Austrian Economics Newsletter

Summer 1991 • The Ludwig von Mises Institute

The Antitrust Economists'

Paradox

By Thomas J. DiLorenzo

Today regulation is generally recognized as a

mechanism by which special interests lobby the
government to create barriers to entry or other spe
cial privileges. Research has shown, for example,
that the Civil Aeronautics Board cartelized the air
line industry, the Interstate Commerce Commission
helped monopolize the railroad and the trucking in
dustries, the Federal Deposit Insurance Corporation
sharply limited entry into the banking business, and
occupational licensing created entry barriers into
hundreds of occupations. Much of the history of reg
ulation chronicles monopoly privileges procured
through the auspices of the state, as Adam Smith
pointed out more than 200 years ago in The Wealth of
Nations. Thomas J. DiLorenzo
Oddly, antitrust regulation is still widely viewed
as government's benevolent response to the "failures" trust consultants and expert witnesses often stand to
and "imperfections" of the marketplace. Even econo make a good deal of money, so financial self-interest
mists who are usually skeptical of regulations enacted may preclude criticism of antitrust. Many economists
in the name of the public interest seem to lose their are also unable to voice informed opinions on antitrust.
perspective when it comes to antitrust. George Stigler, If it is not their area of expertise, they may not have
for example, has stated: "So far as I can tell, [the kept up with research over the past 30 years, or exces
Sherman Actl is a public-interest law ... in the same sive concentration on mathematical models may have
sense in which I think having private property, enforce left some economists somewhat detached from eco
ment of contracts, and suppression of crime are pub nomic reality. Finally, it is widely believed that there
lic-interest phenomena. ... I like the Sherman Act."1 was once a "golden age of antitrust" during which
A 1984 survey of professional economists revealed the public was protected from rapacious monopolists
that 83 percent of the respondents believed that "an by benevolent public servants. According to this per
titrust laws should be used vigorously to reduce mo spective, although mistakes have been made, more
nopoly power from its current level."2 This opinion is knowledgeable and public-spirited regulators can
widespread despite common knowledge among anti
trust scholars that in practice the antitrust laws
restrain output and the growth of productivity have
INSIDE
contributed to a deterioration of the competitive po
sition of U.S. industry, and are routinely used to An Interview with Leland B. Yeager 6
subvert competition.
Jack Wiseman (1919-1991) 10
Why then do the antitrust laws continue to com Economics Rankings: A Survey 11
mand such powerful support among economists and Conferences and Conventions 13
legal scholars when the pervasive failures are so well Book Bite 16
known? There are several possible explanations. Anti-
successfully reform antitrust. Once reformed, anti
trust policy can then perform its original purpose and
defend competition and free enterprise.
Unfortunately, the Sherman Act was never in
tended to protect competition. It was a blatantly
protectionist act designed to shield smaller and less
efficient businesses from their larger competitors.
There never was a golden age of antitrust. The stan
dard account of the origins of antitrust is a myth.
Interest Group Politics
and the Sherman Act
In the late 1880s, widespread economic change
produced myriad pleas from relatively small—but
politically active—farmers who sought protection
from larger, corporate competitors. Historian Sanford
Gordon offered an example: "Perhaps the most vio
lent reaction [against industrial combinations] of any
single special interest group came from farmers. ...
They singled out the jute bagging and alleged binder
twine trust, and sent petitions to both their state
legislators and to Congress demanding some relief.
Cotton was suggested as a good substitute for jute to
cover their cotton bales. In Georgia, Mississippi, and
Tennessee the [farmers'] alliances passed resolutions
condemning the jute bagging trust and recommended
the use of cotton cloth."3
Southern farmers were annoyed that consumers
increasingly preferred jute to the cotton cloth they
produced, and they sought antitrust legislation that
would dissolve their competition. Such special-inter
est behavior was characteristic of the farm lobby.
During the 51st Congress, Gordon notes that "64
petitions and memorials were recorded in the Con
gressional Record, all calling for action against com
binations. These were almost* exclusively from farm
groups The greatest vehemence was expressed by
representatives from the Midwest."4
Farmers complained to their national representa
tives that the products they bought from the trust
were increasingly expensive relative to the prices of
farm products, but the facts do not support this con
tention. From 1865 to 1900 farm prices were falling,
Thomas J. DiLorenzo holds the Probasco Chair for
Free Enterprise at the University of Tennessee.
Chattanooga.
Peter G. Klein is a graduate student in economics
at the University of California, Berkeley, a Mlses
fellow, and assistant editor of the AEN.
Alexander Tabarrok is a graduate student in eco
nomics at George Mason University. Mises a fellow,
and correspondent of the AEN.
but at a slower rate than the general price level. This
produced real income gains for farmers. In addition,
the rapidly increasing quality of manufactured goods
further improved the farmers' standard of living. The
volatility of farm prices caused the farmers to be
politically active.
Many other groups joined the antitrust coalition—
small business organizations, academics (though not
economists), and journalists. They argued that the
"giant monopolies" were creating a "dangerous concen
tration of wealth" among the capitalists of the day.
Although the conspicuous wealth of entrepreneurs
such as Rockefeller, Vanderbilt, Mellon, and Mor
gan added fuel to this charge, it does not appear to
be true. In fact, economic historians have concluded
that from 1840 to 1900, the division of national
income between labor and property owners (capital
and natural resource suppliers) remained in a 70-to-
30 ratio.5 Over the same time span, both capital and
developed natural resources increased faster than
the labor force. This means that labor income per unit
of labor rose compared with profit and interest per
unit of property input.
Although there was no significant redistribution
of wealth from labor to capital owners in the aggre
gate, competitive markets always alter the distribu
tion of income in ways that some do not like. There
was no "dangerous concentration of wealth," but
many supporters of antitrust legislation found that
their own income had fallen (or not increased rapidly
enough). The push for antitrust legislation was an
attempt to use the powers of the government to im
prove their economic status.
Economic conditions were changing rapidly in the
latter part of the nineteenth century. Expansion of
the railroad and inland shipping industries greatly
reduced the cost of transportation. Technological
developments led to large-scale (and lower-cost) pro
duction of steel, cement, and other goods. Communi
cations technology rapidly expanded, especially the
use of the telegraph. And the capital markets became
more sophisticated. The United States also under
went a rapid transition from a predominantly agrar
ian to an industrial society. In 1810 the ration of farm
to non-farm labor was approximately 4.0. This ratio
fell to 1.6 by 1840, and by 1880 the labor force was
about equally divided between farm and non-farm
endeavors. Meanwhile, individuals and groups un
comfortable with rapid change were becoming in
creasingly adept at using the regulatory powers of the
state. In this increasingly mercantilist atmosphere,
the Sherman Act was passed in 1890.
Were the Trusts Monopolistic?
In introducing federal "antitrust" legislation,
Sen. Sherman and his congressional allies claimed
that combinations or trusts tended to restrict output
and thus drive up prices. If Sherman's claims were
true, then there should be evidence that those indus
tries allegedly being monopolized by the trusts had
restricted output. By contrast, if the trust movement
was part of the evolutionary process of competitive
markets responding to technological change, one
would expect an expansion of trade or output. In fact,
there is no evidence that trusts in the 1880s were
restricting output or artificially increasing prices.
The Congressional Record of the 51st Congress
provides a list of industries that were supposedly
being monopolized by the trusts. Those industries for
which data are available are salt, petroleum, zinc,
steel, bituminous coal, steel rails, sugar, lead, liquor,
twine, iron nuts and washers, jute, castor oil, cotton
seed oil, leather, linseed oil, and matches. The avail
able data are incomplete, but in all but two of the 17
industries, output increased—not only from 1880 to
1890,but also to the turn ofthe century.6Matches and
castor oil, the only exceptions to the general rule,
hardly seem to be items that would cause a national
furor, even if they were monopolized.
As a general rule, output in these industries ex
panded more rapidly than GNP during the 10 years
preceding the Sherman Act. In the nine industries for
which nominal output data are available, output in
creased on average by 62 percent; nominal GNP in
creased by 16 percent over the same period. Several
of the industries expanded output by more than 10
times the increase in nominal GNP. Among the more
rapidly expanding industries were cottonseed oil (151
percent), leather goods (133 percent), cordage and
twine (166 percent), and jute (57 percent).
Real GNP increased by approximately 24 percent
from 1880 to 1890. Meanwhile, the allegedly monop
olized industries for which a measure of real output
is available grew on average by 175 percent. The more
rapidly expanding industries in real terms included
steel (258 percent), zinc (156 percent), coal (153 per
cent), steel rails (142 percent), petroleum (79 per
cent), and sugar (75 percent).
These trends continued from 1890 to 1900 as
output expanded in every industry but one for which
we have data. (Castor oil was the exception.) On
average, the allegedly monopolized industries contin
ued to expand faster than the rest of the economy.
Those industries for which nominal data are avail
able expanded output by 99 percent, while nominal
GNP increased by 43 percent. The industries for
which we have data increased real output by 76 per
cent compared with a 46 percent increase in real GNP
from 1890 to 1900.
As with measures of output, not all of the relevant
price data are available, but the information that is
at hand indicates that falling prices accompanied the
rapid expansion of output in the "monopolized" indus
tries. In addition, although the consumer price index
fell by 7 percent from 1880 to 1890, prices in many of
the suspect industries were falling even faster.
The average price of steel rails, for example, fell
by 53 percent from $68 per ton in 1880 to $32 per ton
in 1890. The price of refined sugar fell from 9 cents
per pound in 1880, to 7 cents in 1890, to 4.5 cents in
1900. The price of lead dropped 12 percent, from $5.04
per pound in 1880 to $4.41 in 1890. The price of zinc
declined by 20 percent, from $5.51 to $4.40 per pound
from 1880 to 1890.
One function of the Sherman Act was
to divert attention from a more certain
source of monopoly—government.
The sugar and petroleum trusts were among the
most widely attacked, but there is evidence that these
trusts actually reduced prices from what they other
wise would have been. Congress clearly recognized
this. During the House debates over the Sherman Act,
Congressman William Mason stated, "Trusts have
made products cheaper, have reducedprices', but ifthe
price of oil, for instance, were reduced to one cent a
barrel, it would not right the wrong done to the people
of this country by the 'trusts' which have destroyed
legitimate competition and driven honest men from
legitimate business enterprises."7 Sen. Edwards, who
played a key role in the debate, added, "Although for
the time being the sugar trust has perhaps reduced
the price of sugar, and the oil trust certainly has
reduced the price ofoil immensely, that does not alter
the wrong of the principle of any trust."8 Perhaps it
would be more accurate to describe the Sherman Act
as an anti-price-cutting law.
One final argument could be made that the trusts
were practicing predatory pricing, that is, that they
were pricing below their costs to drive out competi
tors. But in more than a century of looking for a
proven real-world monopoly actually created by pred
atory pricing, an example has yet to be found. More
over, prices charged by the nineteenth-century trusts
continued to fall for more than a decade. What ratio
nal businessman would continue to price below cost
for more than ten years?
In sum, the nineteenth-century trusts were not
guilty of the charge levied against them by Sen.
Sherman. There is no consistent evidence that they
restricted output to raise prices.
Government:
The True Source of Monopoly
It appears that one function ofthe Sherman Act was
to divert public attention from a more certain source
of monopoly—government. In the late nineteenth
century, tariffs were a major source of trade re
straints, but the Sherman Act made no provision for
attacking tariffs or any other government-created
barriers to competitive entry. In fact, evidence exists
that a major political function of the Sherman Act was
to serve as a smoke screen behind which politicians
could grant tariff protection to their big business
constituents while assuring the public that some
thing was being done about the monopoly problem.
In a particularly revealing statement during the
debates over the antitrust act, Sen. Sherman at
tacked the trusts on the ground that they "subverted
the tariff system; they undermined the policy of gov
ernment to protect... American industries by levying
duties on imported goods."9 This is certainly an odd
statement from the author of the "Magna Carta of
free enterprise." But increased output and reduced
prices in these increasingly efficient industries ap
parently dissipated the monopoly profits previously
generated by the tariffs. This worked against the
objectives of the protected industries and their legis
lative champions, including Sen. Sherman.
Even more damning is the fact that just three
months after the Sherman Act was passed, Sen. Sher
man, as chairman of the Senate Finance Committee,
sponsored legislation popularly known as the "Cam
paign Contributors' Tariff Bill" that sharply raised
tariff rates. On October 1,1890, the New York Times
reported: "The Campaign Contributors' Tariff Bill
now goes to the president for his signature, which will
speedily be affixed to it, and the favored manufactur
ers, many of whom ... proposed and made the [tariff]
rates which affect their products, will begin to enjoy
the profits of this legislation."
The New York Times further reported that "the
speech of Mr. Sherman on Monday [September 29,
1890] should not be overlooked, for it was one of
confession." Apparently, Sen. Sherman withdrew his
speech from the Congressional Record for "revision,"
but a reporter obtained an unabridged copy of the
original. The New York Times reported: "We direct at
tention to those passages [of Sherman's speech] re
lating to combinations of protected manufacturers
designed to take full advantage of high tariff duties
by exacting from consumers prices fixed by agree
ment after competition has been suppressed.... Mr.
Sherman closed his speech with some words of warn
ing and advice to the beneficiaries of the new tariff.
He was earnest enough in his manner to indicate
that he is not at all confident as to the outcome of
the law. The great thing that stood in the way of the
success of the bill, he said, was whether or not the
manufacturers of this country would permit free com
petition in the American market. The danger was that
the beneficiaries ofthe bill would combine and cheat the
people out of the benefits of the law. They were now
given reasonable and ample protection, and if they
would resist the temptation attaching to great aggre
gations of capital to combine and advance prices, they
might hope for a season of great prosperity.... He did
hope, the Senator concluded, that the manufacturers
would open the doors to fair competition and give its
benefits to the people.... He hoped the manufactur
ers would agree to compete one with another and
would refuse to take the high prices that are so easily
obtained."
It was absurd, of course, for Sen. Sherman to say
that a protective tariff would actually help consumers
if only manufacturers could be trusted to refrain from
raising prices. The whole purpose of tariff protection
is to allow domestic manufacturers to raise prices, or
at least to avoid reducing them. Such hypocrisy led
the New York Times to withdraw its support of anti
trust legislation. The Times concluded: "That so-
called Anti-Trust law was passed to deceive the
people and to clear the way for the enactment of this
... law relating to the tariff. It was projected in order
that the parly organs might say to the opponents of
tariff extortion and protected combinations, 'Behold!
We have attacked the Trusts. The Republican party is
the enemy of all such rings.' And now the author of it
can only Tiope' that the rings will dissolve of their own
accord." Thus, the Sherman Act seems to have been
passed to help draw public attention away from the
process of monopolization through tariff protection.
The Sherman Act won legislators votes and cam
paign contributions from farmers and small business
men who thought antitrust regulation would protect
them from their more efficient competitors, and the
tariff bill was supported by all U.S. manufacturers,
both large and small. In a political sense, then, the
Sherman Act was very efficient. Congress itselfseems
to have been one of the principal special-interest
groups to benefit from antitrust legislation.
Economists and the Emergence
of Antitrust
Although most economists today favor stricter
antitrust regulation, from the 1880s until the 1920s
the economics profession expressed nearly unani
mous opposition to antitrust. When Sanford Gordon
surveyed professional journals in the social sciences
and articles and books written by economists before
1890, he found, "A big majority of the economists
conceded that the combination movement was to be
expected, that high fixed costs made large-scale en
terprises economical, that competition under these
new circumstances frequently resulted in cut-throat
competition, that agreements among producers was
a natural consequence, and the stability of prices
usually brought more benefit than harm to the soci
ety. They seemed to reject the idea that competition
was declining, or showed no fear of decline."10
George Stigler has also noted economists' initial
disapproval of antitrust: "For much too long a time
students of the history of antitrust policy have been
at least mildly perplexed by the coolness with which
American economists greeted the Sherman Act. Was
not the nineteenth century the period in which the
benevolent effects of competition were most widely
extolled? Should not a profession praise a Congress
which seeks to legislate its textbook assumptions into
practice?"11 Stigler offered three possible explanations.
First, economists did not appreciate the importance of
tacit collusion. Second, they had too much confidence in
other forms of regulation as a means of dealing with
monopoly. Third, they underestimated the income
they would receive as antitrust consultants.
Once the economics profession
embraced the "perfect" competi
tion theory, it also embraced anti
trust regulation.
These explanations are plausible, but there may
be an even more important reason for the transfor
mation of economists' attitudes toward antitrust. In
the late nineteenth century most economists viewed
competition as a dynamic, rivalrous process, similar
to the theory of competition embodied in the work of
Adam Smith and today's Austrian economists. Conse
quently, they tended to regard mergers as a natural
consequence of the competitive struggle and not
something that should be interfered with by antitrust
legislation.12 Although some industries were becom
ing more concentrated in the late nineteenth century,
rivalry was still as strong as ever, as the rapid expan
sion of output and the decline in prices attest. Thus,
the economists of the time saw no reason to interfere
in market processes with antitrust regulation.
Beginning in the 1920s, mathematical economists
developed the so-called perfect competition model,
and it replaced the older theory. To economists com
petition no longer meant rivalry and enterprise. In
stead, it meant the equation of price and marginal
cost. Most important, it meant that there must be
"many" firms in "unconcentrated" industries. Once
economists began to define competition in terms of
market structure, they became more and more enam
ored with antitrust regulation as a way of forcing the
business world to conform to their admittedly unre
alistic theory of competition.
Economist Paul McNulty has noted: "The two con
cepts [of competition] are not only different; they are
fundamentally incompatible. Competition came to
mean, with the mathematical economists, a hypotheti-
cally realized situation in which business rivalry . . .
was ruled out by definition."13 F.A. Hayek has madean
even stronger statement: "What the theory of perfect
competition discusses has little claim to be called
'competition' at all and... its conclusions are of little use
as guides to policy."14 Moreover, wrote Hayek, "If the
state of affairs assumed by the theory of perfect compe
tition ever existed, it would not only deprive oftheir scope
all the activities which the verb 'to compete'describes but
would make them virtually impossible."15 Advertising,
product differentiation, and price undercutting, for ex
ample, are all excluded by definition from a state of
"perfect" competition which, according to Hayek, "means
indeed the absence of all competitive activities."
Those economists who use market structure to
measure competition are likely to have a favorable
attitude toward antitrust regulation. Stigler asserted
more than 30 years ago, "One of the assumptions of
perfect competition is the existence of a Sherman
Act."16 To the nineteenth-century economists, how
ever, an antitrust law was incompatible with rivalry
and free enterprise. The perfect competition model
and its corollary, the structure-conduct-performance
paradigm of industrial organization theory, have se
riously misled the economics profession, at least as
far as antitrust policy is concerned.
Conclusion
The two principal reasons for the "antitrust
economists' paradox," then, are the lack of historical
knowledge—particularly about actual economic
events in the late nineteenth century—and the fail
ure to appreciate that competition is best viewed as
a dynamic discovery procedure, as Hayek contends.
Economists who believe that there was once a "golden
age of antitrust" have never produced any evidence of
such an age. As this paper has shown, the Sherman
Act was a tool used to regulate some of the most
competitive industries in America, which were rap
idly expanding their output and reducing their prices,
much to the dismay of their less efficient (but politi
cally influential) competitors. The Sherman Act,
moreover, was used as a political fig leaf to shield the
real cause of monopoly in the late 1880s—protection
ism. The chief sponsor of the 1890 tariff bill, passed
just three months after the Sherman Act, was none
other than Sen. Sherman himself.
In the late nineteenth century most economists
viewed competition as a dynamic, rivalrous process,
much like the contemporary Austrian theory. Ac
cordingly, they nearly unanimously opposed anti
trust on the grounds that such a law would be
inherently incompatible with rivalry. Once the eco
nomics profession embraced the "perfect" competi
tion theory which, as Hayek has said, means "the
absence of all competitive activities," it also embraced
antitrust regulation. For once competition came to
mean "many" firms and the equation of price to
marginal costs, rather than dynamic rivalry, most
economists became convinced that antitrust laws were
needed to force markets in the direction of their ideal
ized model of "perfect" competition. Consequently, an
titrust has for over a century been a tremendous drag
on competition, rendering American industry less
productive and less competitive in world markets.
Robert Bork might not have been exaggerating
when, writing in his book, The Antitrust Paradox, he
remarked that ifgovernment were to somehow force the
economy into "competitive equilibrium," it would have
approximately the same effect on personal wealth as
several strategically placed nuclear explosions.
Quoted in Thomas Hazlett, "Interview With George Stigler,"
Reason (January 1984): 46.
Bruno Frey, et al., "Consensus and Dissention Among Econo
mists," American Economic Review (May 1984): 986-94.
3Sanford Gordon, "Attitudes Toward the Trusts Prior to the
Sherman Act," Southern Economic Journal (July 1963): 158.
4Ibid., p. 162.
R. Gray, and J. Peterson, Economic Development in the United
States (New York: Irwin, 1965).
An Interview
with Leland B. Yeager
Leland B. Yeager is professor of economics
at Auburn University.
Q: Throughout your career as an economist, you
have shown interest in social ethics.
A: I don't see anything peculiar about economists
being interested in ethics. The two fields overlap.
Both are concerned with how people can function
together in society without central direction. Some
how, they pursue their own interests and serve those
of others at the same time.
Q: And your interest is utilitarianism.
A: That's right. Among many classical liberals,
utilitarianism is a bad word. Many don't understand
what it means. Utilitarianism comes in different va
rieties. Mises and Henry Hazlitt, both utilitarians,
are on the same wavelength, as was David Hume,
who inspired F.A. Hayek.
No sensible version of utilitarianism relies on
interpersonal comparisons of utility. Hume, Mises,
Hazlitt, and Hayek did not make interpersonal com
parisons. Bentham, I suppose, did sometimes, not
always, write as if he imagined they were possible.
The same can be said of Edgeworth in Mathematical
Psychics. He seemed to conceive—either as an expos
itory device or even seriously—of drawing up an ag
gregate utility function.
Q: But how can utilitarianism protect the minor
ity against the majority?
The following discussion is based on Thomas J. DiLorenzo, 'The
Origins of Antitrust: An Interest-Group Perspective," International
Review of Law and Economics (June 1985).
Congressional Record, 51st Congress, House, 1st Session (June
20, 1890), p. 4100; emphasis added.
Ibid., p. 2558; emphasis added.
9Ibid., p. 4100.
10Sanford Gordon, "Attitudes Toward the Trusts," p. 158.
George Stigler, "The Economists and the Problem of Monop
oly," American Economic Review (May 1982): 1.
12The following discussion is based on Thomas J. DiLorenzo and
Jack C. High, "Antitrust and Competition, Historically Consid
ered," Economic Inquiry (Summer 1988).
' Paul McNulty, "A Note on the History of Perfect Competition,"
•Journal of Political Economy (August 1967): 398.
,4F. A. Hayek, "The Meaning of Competition," in F. A. Hayek,
Individualism and Economic Order (Chicago: University of Chi
cago Press, 1948), p. 92.
15Ibid.
16George Stigler, "Perfect Competition, Historically Contem
plated," Journal of Political Economy (February 1957): 1. •
A: It is a standard caricature that it cannot. Murray
Rothbard takes this position. But if we go back to
Chapter 5 in Mill's Utilitarianism, the one dealing
with justice, we read that justice is a name for that
set of rules and principles guiding our institutions
and behavior which are of utmost importance to
human happiness. If we set aside justice to give a
thrill to Rothbard's majority—the people who get
their kicks from torturing redheads—then we are
setting aside rules and principles that are vital to a
decent society and therefore to human happiness.
This notion of overriding minority rights to amuse
the majority is a caricature version of utilitarianism.
Respect for minority rights is essential to a decent
society. Any reasonable version of utilitarianism
takes a longer view, considering how a good society
can be sustained. It is not preoccupied with the plea
sures of the moment. In my depressed moments I feel
like not writing anything more on these issues, since
Hazlitt has already said everything.
Leland Yeager (right) and Henry Hazlitt (left) at the
Mises Institute's tribute to Hazlitt in 1987.
 Q: What's wrong with natural rights theory?
A: Nothing. I consider myself a consistent cham
pion of the kind of rights that are mentioned in the
Declaration of Independence and the Bill of Rights.
But it is wrong to start with some conception of rights
and then try to derive everything else from there. The
importance of respecting human rights follows from
how vital they are to a good society and so to human
happiness.
I get the impression from libertarian rights theo
rists—like Tibor Machan—that they want to just
posit human rights, perhaps mentioning the nature
of the individual human being and his responsibility
for his own life. The good guys see rights practically
as ultimates, the bad guys don't, and that's that. Such
theorists must think it somehow demeaning to
human rights to mount a sustained argument for
them (which, I think, would necessarily be a utilitar
ian argument).
My objection to rights theory, as presented by those
who want to distinguish themselves from utilitarians, is
the basis on which they enunciate rights. Rothbard's
rights are peculiarly narrow—to one's body and to prop
erty. Many "rights" being bandied about nowadays
amount to claims to all sorts of good things, it being left
vague just who has the corresponding obligations to
supply these good things, and why.
Furthermore, to invoke rights in a discussion is to
use heavy artillery that impairs peaceful discourse. A
rights advocate may say in effect: Morality requires
adhering to my policy, and anyone who denies the rights
I have announced is an enemy of morality. And that's
the end of the discussion. This is not scholarship at its
best.
Q: But you want to hold on to a notion of rights.
A: Not as the very starting point, but—yes—as
concepts that arise within the field of ethics. The
following definition of rights seems to work in most
contexts where the word appears: Rights are entitle
ments to behavior on the part of others that are
binding on those others with a particularly strong
degree of moral force. Rights to life, liberty, and
property mean that others are particularly obliged
not to invade our own lives, bodies, freedom, and
possessions.
Q: But in popular discussion, the terms "rights" is
most often used to mean the opposite of your definition.
A: True. Civil rights are valid, but people try to
sell contrary policies under its name. The so-called
civil-rights bill currently pending, which increases
opportunities for anybody who has a grievance to sue
the employer or potential employer, is a bad idea. It
is disingenuous to deny that such laws tend to estab
lish de facto quotas. If the best way to protect yourself
from suits is to have the statistically "correct" mix of
groups, you're being prodded to staff your firm that
way. Many good intentions vaguely written into law
only bring opportunities for nasty and litigious types
to exploit the law in other ways.
Q: Do you wish more economists were interested
in ethics?
A: We can't expect all economists to be interested
in the same things. But the tradition of economists
being interested in ethics goes way back and carries
up to the present. Hume, Smith, Sidgwick, Mill,
Keynes, Mises all were, as do Hayek, and Buchanan.
And ethics does indeed seem to be gaining explicit
attention in economics discussion these days. The
typical economics journal does not deal with the sub
ject, however, since it is supposed to be on the fron
tiers and cannot be concerned with the great bulk of
already accepted doctrine.
Q: What role has the mathematization of the
profession had in pushing aside ethical discussion?
A: It has played a role in pushing aside the over
laps between economics and ethics, for it isn't obvious
how one puts ethics into equations. But I don't want
to condemn mathematics, since doing so would be
engaging in a particular type of methodology. I don't
much admire laying down methodological taboos,
telling your colleagues the wrong and right ways to
go about their work.
Q: Are you uncomfortable with Mises's views on
the use of mathematics, that they have a limited use
in doing history but not in economic theory?
A: I have always been a bit dismayed at Mises's
stern line against mathematics in economics. How
can one be so farsighted as to see that nothing good
can come out of applying it to economics?
In general, I think people should be more modest in
their methodological sermonizing. Just because one
theorist doesn't apply certain methods doesn't mean
they should be taboo. Mathematics can be a good way
of conveying some ideas. With some concepts, you have
to keep hammering at them to get them across to your
students. The idea of maximizing utility under con
straints should be done with words, graphs, and math
ematics. Three ways are better than one. To really
understand these topics, you've got to go over them
several times while using a variety of techniques.
Q: You speak about Austrian taboos, but aren't
there taboos in the mainstream?
A: Yes. Plenty of methodological taboos are never
even discussed. Tacit methodologizing is even worse
than explicit methodologizing. If people are explicit,
they lay out their message for inspection. An implicit
assumption of the mainstream is that if economic
reasoning is to be "rigorous"—meaning worth any
attention, I guess—it must appear in a formal model
of maximization of utility, profit, or present value.
Q: Is any particular school guilty of this?
A: The New Classicists are my particular bug
bear. They tell us that we must suppose that markets
are always clearing, that we've got to interpret the
business cycle as if markets are always clearing, that
we've got to see unemployment as voluntary with
holding of labor from the market. But this notion
that all markets are clearing, or are close enough to
clearing so that we are required to do our reasoning as
if they were clearing, has no more merit than a meth
odological precept whose basis hardly gets explicitly
discussed.
I am skeptical about all such postulates. What
postulates are legitimate depends on what you are
studying. For example, if you are doing an exercise in
microeconomics to find the long-run equilibrium con
sequences for a product's price and output of a speci
fied change in taxes or technology, then it only
clutters up the analysis to focus on the transition
from the present state of affairs to the future equilib
rium state. We then have no particular reason to be
interested in the disequilibrated markets before
prices have fully adjusted. But if we are doing macro
economics—which is concerned with lapses from full
coordination and with what accounts for the greater
or lesser degree of lapse—then transitional obstacles
are the center of the topic. What might be merely a
fringe complication set aside in a micro analysis
moves to center stage in macro. Yet New Classical
economics dismisses all concern with lapses of coor
dination and the failure of markets to clear. It simply
wipes away the problem.
Q: Are you, then, a methodological pragmatist?
A: I am a methodological libertarian. I am not
saying that anything goes, or that whatever one
comes up with is automatically valid. Divine inspira
tion is not as good as looking at the facts. But let
people work with whatever method works for them
and fits with their talents and inclinations. After all,
their work is open for public inspection.
Q: Donald McCloskey has been persuasive in this
regard. What do you think of his work?
A: I agree with him at many points when he is
speaking for himself. I haven't read all the people he
cites—those associated with deconstructionism and
hermeneutics—but my impression is not too favor
able. Hermeneutics was a flash in the pan, but it is
an example of what happens quite often in economics.
Economists will latch onto an idea out of some other
field in hopes of making a splash in their own. They'll
dip into engineering, psychology, or mathematics and
try to make a reputation. This way they can look
catholic and widely read.
Q: And what of your view toward Shackle and
Lachmann, the radical subjectivists?
A: They advanced a kind of subjectivism I reject—
nihilism. I know they don't call it that, but that is the
way it comes across to me. If the extreme subjectivists
like Lachmann and Shackle take themselves seri
ously—that expectations are totally subjective, that
we cannot know anything about the future, that the
future is being freely invented—why would they pose
as professors of economics? Why do they set out to do
anything? Lachmann was a dear man, but his doc
trine was negative and destructive.
Q: How do you see your own role in the Austrian
school?
A: I don't know whether I am considered a critic
of Austrian economics or not. I have criticized the
Austrians' business-cycle theory and their method
ological preachments. But I have long had a respect
ful and sympathetic interest in the school. I first came
across some books by Mises in the Oberlin College
library shortly after World War II—Omnipotent Gov
ernment and Bureaucracy, as I recall. I was im
pressed and learned a lot. In fact, I included some of
Mises's insights in my answers on a final exam in an
antitrust course. A "C" grade testified to my bad
judgment on when and how to express my enthusi
asm. Once, while visiting the Princeton University
library, before Human Action appeared in English, I
read parts of its earlier version, Nationalokonomie. I
had already read Hayek's essays in Individualism and
Economic Order. But mostly I was very excited about
Mises's doctrine of calculation under socialism. I gave
a faculty seminar on that topic in 1949 when I was
teaching for one year at Texas A & M. I even thought
about exploring some related topic for my Ph.D. disser
tation.
Q: Did you ever meet Ludwig von Mises?
A: Yes, several times. Probably around 1948 or
1949, while a graduate student at Columbia Univer
sity, I somehow received or wrangled an invitation to
visit him in his apartment. Our conversation drifted
onto the alleged intellectual dishonesty of leftist econ
omists. At one point I asked, "Professor Mises, are
their any honest leftists?" He pondered for half a
minute or so and then replied, in all seriousness, 'Yes:
Gottfried Haberler."
Leland B. Yeager
 About a year later I took an extracurricular short
course in monetary theory that Mises was offering at
New York University. I'm afraid I learned more there
than in all the lectures at Columbia. I credit Mises—
some might say I should blame him—for my basic
ideas on monetary economics.
I attended a two-week Volker Fund conference in
1955 at which Mises was one of the three main lec
turers. I saw him occasionally after that. In 1979,
after his death, when I was working on my transla
tion of his Nation, Stoat, und Wirtschaft, I received
some advice from Mrs. Mises at their apartment.
Q: What themes in Austrian economics do you
like?
A: I like the concern with the big picture. The
Austrians have shown how the activities of millions
of separate people can be coordinated into a system
that has a semblance of logic and structure even
without a central planner. And I also like the Austrian
concern with institutions. Unlike the mainstream,
which sometimes gets bogged down in details about
decision-making within firms and households, Aus
trians are primarily concerned with economy-wide
relations among such units.
Q: And what don't you like?
A: I am not a card-carrying Austrian. I don't like
the way the business-cycle theory gets recited again
and again without any new evidence or reasoning. On
capital theory, I find myself disagreeing with some
present-day Austrians. Briefly, my view is that if you
put together Bohm-Bawerk, Cassel, and Fisher and
make the proper selection and combination of their
doctrines, you have the essence of capital theory. The
interest rate is determined by interaction between
time preference and the productivity of roundabout-
ness. I don't know why this view should be considered
anti-Austrian. Bohm-Bawerk and Hayek explicitly
recognized both time-preference and productivity. I
don't quite understand how the pure subjectivist or
pure time-preference theory came to be regarded as
a key part of Austrian doctrine. I only have a hunch.
Maybe people thought that since subjectivism is good,
the more subjectivism the better.
Q: You don't regard Austrian economics as a sep
arate school within economics?
A: It certainly shouldn't separate itself and take
on the mission of doing battle with the mainstream.
All of us economists have some ideas we hope to
contribute to our fellow economists. The Austrian
tradition is distinctive in having a favored set of
topics and perhaps a method. But Austrians should
be trying to influence the general understanding of
how the economy works.
Q: What can formal Austrian theory add to the
body of mainstream thought?
A: Emphasis on the dispersion of knowledge in
society, and the need to transmit it through the mar
ket, is a message that should penetrate the main
stream more fully. And the emphasis on legal institu
tions and their role in the coordination of economic
activity is also a fruitful framework for study. Hayek
often gets credit for these concerns, but the knowl
edge problem is already implicit, at least, in Mises.
The planners don't know how to combine the factors
of production, even supposing they know what they
want to produce. Mises's emphasis on meaningful
markets displays his interest in transmitting this
knowledge through the price system, a point that
Hayek elaborated on.
Q: What about the role of entrepreneurship as a
unique Austrian contribution?
A: It does need to be hammered home, but I think
the mainstream has got the message by now. If they
can find an economist who hasn't yet got it, then
Austrians should continue. The problem is that en
trepreneurship is an idea that is difficult to model
formally. So far, anyway, working in this area doesn't
provide much opportunity to display technical ability.
I do think that there has been too much Austrian
discussion about whether entrepreneurship is equil
ibrating or disequilibrating. It is clearly both.
Q: Any thoughts on the anti-socialist revolution
in Eastern Europe?
A: Sure. It overwhelmingly demonstrates that
attempts at central economic direction do not work.
The experiments made since 1917 and since 1945
have been decisive. The advocates of socialism will no
longer come from the ranks of economists. It is no
longer intellectually respectable. •
r
Austrians Expand Program
at New York University
The Austrian Economics program at New
York University has announced an ambitious
publication program. Mario Rizzo and Law
rence White (University of Georgia) will co-
edit "Foundations of the Market Economy,"
a series of monographs for Routledge Press.
Peter Boettke, Israel Kirzner, and Mario
Rizzo will serve as general editors for JAI
Press's annual publication, Advances in Aus
trian Economics, which will assemble articles
on a general topic. The first volume will focus
on the topic "Is Change Possible?" Finally, in
conjunction with New York University Press,
a series titled "The Political Economy of the
Austrian School" has been launched to gather
papers by Austrians on a topic in economic
policy. •
 Jack Wiseman (1919-1991)
By Peter G. Klein

W i t h the death of Jack Wiseman this January

the Austrian school has lost a distinguished
"fellow traveler." Throughout a long career at the
London School of Economics and the University of
York, and through close associations with the Insti
tute of Economic Affairs in London and the Center for
the Study of Public Choice at Virginia Tech and
George Mason University, Wiseman was a tireless
fighter for subjectivism in economics and a vocal
opponent of positivism, undue sub-specialization,
and the esoteric, technique-oriented character of
modern economic theory. He also represented a living
link with the great "London tradition" of the 1930s
and 1940s, perhaps the last period when distinctively
"Austrian" ideas were playing an active role in the
development of mainstream economics.
Born to a poor family in the English midlands, the
cradle of the industrial revolution, Wiseman pro
ceeded by scholarships through the local secondary
schools and later to the L.S.E., which he entered in
1946 only after a seven-year delay for military ser
vice. At the L.S.E. he joined a truly extraordinary Jack Wiseman
group of thinkers: His first economics class was
taught by William Baumol, then a newly arrived thralled with macroeconomics, growth, and "positive
graduate student; the chairholders in economics were economics" (recall that Hayek himself had mostly
F. A. Hayek, Lionel Robbins, James Meade, T. S. given up economic theory by that time). Wiseman
Ashton, R. G. D. Allen, Edmund Phelps-Brown, F. W continued to pursue his own interests, however, de
Paish, and R. S. Sayers, and also teaching were P. T. veloping his "unknowability thesis": The central con
Bauer, Arnold Plant, and Harold Laski; his personal straint we face is our inability to know the future. It
tutor was Ronald Coase. He would later describe the was also during this period that he collaborated with
department as "the best economists' club in the Alan Peacock on a widely read study on The Growth
world."1 Wiseman concentrated on the "core" subject of Public Expenditure in the United Kingdom.3
area, where he worked closely with Robbins with
plans for an academic career. Wiseman continued lecturing at the L.S.E. until
1964, when he joined Peacock to set up a program
After graduation he secured a temporary lecture in public finance at the newly created University of
ship at L.S.E. in Industry and Trade, and was later York, where he remained until retirement in 1987.
promoted to a full lectureship in Business and Public At York he began to work with Stephen Littlechild,
Finance. It was in these two areas (what would today author of The Fallacy of the Mixed Economy, on a
be called industrial organization and public finance), self-described "subjectivist economics textbook."
that Wiseman published his earliest works: first a Sadly, the project was never completed, though its
1953 Economica article on collectivist economic plan
flavor can be gathered from the delightful essay on
ning—a subject with which, unfortunately, the aca "Crusoe economics" that came out of the project and
demic establishment had mostly lost interest—and appeared in a volume honoring George Shackle. He
then his best-known paper, "The Theory of Public also came to develop a close relationship with James
Utility Pricing: An Empty Box."2 Both of these, and Buchanan, whom he had met at the L.S.E. in 1960,
especially the latter, argued along Austrian lines that and with whom he shared interests in both Shackel-
marginal-cost pricing rules cannot be meaningfully ian subjectivism and the public choice approach to
applied to collective decision-making processes or political theory; as a visitor at Buchanan's Public
public resource allocation, because "cost" and "bene Choice Center he began to sketch an outline of a "new
fit" exist solely in the mind of the individual actor, as political economy," a grand reconstruction of eco
anticipated prior to action though realized only after. nomic science that he continued to develop until his
That is, "marginal social cost" is more than a tricky death.
thing to measure; it is impossible even to define.
Perhaps predictably, the work failed to generate He died of cancer at his home in Yorkshire at the
much interest in the profession, which was then en- age of 71. His friends and colleagues remember him

10
as an unpretentious, practical man, an independent
thinker and, above all, a great talker. He is at least a
writer whose work deserves to be better known.
*In an autobiographical sketch publishedin his bookof essays
Cost, Choice and Political Economy (London: Edward Elgar,
1989), p. 28. There Wiseman singles out as the source of its
excellence not only the L.S.E. people themselves, but also the
style of teaching, with its emphasis on student participation.
By contrast, he describes a year spent as a visitor at Berkeley
in 1962 with surprise for the faculty's lack of interest in
students: "After L.S.E., the [American] system seemed remote
and uncaring. The first year of undergraduate study was
treated as a 'weeding-out'period in which the dropout rate was
very high. Teaching this group was a chore left largely to
junior staff, teaching assistants and unwary visitors; seniority
Economics Rankings:
A Survey
by Alexander Tabarrok
"The popular subject of discussion among
economists is not so much economics as
economists" (Samuelson 1962).
Economists do love to rank themselves. There is
no doubt a Freudian explanation for this but that will
have to await further research. For now the Austrian
Economics Newsletter is pleased to report the long-
awaited results.
Top Ten Economists
in the U. S.
1. Gary Becker (Chicago)
2. Henri Theil (Florida)
3. Martin Feldstein (Harvard)
4. Robert Lucas (Chicago)
5. Robert Barro (Harvard)
6. Oliver Williamson (Berkeley)
7. Robert Solow (MIT)
8. Zvi Griliches (Harvard)
9. Thomas Sargent (Hoover Institution)
10. Mancur Olson (Maryland)
Source: Marshall Medoff, "The Ranking of Economists,"
Journal of Economic Education (Fall 1989):405-15.
Explanation: The rankings here are based upon
the total number of citations received in the years
1971 to 1985 from a population of all economists in
the top 125 universities in 1985. Nobel prize win
ners have been excluded from this list (Robert
Solow received his Nobel prize after Medoff com
pleted his article) as are economists over 65 years
of age.
11
was rewarded not only by income but by the relinquishment ofsuch
chores..." (p. 26). Does this sound familiar to the modern American
student?
2JackWiseman, "Uncertainty, Costs and Collectivist Economic
Pricing," Economica (May 1953); idem, "The Theory of Public Util
ity Price: An Empty Box," Oxford Economic Papers (February
1957). Both reprinted in James M. Buchanan and G. F. Thirlby,
eds., L.S.E. Essays on Cost (London: Weidenfeld and Nicolson,
1973), and in Cost, Choice and Political Economy, op. cit.
3Alan T. Peacock and Jack Wiseman, The Growth of Public
Expenditure in the United Kingdom (London: Oxford University
Press, [1961] 1967).
4S. C. Littlechild and Jack Wiseman, "Crusoe's Kingdom: Cost,
Choice and Political Economy," in S. Frowen, ed., Unknowledge
and Choice in Economics (London: Macmillan, 1989), reprinted
in Cost, Choice and Political Economy, op. cit. •
Top Ten U.S. Economics Departments
1. Chicago 6. Minnesota
2. MIT 7. Yale
3. Princeton 8. UCLA
4. Rochester 9. Stanford
5. Harvard 10. Columbia
Source: John Tschirhart, "Ranking Economics Departments in
Areas of Expertise," Journal of Economic Education (Spring
1989): 199-222.
Explanation: Tschirhart looked at all departments
offering Ph.D's in the United States. The rankings are
based upon; the per capita, total number of standard
ized and quality adjusted (by journal) articles published
during the period 1975 to 1984.
Top Ten Economics Journals
1. Journal of Political Economy
2. Journal of Financial Economics
3. American Economic Review
4. Journal of Monetary Economics
5. Journal of Finance
6. Journal of Economic Literature
7. Econometrica
8. BellJournal of Economics
9. Brookings Papers on Economic Activity
10. Review of Economic Studies
Source: S. J. Liebowitz and J. P. Palmer,"Assessing the
Relative Impacts of Economics Journals,"Journal of Economic
Literature (March 1984): 77-88.
Explanation: The rankings are based upon the ci
tations from journals (other than the journal being
ranked) in 1980 to articles published during the pe
riod 1975 to 1979. These citations are weighted in an
iterative procedure so that a citation from the Journal
of Financial Economics to the JPE is worth more than a
citation from the Review of EconomicStudies to the JPE.
The citations are also weighted by the number of char
acters a journal publishes, this controls for the size of
the journal.
 Top Ten Economics Book Publishers
with Comparison to JPE
1. University of Chicago Press 0.83
2. Cambridge University Press 0.51
3. Brookings Institution 0.47
4. Basic Books 0.46
5. Hoover Institution Press 0.37
6. Allen and Unwin 0.31
7. North-Holland 0.26
8. Harvard University Press 0.24
9. Harcourt Brace Jovanovich 0.24
10. Princeton University Press 0.22
Source: David Laband, "Measuring the Relative Impact of
Economics Book Publishers and Economics Journals," Journal
of Economic Literature Qune 1990):655-60.
Explanation: The number in the far right column is
the relative impact of publishing a book compared to
publishing a JPE article. For example an economics
book published by the Cambridge University Press in
the study period received only about half as many
quality adjusted citations as an article in the JPE.
The rankings are based upon the number of cita
tions in the period 1981 to 1985 to books which were
published (and announced in the Journal of Economic
Literature) in 1980. The citations were weighted accord
ing to the rankings established by Liebowitz and
Palmer. Textbooks and directories are excluded.
Comments
The numbers reveal one thing for certain—the
University of Chicago is by far the most influential
and powerful university in the economics profession.
Chicago has the number one economist, department,
journal, and book publisher! The only sign of its
weakness is in the number of top, young (40 or under)
economists. According to Medoff (1989, p. 413, Table
3) Chicago has none of the top ten young economists.
MIT leads in this regard with four and Princeton
follows closely with three. However, this is not likely to
be reflected in Chicago's (statistical) ranking very
much. This is because of the immense importance of
University of Chicago journals. Graves, Marchand
and Thompson (1982) found that two-thirds of the
articles published by University of Chicago econo
mists were in three journals published by the Univer
sity of Chicago (Medoff, p. 406). This wouldn't matter
except for the fact that authors from the same school
as the editor tend to receive more pages than unaffil
iated authors (Laband, 1985a). Parochialism may
therefore effect rankings at least in the short run
(Stigler and Friedland, 1975).
It is interesting to note that the ranking of the top
10 departments is fairly invariant to the measures
used. Laband (1985b) in the Southern Economics
Journal ranked the top 50 departments according to
a composite score of pages published per faculty mem
ber, cites per article published, and graduate student
placement plus a measure of graduate publication.
He also included the percent change in published
12
pages and the percent change in cites (this was in
order to measure the extent a department has im
proved or worsened.) Seven of Laband's top ten over
lap with Tschirhart's top ten. After Golden,
Carstensen, and Weiner (1987) "corrected" for some
statistical oversights in Laband's study, nine of the
top ten overlap. However, there are exceptions to this
rule. For example, when all articles are included, not
just those in mainstream journals, Tschirhart finds
that George Mason University, which specializes in
public choice and Austrian economics, jumps from a
ranking of 31 to that of eight! Tschirhart's rankings
are the most recent and probably the most valuable
because he ranks by area of expertise as well as
general rank.
The rankings of books vis-a-vis JPE articles may
be misleading. Articles generate cites because they
tend to be on current and controversial subjects. But
how many of these articles withstand the test of time?
How many make permanent contributions and how
many are cited merely so that they can be refuted? As
a hypothesis I would suggest that books have more
long term impact than articles. This could be tested
by examining the relative impact of books published
50 years ago and articles published 50 years ago.
Citations to Austrian Economists
1. F.A.Hayek 280
2. Israel Kirzner 47
3. Carl Menger 46
4. W. H. Hutt 29
5. Lawrence White 27
6. Murray Rothbard 24
7. Don Lavoie 23
8. Gerald O'Driscoll 20
9. Ludwig Lachmann 14
10. Ludwig von Mises 12
Source: Social Science Citation Index, 1989.
Explanation: This list includes only 1989 citations.
The sample from which the list was taken was small and
chosen on the basis of what I consider to be general
opinion among Austrians about who is an Austrian.
Auburn, George Mason, and
New York Universities
Auburn University has been ascending the ranks
of economics departments. Its relatively young de
partment ranks third among departments with an
Austrian orientation. According to the various rank
ings, its publishing strengths are in the areas of
history of thought, labor economics, and microeco
nomics. It is difficult to assess George Mason Univer
sity over time because it is largely a creature ofrecent
imports from other schools. Some early rankings do
not have George Mason listed, but some recent rank
ings place George Mason in the top 20. According to
the various rankings, its strengths are in the areas of
public finance, welfare economics, and natural re
source economics. The New York University depart
ment has consistently ranked in or near the top 20.
It ranks high in a number of fields including micro-
and macroeconomics, welfare theory, and interna
tional economics.
Now that we know the top ten economists, the
best departments, the most prestigious journals, the
most influential book publishers, and the ranking of
Austrians in the profession there is only one impor
tant question left: Who do you think is going to win
the Nobel prize this year?

Golden, J., Carstensen, F. and P. Weiner. 1987. "An Evaluation

of 50 Ranked Economics Departments: Comment." Modern Eco
nomics Journal 54: 212-15.
Graves, P., Marchand, J. and R. Thompson. 1982. "Economics
Departmental Rankings: Research Incentives, Constraints, and
Efficiency." American Economic Review 72: 1131-41.
Laband, D. 1985a. "Publishing Favoritism: A Critique of Depart
ment Rankings Based on Quantitative Publishing Performance."
Southern Economic Journal 52: 510-15.
Laband, D. 1985b. "An Evaluation of 50 Ranked Economics
Departments—By Quantity and Quality of Faculty Publications
and Graduate Student Placement and Research Success." Southern
Economic Journal (July): 216-40.
Medoff, M. 1989. "The Ranking of Economists." Journal of Eco
nomic Education (Fall 1989): 405-15.
Samuelson, Paul. 1962. "Economists and the History of Ideas"
American Economic Review (March): 1.
Stigler, G. and C. Friedland. 1975. "The Citations Practices of
Doctorates in Economics." Journal of Political Economy 83: 477-
507. •
Convention
Austrians Convene at Southwest
Social Science Association
Two sessions on Austrian economics were organ
ized by Mark Thornton of Auburn University
for the 1991 Southwest Social Science Association
which took place in San Antonio, Texas, March 27-30.
The sessions were on the theme of "Global Change:
Investigation, Understanding, Survival." The first ses
sion, "Financial Crisis in Capitalism," examined the
impact of public sector institutions on the recent perfor
mance of markets. Roger Garrison of Auburn Univer
sity examined the impact of government deficits on
the economy in his paper, "Public Sector Borrowing
and Private Sector Performance." Garrison noted
that mainstream economists have not been able to
find the effect of deficits on the economy because they
typically examine only one possible effect such as
inflation or "crowding out." He said that deficits do
not cause one particular effect, but many, and be
cause of changes in policy and political regimes the
relative impact of deficits changes over time. This
actually makes deficits much worse than taxes be-
From left to right, top: Yuri Maltsev,
Hans-Hermann Hoppc, Larry Sechrest.
Second row: William Breit, John McC-
allie, and Roger Garrison. Third row:
Murray Rothbard.
cause of the additional uncertainty it creates for indi
viduals making long-run decisions.
Larry Sechrest of Sul Ross State University
applied Austrian methodology to central bank pol
icy in "The Impossibility of Rational Monetary Pol
icy." Parth Shah of the University of Michigan,
Dearborn investigated the role of the Hong Kong
government and "free banking" institutions to de
termine the source of stability of the Hong Kong
dollar.
John McCallie of the University of Alabama, Bir
mingham presented his historical investigation of
deposit insurance in 'The Crisis in Government De
posit Insurance." He found that economists warned
against government deposit insurance when it was
first proposed, predicting in many cases the problems
facing deposit insurance today. Murray Rothbard of
the University of Nevada, Las Vegas provided com
ments on McCallie's paper. The non-Austrian com
mentators of the session were in general agreement
with the findings presented.
The second session, "The Downfall of Commu
nism," was a joint session of economics, international
studies, and political science, and was one of the
best-attended sessions of the convention.
Hans-Hermann Hoppe of the University of Ne
vada, Las Vegas presented his "Economic and Socio
logical Analysis of the Unification of Germany," and
was commented on by Larry Sechrest. Yuri Maltsev
of the U.S. Institute of Peace presented "The Political
and Economic Institutions of the Soviet Union in
Transition." Commentator Mark Thornton noted that

13
Maltsev presented an accurate but bleak picture of
the future in the Soviet Union.
Rothbard's paper "How and How Not to Desocial-
ize," provided a set of guidelines on how the process
of desocialization could be successful and how it
could result in failure. Former President on the
Southwest Social Science Association, William
Breit of Trinity University began his comments on
Rothbard's paper:
I am in agreement with much of what Professor
Rothbard had to say. My words of agreement must
sound like strange music to Rothbard's ears be
cause he has for so long been in a tiny minority in
holding his opinions on most economic issues. He
is quite right in asserting that for the last half-cen
tury almpst all western economists believed that
there is no calculation problem under socialism
and that the Soviet economy was successful and
would eventually overtake the United States. Of
course Murray Rothbard's was almost a lone voice
in the wilderness saying nay to this orthodoxy. As
you can discern from his paper he is not quite a
shrinking ego. And yet he has resisted the tempta
tion to say, "I told you so" even though he would
have been fully justified in saying it. No one could
have taken more satisfaction than Rothbard in
having lived to see the collapse of communism and
socialism around the world. Now, at least on this
question, Rothbard is in the majority. There are
few people anywhere anymore who hold the view
that central direction is an efficient way to organ
ized economic activity.
Austrians have been active at the Southwest So
cial Science Association since at least 1984. These two
sessions testify that Austrian economists have a
strong and growing presence in the Association and
in the economics profession as a whole. MT •
Conference
u
Egalitarianism and the
Free Society"
T o combat the growth of "politically correct"
thinking on campus, and in public discourse,
the Mises Institute recently sponsored a scholarly
conference on "Egalitarianism and the Free Society."
It explored the relationship between the state-en
forced ideal of perfect equality and its incompatibility
with true human liberty.
Held in Princeton, New Jersey, from April 11-13,
1991, it featured some of the top economists, journal
ists, sociologists, and philosophers associated with
the Austrian school of economics. The speakers pre
sented ideas on some of the most controversial aca
demic and political trends of our time.
Murray Rothbard of the University of Nevada,
14
Las Vegas set the tone of the conference by returning
to, and expanding upon, issues he raised in his classic
1970 essay "Freedom, Inequality, Primitivism, and
the Division of Labor." The fact of human inequality
is not only all pervasive; it is necessarily implied in
the very idea of the division of labor. Yet since it
became clear to the Left that the economic side of
socialism was destined to fail, it has pursued a war
for forced equality through unfairly privileging un-
derachievers and handicapping successful people.
He noted that it is nearly impossible to caricature
this movement because of the ever/expanding list of
"victims" and the increasingly absurd justification
for their "claims." He attempted, however, to pro
vide a flavor of the absurdity by insisting on affir
mative action for short people, a victim group of
which Rothbard himself is a distinguished member.
Llewellyn H. Rockwell, Jr., president of the Lud
wig von Mises Institute, presented an intellectual
survey of the concept of envy. Although this human
emotion has been consistently condemned by great
thinkers since the Ancients, it is rarely if ever men
tioned in modern public policy discourse, much less
thoroughly explored. Rockwell theorized that it is
actually a prime motivation behind the economic and
social collectivism in the West. For example, why is
the welfare state still glorified even though it has
failed to do what it is allegedly supposed to do? The
reason is that welfarism actually succeeds in one
area: institutionalizing envy. That is, it may not help
the poor, but it hurts the rich, which, in an envious
society, is the point after all.
Joe Salerno of Pace University provided a blister
ing attack on the transfer state, snowing how the pur
suit of equality is an ellusive goal, and that the attempt
to reach it can cause immeasurable destruction to social
cooperation. He elaborated on Rothbard's thesis that
income transfers are not welfare enhancing and showed
that they always diminish welfare. He put his theory in
the context of work he is doing on the connection be
tween the market economy as a coordinating agent and
the "social appraisement process" of economic calcula
tion. David Fand of George Mason University's Public
Choice Center discussed other forms of pernicious re
distribution.
Jeffrey Herbener of Washington and Jefferson
College traced the idea of egalitarianism from the
ancient philosophers, to the economic tradition of the
scholastics, to the modern Austrians, to show that the
subjectivist/free-market tradition has relied on the
idea of inequality of personal attributes to under
stand how the liberal social order is most conducive
to individual creative potential.
Paul Gottfried of Elizabethtown College took on
the nebulous ideas of modern democratic theory and
linked them to the leftist desire for social leveling. He
argued that not only is democracy not required for the
preservation of individual liberty, but that democracy
is often the enemy of liberty and of private property.
Democracy, especially the pursuit of "global democ
racy," creates a social calculus of interventionism of
which the primary beneficiaries are interest groups.
He argued that the democratic tradition runs counter
to the rule of law, making it antithetical to the market
and the constitutional republic.
Thomas DiLorenzo of the University of Tennes
see, Chattanooga argued against the wave of legis
lation presumably designed to help disabled people,
the newest victim group that has achieved official
status in Washington. He noted that there are al
ready 43 different categories of disabilities that
make one eligible for special treatment. The irony
is that disability legislation—especially the
American's with Disability Act of 1990—ends up
hurting the most severely disabled persons. It man
dates that employers always accommodate disabil
ities; on the margin, employers will choose the least
disabled to save the expense. Like other groups that
seek victim status, official legal privilege will set
up barriers to authentic participation in the division
of labor.
Samuel Francis, award-winning editorial writer
for the Washington Times, argued that egalitarian
ism in politics is a boon for the managerial elite class
that runs the bureaucratic State. Far from being an
independent unit, this elite group has a symbiotic
relationship with corporate business and elected
leaders. Since the New Deal, this elite has superim
posed its -vision of society on top of traditional pat
terns of social and economic relations. His strategy
for unseating this managerial elite from its position
of power is both academic and activist. First, the
governing ideology of egalitarianism must be refuted
and, second, the elite's designs for society must be
exposed.
Steven Goldberg of the City College of New York
took on the difficult question of equality between the
sexes, which has been a governing ideal in social
legislation for decades. The premise most widely ad
vanced to support the egalitarian sexual vision is that
it is an arbitrary social choice whether men or women
hold dominant positions in government and business.
Goldberg presented an empirical argument that, con
trary to sociology texts, history presents no example
of a non-patriarchal society. Every supposed example
to the contrary ends up being completely mistaken.
The fact of patriarchy's all pervasiveness should cau
tion social engineers about the limits to legislative
attempts toward sexual leveling.
David Gordon of the Ludwig von Mises Institute
presented Mises's own views about equality and in
equality, showing that egalitarianism was antitheti
cal to his social and economic system. Mises's
world-view, in fact, relied on individual differences
working themselves out through the market process.
Efficiency can be best defined in terms of a system
15
that allows individual talents, always distributed un
equally, to be put to their best use. Mises thought that
the concept of equality is relevant only in terms of
how the law ought to treat individuals. Gordon fur
ther showed that Mises's anti-egalitarianism is
rooted in a more general philosophical tradition that
stood against all attempts to uproot the basis of social
patterns consistent with liberty.
Joe Sobran, critic-at-large for National Review,
explained how modern notions of civil rights are in
complete contradiction to an older version of rights.
Modern civil rights are group-directed privileges to
coerce private parties and gain access to public funds.
Moreover, he argued, this difference is widely under
stood by the public, which supports civil rights in the
abstract, but resents the pressure group tactics of
seizing more legal favors from the state.
Thomas Fleming, editor of Chronicles magazine,
spoke on how the premise of equality plays itself out
in the world of education. The egalitarian ideology
has led to the collapse of the public school, the
bullying of private schools, and the radical central
ization of education. As an alternative, he sug
gested a radical privatization of education and an
elimination of laws restricting the manner in which
private schools conduct their affairs. Barring that,
he said, all plans for education reform ought to be
judged on one criterion: Do they begin to decentral
ize the control of education, or do they further
centralize it? He judged President Bush's education
reform plan—with its promotion of means-tested
vouchers and a national curriculum—as going ex
actly in the wrong direction.
In honor of the conference, the Mises Institute has
republished Rothbard's 1970 essay on egalitarianism,
but with an extensive new introduction.
Some of the papers from the conference will be
released during the next six months. All will be
published in a volume by Kluwer Academic Publish
ers. J AT •
Speakers (I to r) Thomas DiLorenzo, Jeffrey Herbener, Joe
Salerno and Sam Francis answer questionsfrom theaudi
enceat the closing session of the 'Egalitarianismand the
FreeSociety"conference in April.
 Freedom, Inequality, Primitivism,
and the Division of Labor
Murray N. Rothbard
The Ludwig von Mises Institute, 1991
H irst published in 1970, Murray Rothbard's pre-
•*- scient essay "Freedom, Inequality, Primitivism,
and the Division of Labor" has just been reprinted by
the Ludwig von Mises Institute in a handsome mono
graph, complete with a new introduction by the au
thor. In this important essay, Rothbard demonstrates
his remarkable ability to transcend traditional cate
gories, defy ordinary analysis, and integrate econom
ics, ethics, and sociology into a powerful system of
social thought.
Many so-called free-market economists "defend"
inequality on the grounds that it is necessary to
provide incentives that further economic growth and
wealth creation. Milton Friedman tries to appease
egalitarians on these grounds in Capitalism, and
Freedom. Friedman goes so far as to argue that much
of the inequality in a capitalist society is really the
result of "true equality." Paying higher wages for
more difficult jobs, for example, is required so that
the total return on work is truly equal. Similarly the
inequality in wealth created when some take on en
trepreneurial risks with potentially high payoffs is
really the result of everyone's equal right to buy
lottery tickets. And don't forget, Friedman concludes,
that government intervention in the economy creates
a lot of inequality.
Now, Friedman is one the great economists of our
time and he has done much to make classical liberal
ideas respectable in our universities. But this blatant
pandering to egalitarianism is a sorry spot on his
record. It is a great shame that he chooses to accept
the premise of his enemies—that equality is a social
norm worth striving for—in order to argue for capi
talism. If egalitarian social leveling is the goal, after
all, capitalism cannot compete with the alternatives.
Rothbard, in contrast, takes the egalitarians head
on: He revels in the inequalities of capitalism and
glorifies them. Of what value would freedom be, he
asks, if men were all the same? "The glory of the
human race is the uniqueness of each individual, the
fact that every person, though similar in many ways
to others, possesses completely individuated person
ality of his own." The uniqueness of each individual
is one of the great arguments in favor of freedom.
And it is one of the great benefits of capitalism,
the social system created when men are left free, that
it allows men to extend and amplify their differences.
Copyright © 1991 by the Ludwig von Mises Institute, Auburn University, Auburn, Alabama 36849, (205) 844-2500. Volume 12, Number3.
Editor: Mark Thornton (Auburn University). Associate Editor: Jeffrey A. Tucker (George Mason University). Assistant Editor: Peter G.
Klein(UniversityofCalifornia,Berkeley). Correspondents: Amy Marie Marshall (NotreDame University);SofiaBump, Richard R. Hite,
and Alexander Tabarrok (George Mason University); James P. Philbin (UNLV). Managing Editor: Judith F. Thommesen.
16
Through the division of labor each man specializes in
the tasks at which he is best. "The philosopher, the
scientist, the builder, the merchant—none could de
velop these skills or functions if he had had no scope
for specialization ... no individual who does not live
in a society enjoying a wide range of division of labor
can possibly employ his powers to the fullest." To
employ one's powers to the fullest in the field of one's
choice is more than an instrumental virtue; it's a key
element to being fully human. "Personality," as Lud
wig von Mises puts it, "has been acquired in the
course of the evolution of society. What scope is there
for the individual human being—diverse in talents,
thoughts, goals, and desires—in a primitive and stag
nant society, in which son follows father in back-
breaking drudgery interrupted only by the
remorseless change of seasons?"
Rothbard's tribute to inequality is matched by
devastating attacks on the New (now old) Left, par
ticipatory democracy (an underdeveloped area in lib
ertarian thought), and most importantly
romanticism and the mythology of the noble savage.
He couldn't have been more predictive on the domi
nant themes in our contemporary political culture.
A great deal could be said about Rothbard's intro
duction alone. It is a tantalizing glimpse of the devel
opment of his thought since he wrote the essay.
Several new developments are discussed, such as
group quotas. Particularly interesting is Rothbard's
revised understanding of Adam Smith and the divi
sion of labor, and the roots of romanticism. Rothard
now finds Smith's contributions to be misleading and
not as seminal as he once thought, and the issue of
romanticism he now believes should be placed into
the wider context of theology.
Freedom, Inequality, Priuitiuism, and the Divi
sion of Labor is powerful and fascinating reading. It
contains many ideas which deserve wider audience
and a bigger debate; hopefully this new monograph
will stimulate that debate. ATT •
The book is available to full-time students for no
charge (please enclose a copy of your student ID).