failure and the big three
on Monopoly externalities and public goods.
So that might be another reason. Why there's this overlap or high
correlation between Austrian economists.
I would say 100% correlation. There are no exceptions that I
know of, but there could be, I mean, you could be an Austrian
Economist and favor. The minimum wage if you were bad
guy because you hate the, I mean, it's a coherent position.
Yeah. I'm extremely condiments and I
hate unskilled workers gonna have a real high.
Minimum wage. Now.
My economics is impeccable. I know that if you have a higher
minimum wage, all unskilled people will not be able to get a
job and I hate them and I don't want them to work.
You still have a miserable life perfectly coherent position.
I mean, I don't take that position, but I mean I could and
then I'd be a good Economist and not a Libertarian because, you
know, you're not supposed to as a Libertarian.
You're not supposed to forcibly unemployed people.
Yeah, I can't. One of the most recent, you know
what anti-free Market articles out of the New York Times was
about how the this woman came up with a theory of monopsony.
And this refuted a major myth of the free market that perfect
competition exists. So what they do is they create
the straw man that we believe in, you know, perfect humans and
perfect organizations. So if they can point to any
imperfection, they could use that as a justification for the
state but also, The Austrian does is take those shortcomings
and apply them to the state and you realize that they're the
same fallible humans except the state.
You can't opt out of funding. So you just basically come to
the privatize everything conclusion.
Why do you think there's that blatant double standard amongst
the wisest people on the planet that some people are in perfect.
Therefore the state has the right to violently dominate the
entire economy. Yeah.
Well when I first started that was the dominant syllogism.
We want Perfection markets are imperfect because they are
populated by people and therefore we need government.
Yeah. Now one of the one of the
benefits of the public Choice school and June Buchanan, Gordon
tullock. Was the inverted that they say,
yes, we want Perfection government is in perfect.
Therefore, we want the market magnificent II, just love it.
So what you're really asking now is why do so many intelligent
people Nobel Prize, winners and economics?
The minimum wage law and not because they want the
unemployment for unskilled workers.
Why? Or let me put it another way?
We've got brilliant proponents of free markets and economic
freedom. I mean, Ian ran was magnificent
with a book. So, Ron Paul Murray rothbard
Ludwig von mises and yet, you know, Ron Paul runs for office.
He gets the usual 1% when he runs on the libertarian party
ticket. And, you know, Joe Jorgensen and
Gary Johnson, the last 2, LP candidates, you know, they got
the usual. Well, Gary got 3%, which was
unprecedented. But Joe got back to our usual
one-and-a-half percent or three-quarters of % y given that
our views of so correct. Why are so few people convinced
by it? And I did write an article on
that and the article talks about sociobiology and sociobiology is
the theory of Why we are the way we are.
And the answer is because of what it took to leave, people in
the Next Generation or our genetic code to the Next
Generation. A million years ago when we were
in the caves of the trees or wherever we were.
For example, nowadays. Nobody is afraid of bathtubs.
You afraid of a bathtub. I'm afraid of a bathtub.
Whereas we're afraid of snakes. You see, a snake crawling around
and you're going to get a chair and Bash it, or you going to get
it. A chair and stand up on it or
something. I mean, you're gonna you know,
be a little upset if there's a big snake floating around, why
nowadays bathtubs kill many more people than snakes Milton,
Friedman was killed by a bathtub.
He was taking a shower, you want me in or out and, and he tripped
and hit his head on the side of the bathtub.
And on the way to the hospital. He died, tragically great loss
for her eye movement. Nobody's afraid of her bad time.
Everyone is afraid of the snake and nobody dies from bathtub
from snakes nowadays. But a lot of people die from
bathtubs. Why is it well a million years
ago. If you are afraid of a bathtub
that conveyed no advantage to you because the 10 bathtubs,
whereas if you are afraid of snakes that help you lead
children to the Next Generation because you are alive.
Another, another example, more and more pertaining to the point
at issue, two tribes of people, our tribe and this other tribe
and we have the same opposable thumbs the same musculature of
the same brain power all the same except in our tribe.
You get sick this week. I help you next week.
I get sick. You help me, we survive this
other tribe. Doesn't have this benevolence.
Dean or this benevolence hardwiring, you get sick there
and I don't help you next week. I'm sick and you're not around
to help me that try parishes. So we're hardwired to be afraid
of snakes which is irrelevant to the point just to illustrate
sociobiology and we're also hardwire it.
So I've been Evelyn's and toward explicit cooperation go.
We're not hardwired to an implicit cooperation.
What's implicit cooperation? The free enterprise system
markets helping each other. Operating ultimately 7 billion
people. Can all cooperate the greater
cooperation than basketball team or I don't know.
Even an orchestra 100-member. Orchestra playing 64th notes
that's impressive. But 7 billion people cooperating
that's, you know, magnificent in terms of cooperation, but we're
not hardwired for that. We're hardwired for explicit
cooperation. If you got sick now, I would
call somebody or I would be very upset and, you know, if you
lived next door to me. I would, you know, give you the
Heimlich maneuver or whatever it is.
And I'm sure if ice Versa, but I can students coming in every
freshman students and you mentioned price gouging and they
go. Oh, that's horrible.
And minimum wage. Oh, that's great.
And and we have to have egalitarianism.
Namely, that got the thank God. They've got the hard wiring for
benevolence. But only explicit benevolence
not implicit benevolence the market.
So I think that's one of the reasons we're doing very badly
in converter. For the masses to one.
True Faith, namely freedom and free, enterprise economic
freedom. I think that's a reasonable good
explanation of why it's sort of like the rock of Sisyphus.
You push it up. Keeps coming, there.
You push it out, keeps coming down.
Now, look, this doesn't mean that we shouldn't try just
because I think we're not going to succeed, doesn't mean we
shouldn't try. I can't think of anything better
than a promote Liberty. I mean, it just magnificent kind
of a thing better than Mozart and I'm a big Mozart fan.
So, I am here to the pessimistic view but I don't say people
should drop out or, you know, leave the libertarian movement.
I try to encourage people to join it.
Excellent. Yeah, but price-gouging, it is a
great one where they think. I'm for cooperation.
There should be laws against price gouging when you are
literally stopping people from making exchanges and stopping
the incentive for people to bring scarce resources to where
they're needed. Most Just so that does give me
some hope that that can be pointed out to people or that
can be explained in in great, great books, like yours.
I do want to get back to. If I'm look let's take the
minimum wage. For example, if you say well,
the minimum wage causes unemployment, the Austrian looks
at a logical, a priori approach. The empiricist will say, let's
look at the minimum wage where it's been raised in countries,
and then what their unemployment rate has been After that, what
are the shortcomings in the empirical approach that the
Austrian approach does not have? Well, you know, it's actually
not exactly that case, because austrians also can do empirical
work, but we interpreted very differently.
We interpreted not as a test, but rather as an illustration, I
mean, what was it? The card and Krueger New Jersey
and Pennsylvania. One of them raised their minimum
wage and they couldn't find any unemployment effects there.
Okay, so they fail to illustrate the, a pathetic mess.
Certainly true statement that when you raise minimum wage or
when you have a minimum wage, anyone below that level with
their skills isn't going to get a job.
So an Austrian can engage in empirical work.
And sometimes the empirical work is a good illustration of the a
pathetic necessarily true and necessary truth and sometimes it
is. And so they failed to illustrate
it properly, it in that case. But but what the mainstream
says, well since we couldn't find it in, This case the theory
is wrong. I mean, you know, that's crazy.
Is this sort of like the Pythagorean theorem?
We know that the what is it? The squares of the sides equal,
the square of the hypotenuse, right?
And now I'm going to go take a triangle is a triangle?
And I measure the thing and I take the square of each side and
guess what? It doesn't come out.
Well, then, that just shows that my triangle is crappy.
Right? I mean, we know that the
Pythagorean theorem is true, a particular Glee.
We know that two plus two is four and and somehow we try to
illustrate this and it didn't work out.
Well so much the worse for the illustration.
So again, it's not that austrians refused to engage in
empirical work. It's how we interpreted.
We interpreted just as an illustration.
So if we look at something like, I guess the fact that they are,
are no controlled experiments. No.
Truly controlled experiments among humans.
So, I say, you know, what, I hereby issue 1000 regulations on
Walter block, and Walter. You need my permission before,
you can publish any more papers? And then we look at the amount
of work that you've done between now.
And when the, Asians expire in two years.
Well, it's impossible to know what you would have done.
Had. I not impose that regulation on
you. So is it the fact that human
beings are diverse and relatively spontaneous and have
some sort of unpredictability and Free Will, is that what
gives the Austrian position at strength?
That the empirical approach doesn't have?
Well, you're right. I mean, the closest we've come
to a controlled. Experiment is East Germany and
West, Germany, and North and South Korea.
Yeah. The Koreans and the Germans east
and west, north and south have the same culture, the same
history, the same literacy, the same everything, and it was just
an accident of war that broke him up roughly half, half way
each. And the North Korea is economic
basket case and the South Korea is doing very well and East.
Germany was horrible and people would try to leave and go west
and they were risking their lives and sometimes getting
shot. So you might say, well, here's a
This firm this proves that free enterprise is right, but you can
always say well look, you know, the reason that East Germany
didn't do too. Well is that the dictator of
North Korea should have been in East, Germany and the dictator
of East. Germany should have been in
North Korea. Then everything would have been
fine. And I mean, how can we prove
that? That's not true.
So these are good illustrations, but you don't want to just rely
on an illustration want to say, look, the reason the reason that
the North Korean and East Germany, where you can Unlike
basket cases is now you go read Human Action and a man, economy
and state. And you find the reason and the
reason was very briefly, the 10 prizes.
No free market prices that were just arbitrary prices and prices
indicate scarcity. And you didn't know whether to
build railroad tracks out of platinum or, or are Ian.
And unless you knew that Platinum was so much more
valuable that you shouldn't do it.
You shouldn't waste it on railroad tracks.
You have to use it for more. Thanks, but if you don't have
the prices then you don't know. So yes, illustrations are good,
but you can only go so far with an illustration because look at
my counter example, we should have switched dictators, which
is a little silly. But how can we say them?
Nay? How can we say?
Well, no, no. No, that's wrong.
I don't know. Maybe it is.
I mean, I don't think it's right because you know as these has
shown that that you have no economic rationality unless you
have prices. That indicate something real.
And in the Soviet Union, like during the first five year plan,
they adhere to their view of not of this chewing prices then
happily for them. They had the naep, the new
economic plan where they now got prices, a Sears Roebuck catalog
or Chicago Mercantile Exchange. Well, they might not have fit
exactly what needed in Russia, but at least it was coherent
prices. So, they did a little bit
better. Yeah.
And also, It gives our opposition are well-meaning
opposition a little too much wiggle room because they can
always say, well that was socialism, then we tried it and
it didn't work. Just like, you know, the light
bulb was never invented until someone found a way to do it.
So all we have to do with socialism statism fascism, end
slavery is find a method that works and then the word Works
turns out to be the most vague thing.
You could ever think of because anything you could Define work,
you know, some people benefited well, Well, what would have
happened in the absence of that? So yeah, those those are all
excellent. Could you please expand on the
Socialist calculation problem? So, for example, if you say,
well, we can't have one Central Authority because they don't
have the ability to determine trade-offs and opportunity
costs. Well, couldn't we?
Just have local governments reporting to the states,
reporting to the regional and reporting to the central
Authority? Well, we could.
But you know, one of the promises, if you screw up under
the Communist Regime, you don't lose money.
They just give you more taxes like take these socialist.
The post office. They lose money hand over fist
every year and they never go broke.
So the you don't have the market discipline.
I wanted to mention my old high-school buddy.
Bernie Sanders, who is now, busy promoting socialism all over the
place. And what he means by socialism
is Sweden and Norway and Finland and Denmark, you know, the
Scandinavian countries. Well, one of my books, what we
did is we raided the economic freedom of all the countries in
the world and guess where the Scandinavian countries come here
in the top decile of free enterprise.
Yeah. Bernie doesn't realize that what
socialism is, is Cuba and Venezuela and North Korea.
He thinks it's, you know, the Scandinavian countries, which is
highly problematic, but you're quite right that The central
planning doesn't work because you don't have coherent prices
and the prices don't reflect the reality.
I mean, should you bore a tunnel through the mountain for the
railroad or the highway or should you go around it?
Well, it depends on the interest rate.
It depends upon well, the interest rate because you're
going to because if you go straight through it's going to
cost a lot now, but it's going to save a lot of money later.
Whereas, if you round, it'll Be a lot cheaper but more people
will die and traffic will go secured ously.
It'll take longer forever. Well, you need some sort of an
interest rate to determine which way to go and you can only get
an interest rate that reflects time preferences in the market.
Whereas, how does the central planning Bureau?
No, and why would it help to have a sub planning Bureau?
And then a Sub sub planning Bureau?
They're still not going to get what an interest rate should be
or what the price of platinum should.
Look II wrote a half-hour to interviews like this.
We got two minutes. That's so one.
One more question or comment. Yes, final question.
What is the most important implication of you?
Mises Human Action? The idea that humans act.
Why is that important along with its implications?
Well, one crucial and Important aspect of it is that if you try
to deny it, you can't because if you try to deny Human Action,
you're engaging in Human Action is sort of like stuck in it.
You know, I'm a mainstream Economist and eyes and either
this human actual. What did I just do?
My denial is Human Action? So it's sort of a synthetic, a
priori again, and Gary Becker and, and James Buchanan.
Dismissed. Ostracism is a called a
religious. Fanatics because we believe in
synthetic. A priori is because we believe
in necessarily necessary truths and we're not basing them, on,
on Empirical research. We're basing it on praxeology
since I've got one more minute. Let me just put in a brief.
I'm a professor at Loyola University.
I'm always looking for good students who are interested in
Austria libertarianism. So if you're a high school
student thinking of a College come consider us and if you're a
university student, and there are no professors there that
profess, anything like Australia paternalism.
Please, consider transferring. We'll look.
I really enjoyed this and maybe we'll do it again in a month or
so. I really appreciated the quality
of your questions and comments. Thank you for watching Keith
Knight. Don't tread on anyone in the
libertarian Institute. Mr. Block always a pleasure.
Thank you. Thank you.
Take care.