Douglas French on Ludwig von Mises and the Advancement of Free-Market Thinking
The Daily Bell is pleased to present an exclusive interview with Douglas French.
Introduction: Douglas French is president of the Mises Institute and author of Early Speculative Bubbles & Increases in the Money Supply. He received his Masters degree in economics from the University of Nevada, Las Vegas, under Murray Rothbard with Professor Hans-Hermann Hoppe serving on his thesis committee.
Daily Bell: Can you give us some background about yourself? Where did you grow up and how did you become interested in Austrian economics?
Douglas French: I grew up in Abilene, Kansas and like Dwight D. Eisenhower, was an average student at Abilene High School. Sports was my primary interest in school. I lettered in three sports, and went on to play football at Washburn University in Topeka, Kansas.
I dropped out of college in my third year out and worked as a bartender and bar manager for ten years. During that time I returned to college to finish my undergraduate degree with a major in economics and finance.
After moving to Las Vegas in 1986, I took an entry-level job at a bank and ultimately worked in the banking business in Nevada for 22 years. In the fall of 1989 I decided to enroll at the University of Nevada at Las Vegas (UNLV) and pursue a masters in economics. In the fall of 1990 I took "History of Economic Thought" with Murray Rothbard and my life was changed forever. I took "U.S. Economic History" with Murray as well and wrote my masters thesis under his direction. While researching and writing my thesis on early speculative bubbles I became interested in Austrian Economics, especially Austrian Business Cycle Theory.
Daily Bell: Tell us what you do at the Mises Institute and how you came to your important free-market role.
Douglas French: I serve as the President of the Institute. Lew Rockwell and the late Burt Blumert asked if I would come to work for the Institute in the fall of 2008. Along with being a student of Murray's I had been a donor to LvMI and had attended a number of events as well as speaking at a few conferences. So I feel like I've been closely involved with LvMI's mission for a number of years.
Daily Bell: You studied under Murray Rothbard and with Professor Hans-Hermann Hoppe. Can you give us some background and anecdotes about them? What has made them such famous proponents of free-markets and human action?
Douglas French: Murray was the happiest person I've ever met. Especially considering that the UNLV economics department did all it could to discourage students from take his classes and classes from Hans. He was generous with his time and his students would wait long periods just to chat with him. Thankfully, someone eventually found a chair and put it outside his door so we didn't have to keep sitting on the hard tile floor in the hallway.
The first night of class I remember Murray walking through the door and he started talking immediately about the crazy politicians wanting to fix gas prices. Anyone who has taken classes with Murray will tell you he was a walking bibliography. His lectures were filled with endless reading suggestions. And not just book titles but author, publisher, date published. Of course, as a thesis advisor he was the best: references, strategist, and cheerleader.
Of course Murray selected the rest of my thesis committee for me and professor Hoppe was at the top of his list. However, I never had the opportunity to take classes from him.
My thesis defense lasted for more than a couple hours as I remember. Sitting through my oral defense had to seem like the longest two hours of my committee members' lives. But none of the Keynesian faculty members who dropped by to comment chose to stick around long enough to critique me.
Since I had no background in Austrian economics or Libertarianism, at the time, I had no idea how lucky I was to be studying under the man who is considered the father of the modern libertarian movement and was the dean of the Austrian school until his death, not to mention having one of the most important scholars of our time and the current dean of the Austrian school as a thesis committee member.
Daily Bell: Give us a historical – economic – framework for Ludwig von Mises. How did his thinking evolve?
Douglas French: When Mises went to college he described himself as a statist "through and through" like most of his fellow classmates. However, he was anti-Marxist, writing that the "platitudes of Marxist literature repelled me." Mises believed that all the Marxist scholars he met were mediocre, except Otto Bauer.
By his fifth semester he began to have doubts about government interventionism. His work on housing conditions in Austria revealed to him that taxation hindered capital investment and limited supply leading to higher rents. But, reductions in these taxes didn't reduce rents and led the government to impose other taxes to replace the taxes that landlords had been paying: early insight that one government intervention leads to a series of others due to the unintended consequences of this intrusions.
In 1903 Mises read Carl Menger's Principles of Economics and from that book, he wrote, "I became an economist." Mises attended Eugene Böhm-Bawerk's seminar in Vienna until 1913 and witnessed continuous debates between Böhm and Bauer over Marxist theory. Mises applied Menger's marginal utility theory to money and the business cycle and these were the subjects of the seminar the last two winter semesters that he attended. The finished manuscript for The Theory of Money and Credit was in the hands of the publisher in early 1912.
Daily Bell: Mises is one of the greatest men who ever lived for his insights into what he called "human action." How did the concept of human action evolve in his mind and why is it one of the most profound statements about the human condition ever uttered?
Douglas French: It was actually Carl Menger who developed a complete theory of social institutions arising from interactions among humans, each with his own subjective knowledge and experiences. It is the spontaneous evolution of these human actions that create institutions whereby individuals discover certain patterns of behavior that aid each person in attaining his goals more efficiently. Menger, and then Mises, applied this insight to the development of money which in turn makes the division of labor possible and satisfaction of wants attainable. This reasoning is the bedrock for understanding how societies and human progress advance. Conversely, this same understanding reveals how government intervention causes society to devolve.
Daily Bell: Can you summarize his great work, Human Action for our readers? Can you recommend some other books by von Mises?
Douglas French: I remember Murray talking about Human Action in class. He said that after he had read it, someone asked him what the book was about, he replied, "Everything!" So, can I summarize a book about everything? Not adequately. To quote from the Introduction to the Scholar's Edition, Human Action is "a comprehensive treatise on economic science that would lay the foundation for a massive shift in intellectual opinion that is still working itself out fifty years after publication."
Mises explained why he wrote Human Action:
Economics does not allow any breaking up into special branches. It invariably deals with the interconnectedness of all phenomena of acting and economizing. All economic facts mutually condition one another. Each of the various economic problems must be dealt with in the frame of a comprehensive system assigning its due place and weight to every aspect of human wants and desires. All monographs remain fragmentary if not integrated into a systematic treatment of the whole body of social and economic relations.
To provide such a comprehensive analysis is the task of my book Human Action , a Treatise on Economics. It is the consummation of lifelong studies and investigations, the precipitate of half a century of experience. I saw the forces operating which could not but annihilate the high civilization and prosperity of Europe. In writing my book, I was hoping to contribute to the endeavors of our most eminent contemporaries to prevent this country from following the path which leads to the abyss.
Bob Murphy, writing in the preface to his, Human Action Study Guide, "Suffice it to say, one cannot really claim to be an Austrian economist – certainly not a Misesian! – without reading Human Action.
In an essay written about Mises, Murray wrote that Human Action is "one of the finest products of the human mind in our century."
One can't go wrong reading any books by Mises. For those interested in booms and busts, I leaned extensively on a book that is now titled The Causes of the Economic Crisis when writing my thesis. For those who wonder why intellectuals and opinion makers hate capitalism, The Anti-Capitalist Mentality is very revealing. Want to understand big government? Read Bureaucracy. Theory and History was Mises's favorite next to Human Action.
Of course the big three are Human Action, Socialism, and The Theory of Money and Credit.
Daily Bell: Tell us how Mises and FA Hayek expanded and finalized the concept of the business cycle.
Douglas French: As I mentioned, Mises applied marginal utility analysis to the money and the problem of the business cycle which became Austrian Business Cycle Theory (ABCT). As Murray Rothbard wrote in an essay about Mises, "At long last, economics was whole, an integral science based on a logical, step-by-step analysis of individual action. Money was fully integrated into an analysis of individual action and the market economy."
Mises exposed the fallacies of the quantity theory of money and Irving Fisher's "equation of exchange." Mises put individual choice into monetary theory and dispensed with the "distorted concentration on mechanistic relations between aggregates." Mises's Regression Theorem showed that money can only be established by the market, beginning with barter, not by government construct. This of course has been proved right as every fiat currency in history has ultimately been made worthless.
Mises formulated his ABCT during the 1920s out of three elements; the boom-bust model from the Currency School, Swedish "Austrian" Knut Wicksell's delineation between bank interest rates and the "natural" rate, and Böhm-Bawerk's capital and interest theory.
"Mises's remarkable integration of these previously totally separate analyses showed that any inflationary or created bank credit," wrote Rothbard, "by pumping more money into the economy and by lowering interest rates on business loans below the free market, time-preference level, inevitably caused an excess of malinvestment in capital goods industries remote from the consumer."
Hayek's ABCT work continued from Mises's explaining the origin of the business cycle in terms of bank-credit expansion.
Daily Bell: Did John Maynard Keynes know Mises? Keynes knew Hayek, but we wonder if he avoided Mises somehow or was in some way reluctant to engage him.
Douglas French: I can't find any evidence that Keynes knew Mises personally. But Keynes did review the German version of The Theory of Money and Credit for the Economic Journal and dismissed it as being unoriginal. But as Donald Boudreaux pointed out in a letter to the Wall Street Journal, "in his 1930 book Treatise on Money, [Keynes] confessed that 'in German, I can only clearly understand what I already know – so that new ideas are apt to be veiled from me by the difficulties of the language.'"
Daily Bell: Were there differences between Hayek and Mises intellectually and otherwise. Was Hayek Mises' favorite pupil?
Douglas French: Hayek attended Mises's Privateseminar, be he didn't necessarily consider himself a student of Mises. He wrote in the introduction to Mises's Memoirs that he was closely associated with Mises. But he came to Mises, "not as a student, but as a fresh Doctor of Law and a civil servant, subordinate to him, at one of those special institutions that had been created to execute the provisions of the peace treaty of St. Germain," Hayek wrote. "The letter of recommendation by my university teacher Friedrich von Wieser, who described me as a highly promising young economist, was met by Mises with a smile and the remark that he had never seen me in his lectures."
Murray writes in Keynes, The Man that Hayek was charmed by Lord Keynes but he didn't succumb to Keynes's ideas. However, Hayek never wrote a critique of The General Theory. And Mark Skousen speculates that Hayek backed off of Keynes in the 1940's not wanting to interfere with Britain's financing of the war effort.
So while Hayek may have been politically pragmatic, Mises never was. Mises's widow Margit described her husband's character, quoting the words Mises wrote about Benjamin Anderson. "He never yielded. He always freely enunciated what he considered to be true. If he had been prepared to suppress or only soften his criticism of popular, but obnoxious policies, the most influential positions and offices would have been offered to him. But he never compromises."
"Of all the Misesians of the early 1930's, the only economist completely uninfected by the Keynesian doctrine and personality was Mises himself," Rothbard wrote. "And Mises, in Geneva and then for years in New York without a teaching position, was removed from the influential academic scene."
Hayek was able to secure teaching positions at the London School of Economics and the University of Chicago, and in 1974 was awarded the Nobel Prize. Mises would never secure such positions, was driven from his own country and had to fight for students and a chance to teach at all. While Henry Hazlitt wrote in Barron's, "If ever a man deserved the Nobel Prize in economics, it is Mises," he of course was never awarded the prize.
Daily Bell: Mises was a proponent of a gold standard was he not?
Douglas French: He was, and wrote: "The superiority of the gold standard consists in the fact that the value of gold develops independent of political actions."
Daily Bell: We have an interest in free-banking here at the Daily Bell (see Selgin interview). We think any kind of financial system is allowable in a free-market and that competition will sort them all out so long as government is not involved – and we do think in a free-market that a gold and silver private market standard would evolve as it has historically. Do you think this is an intellectually defensible position?
Douglas French: Certainly freely competitive banking is far better than the state regulated, fractional-reserve, fiat currency, central bank cartelized banking system we have now. However, in practice, in a free market, I don't believe that the market would accept fractional reserves. It would be regarded as embezzlement at best and fraud at worst. Fractional reserve systems have fallen apart since the ancient goldsmiths issued more gold receipts than they had gold for. I can appreciate the theorizing, but when the rubber meets the road, the sternest task master – the market – would just not allow it.
Fractional reserve banking depends upon hope and prayer: Hope that not everyone shows up for their money all at once and pray that the borrowers pay their loans back. That's not a sound basis for a banking system and requires the force of government to keep propped up.
Daily Bell: Do you think Mises position might have evolved toward free-banking if he was alive currently? Was Rothbard's position evolving toward free-banking before his untimely death?
Douglas French: Murray wrote in an article that now is the Appendix to his book The Mystery of Banking "Ludwig von Mises was one of those believing that free banking in practice would approximate a 100 percent gold or silver money." Mises believed "that demand deposits, like bank notes beyond 100 percent reserves, are illicit, fraudulent, and inflationary as well as being generators of the business cycle." I believe this was also Murray's view when he passed away.
Daily Bell: Is there anything wrong with fractional reserve/fiat-money in a free-market environment?
Douglas French: You couldn't have fractional reserves and fiat money in a free-market. It would not last one day. Fractional reserves require a central bank to cartelize the banking system. In a free market demands on deposits would instantly shut down banks who engaged in fractionalized banking, by lending our their customers deposits.
No one would except paper money with no backing but for the power of government to require people accept it through legal tender laws.
Daily Bell: Regardless of the money standard argument, what was it about von Mises that made him utter such profound truths?
Douglas French: Mises was the rare combination of a dazzling brain, indefatigable work ethic and uncompromising courage.
Daily Bell: What can come after a genius like von Mises? Has everything been said that needs to be said?
Douglas French: There is always intellectual work to do. But all Austrians stand on the shoulders of Mises. Mises himself believed there was little room for economic theorists. "In every field there are very few who can make actual contributions to its intellectual treasury," Mises wrote. "If academic positions were contingent upon independent contributions to economics, barely a dozen professors could be found throughout the world."
Daily Bell: What are your preoccupations going forward from an intellectual standpoint? What are you exploring, researching and writing?
Douglas French: I'm still very interested in speculative bubbles, banking, the effects of inflation and applying Austrian Business Cycle Theory to current economic events (and there is plenty of that to do).
Daily Bell: You are receiving a million visits a month or more at the Institute, online. What has made the Institute such a success under your leadership? What have you been doing to make it grow so fast?
Douglas French: As Lew Rockwell has said, the Institute has been talking for 28 years and now people are finally listening. So, it's not really anything I've done. I just happened to become part of the staff just after the financial crash. Because the Austrian explanation for the financial meltdown is the credible one people are paying attention and interested in the Austrian view. What we do day-to-day is try to make use of every communication avenue we can to spread the message and expose more students (young and old) to the teachings of Mises, Rothbard, Hayek and the other great Austrians. As technology opens more of these avenues, we reach more people and grow quickly. Technology is the greatest weapon that the freedom movement has ever had. Now, time and space cannot limit ideas, and ideas change the world.
Daily Bell: Did you ever dream of the impact that you and Lew Rockwell would be having? You've truly started an international free-market movement.
Douglas French: I didn't start anything. The man I studied under – Murray Rothbard – his friend Lew Rockwell and many others started this modern free-market movement . I'm just honored to be a small part of it.
Daily Bell: Is the Austrian economic movement now starting to catch on at colleges and universities? Will it ever exceed Keynesianism?
Douglas French: Austrian economics is only starting to gain a toehold at a handful of colleges. But the future of education is changing. How long will state governments and parents be able to afford paying for four, five or six years of partying, football games, and sorority dances, with a few classes from out-of-touch tenured professors sprinkled in? The university system sells pieces of paper-diplomas-that have value to employers who use these pieces of paper to making hiring decisions. Eventually, technology will allow employers to test an applicants skills and knowledge and not depend on these expensive pieces of paper. The value of diplomas are depreciating like the value of fiat currency. Because there is nothing (no real education) backing it.
Anyone who wants to learn Austrian economics can do so online, for free, at mises.org. There are hundreds of books, thousands of articles and hours of audio and video material made available due to the generosity of our donors. What we learn best is knowledge that we seek for ourselves, that we are passionate about. We have a generation that is teaching themselves economic truth, no matter what they hear from the talking heads on TV or the tenured Keynesians babbling nonsense about aggregate demand in the classrooms.
Daily Bell: What is planned for outreach? And what's next for you? Can you recommend some articles or books you have written for our viewers?
Douglas French: As I mentioned before, we try to take advantage of every communication portal there is. I believe that based upon the initial response to the first class in the Mises Academy (over 200 enrolled), this program will expand. Our intent is to make all of our books and publications available in ePub formats. Our Mises Circle events held around the country are very popular and we will continue and expand the number of events we hold. Homeschool programs at the Institute have also proved to be very popular and I hope that these one-day programs can eventually be held in other cities. Mises University, the Austrian Scholars Conference and the Summer fellows programs will also continue and to expand. And we will continue to publish books through our publications department and reprint classic works through on-demand avenues, as well as the Quarterly Journal of Austrian Economics. We also host Libertarian Papers, a scholarly journal being managed so well by Stephan Kinsella, on mises.org and many of the great libertarian publications from the past.
Daily Bell: Thank you for your time and the great work you do.
We are extremely fortunate to be able to bring this wonderful interview with Douglas French, the head of the world-renown Mises Institute. We can remember vividly the early 1990s when the Mises Institute was not well known. If the Internet has given Austrian economics a kind of rock-star-band appeal, especially for younger people, then von Mises is surely the lead axe-man.
We have been fortunate enough to interview several individuals close to the Mises Institute including its founder Lew Rockwell who, along with Murray Rothbard, could be said to have sparked the most influential intellectual movement of the late 20th and 21st century. Sure, free-market Austrian economics had been around for several hundreds years and was in fact the most influential economic discipline – in the sense that the powers-that-be were constantly reacting to it and trying to restrict its influence.
Mises was hardly mentioned for much of the 20th century and when he came to America after World War II, he had trouble finding a job. Academic texts were dismissive of both Mises and the Austrian school – so named by German economists who believed in statist bromides and could not, like many others of statist stripe, stomach the truth-telling of free-market economics.
The power elite, which the Bell regularly comments on, couldn't abide either Mises or the larger thrust of Austrian economics. At the heart of Austrian economics are some of the most profound insights ever voiced about the current human condition. The idea of marginal utility – that only the market itself could determine fluctuations in price – makes every law and every regulation a kind of price fix.
What appears to be the most sublime and significant insight into the human condition belongs to the modest and beleaguered professor from Austria, Ludwig von Mises. His insight into economics (building on the great Menger's initial insight) – that it was basically an explanation of the humanity's vital spark and should acknowledge people's capacity for human action at all times – is perhaps the most profound statement about humanity since the Sermon on the Mount.
Not only is the concept of human action extraordinarily significant, it is also in its magnificent simplicity a rebuttal to every falsification and fabrication put forward by would-be dictators to justify their petty schemes and tawdry rapine. Statists will always maintain that a small elite is necessary to guide society toward a better future.
In fact, human action shows us that no matter what leadership is provided by a governing elite, it will never come to fruition as planned. That's because individuals seeing outcomes of which they either approve or disapprove will take human action long before the results of the statist scheme are realized. Humans are pro-active. People, in aggregate, take care of themselves and their families and do so far in advance of any of the dangers that an elite might predict, and often arrive at personal solutions far in advance of solutions offered by the state.
Adam Smith's Invisible Hand, marginal utility and human action, stand as a kind of holy trinity of free-market economic thought. (There is also the profound Misesian analysis of the business cycle, but that is of slightly less consequence than the three concepts just mentioned.) Taken together they are a devastating rebuttal to statists everywhere and certainly to the absurd and soul-destroying policies by most of the nations in the world today, including Western ones.
Thanks to the Internet and to the hard work of committed free-market thinkers such as Doug French and the legendary Lew Rockwell, Austrian free-market concepts are now well known to millions around the world. The proverbial cat is "out of the bag" and this is one reason why the Daily Bell has been so confident about predicting that the elite and its plans for global dominance, as currently configured, will become less effective over time, at least for the foreseeable future. This happened before, when the Gutenberg press launched a communication revolution some 500 years ago that resulted in the Renaissance and the Reformation. We think this is, generally, good news for anyone who believes in freedom and free markets.
Finally, this afterthought would not be complete without a word about the gold standard and free banking, which Doug French commented on his interview above. We think interview itself contains a very good description of Doug French's Misesian position and we have already addressed this issue, previously, in an interview with free-banking proponent George Selgin. Click Here to read the Selgin interview. Between the clear pronouncements of Doug French, and the equally clear approach of George Selgin, we think we have done readers a service in illuminating these issues in a way not often accomplished in the general press. Granted, the Bell is not "mainstream" but these issues are compelling and actually of great import, even though they might not seem to be in the current environment. We are confident they will be, just as we were confident that Misesian thought would eventually sweep the world. Thanks to Doug French, Lew Rockwell and others dedicated to free-market thinking. More changes are coming.
Posted by Dr. Acula on 05/18/10 12:51 PM
"So any monopoly is okay as long as it is government-granted and clothed in the language of property? I don't think you appreciate the absurd lengths to which the idea of 'intellectual property' is taken today."
Click to view link
Reply from The Daily Bell
Thanks. To whom is the comment addressed?
Posted by Dr. Acula on 05/18/10 12:44 PM
"nowhere in the interview above is there any mention of savings, the role of a savings mechanism"
Savings - i.e. withdrawing from consumption - is vital to the creation of capital goods of higher order (e.g., factories). I'm hardly an expert on AE but I know they hardly stop talking about the role of savings.
"the appropriate form and rule structure for a savings institution"
Most Austrian economists dislike fractional reserve banking because of the effect it has on the money supply and the resulting harmful boom-and-bust cycles that causes. Many denegrate it as fraud. Mises at one point suggested free banking, which he thought would drive harmful fractional reserves out of business. In any case, the Austrian ideal would be a money warehouse, with 100% reserves. There would no doubt be a fee for the provided services.
"even Mises might have to reflect that new thoughts will wash over everything he has taught?" - You need to either find a flaw in Mises' logical structure, or show that the world does not conform to his basic assumptions (e.g. one of them is that people consider leisure an economic good). Austrian Economics is more like mathematics and less like fashion. But Austrian economics is also value-free: it does not say whether a given policy is good or bad but simply what consequences a policy will have. Mises himself adopted some basic value judgements like valuing wealth over poverty that lead him to classical liberalism (i.e. politically being for free markets).
Reply from The Daily Bell
"Mises at one point suggested free banking, which he thought would drive harmful fractional reserves out of business."
Do you have a cite for this statement? Is it on Click to view link
Posted by The Gimlet Eye on 05/14/10 03:16 PM
A fine encapsulation of Austrian economics and Mises. I make not be walking away from my readings in this website with titles or high degrees, but I damn sure am walking away with wisdom, and that is a damn sight more important.
It's pretty obvious to me now why governments cannot "abide" Austrian economics; it curtails their endless lust for power and the continuous expansion of that power. Those in power are forever disturbed by the desire to engage in mischief of all sorts. But mischief costs money. All too frequently, they do not have that money, so they simply INVENT it. Thus, fiat money.
I got lucky and found a copy of Mark Skousen's Economics on Trial a few months ago and he says a lot of the same stuff, and then some. His book has been quite a revelation to me. When I first cracked the covers, it was Greek to me; I knew nothing of economics at the time. Now it is all beginning to make sense, especially with the help I get from this website. I have to admit that I am getting a virtual education in how the world works from this website, and for that, I am grateful.
If you are not careful, you may turn me into a full-fledged economist, and that is saying something. Going from nothing to something at my age must be close to a record.
Click to view link
Reply from The Daily Bell
"If you are not careful, you may turn me into a full-fledged economist, and that is saying something."
Good, as long as you're an Austrian.
Posted by LarryCtx on 04/26/10 02:18 PM
Wow! After seeing my paragraphs and spacing disappear I am wondering if HTML is required?P
Perhaps my simplistic babbling is best left in a jumble. Karma, I guess.
Reply from The Daily Bell
A minor glitch that occurs sometims, sorry.
Posted by LarryCtx on 04/26/10 02:00 PM
Thanks for the great interview, and your response, with Douglas French. I was especially impressed with his background as a real person rather than just an academic theorist.
The following are notes I took, inspired by the interview while reading it:
We can get significant insight into others by how they spend their money. (Also good for self-reflection.)
Two prospectives: Leverage or fractional reserves, using other people's money for gambling on something versus business decisions fully backed by collateral.
It seems to me that economics is simply human nature in action. It is applied psychology as well as the mechanics of barter.
Just as the second year of life is labelled "the terrible twos" so are immature young adults often rebellious against the status quo. They make their decisions based on emotion rather than objectively considered facts. In the sixties they chose the siren's song of Communism and rebelled against the USA as founded, and conducted violent demonstrations favoring our enemies. Hopefully, this time around Communism will have lost its luster and they will now join their more mature brethren and embrace free enterprise and reject government control.
Posted by Ryan on 04/26/10 12:17 PM
Mark Humphrey: So any monopoly is okay as long as it is government-granted and clothed in the language of property? I don't think you appreciate the absurd lengths to which the idea of 'intellectual property' is taken today.
Agreements establishing real property rights, that is, property in an object where its use must by physical law be exclusive, pre-date and exist in the absence of the state. 'Intellectual property' in its present form cannot exist without the state. It is a fiction that erodes the value and meaning of the word 'property' as a natural institution arising between humans.
Of course, no one is to say that you cannot use contracts to establish the desired uses of your product, with appropriate breach and termination clauses to compensate you for misuse. But a contract is between two people who have voluntarily entered into a relationship for mutual benefit.
Copyrights and patents use the legal system to injure people who may have never even heard of the plaintiff. In the case of the British system, copyrights were used to injure people who spoke against the political system. That should shed some light on the reason it was created, which is to protect prevalent opinion propagated by the publishing establishment.
Posted by Clayton on 04/25/10 11:48 PM
Back in the early 1970s, when I was going through what can be best described as my personal "Vision Quest," I had the great good fortune to meet and interact with the individual who brought Zen Buddhism to the United States.
He is notable for founding the community at Tassajara Hot Springs in the Coastal Mountains behind Big Sur. He is also notable for the book, Zen Mind / Beginners' Mind. One sunny afternoon, over a cup of tea on an outdoor table near his cabin, Suzuki Ros-hi queried me on the intensity of my need for "answers."
He lightly admonished me for indulging in such a counter-productive and ultimately futile activity, and with the most severe smile in his eyes, he asked me to take another direction all together, and do my utmost to find the best question I could ask of Life.
Years later I was reminded of this moment with the Roshi by the investment celebrity, James Dines. He was chiding a crowd with one of those sayings attributed to Yogi Berra, "Its amazing what you'll see, if you're just looking."
You must be asking, what does this have to do with von Mises?
In the mid-1990's I decided to return to school and take a degree in Accounting in order to study for and pass the CPA examination. To do so, I chose to attend the night school at Golden Gate University.
One of the degree requirements was a course in Money and Banking. At that time, Golden Gate had this very bright and in fact illuminating instructor teaching this course. His name is Jeffrey Hummel. Many of your readers will know him, or at least know of him. He wrote a book that is a part of the revisionist history of the American Civil War, "Emancipating Slaves: Enslaving Free Men."
Beyond the standard rigors of Present versus Future Value and the Time Value of Money, etc., he would occasionally take a juicy tangent. On one of these, he posited the question as to why the North, if it so abhorred slavery, did it not succeed from the South? It would have spared the lives of over 600,000 human beings. Wow, it had never crossed my mind! At that moment, I recognized that this was not just some required course, but here was someone truly worth paying attention to.
Jeffery began his discussion of money by introducing the concept of Outside Money, which is money in and of itself, distinct from Bank Created Money, what von Mises refers to as Fiduciary Media in his first masterpiece, "The Theory of Money and Credit." again, wow! For something we all use on a daily basis to make almost each and every move on the chess board of our lives, this never crossed my mind. By God, Banks create Money! In the vernacular of James Carville, to Hell with the Bond Market, let me come back as a Bank!
But wait, how can a bank create money? I always thought that that was one of the central prerogatives of the State. Why on Earth would they share it? Well, they aren't. We now know that the Banks and the State are one. Anyone who is reading this and has not figured this out, well .... , you fill in the blanks.
Returning to my earlier storyline, after finishing up my studies and passing the CPA exam, I had some free time. The intensity of the whole study and exam process, which anyone who has gone through will attest to, leaves one both exhausted and with a mind on hyper. Jeffery had referred often to Murray Rothbard and we all read his essay, "What Has The Government Done To Our Money?" This started up my personal Vision Quest all over again.
It took me to a book store in San Francisco, where I purchased all the books, small and large, that von Mises had written. It also took me to the RRR (Rothbard, Rockwell Report) conference in San Mateo, Ca later that year., where I first discivered Hans Hoppe. So, starting in early June of 1996, I spent the remainder of the year reading all of von Mises' books. I read "Human Action" after all the rest, with the exception of "Theory and History," which I saved for last.
I distinctly remember coming to the end of "Human Action" and to its final section titled, Economic Cognition and Human Action, where von Mises admonishes us, "It rests with men whether they will make the proper use of the rich treasure with which this knowledge [Economics] provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul Economics: they will stamp out society and the human race."
I put the book down and looked up from my kitchen table and like "Puff, the Magic Dragon" the long deceased Ros-hi of my earlier days was standing there in the room with me. He was severely smiling at me once again. It was like after all these years I had finally gotten it.
Von Mises in his description of "Methodological Individualism," the "Subjective Theory of Value," the "In coincidence of Wants," the origin of the paradox of Certainty (Deductive and Apodictic) in the midst of Uncertainty (Inductive and Probabilistic), his full and uncompromising embrace of Man in his Aprioristic context, filled with unresolvable imperfection and need, is the incarnation of everything the Buddha taught, but coming to us in the form of a German Economic Master.
Von Mises gives to us the example in his life of that passion of mind and uncompromising principle of the heart upon which the success of the humanness of Mankind depends. And completing the work of the Buddha before him, he brings us not an accommodation with Submission, but the true path to Peace and Human Fulfillment, the Voluntary Society.
His principle disciple, Murray Rothbard took his work further by giving us the early sketches of a future system of Justice that would ensure the continuity and fulfillment of von Mises' work. Rothbard died too early, but his student, Hans Herman Hoppe, presses on. He will be followed by many many others, just like the Buddha was followed by a 2600 year procession of Ros-his.
Even should we have to resort to communicating it physically from lips to ears, this message will not die, because it is who we are and every one who embarks on his or her personal Vision Quest will in time, if God willing to grant them such time, come to discover it, and hold it in their hearts and minds as their prize possession.
John Lennon demonstrated that he had gotten a small taste of it when he said, "Imagine there's no countries..." Perhaps, if he had lived long enough, he would have realized the actual admonition should be, "Imagine there's no governments, its easy if you try."
Reply from The Daily Bell
Thanks for providing us with such a graceful, personal meditation about Mises and Human Action.
Posted by F. Beard on 04/25/10 11:48 PM
"We are in danger of being overwhelmed with irredeemable paper, mere paper, representing not gold nor silver; no sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people."
- Daniel Webster
If the "mere paper" was common stock in the bank or other business that issued it, then who would be cheated? Some argue that we should go back to precious metals with or without fractional reserve lending but wouldn't common stock be a much more honest, flexible, and profitable form of money?
Let's just have freedom in money creation and banking and we'll see, won't we?
Posted by Weeble on 04/25/10 09:22 PM
The Click to view link site was my first stop on the way to understanding human behaviour, after accepting an alternate view of the State.
After some grieving, I sought out a learned friend to explain what I had recently discovered. (We're doomed Captain Mainwaring).
My friend heard what I had to say about the state, and immediately steered me away from my negative thoughts to Click to view link, a positive place; a place to understand the reason why people have "a larcenous heart".
Click to view link does a great job explaining what things would be like in a free market economy. Too bad the power elite will not let that happen without a fight. I guess they are too scared to actually compete. One day we will outsmart those farging bastiats and their minions, thereby evening the playing field once again.
Doug, keep up the good work, and DB, you hit the subject nail on the head once again.
I am not sure how I stumbled on DB, but I am glad I did. I visit daily, and then return later to see any fallout from my poorly written comments. (I need to focus a little better).
I never commented on anything I read in the past, but began commenting on your articles (as well as Click to view link, another breath of fresh air, so to speak).
I like your positive outlook on what could happen. I am beginning to feel that there is much hope. I am sure Big Bother is having a hard time keeping a lid on mental emancipation.
Reply from The Daily Bell
Thanks for your feedbacks. We, too, are optimistic.
Posted by Mildred on 04/25/10 08:33 PM
I just loved the photos and music so much. Henry and I bought a CD from the Appenzeller Echo site. Thank you for introducing us to your wonderful home.
Posted by Sally Preston on 04/25/10 08:23 PM
Are those photos real? Is there no poverty in Switzerland? Are there no grotesque Lowe's and Target? Egad, it appears to be Heaven.
Posted by Paul on 04/25/10 05:24 PM
Great interview and commentary, as usual. But, the links to the folk music, photos and the band were OUTSTANDING! I can't wait to visit/move? there and leave this third world country behind! Thanks again!
Posted by SP on 04/25/10 04:30 PM
I have met Mr French while visiting Jekyll Island an informed leader in the free market movement, we are fortunate to have men such as him dedicate their lives to help us understand these great ideas, great work Bell editors, keep it coming.
Posted by Bob on 04/25/10 03:27 PM
Doug French is an outstanding lecturer due to his subtle sense of humor and down to Earth manner of speaking. I would highly recommend "Bubbles Made of Paper: Then and Now" in which he compares Alan Greenspan to John Law.
The lecture is particularly relevant in light of those in the technical analysis camp (Eliot Wave and others) who are comparing this bust to that of the Mississippi and South Sea busts of the early 1700's. Readers should be aware that the correction which followed these bubbles took 50 years.
Readers can find the mp3 file for the lecture at
Click to view link
I eagerly await the day when Mr. Greenspan boards a ship or plane dressed as a woman.
Posted by Not Anti-military Per Se on 04/25/10 03:12 PM
I am curious about Hayek's work and intellectual relationship with Mises at "one of those special institutions that had been created to execute the provisions of the peace treaty of St. Germain."
Was this environment, or specifically the treaty of St. Germain relevant in any more than a general way to Hayek and Mises' relationship, their intellectual development and/or topics covered in the interview.
As Always Thank You for your work at the Daily Bell.
And Thank you to Doug French for the interview and his work in promoting free-market thinking.
Posted by Lyfo on 04/25/10 03:06 PM
In the first part of this free banking discussion I found myself (an Internet trained self-styled amateur economist) arguing on the side of favoring fractional reserve banking as long as there were no MONOPOLIST in the game to steal all the marbles.
Reputation and responsibility (the possibility of earning as well as losing real resources) would provide all the necessary controls, one reasons.
Under this view then anyone could become a borrower or lender regardless of Shakespeare%u2019s admonition to the contrary. Anyone with even two pieces of precious metals to rub together would be, to some extent, credit worthy. Since he can pay, then to some extent he can borrow and he can lend.
There could be markers (of various kinds) out all over the place under free banking. And soon the markers would begin to look like what people today consider as money. As we gain and lose in the marketplace we would become ever more sophisticated and the monetary system would tend to stabilize at a very high or 100% backing.
We continue to ignore the Einstein of Economics at our own peril. Certainly this is a great tragedy.
Posted by Mark Humphrey on 04/25/10 02:58 PM
Thanks to the Daily Bell and Doug French for this fine interview.
Mr. French should be aware of a serious misconception that is promoted by the Ludvig von Mises Institute - the idea that copyrights and patents are ethically wrong. The ethical criticism of these legal devices is based on two false ideas.
The first of these falsehoods is the claim that patents and copy rights protect "intellectual property," which the Institute contends has no basis in reality. But there is no fundamental distinction between "intellectual" and "physical" property.
All property results from applying one's ideas to physical reality. No one owns ideas. What one does own is the right to dispose of one's property, which includes setting terms of its sale. Most writers and inventors prefer to restrict buyers from making unauthorized copies of their products. Patents and copy rights attempt to defend the right of individuals to dispose of their property as they see fit.
The second falsehood used to attack patents and copy rights is the notion of "market justice" and anarchism. Thus, patents and copy rights are condemned by the Mises Institute as "grants of monopoly privilege" by the state.
But my exclusive occupancy of my home is also a "grant of monopoly privilege" by the state, for the obvious reason that unauthorized occupancy by trespassers is outlawed.
The key to understanding patents and copy rights has nothing to do with their enforcement by the government. It has everything to do with the fundamental nature of these legal devices.
Posted by Mpresley on 04/25/10 02:12 PM
My suggestion to all is to go out and buy a copy of Human Action. Other than being large (you get more than you pay for), if you are not familiar with his writing you will be pleasantly surprised at how accessible he is, and how interesting and comprehensible is his style.
Posted by Butte Bill on 04/25/10 01:52 PM
I heard Doug French give a lecture back in 2005 on the topic of banking. At the time he worked for a Nevada bank and predicted that a tremendous number of banks would go under, as the asset value of monies loaned out to commercial (and other) ventures was often less than the alleged capital of the banks. He predicted that he would be working as a bartender (again) in the next few years, due to bank implosions. Glad to see he's doing the good work he is.
Posted by Frederik on 04/25/10 10:24 AM
It would be a good deed to put the main thrusts of the Keynesian
and the Austrian economic theories into a comparable article by
"the Daily Bell".