FEE seeks candidates who may be unfamiliar with the ideas of a free and prosperous society, but are eager to discover the driving forces behind the maximization of human potential. We strive to impart these principles to our students in order for them to articulate, debate, and defend them when they return home.

For a third consecutive year we will host seminars in our branch office location: Atlanta, Georgia. Taking place in the Georgia Pacific building, our exciting Freedom University seminar series are designed to introduce college students to: Austrian economics, history and current events. For the first time this year we offer a summer seminar only for FEE alumni. Communicating liberty is designed to teach FEE alumni techniques of how to become effective communicators and spread the ideas of liberty.

Our Advanced Austrian economics seminar will take place at the FEE headquarter office in Irvington, NY.

Beautiful Salt Lake City will be the home of two seminars specifically designed for high school-aged students.

The goal of our seminars is not only to educate and engage students with the ideas of the free and prosperous society, but also to create life-long associations between our alumni and the Foundation for Economic Education.

Please visit the seminars page to download and complete the application, and do a friend a favor by forwarding this link!

May you have a prosperous and liberty-filled New Year!

Rothbard articulates the economic way of thinking in a clear and straightforward way, making economic theory accessible to a wide variety of individuals. His discussion on price formation (not determination) is significant for understanding Austrian price theory. His elaborations on capital, production and entrepreneurship, money’s role in the business cycle, monopoly and competition, the role of the State, and political economy are all indispensable for economists to better understand the world outside our windows. Peter Boettke and Christopher Coyne have also pointed out the vital insights Rothbard contributed to the socialist calculation issue in Man, Economy, and State.

The bottom line is, despite being a principles text, Man, Economy, and State made important analytical contributions to economics. It also is taken for granted just how knowledgeable Rothbard was of mainstream economics of the time, which is illustrated by his footnotes. These footnotes deserve as much attention by scholars as the main text.

“It is in fact the most important general treatise on economic principles since Ludwig von Mises’ Human Action in 1949.” These closing words of Hazlitt’s review help to clearly illustrate my point. Hazlitt was not one to make such a statement lightly. Human Action was of earth-shattering importance for individuals like Hazlitt. Just as in 1962, both books are still as important today, along with F. A. Hayek’s Individualism and Economic Order and Israel Kirzner’s Competition and Entrepreneurship. These are the texts that anyone who claims to have mastered Austrian economics needs to have read and absorbed.

Download Hazlitt’s review of Man, Economy, and State, “The Economics of Freedom” here.

The following conditions apply:

1. Authors nominated must be members in good standing with the SDAE (check the Society’s website for information on how to join).

2. The books and articles nominated must have been published between January 1, 2009 and August 31, 2011.

3. Nominated articles should be emailed as an attachment or as a URL to the article to Chris Coyne – ccoyne3@gmu.edu

4. Nominations for the book prize should include the title and all other relevant information (publisher, date of publication, ISBN #) and be sent to the above email address. Those nominating books need not send copies. Edited volumes and short monographs are not eligible for the award.

5. All nominations must be received by Chris Coyne no later than October 15, 2011.

6. Self-nominations will not be accepted.

Each prize comes with a cash award of $500 thanks to the generous support of the Foundation for Economic Education. Recipients will be required to submit a short blog post on their winning book or article for posting on the FEE website.

Winners will be announced at the annual banquet of the SDAE, this year in Washington, D.C. in conjunction with the Southern Economic Association meetings from November 19-21, 2011. The SDAE dinner will be held on Sunday, November 20.

Questions may be directed to Chris Coyne at ccoyne3@gmu.edu

Chris Coyne
SDAE Vice President

Mises wholly rejected this notion. As he explained in his 1942 essay “Social Science and Natural Science,” originally published in the Journal of Social Philosophy and Jurisprudence (Vol. 7, No. 3), while he was working for the National Bureau of Economic Research, the social and natural sciences require different methods. Economics is a human science that derives laws that take into account the complexity of human experience. These laws have the same status as the laws of the natural sciences, but due to the complexity of human action different methods are needed to derive them.

This position of methodological apriorism was not completely new to Mises, it was also the approach of the earlier Austrian tradition emphasized by Carl Menger and Eugen Boehm-Bawerk. Experiments are very important to the natural sciences but as Mises explains, “the social sciences cannot make use of experiments. The experience with which they have to deal is the experience of complex phenomena… The social sciences never enjoy the advantage of observing the consequences of a change in one element only, other conditions being equal.” So, unlike in a laboratory, economists cannot verify their statements using experience.

But by the 1950s, however, the economics profession had followed Paul Samuelson’s lead, rather than Mises’s, using the methods of formalism and positivism. Formalism had become synonymous with logical rigor and positivistic testing was the only means of conducting empirical analysis. To not follow in this direction was considered unscientific. By the 1960s economists had come to distance themselves from the exact laws of Menger and the apriorism of Mises. Indeed, with the exception of a handful of Austrian followers, they had become things of the past.

Today many have come to misinterpret the Austrian position on the role of theory and history in economics. Perhaps due to the fact that economics has become dominated by what many have called “physics envy”, most are ignorant of what Mises’s position truly was. The caricature of the position seems to be that Austrian theory places no importance on empirical analysis. In fact, empirical work is completely rejected and thus ignored. Nothing could be further from the truth.

The role of empirical analysis is still very important, but you cannot treat statistical findings in the real world as you would treat a laboratory experiment. Material provided by statistics is the outcome of historical complex forces. Thus theory is necessary to aid historical investigations. As Mises said, “There is no doubt that up to now in history only nations which have based their social order on private ownership of the means of production have reached a somewhat high stage of welfare and civilization. Nevertheless, nobody would consider this an incontestestable refutation of socialist theories.” The advancement of economics requires blending of both deduction in theory and empirical induction.

There is no doubt the profession has steered away from aprioristic approach. It is born out of the confusion over the role knowledge plays within economic theory. Austrian economics has an important place in better understanding of this problem. More economists should take the time to read the methodological work of Mises and the Austrians.

Download “Social Science and Natural Science” by Ludwig von Mises here.

At the time Hayek’s Nobel prize in economics came as quite a surprise. Hayek was the leading proponent of the Austrian school of economics (Ludwig von Mises had passed away a year earlier), which by this point had fallen out of the mainstream (in fact, Hayek’s Nobel win and a Institute for Humane Studies conference in June of 1974 on Austrian economics held in South Royalton, VT are often considered the two main catalysts for the revival of the Austrian school at that time).

Friedrich A. Hayek was a leading critic of the overuse of mathematical formalization, which had come to dominate the economic discipline. Not to mention, Hayek was popularly known, mostly thanks to his book The Road to Serfdom, as overtly a free market economist. This was why Read expressed shock that he shared the prize with Myrdal, who was notorious for his left-wing anti-market views. It is often believed that sharing of 1974 Nobel prize in economics occurred because the Royal Swedish Academy of science recognized the need for some balance.

Regardless, Hayek’s recognition has been extremely important to the development of economics. He has become one of the most cited winners of the Nobel Prize by other Nobel laureates in economics and his influence on them is undeniable, from James M. Buchanan, Ronald Coase, Douglas North, Vernon Smith, Robert Lucas, Edmond Phelps, Leonid Hurwicz, and Elinor Ostrom, and even to Joseph Stiglitz, just to name a few.

The economic discipline in the 20^th century is often viewed as a battle of ideas between Hayek and John Maynard Keynes, where, as the rap song Fear the Boom Bust (a new one, Fight of the Century premiers today April 28^th) says, “I want to steer markets (Keynes), I want them set free (Hayek).” The battle boiled down to this: Can markets be planned and controlled by the state or is the invisible hand, or spontaneous order, where the multitudes of individual plans come together through no conscious human effort, necessary for markets to function? Hayek’s work on knowledge illustrates very well why it must be the latter, as state planning and control will always fail to achieve its ends. And, the current crisis seems to be proving Hayek correct, yet again.

In his last days Ludwig von Mises supposedly said that he hoped for another Hayek. Hayek’s Nobel prize was not only an achievement for the economics profession, but a big win for the liberty movement as well. Another Hayek would not only be helpful, but would arguably be necessary, if we are to continue to gain ground. It is easy to see why: nearly 40 years later we are still celebrating Hayek’s Nobel Prize.

The letter from Leonard E. Read to Friedrich A. Hayek from October 9, 1974.

P.S. The books Read is referring would be the 3 volume set, Law, Legislation and Liberty.

For the audio file of this lecture click here.

For the audio file of this lecture click here.

For the audio file of this lecture click here.

For the audio file click here.

“In this age of the great struggle in favor of freedom and the social system in which men can live as free men, you are our leader. You have indefatigably fought against the step-by-step advance of the powers anxious to destroy everything that human civilization has created over a long period of centuries…. You are the economic conscience of our country and of our nation.”

Henry Hazlitt spent his career in journalism promoting the works of the Austrian School of economics. What separated Hazlitt from the rest, and lead Mises to call him our leader, was his understanding of economics. Although he had not been an economist by training or profession, his work proved he understood the economic concepts better than many with doctorate degrees. Through his work in journalism and organizations like the Foundation for Economic Education and the Mont Pelerin Society he was able to spread the ideas of liberty and economics to audiences that would not dare to pick up professional journals or technical tomes, like Human Action.

Today’s document, a letter from the Canton Supply Company to Hazlitt on April 17, 1951, illustrates how Henry Hazlitt spread important ideas of liberty through his work. The letter is a piece of fan mail praising Hazlitt for his book The Great Idea, which was republished later as Time Will Run Back. This book is a distinctive and often forgotten work by Hazlitt. It is different because in the form of a fictional novelit attempts to illustrate the knowledge problems associated with socialism. While few may find the tale of dystopia where an ignorant young man inherits the role of dictator of a world communist system to be classic literature, it is nevertheless a brilliant economic step-by-step reasoning from the failure of communism back to the success of a purely free market.

Henry Hazlitt’s book explains why socialism as a means is impossible for achieving the desired ends of an advanced material society. The idea that socialism fails to connect the means with the desired ends come from Mises’s “Economic Calculation in the Socialist Commonwealth” and Hayek’s “The Use of Knowledge in Society.” While in debates on the merits of socialism college students commonly respond “but socialism is perfect in theory,” Mises and Hayek illustrate why this socialism is complete nonsense even in theory. Sadly, Mises and Hayek were not known to be good communicators. Hazlitt, on the other hand, was a skilled, clear, and entertaining writer. He may be gone, but because his work lives on he is, in many ways, still our leader.

Download the Canton Supply Company to Hazlitt letter of April 17, 1951 here.

One reason economists often misdiagnose the importance of advertising can be found in the neo-classical models they use. In a general equilibrium model there is no need for advertising due to assumptions such as perfect competition, homogeneous goods, and full information, i.e. markets clear, each particular product is identical so there is no quality competition, and individuals have full information.

Now, of course, in the real world this is not true. Which is why, in looking at a question like this, Austrian models paint a more accurate picture. The market is a competitive process where individuals do not have full information and entrepreneurs compete on more than just price. This makes advertising necessary. For example, a hamburger sold on the market is going to differ from other hamburgers in regards to the grade of meat, toppings put on it, type of bread, etc. But the product is not only just the actual burger. The atmosphere of where you purchase it also matters, whether it is eaten at a restaurant or taken to go, the product is the whole package. Finding this information increases consumer satisfaction. Advertising helps consumers do this. Essentially, advertising entrepreneurs are picking up big bills on the sidewalk by matching the subjective preferences of consumers with what they desire but previously did not see.

If advertising is loud, big, and in your face it is only because it needs to be. We live an “affluent society.” Meaning a society were many, many opportunities are placed before consumers who must choose for themselves. Producers must fight to be heard over each other to get consumers the information they need to get the products they want.

If there is a distaste or moral repugnance to the advertising we receive, well it is our own fault. As Ludwig von Mises has noted, the consumer is king. The market is like an efficient democracy where each dollar is like a vote. In a free market, entrepreneurs would only provide the things consumers desire, this goes for advertising as well. H.L. Mencken once said democracy is the theory that people know what they want and deserve to get it, good and hard. And the market, as a democracy, is very good at doing just that.

Of course there will always be the cheats and the liars but in time the market will weed them out. For the market is a discovery process and advertising does play a vital role. So, we should raise our glasses of whiskey, or whatever we’re drinking, in thanks to the real life Donald Drapers of the world, for helping us find what we desire.

Download the Israel Kirzner lecture of Advertising here.

As Israel Kirzner (who many can rightly claim to be the current dean of the Austrian school) illustrates well in his “History of the Austrian School” lecture every summer here at FEE (watch his 2009 lecture here), the Austrian school at about the time of FEE’s founding in 1946 was anything but the mainstream of economic thought. Sure Mises and Hayek were still putting out work, but as Kirzner says in his lecture “…books that no one was reading.” Economists at the time were following Paul Samuelson’s lead with the neo-classical synthesis, which stated that the classical school was correct in microeconomic issues but Keynesian economics was needed for macroeconomic issues, and the mathematical formulation of the discipline.

Kirzner is not completely right though; the work of Mises and Hayek was not completely unread. A small minority was still resisting the new trends of the economics of the 1940s and 1950s and this is in large part due to the work of organization’s like FEE. For a while FEE was the lone voice for these ideas and because of these efforts Austrian ideas are spreading. This, however, is all the more reason to work harder to make sure these ideas spread even further.

The Austrian school is part of the larger mainline of economic thought from Adam Smith, Carl Menger, Ludwig von Mises, F.A. Hayek, and to modern economists such as James Buchanan and Israel Kirzner. And this tradition is still moving forward and being written. Today’s document is a photo of a slightly younger Israel Kirzner giving a lecture (probably his history of Austrian economics lecture) in the historical FEE classroom in Irvington. He is writing Menger (for Carl Menger the founder of the Austrian tradition) followed by ….. Many great minds have helped contribute to the ideas of Austrian economics but this photo is a stark reminder that the best may still be yet to come. Who will be the next in the line of great Austrian economists? Who ever it is they, like many of the current Austrians today, may very likely get their start here at FEE.

Download the picture of Kirzner lecturing in the FEE classroom here.

The Power Point presentation of the lecture — Business Cycles 2010.

For the video file click here.

For the video file of this lecture click here.

Download PowerPoint: Praxeology, Supply & Demand 2010

One such example can be found here in Murray Rothbard’s comment on Louis Spadaro’s paper “Toward a Program of Research and Development for Austrian Economists,” which was presented at the 1976 Austrian Conference at Windsor Castle.

Rothbard agrees with the basic thrust of Spadaro’s argument–namely, that Austrians should pursue the line of research in what makes us unique. This, of course, is the importance placed upon subjectivity in economic analysis. From there, however, Rothbard found many problems with Spadaro’s proposed program. Most notable was Spadaro’s belief that Austrians spend too much time attacking anti-Austrian fallacies. Rothbard believed that the refutation of such fallacies serves the purpose of giving Austrians a dialogue in the mainstream journals, convincing young economists and students, encouraging young economists to hone their skills in Austrian methods, and helping young Austrians to shake off the economic flaws they learn in graduate school.

These flaws or vices are not really important. All economists, including the Austrians, have their vices. The question is whether we are moving forward in progressive research. Rothbard wanted to add to Spadaro’s proposal, of further development of subjective theory, by placing importance also on political institutions and the use of history. Modern Austrian economics is indeed moving forward. Many young Austrians have followed Rothbard’s advice by working on applied topics using history and discussing the importance of institutions. One example is Chris Coyne’s fantastic book After War, which uses praxeology and history to analyze reconstruction efforts.

Rothbard’s points are important. The interaction of government and market participants plays a large part in human action and there is so much we can learn by just simply looking out the window. Young students interested in Austrian economics should read both Spadaro’s piece and Rothbard’s comment because, despite the mistakes we will undoubtedly make, we need to make sure we are still moving forward.

Download Rothbard’s Comment on Louis Spadaro’s Toward a Program of Research and Development for Austrian Economics here.

Hayek first encountered FEE and Leonard Read, FEE’s founder and first president, in 1947 as plans were being made for the very first Mont Pelerin Society meeting in Switzerland. Read became part of Professor Hayek’s circle–indeed one of its most respected members, a man on whom Hayek relied “not only to spread the gospel, but as much to contribute to the development of ideas.” Hayek’s The Use of Knowledge in Society inspired Read’s famous essay I, Pencil, which remains instrumental in FEE’s efforts on behalf of liberty.

Hayek also became a prominent member of the FEE faculty, addressing students of all ages and walks of life at FEE seminars around the country and at the Foundation’s home in Irvington-on-Hudson, in the very classroom where students celebrate the freedom philosophy today.

In 1968 F. A. Hayek delivered a touching and beautiful tribute to FEE: “The institution Leonard Read has built up bears the modest and prosaic name of a Foundation for Economic Education. I believe that what the Foundation for Economic Education and all its co-fighters and friends are committed to is nothing more nor less than the defense of our civilization against intellectual error.”

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Has any group of professionals ever been so spectacularly wrong? Pre-Copernican astronomers and cosmologists, I suppose, and for the same reason, really: They had an entire, internally consistent, theoretically rich system that described the universe. They were wrong — the sun and other celestial bodies save the moon didn’t actually revolve around the Earth, as they insisted — but no matter. It was a thing of beauty, their cosmic order. A vast faith was sustained in part by their pseudo-science, a faith from which such free thinkers as Galileo deviated at their own risk.

As it was with the pre- (or anti-) Copernicans, so it is with today’s mainstream economists. Theirs is an elegant system, a thing of beauty in itself…. It just fails to jell with reality. And unlike the pre-Copernicans… their latter-day equivalents in the economic profession pose a clear and present danger to the well-being of damned near everyone.

Meyerson elaborates on the problems with the mainstream:

[It] is not simply that it failed to predict the near-collapse of the world financial system last year. The problem is that it believed such a collapse could not happen, that all risk could be quantified by mathematical models and that these quantifications could help us correctly price just about everything. Out of this belief arose the banks’ practice of securitization, which put a value on all manner of mortgages and enabled buyers to purchase and swap them with the certainty that such transactions reflected an accurate judgment of the value of the properties and the risks associated with them.

Except, they didn’t. So long as economists insisted that they did, however, there really was no need to study such things as bubbles… Under mainstream economic theory, which held that everything was correctly priced, bubbles simply couldn’t exist.

Judging by these excerpts, you might suspect that Meyerson would have some sympathy toward Austrian economics. His characterization of mainstream economics could easily have come from an Austrian. But I admit I left some things out. Alas, Meyerson isn’t an Austrian. Nor has he any sympathy with the free market. In fact, he curiously labels mainstream economists, pejoratively, as “free market” economists, though he conflates two separable, indeed conflicting, things: belief in the virtues of the market and fascination with mathematical modeling. (To speak strictly, Austrian economics is not free-market economics. It is a particular, value-free approach to the discipline. It requires a moral judgment, which no economic theory can supply, to pronounce the market process, as described by the Austrians, good. To be sure, if one values freedom and prosperity, Austrian economics will be attractive and promising, though of course that is not the test of its validity.)

Meyerson reveals his leanings at the top of the column: “‘The worldly philosophers’ was economist Robert Heilbroner’s term for such great economic thinkers as Adam Smith, Karl Marx, John Maynard Keynes and Joseph Schumpeter. Today’s free-market economists, by contrast, aren’t merely not philosophers. They’re not even worldly.”

The mainstream economists he has in mind are those “at least with the purer strain of free-market economics associated with the University of Chicago.” Despite the financial turmoil they still have not learned their lesson, he says. “The quants at the banking houses say that they simply failed to sufficiently factor some risks into their mathematical models. Once they do, their system will be corrected, and banks can resume their campaign to securitize everything (as some banks are already doing by establishing a secondary market in life insurance policies).”

Then he tips his hand fully: “The one economist who has emerged from the current troubles with his reputation not only intact but enhanced is, of course, Keynes.” (That’s too big a topic to address here.)

Uncertainty and Risk

Interestingly from an Austrian perspective, part of what Meyerson likes about Keynes is his grasp “that an uncertainty attends human affairs that transcends quantifiable risk.” Any Austrian can say something similar. Austrians eschew mathematical economics precisely because human action doesn’t fit into equations and the knowledge presumed by mathematical modeling is denied real human beings.

People are not molecules or planets or rats or bloodless calculators reacting to outside forces or instinct. They are entrepreneurial actors who form preferences and plans based on expectations about the uncertain future, none of which can be quantified. Moreover, these factors manifested in action are not fixed and known in advance; people don’t behave according to predetermined utility functions or indifference curves. Plans and preferences emerge when people choose among alternatives in the hustle and bustle of life, and can change unexpectedly and unpredictably as new situations arise (that is, as other people do unanticipated things.) Value preferences are subjective ordinal rankings of utility, or satisfaction, lacking a unit to which cardinal numbers can be attached and manipulated mathematically. Real costs are subjective utilities forgone and thus unobservable to outsiders. There are no constant quantitative laws in human action, according to which, say, doubling the price of commodity guarantees a predictable quantitative response.

In other words, as the preeminent Austrian economist  Ludwig von Mises asked, “How can economic action that always consists of preferring and setting aside, that is, of making unequal valuations, be transformed into equal valuations, and the use of equations?”

In short, Austrians — Mises, Hayek, Rothbard, Kirzner, and those who have followed — stand second to none in rejecting scientism, the application of the methods of the physical sciences to the social “sciences.” They have relentlessly critiqued the mainstream’s out-of-touch preoccupation with mathematically describing the Neverland of general equilibrium, while ignoring real-world entrepreneurial action under uncertainty. No wonder Austrian economics has often been dismissed by the mainstream for rejecting the mathematicization that Meyerson properly ridicules.

Unfortunately, Meyerson seems oblivious of the Austrian school. If that were not the case, he would not imply that only the Keynesians are skeptical about neat mathematical models that claim to account for all eventualities. Nor would he identify the free market only with the Chicago school. He’d know that the Austrians were not among those economists who were “spectacularly wrong” as the financial fiasco approached. (It is surely inaccurate to say that all Chicago economists were unconcerned.) And he’d know that many prominent mathematical economists dislike the free market.

Austrians have long opposed the Federal Reserve’s price-distorting power over banking and money, the government’s intervention in the market for housing finance, and the too-big-to-fail doctrine that licenses unjustifiable speculation and rescues failing firms from the consequences of their actions. (That’s the free market?) Therefore, Austrian economists were not surprised by the housing bubble or the miserable aftermath of its bursting. Indeed, they have longed warned of a crash.

Where Are Fannie and Freddie?

Meyerson, unsurprisingly, never mentions the Fed, Fannie Mae and Freddie Mac, or the other agents of intervention that set the economy up for recession and other system-wide failure. To him the culprits are irrational animal spirits, no doubt with a big dollop of greed. Since he is blind to government’s responsibility for the crisis, he can write, “Thus the state must ensure against periodic madness in the markets with regulations and social insurance, because madness is a potential threat in markets just as it is in other human endeavors — because the market is a human endeavor, not reducible to a mathematical construct.”

Since the State is a human endeavor, too, why should we assume that government officials, who are plagued by ignorance, political incentives, and the lack of feedback, are immune to the “psychology” that Meyerson says the mainstream economists leave out of their models? Where is his rebuttal of the mountain of evidence that regulation and social insurance (such as federal deposit insurance) create “madness” through the construction of perverse incentives and moral hazard?

The mathematical economists might have been too busy with their models to notice that in the real world intervention was, and remains, rampant. Meyerson dislikes some of the right things. But his ignorance of Austrian economics keeps him from seeing the full picture. The free market didn’t fail — because there was no free market.

I mention this ten-year-old sarcastic foray into economics because Krugman has struck again, this time in a New York Times Magazine article, “How Did Economists Get It So Wrong?”  It turns out, according to the 2008 Nobel Prize winner, that economists falsely claim that capitalism is “perfect”:

Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation.

That was not the only problem with economists, as Krugman sees it.  Not only did they have a wrong-headed faith about free markets, but they also had forgotten the Great Lessons of Keynesianism:

Keynes did not, despite what you may have heard, want the government to run the economy. He described his analysis in his 1936 masterwork, “The General Theory of Employment, Interest and Money,” as “moderately conservative in its implications.” He wanted to fix capitalism, not replace it. But he did challenge the notion that free-market economies can function without a minder, expressing particular contempt for financial markets, which he viewed as being dominated by short-term speculation with little regard for fundamentals. And he called for active government intervention — printing more money and, if necessary, spending heavily on public works — to fight unemployment during slumps. [Emphasis added.]

He adds:

It’s important to understand that Keynes did much more than make bold assertions. “The General Theory” is a work of profound, deep analysis — analysis that persuaded the best young economists of the day. Yet the story of economics over the past half century is, to a large degree, the story of a retreat from Keynesianism and a return to neoclassicism.

One should read Henry Hazlitt’s classic The Failure of the “New Economics” to see something other than the fawning prose that Krugman writes about Keynes. There is so much nonsense in these two paragraphs that it would take a large volume to refute it all.  I will concentrate on just a few things.

First, it is amusing to see Krugman write that Keynes was concerned about economic “fundamentals,” given that Keynesian theory treats all capital and, indeed, all assets as being homogeneous.  There are no economic fundamentals in the Keynesian system; indeed, Keynes (and Krugman) call for inflation, which is general in scope, as a way to end unemployment in specific economic sectors.

Second, like Keynes, Krugman has declared that printing money will solve nearly any economic problem (although he has not used the specific Keynes quote on inflation, that it “turns stones into bread”).  As Hazlitt noted in his classic, Economics in One Lesson, inflation always leads to economic disaster.

Third, as the ATBC so aptly points out, it is inflation that creates the boom-and-bust cycles.  If inflation is the cause of the problem, then even more inflation cannot be the solution.

Krugman is correct when he says Keynes made “bold assertions,” but one searches The General Theory in vain for something profound.  As Hazlitt noted, there is nothing in the book that is both true and original: What is true is not original, and what is original is not true.

Krugman is right that economists “got it wrong.”  However, it was not a religious belief in free markets that caused the trouble, but rather government intervention, something Krugman never seems to mention in any of his columns.

Forget the board. He should start by reading Economics in One Lesson.

FEE Timely Classic

“Understanding Austrian Economics” by Henry Hazlitt

FEE is pleased to announce our 47th consecutive summer of student seminars. We have altered a few things in the program, and it promises to be a rewarding seminar season.

One of the exciting changes on the agenda is our expansion to include different seminar locations. In addition to our home in Irvington, New York, we will host seminars at Northwood University’s state-of-the-art conference center in Midland, Michigan, and at Colorado Christian University’s campus in Denver, Colorado.

The Denver location will be this year’s home to Freedom 101, our seminar specifically designed for high school-aged students (after a one-year hiatus, we are delighted to re-introduce this valuable seminar).

A new addition to the schedule is our Introduction to Austrian Economics seminar. We are quite pleased to offer this primer on the Austrian school of economics. As always, all of our seminars will be intellectually stimulating and filled with excellent speakers. We will welcome back many of our top-notch faculty guests, as well as welcoming a few new faculty lecturers. It is our hope that you will come and join us at one (or more!) of our seminar weeks.

Find out more!!!