Introduction: Mark Thornton is Senior Fellow at the Ludwig von Mises Institute. He serves as the Book Review Editor of the Quarterly Journal of Austrian Economics and as a member of the Editorial Board of the Journal of Libertarian Studies. He has served as the editor of the Austrian Economics Newsletter and as a member of the graduate faculties of Auburn University and Columbus State University. He has also taught economics at Auburn University at Montgomery and Trinity University in Texas. Mark served as Assistant Superintendent of Banking and economic advisor to Governor Fob James of Alabama (1997-1999) and he was awarded the University Research Award at Columbus State University in 2002. His publications include The Economics of Prohibition (1991), Tariffs, Blockades, and Inflation: The Economics of the Civil War (2004), The Bastiat Collection, and The Quotable Mises (2005). He is a graduate of St. Bonaventure University and received his PhD in economics from Auburn University.
Daily Bell: How did you get interested in libertarianism? Give us a sense of your childhood and background — your education as well.
Mark Thornton: I have been instinctively libertarian from my earliest political memories and was already an Austrian and a member of the Libertarian Party before I graduated from St. Bonaventure University. I've written about this here.
Daily Bell: What do you specialize in, from a free-market standpoint — and how did you get there?
Mark Thornton: I wrote my dissertation on alcohol and drug prohibition. After graduating I published a similar book on the subject and a series of academic and general audience articles on the subject. I've also written several articles and a book on the economics of the Civil War (with Robert B. Ekelund, Jr.). More recently I have written a great deal about the economics of Richard Cantillon (the first economic theorist from the Mississippi Bubble era) and about the successes of the Austrian theory of the business cycle. The one thing that ties all these diverse areas together is the basic theory of relative prices and how they can be distorted by government.
Daily Bell: How did you find out about the Mises Institute and how did you end up there?
Mark Thornton: It was at the end of my first year of graduate school in the Masters of Economics program at Auburn University. I was told that the Institute would be moving to Auburn and that they would affiliate with Auburn University and develop all sorts of exciting programs. It was like a dream come true. I have been affiliated with the Institute in some capacity ever since.
Daily Bell: Are you there physically? What are you doing now?
Mark Thornton: Yes, I work at the Institute and I have been working as a full time Senior Fellow for several years. Most of my job consists of research and writing. I also serve as the master of ceremonies at several of our conferences and as the Book Review Editor of the Quarterly Journal of Austrian Economics and in many other capacities. There is a lot of my written stuff on Mises.org as well as audio and video lectures.
Daily Bell: What books or investigations are you involved in now? What is your preoccupation today?
Mark Thornton: My major preoccupation today is the business cycle. I was able to detect the housing bubble and predict the top of the housing market, the stock market meltdown and the resulting market crisis, but I've been amazed at how well and how long they have been able to mask the truth in the form of the sustained bear market rally in the stock markets. I am currently editing a special issue of the Quarterly Journal of Austrian Economics on the economic crisis.
Daily Bell: We're very down on the war on drugs here at The Daily Bell. We think it's destabilizing Mexico and has shattered families throughout America. Can you give us a little history of the war on drugs in America and abroad? Tell us why it is so damaging?
Mark Thornton: It is America's great foreign policy crusade to rid the world of drugs. However, government prohibitions are artificial and unnatural forces in society. They disrupt the natural forces and interactions of individuals. They corrupt government, law, and people. They displace the natural forces in society that would tend to achieve the types of things that prohibition is supposed to address, but in reality only make worse. If you look around the globe you will find that the unstable countries are the same ones where the War on Drugs is waged. Predictably, the crusaders have achieved the opposite of their stated intention.
Daily Bell: Let's turn to the War Between the States, also known as the Civil War. We think this war is the boundary line in America between republic and empire. What say you?
Mark Thornton: You are absolutely correct. Our book Tariffs, Blockades, and Inflation: The Economics of the Civil War places great emphasis on this. The United States was a different form of government after the Civil War than prior to the Civil War. The two most obvious things are protectionism and monetary policy, but it also changed the Constitution and the ideology of the people, and so much more. The war was the final break from the Republic established under the Articles of Confederation and was one of the first steps on the road to Empire.
Daily Bell: You've written extensively on these topics. Can you unravel for us the players in the "Civil War"? Was it actually a war for control by the North — and if so, who was behind the North? England supposedly backed the South but all the New York banks had close ties to the British. Is it possible that certain banking factions in Europe and Britain backed the North even though the public stance was sympathetic to the South?
Mark Thornton: It is very complicated. First, some southerners seceded in order to gain control. They were prepared to use tariffs (of a lower level than the Union) to drive trade into southern ports and to use the revenues to support public works projects like railroads. Likewise, there were northerners who opposed Lincoln's policies and the war. We must remember that he was almost defeated for reelection in 1864. The banking profession has long been one of secrecy, trust, and a balance of public opinion. War is profitable as long as you are not in the fight. England was split between their interest in southern cotton and northern wheat so staying out of the war was probably the profitable thing to do.
Daily Bell: What do you think of Abraham Lincoln? Were his actions in large measure unconstitutional? Did the South have a constitutional right to secede?
Mark Thornton: Everyone has the right to secede. Every nation and every people have the right to secede. I believe the evidence indicates that the South had the legal right to secede. A few decades previous, several northern states believed they had the legal right to secede. Several of Lincoln's actions were unconstitutional and illegal, but even supporters of Lincoln consider many of his actions unconstitutional and illegal, but they support Lincoln because he achieved the greater good of freeing the slaves, even if it was not part of his initial intention. Freeing the slaves was a truly great thing, but it was achieved throughout the Western Hemisphere without out all the bloodshed and destruction. Most people and historians associate greatness with a President if there have been great wars and economic upheaval. I do not. A great President should avoid wars and economic upheavals. Therefore Lincoln is at the bottom of my list.
Daily Bell: Was America more militant after the war than before?
Mark Thornton: We were militant and belligerent both before and after the war. We have become more militant and more belligerent over time and the US government is now the equivalent of an evil empire.
Daily Bell: We've always thought that as soon as government became more entrenched after the war, especially at the federal level that there was an explosion of municipal and federal corruption. This included, of course, the rise of Tammany Hall. In other words, the corruption was not serendipitous but the result of a society that suddenly could not walk away from the government that it had elected.
Mark Thornton: Corruption is inherent in government. The more government and concentrated power in society the more corruption takes place. There was more government after the war and more corruption. It is easy money for those of a certain character. However, remember Murray Rothbard's point that corruption is a second best solution in that corruption allows us to get around government restrictions.
Daily Bell: We think the work you do as a free-market book reviewer and Editor for the Quarterly journal of Austrian Economics is just great. Can you give us a summary of the state of free-market literature these days?
Mark Thornton: The free-market literature is exploding in size and scope at both the academic and general interest level. Twenty-five years ago you could literally read all the Austrian and libertarian literature. Now this is impossible and new writers are coming on to the scene every day.
Daily Bell: Do you have plans to run for office again as a Libertarian or maybe a free-market republican?
Mark Thornton: No. I jokingly said after my 1996 campaign for the US Senate and my stint as Assistant Superintendent of Banking that I would run for vice president on the Libertarian ticket in 2012. I wanted people to stop asking me to run for political office so I gave people something to chew on. However, now that the date is fast approaching I want to disavow that pledge. I'm just another politician breaking yet another promise!
Daily Bell: Do you think things are changing in the US with the advent of the Tea Parties and influence of the Internet? Is the massive federal government under attack and on the defensive or is it more in control than ever?
Mark Thornton: I think there has been long-term ideological progress in the United States and elsewhere. Therefore I am a long-term optimist that this ideology will be turned into policy. The WWII and Cold War generations had their merits but they were sheep politically. Central planning and public utilities have now been largely discredited. Empire building has been discredited and now central banking is coming under attack. I'd like to think of this as Custer's Last Stand and we are the Indians, but I must say that I'm usually a pessimist in the short run.
Daily Bell: Are we headed for another financial bubble or is the unwinding so profound this time that the world economy is truly shattered? Perhaps the world will not experience Japan's "lost decade." Or will stimulus be successful in causing more bubbles?
Mark Thornton: The Japanese used pretty much the same playbook that is being used today in Washington DC. Zero interest rates, stimulus spending, and huge deficits and it did not work just as Austrian economics would predict. It is possible to re-inflate an inflationary bubble economy. Alan Greenspan did it with the housing bubble. However, the best course of action would be to let the world economy of bad debts and investments unwind. We need to liquidate the bad investments and bad debt and start fresh with sound honest money.
Daily Bell: You have a great track record as someone who predicted, along with Peter Schiff and few others, that the housing market was going to implode in the US. So give us your best guess as to where America is headed in the next few years. And what is going to happen to the dollar?
Mark Thornton: The Austrian economists have a great long-term record of predicting economic crisis, but are not particularly good with the timing of regular twists and turns in the cycle (as the Austrian theory suggests). The next crisis should see an initial flight to "quality" which should be a short-term boost for the dollar, but longer term I am a bearish on the dollar. It has enjoyed its status as a reserve currency and they have taken advantage of this position. This implies that it will be a less highly valued as a reserve currency in the future and this portends a much lower value over time. It would seem that we are in a government debt bubble. The Treasury has been issuing ever-larger amounts of debt for a very long time while the bond prices are going up and the interest rate has been in a long term decline. This is the elephant in your soup.
Daily Bell: Admiring the perspectives of the Austrian school and its long-term adherents such as yourself, we started writing several years ago that China was in a fiat-money bubble. Now they've banned land-sales. What's your take?
Mark Thornton: I agree. There have been some amazing things happening in China, but also some amazing economic imbalances. Remember, fixed exchange rates between paper currencies (US and China) do not last forever.
Daily Bell: Thanks for your time. Anything else to add? Can you tell our readers where they can find the Quarterly Journal you edit?
Mark Thornton: It is available at Mises.org from the Literature tab. Mises.org is the largest and one of the most trafficked economics websites in the world. It has very valuable information for people from all walks of life. It helped get people prepared for this economic crisis. It is open 24/7/365. It is all free (books, journals, articles, audio and video files, etc.) with no registration required.
Daily Bell: Thanks again for all the great work you do.
Mark Thornton: Thank you.
Mark Thornton is a good example of how Austrian scholarship encourages a wide range of interests. Not for Austrians like Thornton are the narrow pigeonholes of so many existing economic disciplines. As Ludwig von Mises pointed out in his great book, Human Action, the study of all humankind is the study of free-market economics. In fact, the study of human behavior is the study of economics because economics IS human behavior. This is hard for someone to understand raised on the dry discipline of, say, econometrics, which reduces much of human behavior to statistical trends and projections.
Someone like Thornton, on the other hand, has applied the discipline of free-market economics to history, politics, literature and the central-bank-initiated business cycle. (Yes, this goes for the business cycle, as it is an Austrian concept and not recognized by many modern economists other than as the turning of the large wheel of aggregate demand.) Thornton has written on many of these topics, as well, sometimes in articles and sometimes in book form. Now, he is interested, he says, in business cycle theory and, as such, was one of a few analysts to predict the 2008 explosion of the fiat-money mortgage time bomb. He did so by applying the concepts of monetary theory to the modern sociopolitical and monetary cycle. Unlike other economic disciplines, Austrian economics provides the tools necessary for such analysis. It's why the well-known broker Peter Schiff, also an Austrian, was able to do much the same thing.
One of the beauties of free-market economics is how it brings all areas of life together under one theoretical roof. Austrian economics is attractive because it is conceptual not mathematical. One does not have to be facile with multiple forms of numerical analysis to understand the main concepts of Austrian economics. In fact, one of the most important precepts of Austrian economics is that trend-analysis using various kinds of forward looking numerical analysis doesn't work. This is because of human action itself, which tends to adapt far in advance of the realization of whatever trend is being analyzed.
In fact, this is one of several elements of Austrian economics that drives statists wild. Since there are no good answers to Austrian human-action analysis, Austrian economics is simply ignored (even today) in many academic venues and certainly by most Western governments. Governments in the West are choc-a-block full of econometric economists plying their trade. The tragedy of econometrics is that it emerged AFTER the bifurcation of classical and neo-classical economics. In other words, there is no excuse for it.
Karl Marx was a classical economist (someone who believed in static trend-projection) as was the gloomy Reverend Thomas Robert Malthus who falsely predicted widespread starvation in Britain in the 1700s by projecting out certain population and farming trends. It never occurred to either Marx or Malthus that their trend-analysis would be vitiated by human action – or that in Malthus' case, people would simply find new ways of growing more food. Human beings are not merely passive integers that sit in one place perched on a spreadsheet waiting dumbly for disaster to strike. Thus it is that those who practice econometrics (a discipline that partakes of basic flaw of classical economics) are in a sense disdainful of the marketplace – and contemptuous of the human genius for improvisation, as their theoretical approach does not truly allow for it.
In contrast to those who practice econometrics comes someone like Thornton who sees any one of a number of areas to apply the science of Austrian economics. The great Murray Rothbard practiced economics similarly. There were few if any areas that Rothbard left untouched in his omnivorous approach to economic analysis. He applied his disciplined free-market point of view to most any subject matter, yet all of his analysis was rooted in a profound understanding of economic principles including of course marginal utility, Say's law, etc.
Thornton and many others at the von Mises Institute (and other practicing Austrians around the world) are heir to the joyful Austrian/Rothbardian/Misesian approach to economics. Nothing is off limits and everything connected. That's as it should be. Such an approach is certainly an inspiration to any person, young or old, seeking to more thoroughly explore free-market economics and the generous understanding it offers.