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Economic Controversies

1017 Pages · 2011 · 2.44 MB · English

  • Economic Controversies

    Economic


    Controversies The Ludwig von Mises Institute dedicates this volume


    to all of its generous donors and wishes to thank these


    Patrons, in particular:


    Joseph Edward Paul Melville


    top dogTM


    Stefano Quadrio Curzio


    Andreas Acavalos Patrick T. Mahon, Jr.


    Henry Ahler Naju G. Mancheril


    Wesley and Terri Alexander Peter and Deborah Martin


    Donald E. Bently William W. Massey, Jr.


    Steven R. Berger Samuel Medrano, M.D.


    Dr. Karl Blasius in honor of Rodolfo and Noemi Medrano


    John H. Bolstad Michael L. Merritt


    Herbert Borbe Brian E. Millsap


    Roman J. Bowser Wiley L. Mossy


    John Edward Burgess Paul F. Peppard


    Carl S. Creager Nicholas Pusateri


    Jeremy S. Davis Edward W. Rehak


    Satyabodhi Densmore Sheldon Rose


    Dr. Edward E. Donaldson Karen C. Ross, Ph.D.


    Dr. Larry J. Eshelman in memory of Philip F. Bagwell, Ph.D.


    Lee A. Everhart Thomas S. Ross


    Ernest A. Fata JesusOnTaxes.com


    In memory of John David Fernandez James A. Sadowsky


    Steven Frazer Mr. and Mrs. Joseph P. Schirrick


    Mr. and Mrs. Joel Gompert Norman K. Singleton


    David W. Groff Carlton M. Smith


    James E. Hall Geb Sommer


    Mark L. Hart III Mr. and Mrs. Dennis A. Sperduto


    Dr. Frederic Herman Reginald Thatcher and Nancy Dale


    Jonathon B. Hurley Thatcher 1981 Trust


    Mr. and Mrs. Robert S. James David W. Tice


    Richard J. Kossmann, M.D. Quinten and Marian Ward


    Daniel Krawisz William P. Weidner


    Bailey B. Liipfert, Jr. Dr. Thomas L. Wenck


    Arthur L. Loeb Mr. and Mrs. Walter F. Woodul III Economic


    Controversies


    Murray N. Rothbard


    LvMI


    MISES INSTITUTE Copyright © 2011 Ludwig von Mises Institute and published under


    the Creative Commons Attribution License 3.0. http://


    creativecommons.org/licenses/by/3.0/


    Published by Ludwig von Mises Institute


    518 West Magnolia Avenue


    Auburn, Alabama 36832


    Mises.org


    ISBN: 978-1-933550-96-1 Contents


    Introduction by Gene Epstein . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix


    Section One: Method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1


    1. The Mantle of Science . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3


    2. What is the Proper Way to Study Man? . . . . . . . . . . . . . . . .25


    3. Praxeology as the Method of the Social Sciences . . . . . . . .29


    4. Praxeology: The Methodology of Austrian Economics . . . .59


    5. Praxeology, Value Judgments, and Public Policy . . . . . . . . .81


    6. In Defense of “Extreme Apriorism” . . . . . . . . . . . . . . . . . .103


    7. Praxeology: Reply to Mr. Schuller . . . . . . . . . . . . . . . . . . . .113


    8. The Hermeneutical Invasion of Philosophy


    and Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .119


    Section Two: The Austrian School . . . . . . . . . . . . . . . 137


    9. New Light on the Prehistory of the Austrian School . . . . .139


    10. The Present State of Austrian Economics . . . . . . . . . . . . .161


    11. Ludwig von Mises and the Paradigm for Our Age . . . . . . .225


    12. Value Implications of Economic Theory . . . . . . . . . . . . . . .241


    13. The Myth of Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . .253


    14. Breaking Out of the Walrasian Box: Schumpeter


    and Hansen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .261


    15. Professor Rolph on the Discounted Marginal


    Productivity Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .277


    v vi Economic Controversies


    16. Professor Kirzner on Entrepreneurship . . . . . . . . . . . . . . . .281


    17. Toward a Reconstruction of Utility and Welfare


    Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .289


    Section Three: Property and the Public Sector. . 335


    18. The Politics of Political Economists . . . . . . . . . . . . . . . . . .337


    19. Justice and Property Rights . . . . . . . . . . . . . . . . . . . . . . . . .347


    20. Law, Property Rights, and Air Pollution . . . . . . . . . . . . . . .367


    21. The Fallacy of the “Public Sector” . . . . . . . . . . . . . . . . . . .419


    22. Statistics: Achilles’s Heel of Government . . . . . . . . . . . . .427


    23. How and How Not to Desocialize . . . . . . . . . . . . . . . . . . .433


    Section Four: Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . 447


    24. The Myth of Neutral Taxation . . . . . . . . . . . . . . . . . . . . . .449


    25. The Myth of Tax “Reform” . . . . . . . . . . . . . . . . . . . . . . . . .503


    26. The Consumption Tax: A Critique . . . . . . . . . . . . . . . . . .515


    27. The Case Against the Flat Tax . . . . . . . . . . . . . . . . . . . . . .533


    28. The Uneasy Case for Degressive Taxation:


    A Critique of Blum and Kalven . . . . . . . . . . . . . . . . . . . . .551


    29. The Single Tax: Economic and Moral Implications . . . . . .575


    30. The Value-Added Tax is Not the Answer . . . . . . . . . . . . .587


    31. A Reply to Georgist Criticisms . . . . . . . . . . . . . . . . . . . . . .593


    Section Five: Trade and Freedom. . . . . . . . . . . . . . . . 599


    32. Freedom, Inequality, Primitivism,


    and the Division of Labor . . . . . . . . . . . . . . . . . . . . . . . . . .601


    33. Restrictionist Pricing of Labor . . . . . . . . . . . . . . . . . . . . . .635


    34. Mercantilism: A Lesson for Our Times? . . . . . . . . . . . . . . .641


    35. Capitalism versus Statism . . . . . . . . . . . . . . . . . . . . . . . . . .655


    36. A Future of Peace and Capitalism . . . . . . . . . . . . . . . . . . .671 Contents vii


    Section Six: Money, Banking, and Calculation . . . 683


    37. The Austrian Theory of Money . . . . . . . . . . . . . . . . . . . . .685


    38. Money, the State, and Modern Mercantilism . . . . . . . . . . .709


    39. Austrian Definitions of the Supply of Money . . . . . . . . . . .727


    40. Gold vs. Fluctuating Fiat Exchange Rates . . . . . . . . . . . . .741


    41. The Case For a Genuine Gold Dollar . . . . . . . . . . . . . . . . .755


    42. Inflation and the Business Cycle:


    The Collapse of the Keynesian Paradigm . . . . . . . . . . . . .775


    43. Lange, Mises and Praxeology:


    The Retreat from Marxism . . . . . . . . . . . . . . . . . . . . . . . . .801


    44. Ludwig von Mises and Economic Calculation


    Under Socialism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .815


    45. The End of Socialism and the Calculation


    Debate Revisited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .827


    46. The Myth of Free Banking in Scotland . . . . . . . . . . . . . . .859


    47. Aurophobia: Or, Free Banking on What Standard? . . . . . .879


    Section Seven: Criticism . . . . . . . . . . . . . . . . . . . . . . . . . 893


    48. Milton Friedman Unraveled . . . . . . . . . . . . . . . . . . . . . . . .895


    49. Paul Samuelson’s Economics, Ninth Edition . . . . . . . . . . . .913


    50. Heilbroner’s Economic Means and Social Ends . . . . . . . . . .919


    51. Buchanan and Tullock’s The Calculus of Consent . . . . . . . .927


    Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .933


    Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .961 Introduction


    It was nearly forty years ago that Murray Rothbard changed my


    life. I was then a PhD candidate in economics at the New School


    for Social Research in downtown Manhattan, while also teaching


    Principles courses at a local university. And I was rapidly losing


    interest in the whole subject.


    Bored by the prattling of the left-wing crowd who dominated the


    New School, I could find nothing very satisfying in mainstream eco-


    nomics either. The New School’s left-wingers certainly cared about


    achieving a free society. But their radical agenda mainly consisted of


    the “instrumentalist” ideas of the econ department’s emeritus profes-


    sor Adolph Lowe, which boiled down to coercing people into follow-


    ing the dictates of elitists like him.


    My only real objection to conventional economics was that it


    also bored me. If a theory like “perfect competition” was remote from


    reality, it seemed like a judgment on the imperfections of capitalism.


    After all, to the degree that capitalism was not perfectly competitive,


    it fell prey to the evils of “imperfect competition,” which might


    require intervention from antitrust. As a typically zonked-out prod-


    uct of conventional schooling, I vaguely believed, that to the degree


    that any textbook theory failed to explain reality, so much the worse


    for reality. (Not long ago I spoke with an econ grad student who,


    when pressed, believed this quite explicitly.)


    Always a compulsive book-browser, I had more than once leafed


    through a two-volume work titled Man, Economy, and State in the


    New School library, whose author, Murray Rothbard, I had barely


    heard of. After the third or fourth look, I finally began reading the


    book—and experienced one eureka moment after another. Two


    ix


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