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Something Nice about Austrian Economics

Austrian Economists

I know, I know: I haven't been terribly kind to Austrian economics on this blog, or rather, I have been positively unkind to certain sorts of Austrian economists, and especially to Late Pleistocene types who insist, on a-priori grounds (and against all sorts of evidence to the contrary) that fractional reserve banking can't work well, or wouldn't survive in a free market, or is inherently fraudulent. But before you scold me again about my bad attitude, try trying to talk some sense into this bunch over a span of several decades, and then see if you're still so inclined.

It's also true that I no longer consider myself an "Austrian" economist, and that I haven't done so for decades. I could list a dozen reasons why, starting with the shivers I get whenever I imagine being mistaken for a Homo-Austriapatheticus*, or some other sort of paleo-Austrian, and my aversion to even the slightest whiff of "enthusiasm," to use that term as Hume did. I'm convinced, furthermore, that the world would be better off if half of everything written containing the phrase "Austrian economics," excepting works pertaining to the history of economic thought, had never been written, and if the rest had omitted the phrase. This last observation isn't really as damning as it seems since, would that I could, I'd consign about two-thirds of all other academic writings on economics to oblivion. Still, I can't blame my Austrian friends for wondering whether I have anything nice to say about their school of thought.

Which brings me to my purpose, which is to put my criticisms of Austrian economics into their proper perspective and, in doing so, to blow a raspberry or two at those other economists who pride themselves in their smug contempt for "Austrian economics," and who, in displaying that contempt, can't be troubled to distinguish the blatherings of the pre-Neolithic crowd from the enduring contributions of the School's leading lights.

I can think of no better way to proceed than to harken back to the time of my own first exposure to those leading lights. It was back in 1980, when I was supposed to be earning a Master's degree in Resource Economics at the University of Rhode Island. I say "supposed to" because, after a few months in that program, I was pretty much fed-up with it. I'd imagined that resource economics, and marine resource economics in particular (which is what URI specialized in) would be a great way to combine my two interests, which were economics and marine biology. Think "Adam Smith with an aqua-lung" and you get the idea. But nothing doing: the economics of the program, far from resembling anything Smith had to say, consisted mainly of one Hamiltonian after another. Nor did I go scuba diving, or head off to sea, as I'd done often enough as an undergrad. Hell, I didn't even get to wade around a friggin' fishpond, as I'd done the summer before in Auburn, Alabama.  Instead I diverted myself by swimming a mile or more every morning at Charlestown Beach, and by working my way through the economics section of URI's library.

Actually it wasn't the whole economics section so much as the HG part that held my interest. During 1980, as you may know, the CPI inflation rate reached its highest post-WWII level, just shy of 15 percent, and was seldom below 13 percent. The big economics question was why; and that question concerning what real prices were up to interested me a heckuva lot more than any professorial prattle about "shadow" prices could.

What many of you won't know, unless you were there, is just how bad standard explanations for the inflation were. Keep in mind that for the most part the economics profession back then was still high on Keynesian economics–not the namby-pamby "New" sort taught in many of today's grad programs, but the 200-proof Hansen-Samuelson IS-LM elixir to which Paul Krugman and a few other nostalgics have lately become addicted. And if there's one thing an economist trained in what Axel Leijonhufvud calls the ISLaMic Arts doesn't want to have to deal with, it's pesky questions about movements in the CPI, or any other measure of the price level. You see, the whole wiz-bang apparatus of old-fashioned Keynesian economics is held-together by one carefully-concealed premise: to wit, the premise that the general price level may be regarded, not as a variable, but as a parameter–that is, something given. What's more, that "given" price level is assumed (though no old-fashioned Keynesian would ever admit it, much less express the fact in plain English) to be well above the value that might otherwise clear the market for money balances. Let this little engine of an assumption have its way, and it will handily pull the whole Keynesian freight-train, cute little IS-LM caboose included, along with it. But search every boxcar of that train all you like, the one cargo you will never find is a decent account of how the price level itself is determined, or why it should ever change.

No wonder, then, that the best explanation all those inebriated economists could come up with for the fact that prices were rising faster than ever was that unions or OPEC or both were getting more powerful, and were therefore able to "push" costs up. There was a grain of truth to such theories, of course: costs were going up, along with prices generally; and OPEC had certainly been flexing its muscles. But all the monopoly power in the world couldn't squeeze blood from a stone, or squeeze more and more and yet still more income from a public that had only so much to spend. Something else was enabling the unions and enabling OPEC. Everyone now knows what that was–assuming that Paul Krugman does. But back then very few did.

So there I was, in the stacks at URI, reading book after book in my quest to get to the bottom of the inflation, and finding every last one of them perfectly useless. Then I read Henry Hazlitt's The Inflation Crisis and How to Resolve It, and felt the way Colonel Nicholson must have felt when Colonel Saito finally let him out of his punishment hole–I mean that Hazlitt's bright light almost hurt after so many weeks confined in the dark dungeon of textbook Keynesianism. True, if you read Hazlitt's book today you might find fault with parts of it, as I undoubtedly would as well. But just try reading any of those other books I went through, and you'll agree that they were infinitely worse.

So much for my first, favorable impression of Austrian economics, for although Hazlitt himself was a journalist, he pointed to the Austrian economists as his own guides. I didn't stop with him of course, but kept reading, moving on to more general works on monetary theory, while making a point of including more Austrian works on my reading list. At last I felt ready to tackle von Mises' Theory of Money and Credit, and once again I was struck by how superior it seemed to non-Austrian works covering similar ground. The more I read, the more often I got that same feeling. I don't mean that there were no non-Austrian books that I also liked. I simply mean that the Austrian books I read, mainly by Mises, Böhm-Bawerk, Hayek, and Menger–were always among my favorites. They still are.**

My classroom experience, in the meantime, only served to reinforce my impression that, compared to the Austrian economics I was reading, mainstream economics ca. 1980 was lousy. In one class I remember being confronted by a large IS-LM diagram, made to seem even larger by my habit of sitting in the front row, just opposite the black- (actually green) board. The professor, sticking to the Keynesian script, showed us how, by increasing M, the government could lower i while raising y. (Note that little "y." Without it, IS-LM looses a lot of its mystique.) Up goes my hand–another bad habit. Prof.: "What is it now, Selgin?" Me: "Well, according to this diagram, if we just boost M enough we can borrow for practically nothing, and have all the output we like. So why don't we do that?" Prof. (impatiently): "Well, at some point you get full employment and then things are different." Me: How do we know we aren't at that point already?" Prof. (annoyed): "Well, there are still some unemployed people, aren't there?" Me: "But… " Prof.: "We need to move on."

And on he went. As for me, I was ready to move on as well, though not at URI, and I said as much to another professor with whom I'd originally planned to study. Fortunately for me, not long afterwards he happened to come across a copy of the latest Austrian Economics Newsletter, which he passed on to me. It was the one with Israel Kirzner's photo on the front page. That was the first I'd heard about a surviving remnant of the Austrian school, run by a student of Mises himself.  The knowledge would eventually come in handy, for not long afterwards, after finally quitting the URI program, I  found myself working as a "combustion engineer," climbing the insides of power-plant smokestacks when I wasn't sitting on my hands in a laboratory in Stamford, Connecticut.  In other words, I was  finally at sea, in a manner of speaking, without the foggiest idea of what to do next.

Luckily for me, one of the Austrian works I'd read while at URI was Hayek's Denationalisation of Money. Hazlitt introduced me to the school, and Mises and Böhm-Bawerk showed me the prodigies of scholarship of which its representatives were capable. But it was Hayek who opened my eyes to a vast, unexplored realm for new research. So when, while I was loitering inside that lab, I came across a tiny notice in Reason magazine, offering small grants for summer research, a ready-made proposal was also loitering inside my brain. I duly wrote the thing down and mailed it off to IHS, which was still in good-old Menlo Park back then, receiving from them 1500 smackers in return. Best of all, I got to know Walter Grinder, who was to become a great mentor to me, as he has been to so many others.

That was how I came to write my first paper on free banking. It was called "Free Banking and the Monopoly in Money," and it wasn't all that bad, considering.  Still it never saw, and never will see, the light of day. But it did something better than that, by introducing me, with Walter Grinder's help, to Larry White, who was finishing his own dissertation at the time, and was about to enter the job market. After reading a few chapters of his work, I wrote Larry asking him to let me know when he got a job, because I planned to be his first student. For safety's sake, and remembering that copy of the AEN, I also applied to the NYU Austrian program. As luck would have it, Larry got his first job there, and I got a midnight call from Israel Kirzner himself telling me I'd been granted a fellowship. I remember Kirzner saying, "I…h..h…ope I h..h..aven't…w..w…aken you," and replying, "Professor Kirzner, with this news you could call any time!"

So off to NYU I went, and let me tell you, you couldn't have asked for a better education than I got from the Austrian program there. And I don't mean the education I got from the ordinary NYU PhD program, which the Austrian fellows had to endure along with everyone else.  The regular NYU program was run-of-the mill, or somewhat worse than run-of-the-mill, thanks to the fact that NYU back then suffered from a severe inferiority complex, which it tried to assuage mainly by making its grad students suffer through more, and tougher, mathematics than the Ivy league rivals of which it was jealous. I know this because I compared notes with students attending those schools. Among other things, none of them ever had to sit through a lecture like the one I and all my classmates got upon first entering the NYU program, in which we were told to have a good look at the students sitting at our sides, because only one of each set of three would be around a year later. "What corny B movies did this jerk get that from?" I asked myself. But a year later it wasn't just two out of three who had dropped out: it was two and counting. I ought to know, because more than once I came within a hair's breadth of becoming dropout number three.

No, sir: what made NYU great back then was the Austrian program. Thanks to it, not only did I get to learn the history of economic thought from Israel Kirzner and economic methodology from Fritz Machlup. I got to attend one of the best economic workshops anywhere: the famous Austrian seminar that's still going strong. I learned more economics by sitting in that seminar than I did from all my required classes combined, which were mostly devoted to applied mathematics and statistics. Better still, I got to spend time with a bunch of grad students who were passionate about economics. Passionate. Just attend a few student sessions–or sessions of any sort for that matter–at the AEA or SEA or Econometric Society meetings, and see how much passion you come across. Then tell me there wasn't anything special about those NYU students.

And they were no less passionate about economics outside of class. All of them read, and some read voraciously, papers and books on economics that weren't on any course syllabus. That was a rare thing among economics grad students even in those days; today econ grad students who make time for extracurricular reading–or who merely believe that such reading might possibly be worthwhile–are rare as hens' teeth. I know that because I served on plenty of faculty recruitment committees while working at UGA, and so got to see the sort of material other schools, including some top ones, churned out. For example, I remember mentioning William Stanley Jevons to a candidate whose dissertation was on monetary search models, and getting a blank stare for an answer. ('Twas Jevons who came up with the phrase, "double coincidence of wants.") That, by the way, was one of the better candidates. On another occasion my fellow recruiters and I thought we might succeed in getting candidates to stop droning on about their boring macro dissertations by asking them to name for us their favorite dead macroeconomists. After half a dozen couldn't think of anyone–not even Keynes, for crying out loud!–and another named Milton Friedman, who was then very-much alive, we gave up.

Nor were my fellow grad students at NYU merely interested in Austrian economics. The whole history of economic thought, and much else besides, interested them. More than a few were hard-core bibliophiles, three of whom lived on different floors of the same rickety lower East Side tenement. Their apartments were furnished with nothing save a mattress and stacks of books, with a narrow chasm, reminiscent of the one at Petra, running through the stacks from the bathroom to the mattress, and another one like it running from the mattress to the kitchen. After seeing them I expected the tenement to come crashing down any day, inspiring a headline in the Daily News, or perhaps the Post, screaming, "Bookworms Buried Alive in Alphabet City Avalanche!" Despite that, I got hooked on books myself, and so ended up standing outside of the Strand first thing every Saturday morning, with several other Austrian nuts, waiting for the opening bell to ring so that we could all pounce on the New Arrivals table that had been freshly stocked the night before. I emerged from those raids with my knuckles bloodied, but also, occasionally, with some damned hard-to-find books. What's more, by gosh, I read them. And I learned a lot of economics that way, and a fair bit about other subjects. Other subjects! In grad school!

But just how valuable, some of you may wonder, could the economics in all those old books have been? I will tell you: far more valuable than the vast majority of things I learned in my regular grad school classes, including what I learned from articles on the reading list. You see, the stuff that was considered leading-edge back then, which is what most of the classes were about, is now for the most part as dead and forgotten as the Kings of Nineveh. And that same fate awaits most of what's being taught in today's econ programs. Yet Smith, Bagehot, and Wicksell, and many others beside, are as alive as ever, if not more alive than ever. That, of course, is what it means for a work to count as a classic. But where I went to school, at least, it seemed that the Austrians were the only ones who appreciated the fact, for never once did any of my non-Austrian professors ever venture to suggest that I might make good use of my time reading something that was as much as a decade old, let alone older than that.***

Worse than that was the obvious disdain shown by many (though by no means all) of NYU's non-Austrian economics faculty toward their Austrian colleagues. I well remember the day when the usually courtly Fritz Machlup came to class visibly upset. He'd just been informed, he told us, that the international finance class he'd taught for decades had been taken from him and assigned to some young Turk. Imagine: Fritz Machlup, himself then already a classic, but not quite tooled-up enough to be worthy of teaching "real" economics (as oppose to soft stuff like methodology) to NYU students! Then there was the time when my first-semester micro teacher asked me to join him after class for a drink. Somehow I'd managed to impress him, and though I was too much of a tyro to realize it at the time, he meant to get me to write under him. Of course he couldn't have succeeded, as I was determined to work on free banking with Larry. But even if I hadn't been it wouldn't have happened, for the first thing he said once we were sitting at the bar was, "You seem pretty smart. So why are you wasting time with those Austrians?", to which I replied, thoughtlessly but without guile, "Because I think they're the best economists here." I suppose that the rest of that drinking session wasn't much fun for either of us. Fortunately I can't remember, and anyway the fellow was a good sport, for I still got an A in his class.

So the truth is that I owe a great deal to Austrian economics, and particularly to the Austrian economists, both actual and in the making, with whom I interacted at NYU. Had it not been for the Austrians, I might still be toying with Lagrangian multipliers, or struggling to figure out why interest rates don't behave as if they served to clear the market for money balances. Worse, I might never have been exposed to the works of so many great economists, the great Austrians among them, from which I continue to draw knowledge to this day. Finally, I would never had learned about free banking, or met Larry White, or gotten to write for, assuming that it would still have existed. For that and a lot more, I say to my Austrian friends: thanks for everything, and keep on inspiring others.

*Please note that the term refers to a tiny subspecies of the Austrian economics genus. I contemplated having a link to the Wikipedia page of an actual Homo-Austriapatheticus specimen, but decided not to because I might get sued, or stoned.

**Nota Bene:  The phrase "Austrian economics" does not occur anywhere in these works, unless in introductions added long after their original appearance.

***Nor did the fact that some of the new stuff we were learning also had lasting value make reading older things any less valuable. For example, although the then counter-revolutionary New Classical economics I was taught was indeed valuable, I found it far easier to grasp than I might have thanks to having read the essays by Albert Hahn gathered together in The Economics of Illusion, which contained the gist of it, though written decades before, and in plain English.

  • The real paradox is how some of your posts, long in word count, always seem to end too soon.

    • George Selgin

      Thanks, vv–that's a lot better than being told, as I was on Facebook earlier today, that I could use some English lessons!

  • It was back in 1980, when I was supposed to be earning a Master's degree in Resource Economics at the University of Rhode Island.

    I was getting my undergraduate degree in Resource Development from URI with my area of interest being Resource Economics (they did not have a bachelors in Resource Economics) at that same time you were there. The thing that stands out in my mine about the Resource Economics professors was the negativity. I remember Dr Weaver saying that we where consuming resources so fast that we were pretty much doomed.
    We were assigned to read Paul Erlich and the "Limits to Growth" with no counter point.
    I remember hearing about Julian Simon from a business major and being intrigued. I debated with him (the business major) a little but after thinking about what he said I realized that he made a great case. Ever since I have been a big fan or Julian Simon's work.

    BTW every fall we would swim across the channel from Galilee RI (Near Georges of Galilee restaurant) to Jerusalem RI. Great fun.

  • George Selgin

    My what a small world it is, Floccina! I, too, remember all that Ehrlich-Club of Rome garbage. How anyone who lived through it can fail to be something of a global warming skeptic today I do not know.

    Anyway I hope that while crossing the channel you did not run into as many jellyfish as I routinely had to contend with. Ouch!

    • None of us ever got sting by a jellyfish on those swims.

      • George Selgin

        Lucky you! I sometimes found myself swimming through whole schools of them–and those nematocysts keep on stinging for some time after. Ouch!

  • nomorecranks

    in a free-banking environment wouldn't fractional reserve banks have to offer higher interest rates to compete with banks that advertised 100% reserve or otherwise offer some other services or inducement? Would people not prefer have there savings, all things being equal, with 100% backed banks? And then knowing banks were fractional – with out support of a monopoly and state privilege – there would be greater redemptions from other banks? Is this line of thinking reasonable to posit fractional reserve banks would exist at least much fewer in number and their credit expansion far limited – at least in comparison to today of course. As a lover and reader Rothbard – and I dont know what a Late Pleistocene type is but I was not born 126000 years ago and I thought the whole discussion of your last post "why discuss it" was that we were over the insults, no? – anyway I don't really disagree that fractional-reserve banking technically is fraud – I agree with bionic mosquito and others that yes it is all the the legalese and fine print of the documents you agree to when you open an account with a bank and is incorporated juridically in society that there is no one pretending this isn't taking place, it is well in the open – I think that is a red herring. The issue is, in a free banking market, could you say a word on why I would prefer to keep my savings with a fractional reserve bank as opposed to an advertised 100 reserve bank? I reason that to compete a fractional reserve bank would have to offer higher interest rates to depositors but wouldn't this hamper, all things being equal, there ability to stay in business? Also, if you can answer that satisfactorily – and I would appreciate and welcome that – I still don't know why the act of asking those questions necessitates call those who do Late Pleistocenes or rothbard cranks or make rothbard himself worth of insults. I thought the John Morley paragraph was pleasing but i still feel there is some hypocrisy – maybe I hope not? Ok I hope that make sense. Thank you for your time.

    • Andrew_FL

      A bank that doesn't charge storage fees is already more attractive than a warehouse. But paying interest is one of the reasons banks *aren't* going to be competed out of business by warehouses.

      But, to the extent putting money in a bank is a risk, people supplying savings will ask a higher price for it, that is, they will charge a risk premium. Doubtless, there will be a great variety of banks catering to different degrees of risk aversion.

      I think the Rothbardians sometimes forget that risk preference is a subjective matter like all others. Even Mises unfortunately wrote as though almost no one would ever tolerate greater than zero risk in their savings. It may well be true that *you* would insist on an inordinately high interest rate to leave your money with anything less than a warehouse. Plenty of people would not. In a free market, such warehouses will arise as people have want of them. Judging by the number of Rothbardians on the internet and assuming their sincerity in wanting their savings stored not invested, there may be a number of such successful warehouses. But warehouses face more competition from mattresses and holes in the ground than banks. They offer roughly the same security, and no storage fees.

    • George Selgin

      Nomorecranks, you would prefer frb for the same reason that has caused people to flock to it from the days of the goldsmith bankers: (1) to avoid storage and other fees, and perhaps earn interest besides and (2) to have access to means of payment more convenient, and often more safe, than coin. Note that you cannot have a circulating paper currency backed by 100% reserves, for there's no way for the issuer to recoup costs by tracking the owners and charging them their pro-rata shares of those costs. All the talk of 100-percent banks issuing circulating currency misses this obvious point.

      The reason I do not much like having to answer these questions is simply because I, and Larry White, and many others, have answered them many times already, in print and online, sometimes by writing entire papers addressing them. We've done so for decades now, and on this very blog I have repeated these answers, often pointing to other sources, many times.

      The "Late Pleistocene type" reference, by the way, is a joke referring to Rothbard's "Paleo" libertarianism, and as such is just a tongue-and-cheek way to refer to those Austrians who follow his lead in opposing fractional-reserve banking. If its an insult, its one the Rothbardians walked into!

    • George Selgin

      Here is a general defense of frb by yours truly;

      here is an article by White emphasizing the impossibility of fully-backed ciirculating currency;

      here is a page with links to White's critical analysis of the legal arguments of Huerta de Soto;

      here is my paper on goldsmith banking, showing that fractional reserves were preferred even then, and that fraud had nothing to do with it (the paper has since been published in the Financial History Review;

      here is an earlier post of mine, exposing the ridiculousness of the argument that banknotes of the past were, or at least were not sufficiently distinguished from, "warehouse receipts";

      and here is another turning the Rothbardian claim that fractional reserve banks wouldn't survive without help from the state on its head.

      There's a ton more were these came from. But a sample will, I trust, convince you that there are no arguments out there against frb that the free bankers haven't addressed, and addressed very thoroughly.

      And here, finally, is a typical, current Mises Institute production, studiously ignoring every bit of it.

      • nomorecranks

        I very much appreciate that I will be busy with these. I'm sure these papers address these questions nonetheless I will leave you still wondering out loud for the time being how a frb wouldn't be vulnerable to a concerted effort on runs and why a 100% bank can't offer investment and lending services – its just a matter of negotiating time deposits instead of sight deposits and offer "storage" fees for no cost. It also seems to me that technology today is well equipped to handle some cost concerns of the past. In any event I will bring an earnest effort to check these out so you don't repeat yourself for the 10th year on-going. Although, bear in mind it was you and your mates decision to participate in an open public blog that you allow anyone to comment upon. If new people find your blog and comment upon it and you find this annoying you are free to restrict the option but its not my fault I am not a monetary economist expert in all your papers.

        The other issue is the rothbard bashing. I give benefit to the tongue-and-cheek but it is a turn-off. In all seriousness who, certaintly not me, could really take to heart an insult lobbed at dead philosophers or a dead poet or some such thing but I'm just saying the guy has 60 plus pages of a bibliography and it looks ridiculous when economists insult the man. I don't know who they think they are fooling – everyone well knows by now murray rothbard wasn't stupid. It certainly doesn't turn anybody off to Rothbard but it may turn people off to those who engage in it. Again, not an issue worth belaboring but just giving some helpful criticism.

        Peace out

        • George Selgin

          The actual target of my barbs isn't Rothbard himself, for whom I actually have some respect (and who I certainly don't consider stupid) but many of his very-much alive disciples, most of whom, needless to say, have no such records as ought to make it appear ridiculous to poke fun at them, and many of whom can be shown to be perfectly ignorant, if not dangerously so. If you want to know more about just how dangerous, write me separately and I will give you some examples. Then you can tell me whether ridicule–admittedly a sort of an "atomic option" when it comes to battles over ideas–isn't a weapon they richly deserve to have launched at them!

          Alas, it is hard to come up with a name that isolates the people I refer to from, not only the best of the Austrians, but from Rothbard and Salerno and some others who can at most be faulted for allowing themselves to be associated with the nasties to whom I refer. "Rothbardian" is obviously too broad, and I meant "Late Pleistocene" to capture it. Now it's back to the drawing board.

        • George Selgin

          A bank can only lend to the extent that it doesn't have 100% reserves. Of course if the requirement applies only to demand deposits, it doesn't constrain the productive investment of savings bound up in-non-demand deposits. But less harm isn't no harm. Imagine someone saying that we should have a 20 MPH speed limit on highways for all cars, pointing out to him or her the harm this would do, and being offered the reply that trucks would still be allowed to go faster. You would not be happy with that answer, I presume!

      • SpontaneousOrder

        I really enjoy the post and cherish anything that contributes, anecdotally, or formally, to the history of the social interplay within and without the Austrian school. Brian Doherty's Radicals for Capitalism, say, is less than satisfactory.

        I think I know what the "Noah-Smith" Rothbards you separate out are. The Gary North crowd? I'm just speculating, correct me if I'm wrong. However, Gary North is a Christian first, A historian second, and an economist – Austrian – maybe 3rd, maybe. I think confusing the libertarian periphery with Austrian economics is not accurate. These are not Austrian economists. They are interdisciplinary libertarians that have used Austrian economics perhaps, but are otherwise irrelevant to an Austrian School history.

        Rothbard gets a lot of flack for his views on FRB, but I think the greater circus – and deserves far more criticism – is the Hayek, Buchanan, Tullock, Rawls cult of social-contract, redistributive justifications, utilitarian fallacies and other state legitimizing nonsense. Whatever you want to say about Rothbard he is undeniably more consistent than these thinkers. BTW I am not taking away Hayeks obvious contribution – I listen to Walter Block when he says Hayek has done the most to advance the school (even if he rejected Mises' Praxeology). But, I also agree with….wait for it….Gary North when he points out that if you get to Hayek's later works like Road to Serfdom, Constitution of Liberty, and others, that the redistributive incantations you will find are timeworn to say the least.

        Professors like Peter Boettke will call me an Internet Austrian after chastising his favorite thinkers above – and thats fine, I guess I am one since my employer is not academia, but even Professor Boettke, quite frequently, will give Rothbard center stage and will not hesitate to cite or pay great fees to the man. See his essay on Murray's underrated contribution on the socialist question in his Living Economics – it is a simple and great read. Which always confused me on the visceral between GMU and Mises-I and I have just realized its a personal issue. The interplay is a Salerno-Boettke and whomever problem: it began with them, It will end with them.

        I unabashedly love Murray Rothbard. He is a great thinker, a great writer, he needs no defense, the world would be a better place if everybody read him, more and more people do read him, and its a train long-left the station that can't be stopped now anway so I would say to people like Nomorecranks: you don't need to waste your time defending him – the Rothbard-as-relevant debate has been settled a long time ago and for all-time. Most economists who are too stubborn to admit this are really just envy of Rothbards' quantity of output.

        So, how 'bout it Dr., once and for all: is it true you are upset Rothbard gave you a less than enthusiastic review of your book? On a lot of blogs I see this issue come up time and time-again in any analysis of the psychological motivations of George Selgin.

        Finally, and the reason I replied in the first place, is a more serious question. In a "legal" critique I always see Huerta de Soto, and to a lesser extent perhaps Richard Timberlake come up in monetary affairs.
        However, my understanding is that the authority on the juridical analysis of monetary affairs in the U.S. is Pieces of Eight : The Monetary Powers and Disabilities of the United States Constitution. This is the book that is actually bought by, and kept in, university law departments – my own copy came from law school friends who obtained it from the school library – it is also the tome cited by a number of justices. I know a lot of economists reference Soto, and Timberlakes newer book may bring some of the issues to otherwise unfamiliar economists, but as far as scholarly legal relevance is concerned it is this book by Edwin Vieira Jr. that needs to be used in any critical analysis that otherwise isn't meaningless?

        I will end with this mind-boggler: if it wasn't for Murray Rothbard, and the consequences of all the attendant exploration that necessarily engenders, I wouldn't have ever read or become a fan of (despite some aggregative methodological differences (MMT) of course – no-one is perfect, but thats a slight non-barrier) George Selgin! Food for thought!

        • George Selgin

          SA, you aren't entirely wrong in your identification of Noah-Smith libertarians; and yes, most of them hardly deserve to be called economists. But others certainly are economists in the first rather than second or third place, including some at the very top of the MI heap. And you will search high and low and not find any of them, ever, making any effort to counter the errors perpetuated by the others I refer to–let alone renounce some of their more nefarious beliefs. Au contraire!

          As for those others, here, a nice specimen, consisting of a comment on a MI blog published in response to, that is to say after, this one:

          "George Selgin can argue all he wants about the inevitable existence of fractional reserve banking in a free banking era. He claims to have logical reasons for such an assumption. At the same time he discounts the possibility that this practice would be abandoned because of market forces. If fractional reserve banking is done in secret it is fraudulent and if it is done openly it will not be able to compete with banks that do not practice fractional reserve banking. One thing for sure, there does not have to be any coercion in making this determination (if he fails to agree on this then he needs to make such a stance clear to everyone) because the market will be the deciding factor whether there is no fractional reserve banking or whether there is fractional reserve banking in the free banking era that will come in the future."

          This is the sort of amateur (Don't trouble me with facts!) "a-priorism" that drives me nuts!

          "So, how 'bout it Dr., once and for all: is it true you are upset Rothbard gave you a less than enthusiastic review of your book? On a lot of blogs I see this issue come up time and time-again in any analysis of the psychological motivations of George Selgin."

          Nope. Murray never reviewed Theory of Free Banking so far as I know. He did criticize White's Free Banking in Britain, eliciting a considered reply from Larry, but no ill-will at all (not Larry's style). As for claims that I was otherwise "rejected" by Rothbard, not so: we got along fine. The last time I interacted with him, though, was as the Mises University in 1989 or so. But there was never any tension between us. Nor did I ever find it necessary to criticize Rothbard, apart from refuting his views on frb, until Lew Rockwell came out with his senseless and pointless claim that Friedman was a relatively unknown economist outside of the academy, and much less famous there than Rothbard, who was also (of course) a better economist. That, too, got my back up, and compelled me to put in my two cents for the sake of not letting everyone have another reason to think Austrians totally nuts. (My input was in fact prompted by the complaints of Milton's son, David.)

          Finally, Vierra's Pieces of Eight is OK, though I personally am especially fond of Timberlake's work, in part because he has the advantage over Vierra of bringing monetary economics to bear on the topic. As for HdS, I recommend to you once more Larry White's commentaries, linked above.

          • SpontaneousOrder

            I am satisfied with this response. Your inexhaustible willingness to engage and answer all these questions is why this blog is my favorite.

            Where did the myth of the Selgin v Rothbard book-review grudge come from? Have I been duped by this urban legend? It seems so. Well, I'm glad I know the truth now.

            I have no dog in GMU, Critical Theory, Kochtopus, Gadamer, hermeneutics, hermits, hermetically-sealed, $80,000 hermes-birkin bags, or any other hermes, Husserl, Bergson (Caldwell and that crowd), "Chicago School: Libertarian or Jacobin?", FRB or the Illuminati, from Byran Caplans mathematically illiterate "proofs" against "Austrianism," to Biblical Conspiracy Theory, to Lord Keynes obsession with Robert Murphys long lost interest-rate thesis, to Brad DeLongs love affair with Karl Marx, to Catos stealing of Rothbards shares, to EPJs infamous butthurt comment:

            December 9, 2014 at 3:16 PM
            Wanna know why Selgin is still so butthurt after all these years? Rothbard eviscerated his and White's Scotland "free banking" thesis after initially praising their work

            You guys are ALL nutz!

        • gcallah

          "Whatever you want to say about Rothbard he is undeniably more consistent than these thinkers."

          Consistency in being wrong is no virtue.

    • gcallah

      nomorecranks, your own comment is evidence of the crankery afoot: this has all been answered, many times, by the free banking people, in many publicly available posts: and yet you are unaware of this, have a firm opinion on the topic despite never having confronted this extensive literature, and post your question as if you were posing a real stumper to someone who has spent decades studying this very topic. This is all on the level of denying the moon landing.

      • RL

        Yes, and George pointed that out very well, Gene. The only difference is, he did it with some semblance of respect.

        I'm as exasperated with so-called "internet Austrians" as the next academic economist, but trolling the comments section for the sole purpose of being a jackass isn't exactly respectable (or a sign of emotional maturity).

        • gcallah

          Whereas trolling the comments section for the sole purpose of dumping on me is a very mature activity.

          • George Selgin

            Fellows, I think it's time to leave my sandbox before I have to replace the sand entirely! You are welcome to join in on a fresh post after cooling off and cleaning up!

        • gcallah

          And weirdly, in another comment you accused George of "sneering"!

          • RL

            You might want to check the dates, Gene. My original comment to George was mostly just to express my interest in the post and relay a similar story. I came back to see if anyone else had made similar statements. I ended up finding the always hateful and butthurt Gene Callahan harassing people, as usual. You're quite vain if you think the whole point of me being here was you. How droll.

          • gcallah

            Yes, RL, and calling others "hateful" and "butthurt" is very, very mature on your part.

          • gcallah

            And again, you illustrate my point: anyone who is viewed as "breaking" with the Rothbardians is subjected to a smear campaign: "hateful," "butthurt," "sneering," etc. George has been subjected to such a campaign, and when I step in to defend him, so am I! I wrote 200 articles for, and dozens more (and a book) for the Mises Institute. But immediately after I published mild criticisms of Rothbard, I immediately began finding smears of me circulating. So welcome to the club, RL!

          • gcallah

            And note that I have not attacked anyone's basic person here! I told nomowhatever that he was engaged in crankery here by criticizing George's work without bothering to read it. But I did not say HE was a crank or anything else about him. Now, in response, you and he have heaped piles of personal insults on me! But, right, I am "hateful."

          • RL

            I really don't care about your opinion of Rothbard or anyone else. And yes, when you enter the blog swinging away with childish insults, you're going to get them back.

            Just as you claim to be describing the behavior of Rothbard and his "followers," I was merely describing yours.

            I'm done. Continue to rage about the evil Rothbard. I have no interest in listening to it.

          • gcallah

            No, RL, you and nomowhatever are the only one's who have descended into personal insults. QED.

          • gcallah

            And RL it is quite evident that you are "done" because you can't deny that it is only you and Nomowhoever that have descended into personal to vituperation here.

          • gcallah

            Maybe, RL, to back up your smears of "hateful" and "butthurt," you could point to a single instance in this thread of me attacking you personally with such language?

  • RL

    For the most part, I thoroughly enjoyed this post. I find the sneering a bit off-putting, though probably less now than I did as an undergrad.

    I personally came to the Austrians thanks to the Ron Paul campaign during my undergraduate years. Having heard names like "Mises" and "Hayek," I did some reading and eventually ended up in a PhD program (far away from Auburn, the Beltway, and the northeast) studying under a professor who had some interest in the Austrian school, specifically in Austrian capital theory. I'm just beginning my career as an academic, but I have no doubt he and I will get around to publishing some Austrian stuff.

    After speaking with and listening to lectures by some of the non-Auburn Austrians, I have steered clear of the Auburn crowd. I attended their research seminar in 2014 and, with a few exceptions, didn't get a good vibe. Friedman was correct that there are *really* only good and bad economics and there are plenty of other venues to publish, present, and get feedback from those who do good economics.

    • George Selgin

      RL, you are young yet: you may eventually get 'round to wanting to do some "sneering" yourself!

      And please note, when I go after the bad-Austrians, it is as much for the sake of sparing the good ones needless calumny as for any other purpose.

    • gcallah

      RL, nobody but nobody sneers as much as Rothbard and his followers!

      • RL

        Well Gene, seeing as your comment is itself a sneer, it's either an un-funny joke or evidence that you have zero ability to self-reflect.

        I've read quite a bit of your stuff. Thankfully your academic writing doesn't involve nearly as much of the poor attitude you exude in your posts online.

        Leave it to ol' Gene to dismiss an entire swath of people he disagrees with. How droll.

        • gcallah

          No, no sneer, RL: a simple statement of fact. Do you deny it is true?

          • RL

            Well you'd have to define who you're talking about and what specifically these alleged sneers are, Gene. I realize that perpetually butthurt people like yourself are content with just claiming your opponents are this or that, but it's not terribly convincing. Sneers aren't a big deal if you can back them up… George didn't, so I made a passing comment about it.

            So, if by "Rothbard and his followers" you mean literally everyone who thinks Rothbard made valuable contributions, then I seriously doubt your claim. Even George admits Rothbard made many important and original contributions to economics. Sure, there are many "internet Austrians" who are annoying, but that has nothing to do with 1) Rothbard or 2) professional economists who think his work is valuable.

          • martin

            RL F'd you in the A

        • gcallah

          And you will note that all I was doing here was defending George against YOUR attack. These folks have been busy sneering at him for decades. If his tone reflects that, it is pretty understandable.

          • RL

            I wasn't attacking him. Only a butthurt crybaby would think so.

            And yes, I have read some of your work and think what I've read is good. Most of it doesn't interest me, but some does.
            See, that's a respectful statement, Gene. Study it a bit and see what you can learn.

          • gcallah

            So when you criticize his "sneering," that was all just good fun? And when you descend to personal attacks on people who make a completely impersonal comment ("No one sneers more than the Rothbardians": that said nothing whatsoever about you!), that is a sign of mature and non-hateful commentary!

          • RL

            Your comment about Rothbardians was completely uncalled for and, frankly, given your internet troll persona, I can scarcely imagine anyone familiar with your poor attitude interpreting your response as anything but an insult.

            So really, Gene, it was you who felt the need to attack. I'm merely putting the mirror in front of your face so you can see what you look like.

            I told him I enjoyed his post but that he sneering was unnecessary. That's literally all I said. Why is that so horrifically insulting to you?

          • gcallah

            You know, I figured out who RL is! This is someone who was offended by some remark I made *several years ago*! So he apparently has been stalking around the Internet, just waiting for a chance to hurl insults at me. Talk about "butthurt"!

      • nomorecranks

        It is with great difficulty anyone could find a sole more fantastically irrelevant, unknown, not cared for, and have no influence or regard in his field – economics; anyone with greater confidence about can assert no future generation will read about, care for, or even knew existed, than gene callah who's output is a pitiful pygmie next to Rothbard; Rothbard, who I may or may not follow, or whose followers may or not have anything to say, good or ill, about gcalla whom his presumptions make a greater and greater fool of with every new comment.

        You are laughing stock and an envious little worm with no insight and no talent. Followers of all stripes, Rothbard or whoever else, will continue to ask questions, learn, inquire, criticize perhaps, and there is not a thing you or any stain or blackened flop, deadbeat, or crow that acts as snearing as you towards the pursuit of truth could or would, or will be able to do to stop it.

        Let no more then be heard of Gene the idiot.

        • gcallah

          Well, thanks for confirming my statement that no one sneers more than the Rothbardians!

        • gcallah

          And did you note that even RL, while attacking me, noted that he has read lots of my "output"? A lot more, I bet, than he has read of your "output"!

  • Very much enjoyed the auto-biographical parts, with voracious reading and NYU experience.

    • George Selgin

      Thank you, Richard.

  • Interesting history! Why should anyone care what you call yourself as long as you continue to write about good economics. Machlup's book on the stock market got me interested in the economics of that market and Lachmann helped me understand it even more.

    • George Selgin

      Thanks, M: those are two very good books! And Machlup's is one of the ones that cost me a fair amount of knuckle-skin to get hold of!

  • John S


    I'm also a fan of Machlup's book. Which Lachmann book are you referring to–"Capital and its Structure" or something else?