The following history of money was learned by reading my new favorite economist, Murray Rothbard.  His History of Money is a mighty tome, which will scare many readers off, but has so many nuggets in it, that I felt led to summarize just a portion on this blog. I want to personally thank the Mises Institute for providing access to Rothbard’s works.  Here is my summary of the beginning of fiat paper money in the West.  All factual details were pulled from Rothbard’s ground breaking research.   

Outside of the medieval Chinese, who invented both paper and printing hundreds of years before the West, colonial Massachusetts was the first government to issue fiat paper money.  In fact, the colonial Americans were the reigning experts on fraudulent paper money issues, backed by nothing more than the misplaced trust the colonist had for their state governments.  The dismal monetary history began with a failed plundering expedition against the French colony of Quebec.  The Massachusetts government had grown accustomed to victorious raids against Quebec, typically paying the colonial recruits out of the proceeds lifted from the defeated French.  But in 1690, the New England colonials were defeated, causing a small problem for Massachusetts, but a huge problem for West.  The lesson learned by local colonial New England politicians have been co-opted by money hungry politicians of today, making fiat money the standard operating procedure out of every financial mess caused by over promising and under delivery bureaucrats in Washington.  See the chart below, that I found online, displaying the alarming drop in the purchasing power of the USA dollar through fiat monetary policies.

The soldiers arrived back in Boston ill tempered, demanding payment of their money, regardless of the outcome of the raid.  Hosting discontented soldiers with weapons, along with the will to use them, in the city was not an enjoyable sight for Boston citizens.  Rejected in an attempt to raise the funds from local merchants, the governmental leaders struck upon an idea that still echos through society.  Massachusetts concluded that printing £7,000 of paper notes, using them to pay the soldiers, was safer than having soldier unpaid within the city.  Concerned that the public would not accept the paper, the government made several pledges in an attempt to alleviate the public’s suspicion.  First, that it would redeem the paper notes in gold or silver out of tax revenues over the next couple of years, and second, that no more notes would be issued.  Not surprisingly, both parts of the pledge were disregarded as fast as government politicians could say, “Free Money.”  The bills went unredeemed for over forty years, while other notes were issued when money was needed.  It took less than four months for more notes to be issued, ignoring the pledge wholesale in government’s greed for free funds.  By February of 1691, another £40,000 of unbacked paper notes was issued to make up for a shortage of government funds, politicians proclaiming boldly, and falsely, that this would be the last issue of notes.

Massachusetts had stumbled across the SFN (Something For Nothing) formula, and not withstanding the number of pledges to stop issuing notes, the local politicians were like kids running loose in a candy store while the owner sleeps behind the counter.  Government induced fiat paper inflation was born and bred upon the shores of America.    The increasing supply of paper money, along with the growing lack of confidence in the paper, since it wasn’t backed by anything, but the level of trust colonist had in the local politicians, depreciated by over 40 percent, as compared to the gold and silver specie (coins). Like all governments, when they are busted with their hands in the candy, Massachusetts used force to make the “greedy”, “traitorous”, merchants take paper on par with specie.  This simply kicked in Gresham’s law, driving real money underground, while everyone bought and sold using paper (no better than Parker Bros Monopoly money) in the New England economy.  Citizens are not stupid, why use real specie, when paper money is worth 40 percent less and other citizens are forced, by law, to take it on par with gold and silver specie.  The corresponding shortage of coins drove more of the egregious behavior that caused the inflation in the first place.  Over £240,000 of paper money was issued by 1711, but during the same time, specie had all but disappeared.  The shortage of gold and silver didn’t cause the need for paper money, but the paper money enacted Gresham’s law, which caused the predictable shortage of specie.

I will save you the blow by blow details, offered in Rothbard’s book, of Massachusetts further inflationary printing of paper issues, but needless to say, New England government leaders did not prove trustworthy.  Learning the history of  fiat paper issues in Colonial America should be enough to scare all American citizens into demanding gold backed dollars, but sadly, few are willing to learn from history.  The British Crown, finally intervened, halting the mad rush into insolvency, caused by SFN paper induced fever suffered by local New England government leaders.  But before the British intervened, from 1744 to 1748, paper money expanded from, are you ready for this, £300,000 to £2.5 million! The depreciation of Massachusetts money was to such an extent that silver had risen to over sixty shillings an ounce, over ten times the price that it sold before the ‘paper money mania.’

There is much more to say on inflation and the purposeful depreciation of the American dollar for the benefit of Washington bureaucrats, but I will save it for another day.  Just one question before I end, “Do you think today’s politicians are more trustworthy than the local Massachusetts politicians were in their day?”  If you answer the question the same way that I did (a resounding no), then why do we allow the Federal Reserve to do the dirty work of today’s politicians?  In an obvious effort to subvert the direct printing of fiat money by government, through the use of a Federal Reserve (that isn’t federal, and has no reserves), but merely prints the money for our bureaucrats and loans it back to our government at taxpayers expense, government is bilking its citizens that it should be protecting.  Some may wonder why I bother to read this stuff, let alone share it with others, but I believe my duty is clear; wherever there is injustice, and I sit back and do nothing, I become an enabler to that injustice.  My conscience will not allow me to sit back and do nothing, hopefully, others similarly endowed with conscience, will educate themselves and the injustice will end. God Bless, Orrin Woodward

Character is not a binary switch, meaning one cannot divide people into two Manichean groups, one with character and the other without.  Instead, think of character, less like an on/off switch and more like the spectrum of colors.  A few people having little to no character, a few others, having character that cannot be bought, while the masses fall into a spectrum of character, having a portion of character, moving from a little to a lot.  The more character someone has, the harder it is to buy them out, resisting offers of rewards or punishments intended to bend their character to comply with the wishes of the exploiters in life.  Most people have a price, yielding their character at that point, surrendering their principles to their pocketbooks and peace.  But a few, only a courageous few, will hold onto their principles, withstanding vociferous criticism, eschewing lucrative financial gains, no matter what to maintain their character.   Although few in number, they appear regularly on the stages of history, standing for their convictions, regardless of the price to be paid.  Whether one agrees with their stand or not, everyone should respect their convictions.  Imagine history without the likes of St. Paul, Augustine, Martin Luther, George Washington, Adam Smith, Ludwig Von Mises, Martin Luther King Jr., and Mother Theresa, to name just a few.  History is altered when men and women of character refuse to surrender at any price, valuing living authentic lives based upon their deepest principles, rather than receive the applause of the world, while knowing that they have sold out.  Standing for justice regardless of the strength of the opposition or the personal cost entailed in the stand is not for the weak of heart.   Thankfully, even though few in number, others, with the same convictions, but less courage, discerning the truthfulness of the stand, will rally around the leader, creating a movement that changes the course of history.  

Let’s review one such life,  a man by the name of Ludwig Von Mises, an economic leader who stood for truth in an era when most economist stumbled over themselves bowing to a lie.  There is an old saying, “Any dead fish can float downstream, but it takes a live one to swim against the current.” Mises swam against the currents, defending free enterprise and classic liberalism when nearly all were chasing after the perks offered by teaching government intervention and control.  Many other economist intellectually understood the errors in the Keynesian policies, knowing in there heart and minds that government spending sprees would only lead to massive debt and unemployment, but willingly surrendered their convictions for personal advancement during the Keynesian bubble turned train wreck.  Mises, a one man band against his profession initially, refused to go along with the charade, pointing out the logical fallacies, calculating the long term consequences, influencing other economist not to sell their minds for money and prestige.  Mises, a prototypical example of a man without a price, lived his life by the motto from Virgil, the Roman poet who wrote, “Tu ne cede malis sed contra audentior ito,” meaning, “do not give in to evil, but proceed ever more boldly against it.”  Mises proceeded to do just that for the duration of his long life.

In fact, Murray Rothbard, one of the great economists and minds of the twentieth century wrote of Mises:

Holding these views, and hewing to truth indomitably in the face of a century increasingly devoted to statism and collectivism, Mises became famous for his “intransigence” in insisting on a non-inflationary gold standard and on laissez-faire.

Effectively barred from any paid university post in Austria and later in the United States, Mises pursued his course gallantly. As the chief economic adviser to the Austrian government in the 1920s, Mises was single-handedly able to slow down Austrian inflation; and he developed his own “private seminar” which attracted the out­standing young economists, social scientists, and philosophers throughout Europe. As the founder of the “neo-Austrian School” of economics, Mises’s business cycle theory, which blamed inflation and depressions on inflationary bank credit encouraged by Central Banks, was adopted by most younger economists in England in the early 1930s as the best explanation of the Great Depression.

At a time when the stream was flowing to Statism, whether in the form Nazism, Fascism, Socialism, or Communism or the New Deal, Mises had overcome the hysteria of the times to think deeply on the underlying issues.  Rothbard again, shares Mises contributions in the following way:

For Mises was able to demonstrate (a) that the expansion of free markets, the division of labor, and private capital investment is the only possible path to the prosperity and flourishing of the human race; (b) that socialism would be disastrous for a modern economy because the absence of private ownership of land and capital goods prevents any sort of rational pricing, or estimate of costs, and (c) that government intervention, in addition to hampering and crippling the market, would prove counter-productive and cumulative, leading inevitably to socialism unless the entire tissue of interventions was repealed.

As I write this in 2010, after years of inflationary government policies, causing government debt to reach unsustainable levels, with socialistic thinking engendered into the masses through a school system funded by our Statist bureaucrats, Mises looks like a prophet.  Few will ever understand the courage it must have required of Mises to sustain such personal and professional animosity, all the while, believing that time would prove him right, knowing that truth is more important than professional perks. In fact Robert Heilbroner, a famous economist, more of the socialists flavor, but honest in his research of the data, in his article conceding the defeat of socialism to free enterprise, titled, The World After Communism, concluded:

But what spokesman of the present generation has anticipated the demise of socialism or the “triumph of capitalism”? Not a single writer in the Marxian tradition! Are there any in the left centrist group? None I can think of, including myself. As for the center itself—the Samuelsons, Solows, Glazers, Lipsets, Bells, and so on—I believe that many have expected capitalism to experience serious and mounting, if not fatal, problems and have anticipated some form of socialism to be the organizing force of the twenty-first century.

… Here is the part hard to swallow. It has been the Friedmans, Hayeks, von Miseses, e tutti quanti who have maintained that capitalism would flourish and that socialism would develop incurable ailments. Mises called socialism “impossible” because it has no means of establishing a rational pricing system; Hayek added additional reasons of a sociological kind (“the worst rise on top”). All three have regarded capitalism as the “natural” system of free men; all have maintained that left to its own devices capitalism would achieve material growth more successfully than any other system.

Heilbroner confronted the socialistic demise in the late 1980’s, not by diverting people’s attention, not by making excuses, but by honestly admitting that Mises, and his followers, were right all along.  I respect Heilbroner for calling out the ‘elephant in the room‘ avoided today’s Statists oriented economists.  The socialist/statist economist and politicians were wrong, even when a million of them called untruth the truth, it doesn’t alter the real truth.   Mises and his small band of rascals, although deprived of honors and recognition in their lifetime (with the exception of Hayek’s Nobel Prize the year after Mises death, probably in deference to the recently fallen defender of free enterprise), stood for truth and time has proven them right.  Government intervention, far from being a modern day elixir, has damaged economies and markets wherever its poison has been imbibed.  Sadly, once an untruth sinks into the consciousness of the body politic, rooting out the cancer can be a long term process.  As Mises stated in his magnum opus, Human Action, “Economics deals with society’s fundamental problems; it concerns everyone and belongs to all. It is the main and proper study of every citizen.”  All citizens should study the history of political, economic and spiritual freedoms, the very freedoms that under-gird all of our liberties enjoyed today.

One might be thinking, if Mises pointed out the fallacies of bank inflations and socialism as early as the 1920’s, why did we proceed for nearly a century on a spending binge, resulting in the near bankruptcy of most governments in the West?  The answer revolves around character, or, more precisely, lack of character.  ‘Follow the money’ – FTM, is the main principle that modern day politicians use to justify their egregious behaviors.  FTM along with it’s brother SFM – ‘something for nothing’ combine to make a powerful force, overcoming principles and character wherever they are allowed to prosper unchecked.  Since most people have a price, referring back to the spectrum of character,  educators and politicians FTM’d into supporting Keynesian policies, rationalizing their sell out, by the pot of gold at the end of the rainbow, offered to all willing to following the current.  The current that Mises opposed in his battle for truth against the modern currents.  Exploiters love something for nothing and will follow the money to determine their current convictions, no pun intended.   Meaning, that sadly, most people’s convictions are arrived at by following the external currents, not by, following their internal character.  FTM may sound cynical, but no professional in the historical or economic fields, interpreting historical events properly, can accurately understand motives and methods without thinking through FTM.   Since few can withstand the heady effects of money, power and prestige, FTM is usually the best indicator in studying the world’s actions.  Outside of the a select few like Mises, the minority character centered individuals, FTM is nearly a fool proof method in economic and historical studies.  But how are both educators and politicians rewarded for supporting faulty Keynesian economics?

Let’s start with the politicians, and what they gain by FTM and SFM.  Politicians, especially in modern day democracies, are constantly in need of at least two things.  The first being money.  If politicians had a way to tax the people without having to announce an unpopular tax increase, they would think they had died and gone to political heaven.  Keynesian economic thought made this heaven come to earth, by morally justifying, what previously had been verboten.  Keynesians taught that, by inflating the money supply, reaping the benefit of paper money not backed by gold or any other real wealth, at the expense of the masses by lowered value of their money, politicians could enjoy more money and power while maintaining popularity in office.  Keynesian’s provided an amenable world-view for politicians, condoning their SFM tendencies through inflationary money policies (read: a secret tax on the citizen’s money) without having to risk an election day disaster, proclaiming to all that they didn’t raise taxes.  Instead they applied a secret tax (worse than income tax in certain cases) applied through inflating the money supply. Since it’s not understood by the mass of people, politicians, hiding behind the Keynesian mantra, pass along to future citizens, citizens that the current politician doesn’t need to pander to, in order maintain peace with current electorate.  Like John Maynard Keynes, the economic systems founder, when fighting back against the rational economist, who pointed out the logical long run fallacies of Keynes’ proposals, stated, “In the long run, we are all dead.”  Perhaps a funny quip to confound the people, belying the immorality of modern economic methods by providing politicians with free money at posterities expense.

The economist, on the other hand, benefit from the prestige gained by supporting the immoral Keynesian policies.  It would take an individual of Mises like character, to withstand the promises of advancement, by supporting the Keynesian theories of government intervention throughout the economy.  Why do universities support government intervention?  Can you say FTM?  Who is funding nearly all the universities in America and the Western world?  Government anyone?  Statist Government?  The very government, who partners with educators to convince the masses on the benefit of inflationary and socialistic methods, then rewards the same educators by money grants, by prestigious university posts, and by government advisory roles in the Statist government created by said propaganda.  If you follow the money, it flows something like this in a simplistic rendition: government prints paper money, stealing value from all Americans, takes some of money to reward economist educators (I use that word loosely), who write mighty tomes (propaganda) in support of said governments, creating a virtuous cycle of advancement for exploiters in both the political and educational fields.  All of these benefits paid for at the expense of the masses, who being ignorant of the scheme, merely wonder why it becomes tougher every year to make a living.  Politicians win by spending money that isn’t theirs; economists win by receiving advancements by teaching untruths; the citizens lose by swallowing the lie, surrendering ‘we the people’ to ‘we the exploited.‘  The losses endured come in several forms.  First by having the value of their hard earned dollars reduced yearly, forcing people on fixed incomes to go back to work or seek government handouts, selling their freedoms in the bargain, the dollars loses value every year.  Second, the citizens are filled with propaganda on the benefits of Statist interventions, even though, after five thousand years of recorded history, socialism/statist policies have never worked.  This reminds me of the Kings of  Statist policies, Hitler and Lenin.  Hitler, that master manipulator through propaganda said, “Make the lie big, make it simple, keep saying it, and eventually they will believe it.”  How about this classic from Hitler as well, “How fortunate for leaders that men do not think.”  Not to be outdone, Lenin said, “A lie told often enough becomes truth.”  If economists are rewarded for following the company line, and the companies in this case is funded by the government, then it doesn’t take a grand conspiracy, but merely an understanding FTM and SFM, to see why our present economy is failing.  It’s hard for anyone to stand in the workplace, especially, if the boss rewards certain behaviors, while punishing others, leaving people in a moral quandary, pitting their money against their morals.
We have surrendered economic truth to the peace and
affluence of the elites all at the expense of the mass of citizens.   It
is time for a group of men and women, like our founding fathers, to
stand for truth, no matter where it leads.  If everyone continues the
charade parade, society as a whole is the loser.  Even those who benefit
in the short term will lose when the system collapses.  Whether you are
a Republican, a Democrat, a Libertarian, an Independent, or undecided,
you have a vested interested in weeding out the intoxicating effect that
SFM and FTM have over our body politic.  God only knows the future
course of our country, but let it not be written, in the hour of need,
that our great country was abandoned by leaders, who lacked the courage
and character to make a stand.  Millions of men and women will surrender
to untruth, the subsequent lies engulfing the world in darkness, but
when one courageous person has had enough, one person, be it man or
woman, who being sick and tired of the lies and darkness, lights a match
inside his soul with truth, scattering the darkness of the millions by
the light cast from one soul set burning brightly on the oil of truth!
Where is the next generation of men and women, willing to set there soul
on fire for truth?  People, who, as Mises life motto from Virgil said,
“do not give in to evil, but proceed ever more boldly against it.”  God
Bless, Orrin Woodward

Sitting down to read one of my favorite authors (Murray Rothbard), I stumbled across a description of the Austrian School
difference that stunned me, being the best description of the Austrian School Theory of History and Economics that I have ever read.  Dr.Joseph Salerno, who wrote this essay, is a professor at Pace University and delivers a powerful essay on Ludwig Von Mises and Murray Rothbard in this introduction to Rothbard’s book on banking.  If you would like to understand why economics matters more today than ever before, being concerned with the failure of modern day economic messiahs, then this portion of Salerno’s essay is for you.  Leadership matters and you are only qualified to lead in fields in which you have mastered the materials.  History, Economics and Leadership go hand in hand if you plan on making a difference in our world today.  Enjoy the article and please share your thoughts. 

God Bless,

Orrin Woodward

Rothbard’s approach to monetary history does not focus on measurement but on motives. Once the goals of the actors and their ideas about the appropriate means for achieving these goals have been established, economic theory, along with other sciences, is brought to bear to trace out the effects of these actions in producing the complex events and processes of history which are only partially and imperfectly captured in statistical data. This is not to say that Rothbard ignores the quantitative aspects of historical monetary processes. Indeed, his book abounds with money, price, and output data; but these data are always interpreted in terms of the
motivations of those who have contributed to their formation. For Rothbard, a particular price datum is, no less than the Spanish-American War, a  historical event,  and its causes must be traced back to the subjective aims governing human plans and choices.

In flatly rejecting the positivist approach to economic history, Rothbard adopts the method of historical research first formulated by Ludwig von Mises. In developing this method, Mises correctly delineated, for the first time, the relationship between theory and history. It is Rothbard’s great contribution in this volume—and his earlier  America’s Great Depression —to be the first to consistently apply it to economic history. It is worth summarizing this method here for several reasons. First, Mises’s writings on the proper method of historical research have inexplicably been almost completely ignored up to the present, even by those who have adopted Mises’s praxeological approach in economics. Second, familiarity with Mises’s method of historical research illuminates the source and character of the remarkable distinctiveness of Rothbard’s historical writings. In particular, it serves to correct the common but mistaken impression that Rothbard’s historical writings, especially on the origin and development of the U.S. monetary system, are grounded in nothing more substantial than an idiosyncratic “conspiracy theory of history.” Third, it gives us an opportunity to elucidate the important elaboration of Mises’s method that Rothbard contributed and which he deploys to great effect in explicating the topic of this volume. And finally, we find in Mises’s method a definitive refutation of the positivist’s claim that it is impossible to acquire real knowledge of subjective phenomena like human motives and that, therefore, economic history must deal exclusively with observable and measurable phenomena.

To begin with, Mises grounds his discussion of historical method on the insight that ideas are the primordial stuff of history. In his words:

“History is the record of human action. Human action is the conscious effort of man to substitute more satisfactory conditions for less satisfactory ones. Ideas determine what are to be considered more and less satisfactory conditions and what means are to be resorted to to alter them. Thus ideas are the main theme of the study of history.”

This is not to say that all history should be intellectual history, but that ideas are the ultimate cause of all social phenomena, including and especially economic phenomena. As Mises puts it.

“The genuine history of mankind is the history of ideas. It is ideas that distinguish man from all other beings. Ideas engender social institutions, political changes, technological methods of production, and all that is called economic conditions.”

Thus, for Mises, history:

“establishes the fact that men, inspired by definite ideas, made definite judgments of value, chose definite ends, and resorted to definite means in order to attain the ends chosen, and it deals furthermore with the outcome of their actions, the state of affairs the action brought about.”

Ideas—specifically those embodying the purposes and values that direct action—are not only the point of contact between history and economics, but differing attitudes toward them are precisely what distinguish the methods of the two disciplines. Both economics and history deal with individual choices of ends and the judgments of value underlying them. On the one hand, economic theory as a branch of praxeology takes these value judgments and choices as given data and restricts itself to logically inferring from them the laws governing the valuing and pricing of the means or “goods.” As such, economics does not inquire into the individual’s motivations in valuing and choosing specific ends. Hence, contrary to the positivist method, the truth of economic theorems is substantiated apart from and without reference to specific and concrete historical experience. They are the conclusions of logically valid deduction from universal experience of the fact that humans adopt means that they believe to be appropriate in attaining ends that they judge to be valuable.

The subject of history, on the other hand, “is action and the judgments of value directing action toward definite ends.”!” This means that for history, in contrast to economics, actions and value judgments are not ultimate “givens” but, in Mises’s words, “are the
starting point of a specific mode of reflection, of the specific understanding of the historical sciences of human action.” Equipped with the method of “specific understanding,” the historian, “when faced with a value judgment and the resulting action . . . may try to understand how they originated in the mind of the actor, ”it is true that in deriving theorems that apply to the specific conditions characterizing human action in our world, a few additional facts of a lesser degree of generality are inserted into the deductive chain of reasoning. These include the facts that there exists a variety of natural resources, that human labor is differentiated, and that leisure is valued as a consumer’s good.

The difference between the methods of economics and history may be illustrated with the following example. The economist qua economist “explains” the Vietnam War-era inflation that began in the mid-1960s and culminated in the inflationary recession of 1973-1975 by identifying those actions of the Fed with respect to the money supply that initiated and sustained it. The historian, including the economic historian, however, must identify and then assign weights to all those factors that motivated  the various members of the Fed’s Board of Governors (or of the Federal Open Market Committee) to adopt this course
of action. These factors include: ideology; partisan politics; pressure exerted by the incumbent administration; the grasp of economic theory; the expressed and perceived desires of the Fed’s constituencies, including commercial bankers and bond dealers; the informal power and influence of the Fed chairman within the structure of governance; and so on.

In short, the economic historian must supply the motives underlying the actions that are relevant to explaining the historical event. And for this task, his only suitable tool is understanding. Thus, as Mises puts it.

“The scope of understanding is the mental grasp of phenomena which cannot be totally elucidated by logic, mathematics, praxeology, and the natural sciences to the extent that they cannot be cleared up by all these sciences.”

To say that a full explanation of any historical event, including an economic one, requires that the method of specific understanding be applied is not to diminish the importance of pure economic theory in the study of history. Indeed, as Mises points out, economics provides in its field a consummate interpretation of past events recorded and a consummate anticipation of the effects to be expected from future actions of a definite kind. Neither this interpretation nor this anticipation tells anything about the actual content and quality of the actual individuals’ judgments of value. Both presuppose that the individuals are valuing and acting, but their theorems are independent of and unaffected by the particular characteristics of this valuing and acting.

For Mises, then, if the historian is to present a complete explanation of a particular event, he must bring to bear not only his “specific
understanding” of the motives of action but the theorems of economic science as well as those of the other “aprioristic,” or non-experimental, sciences, such as logic and mathematics. He must also utilize knowledge yielded by the natural sciences, including the applied sciences of technology and therapeutics. Familiarity with the teachings of all these disciplines is required in order to correctly identify the causal relevance of a particular action to a historical event, to trace out its specific consequences, and to evaluate its success from the point of view of the actor’s goals.

For example, without knowledge of the economic theorem that, ceteris paribus, changes in the supply of money cause inverse changes in its purchasing power, a historian of the price inflation of the Vietnam War-era probably would ignore the Fed and its motives altogether. Perhaps, he is under the influence of the erroneous Galbraithian doctrine of administered prices with its implication of cost-push inflation.  In this case, he might concentrate exclusively and irrelevantly on the motives of union leaders
in demanding large wage increases and on the objectives of the “technostructure” of large business firms in acceding to these demands and deciding what part of the cost increase to pass on to consumers. Thus, according to Mises,

“If what these disciplines [i.e., the aprioristic and the natural sciences] teach is insufficient or if the historian chooses an erroneous theory out of several conflicting theories held by the specialists, his effort is misled and his performance is abortive.” But what exactly is the historical method of specific understanding, and how can it provide true knowledge of a wholly subjective and unobservable phenomenon like human motivation? First of all, as Mises emphasizes, the specific understanding of past
events is not a mental process exclusively resorted to by historians. It is applied by everybody in daily intercourse with all his fellows. It is a technique employed in all interhuman relations. It is practiced by children in the nursery and kindergarten, by businessmen in trade, by politicians and statesmen in affairs of state. All are eager to get information about other people’s valuations and plans and to appraise them correctly!

The reason this technique is so ubiquitously employed by people in their daily affairs is because all action aims at rearranging future conditions so that they are more satisfactory from the actor’s point of view. However, the future situation that actually emerges always depends partly on the purposes and choices of others besides the actor. In order to achieve his ends, then, the actor must
anticipate not only changes affecting the future state of affairs caused by natural phenomena, but also the changes that result from the conduct of others who, like him,  are  contemporaneously planning  and  acting. Understanding the values and goals of others is thus an inescapable prerequisite for successful action.

Now, the method that provides the individual planning action with information about the values and goals of other actors is essentially the same method employed by the historian who seeks knowledge of the values and goals of actors in bygone epochs. Mises emphasizes the universal application of this method by referring to the actor and the historian as “the historian of the future” and “the historian of the past,” respectively. Regardless of the purpose for which it is used, therefore, understanding aims at establishing the facts that men attach a definite meaning to the state of their environment, that they value this state and, motivated by these judgments of value, resort to definite means in order to preserve or to attain a definite state of affairs different from that which would prevail if they abstained from any purposeful reaction. Understanding deals with judgments of value, with the choice of ends and of the means resorted to for the attainment of these ends, and with the valuation of the outcome of actions per-formed.

Furthermore, whether directed toward planning action or interpreting history, the exercise of specific understanding is not an arbitrary or haphazard enterprise peculiar to each individual historian or actor; it is the product of a discipline that Mises calls “thymology,” which encompasses “knowledge of human valuations and volitions.” Mises characterizes this discipline as
follows:

“Thymology is on the one hand an offshoot of introspection and on the other a precipitate of historical experience. It is what everybody learns from intercourse with his fellows. It is what a man knows about the way in which people value different conditions, about their wishes and desires and their plans to realize these wishes and desires. It is the knowledge of the social environment in which a man lives and acts or, with historians, of a foreign milieu about which he has learned by studying special sources.”

Thus, Mises tells us, thymology can be classified as “a branch of history” since “[i]t derives its knowledge from historical experience.” Consequently, the epistemic product of thymo-logical experience is categorically different from the knowledge derived from experiments in the natural sciences. Experimental knowledge consists of “scientific facts” whose truth is independent of time. Thymological knowledge is confined to “historical facts,” which are unique and non-repeatable events. Accordingly, Mises concludes,

All that thymology can tell us is that in the past definite men or groups of men were valuing and acting in a definite way. Whether they will in the future value and act in the same way remains uncertain. All that can be asserted about their future conduct is speculative anticipation of the future based on specific understanding of the historical branches of the sciences of human action. . . . What thymology achieves is the elaboration of a catalogue of human traits. It can moreover establish the fact that certain traits appeared in the past as a rule in connection with certain other traits.”

More concretely, all our anticipations about how family members, friends, acquaintances, and strangers will react in particular situations are based on our accumulated thymological experience. That a spouse will appreciate a specific type of jewelry for her birthday, that a friend will enthusiastically endorse our plan to see a Clint Eastwood movie, that a particular student will complain
about his grade—all these expectations are based on our direct experience of their past modes of valuing and acting. Even our
expectations of how strangers will react in definite situations or what course political, social, and economic events will take are based on thymology. For example, our reservoir of thymological experience provides us with the knowledge that men are jealous of their wives. Thus, it allows us to “understand” and forecast that if a man makes overt advances to a married woman in the presence of her husband, he will almost certainly be rebuffed and runs a considerable risk of being punched in the nose. Moreover, we may forecast with a high degree of certitude that both the Republican and the Democratic nominees will outpoll the Libertarian Party candidate in a forthcoming presidential election; that the price for commercial time during the televising of the Major League Soccer championship will not exceed the price for commercials during the broadcast of the Super Bowl next year; that the average price of a personal computer will be neither $1 million nor $10 in three months; and that the author of this paper will never be crowned
king of England. All of these forecasts, and literally millions of others of a similar degree of certainty, are based on the specific
understanding of the values and goals motivating millions of nameless actors.

As noted, the source of thymological experience is our interactions with and observations of other people. It is acquired either directly from observing our fellow men and transacting business with them or indirectly from reading and from hearsay, as well as out of our special experience acquired in previous contacts with the individuals or groups concerned. Such mundane experience is accessible to all who have reached the age of reason and forms the bedrock foundation for forecasting the future conduct of others whose actions will affect their plans. Furthermore, as Mises points out, the use of thymological knowledge in everyday affairs is straightforward:

“Thymology tells no more than that man is driven by various innate instincts, various passions, and various ideas. The anticipating individual tries to set aside those factors that manifestly do not play any concrete role in the concrete case under consideration. Then he chooses among the remaining ones.”

To aid in this task of narrowing down the goals and desires that are likely to motivate the behavior of particular individuals, we resort to the “thymological concept” of “human character. ” The concrete content of the “character” we attribute to a specific individual is based on our direct or indirect knowledge of his past behavior. In formulating our plans, “We assume that this character will not change if no special reasons interfere, and, going a step farther, we even try to foretell how definite changes in conditions will affect his reactions.” It is confidence in our spouse’s “character,” for example, that permits us to leave for work each morning secure in the knowledge that he or she will not suddenly disappear with the children and the family bank account. And our saving and investment plans involve an image of Alan Greenspan’s character that is based on our direct or indirect knowledge of his past actions and utterances. In formulating our intertemporal consumption plans, we are thus led to completely discount or assign a very low likelihood to the possibility that he will either deliberately orchestrate a 10-percent deflation of the money supply or attempt to peg the short-run interest rate at zero percent in the foreseeable future.

Despite reliance on the tool of thymological experience, however, all human understanding of future events remains uncertain, to some degree, for these events are generally a complex resultant of various causal factors operating concurrently. All forecasts of the future, therefore, must involve not only an enumeration of the factors that operate in bringing about the anticipated result but also the weighting of the relative influence of each factor on the outcome. Of the two, the more difficult problem is that of apportioning the proper weights among the various operative factors. Even if the actor accurately and completely identifies all the causal factors involved, the likelihood of the forecast event being realized depends on the actor having solved the weighting problem. The
uncertainty inherent in forecasting, therefore, stems mainly from the intricacy of assigning the correct weights to different actions and the intensity of their effects.

While thymology powerfully, but implicitly, shapes everyone’s understanding of and planning for the future in every facet of life, the thymological method is used deliberately and rigorously by the historian who seeks a specific understanding of the motives underlying the value judgments and choices of the actors whom he judges to have been central to the specific event or epoch he is interested in explaining. Like future events and situations envisioned in the plans of actors, all historical events and the epochs they define are unique and complex outcomes codetermined by numerous human actions and reactions. This is the meaning of Mises’s
statement.

“History is a sequence of changes. Every historical situation has its individuality, its own characteristics that distinguish it from any other situation. The stream of history never returns to a previously occupied point. History is not repetitious.”

It is precisely because history does not repeat itself that thymological experience does not yield certain knowledge of the cause of historical events in the same way as experimentation in the natural sciences. Thus the historian, like the actor, must resort to specific understanding when enumerating the various motives and actions that bear a causal relation to the event in question and when assigning each action’s contribution to the outcome a relative weight. In this task, “Understanding is in the realm of history the equivalent, as it were, of quantitative analysis and measurement.” The historian uses specific understanding to try to gauge the causal “relevance” of each factor to the outcome. But such assessments of relevance do not take the form of objective measurements calculable by statistical techniques; they are expressed in the form of subjective “judgments of relevance” based on thymology. Successful entrepreneurs tend to be those who consistently formulate a superior understanding of the likelihood of future events
based on thymology.

The weighting problem that confronts actors and historians may be illustrated with the following example. The Fed increases the money supply by 5 percent in response to a 20-percent plunge in the Dow Jones Industrial Average—or, perhaps now, the Nasdaq—that ignites fears of a recession and a concomitant increase in the demand for liquidity on the part of households and firms. At the
same time, OPEC announces a 10-percent increase in its members’ quotas and the U.S. Congress increases the minimum wage by 10 percent. In order to answer the question of what the overall impact of these events will be on the purchasing power of money six months hence, specific understanding of individuals’ preferences and expectations is required in order to  weight  and  time  the influence of each of these events on the relationship between the supply of and the demand for money. The ceteris-paribus laws of economic theory are strictly qualitative and only indicate the direction of the effect each of these events has on the purchasing power of money and that the change occurs during a sequential adjustment process so that some time must elapse before the
full effect emerges. Thus the entrepreneur or economist must always supplement economic theory with an act of historical judgment or understanding when attempting to forecast any economic quantity. The economic historian, too, exercises understanding when making judgments of relevance about the factors responsible for the observed movements of the value of money during historical episodes of inflation or deflation.

Rothbard’s contribution to Mises’s method of historical research involves the creation of a guide that mitigates some of the uncertainty associated with formulating judgments of relevance about human motives. According to Rothbard, “It is part of the
inescapable condition of the historian that he must make estimates and judgments about human motivation even though he cannot ground his judgments in absolute and apodictic certainty. ” But the task of assigning motives and weighting their relevance is rendered more difficult by the fact that, in many cases, historical actors, especially those seeking economic gain through the political process, are inclined to deliberately obscure the reasons for their conduct. Generally in these situations, Rothbard points out, “the actor himself tries his best to hide his economic motive and to trumpet his more abstract and ideological concerns.”

Rothbard contends, however, that such attempts to obfuscate or conceal the pecuniary motive for an action by appeals to higher goals are easily discerned and exposed by the historian in those cases “where the causal chain of economic interest to action is simple and direct. ” Thus, for example, when the steel industry lobbies for higher tariffs or reduced quotas, no sane adult, and certainly no competent historian, believes that it is doing so out of its stated concern for the “public interest” or “national security.”
Despite its avowed motives, everyone clearly perceives that the primary motivation of the industry is economic, that is, to restrict foreign competition in order to increase profits. But a problem arises in those cases “when actions involve longer and more complex causal chains. ” Rothbard points to the Marshall Plan as an example of the latter. In this instance, the widely proclaimed motives of the architects of the plan were to prevent starvation in Western European nations and to strengthen their resistance to the allures of Communism. Not a word was spoken about the goal that was also at the root of the Marshall Plan: promoting and subsidizing U.S. export industries. It was only through painstaking research that historians were later able to uncover and assess the relevance of the economic motive at work.

Given the propensity of those seeking and dispensing privileges and subsidies in the political arena to lie about their true motives, Rothbard formulates what he describes as “a theoretical guide which will indicate in advance whether or not a historical action will be predominantly for economic, or for ideological, motives.”39 Now, it is true that Rothbard derives this guide from his overall worldview. The historian’s worldview, however, should not be interpreted as a purely ideological construction or an unconscious reflection of his normative biases. In fact, every historian must be equipped with a worldview—an interrelated set of ideas about the causal relationships governing how the world works—in order to ascertain which facts are relevant in the explanation of a particular historical event. According to Rothbard, “Facts, of course, must be selected and ordered in accordance with judgments of
importance, and such judgments are necessarily tied into the historian’s basic world outlook.”

Specifically, in Mises’s approach to history, the worldview comprises the necessary preconceptions regarding causation with which the historian approaches the data and which are derived from his knowledge of both the aprioristic and natural sciences. According to Mises:

“History is not an intellectual reproduction, but a condensed representation of the past in conceptual terms. The historian does not simply let the events speak for themselves. He arranges them from the aspect of the ideas underlying the formation of the general notions he uses in their presentation. He does not report facts as they happened, but only  relevant  facts. He does not approach the documents without presuppositions, but equipped with the whole apparatus of his age’s scientific knowledge, that is, with all
the teachings of contemporary logic, mathematics, praxeology, and natural science.”

So, for example, the fact that heavy speculation against the German mark accompanied its sharp plunge on foreign-exchange markets is not significant for an Austrian-oriented economic historian seeking to explain the stratospheric rise in commodity prices that characterized the German hyperinflation of the early 1920s. This is because he approaches this event armed with the supply-and-demand theory of money and the purchasing-power-parity theory of the exchange rate.
These “presuppositions” derived from praxeology lead him to avoid any attribution of causal significance to the actions of foreign exchange speculators in accounting for the precipitous decline of the domestic purchasing power of the mark. Instead they direct his attention to the motives of the German Reichs-bank in expanding the money supply. In the same manner, a modern historian investigating the cause and dissemination of bubonic plague in fourteenth-century Europe would presuppose that the blossoming of religious heresy during that period would have no significance for his investigation. Instead he would allow himself to be guided by the conclusions of modern medical science regarding the epidemiology of the disease.

The importance of Rothbard’s theoretical guide is that it adds something completely new to the historian’s arsenal of scientific preconceptions that aids him in making judgments of relevance when investigating the motives of those who promote or oppose specific political actions. The novelty and brilliance of this guide lies in the fact that it is neither a purely aprioristic law like an economic theorem nor an experimentally established “fact” of the natural sciences. Rather it is a sociological generalization grounded on a creative blend of thymo-logical experience and economic theory. At the core of this generalization is the insight
that the State throughout history has been essentially an organization of a segment of the population that forsakes peaceful economic activity to constitute itself as a ruling class. This class makes its living parasitically by establishing a permanent hegemonic or “political” relationship between itself and the productive members of the population. This political relationship permits the rulers to subsist on the tribute or taxes routinely and “legally” expropriated from the income and wealth of the producing class. The latter class is composed of the “subjects” or, in the case of democratic states, the “taxpayers,” who earn their living through the peaceful “economic means” of production and voluntary exchange. In contrast, constituents of the ruling class may be thought of as “tax-consumers” who earn their living through the coercive “political means” of taxation and the sale of
monopoly privileges.

Rothbard argues that economic logic dictates that the king and his courtiers, or the democratic government and its special interest groups, can never constitute more than a small minority of the country’s population—that all States, regardless of their formal
organization, must effectively involve oligarchic rule. The reasons for this are twofold. First, the fundamentally parasitic nature of the relationship between the rulers and the ruled by itself necessitates that the majority of the population engages in productive activity in order to be able to pay the tribute or taxes extracted by the ruling class while still sustaining its own existence. If the ruling class comprised the majority of the population, economic collapse and systemic breakdown would swiftly ensue as the productive class died out. The majoritarian ruling class itself then would either be forced into productive activity or dissolve into internecine warfare aimed at establishing a new and more stable—that is, oligarchic—relationship between rulers and producers.

The second reason why the ruling class tends to be an oligarchy is related to the law of comparative advantage. In a world where human abilities and skills vary widely, the division of labor and specialization pervades all sectors of the economy as well as society as a whole. Thus, not only is it the case that a relatively small segment of the populace possesses a comparative advantage in developing new software, selling mutual funds, or playing professional football, it is also the case that only a fraction of the
population tends to excel at wielding coercive power. Moreover, the law of comparative advantage governs the structure of relationships within as well as between organizations, accounting for the hierarchical structure that we almost invariably observe within individual organizations. Whether we are considering a business enterprise, a chess club, or a criminal gang, an energetic and visionary elite invariably comes to the fore, either formally or informally, to lead and direct the relatively inert majority. This “Iron Law of Oligarchy,” as this internal manifestation of the law of comparative advantage has been dubbed, operates to transform an initially majoritarian democratic government, or even a decentralized republican government, into a tightly centralized State controlled by a ruling elite.

The foregoing analysis leads Rothbard to conclude that the exercise of political power is inherently an oligarchic enterprise. The small minority that excels in wielding political power will tend to coalesce and devote an extraordinary amount of mental energy and other resources to establishing and maintaining a permanent and lucrative hegemonic bond over the productive majority. Accordingly, since politics is the main source of their income, the policies and actions of the members of this oligarchic ruling class will be driven primarily by economic motives. The exploited producing class, in contrast, will not expend nearly as many resources on politics, and their actions in the political arena will not be motivated by economic gain to the same degree, precisely because they are absorbed in earning their livelihoods in their own chosen areas of specialization on the market. As Rothbard explains:

“the ruling class, being small and largely specialized, is motivated to think about its economic interests twenty-four hours a day. The steel manufacturers seeking a tariff, the bankers seeking taxes to repay their government bonds, the rulers seeking a strong state from which to obtain subsidies, the bureaucrats wishing to expand their empire, are all professionals in statism. They are constantly at work trying to preserve and expand their privileges.”

The ruling class, however, confronts one serious and ongoing problem: how to persuade the productive majority, whose tribute or taxes it consumes, that its laws, regulations, and policies are beneficial; that is, that they coincide with “the public interest” or are designed to promote “the common good” or to optimize “social welfare.” Given its minority status, failure to solve this problem exposes the political class to serious consequences. Even passive resistance by a substantial part of the producers, in the form of mass tax resistance, renders the income of the political class and, therefore, its continued existence extremely precarious. More
ominously, attempts to suppress such resistance may cause it to spread and intensify and eventually boil over into an active revolution whose likely result is the forcible ousting of the minority exploiting class from its position of political power. Here is where the intellectuals come in. It is their task to convince the public to actively submit to State rule because it is beneficial to do so, or at least to passively endure the State’s depredations because the alternative is anarchy and chaos. In return for fabricating an ideological cover for its exploitation of the masses of subjects or taxpayers, these “court intellectuals” are rewarded with the power, wealth, and prestige of a junior partnership in the ruling elite. Whereas in pre-industrial times these apologists for State rule were associated with the clergy, in modern times—at least since the Progressive Era in the U.S.—they have
been drawn increasingly from the academy.

Politicians, bureaucrats, and those whom they subsidize and privilege within the economy thus routinely trumpet lofty ideological motives for their actions in order to conceal from the exploited and plundered citizenry their true motive of economic gain. In today’s world, these motives are expressed in the rhetoric of “social democracy” in Europe and that of modern—or welfare-state—liberalism in the United States. In the past, ruling oligarchies have appealed to the ideologies of royal absolutism, Marxism, Progressivism, Fascism, National Socialism, New Deal liberalism, and so on to camouflage their economic goals in advocating a continual aggrandizement of State power. In devising his theoretical guide, then, Rothbard seeks to provide historians with a means of
piercing the shroud of ideological rhetoric and illuminating the true motives underlying the policies and actions of ruling elites throughout history. As Rothbard describes this guide, whenever the would-be or actual proprietors and beneficiaries of the State act, when they form a State, or a centralizing Constitution, when they go to war or create a Marshall Plan or use and increase State power in any way, their primary  motivation is economic: to increase their plunder at the expense of the subject and taxpayer. The ideology that they profess and that is formulated and spread through society by the Court Intellectuals
is merely an elaborate rationalization for their venal economic interests. The ideology is the smoke screen for their loot, the
fictitious clothes spun by the intellectuals to hide the naked plunder of the Emperor. The task of the historian, then, is to penetrate to the essence of the transaction, to strip the ideological garb from the Emperor State and to reveal the economic motive at the heart of the issue.

In characterizing the modern democratic State as essentially a means for coercively redistributing income from producers to politicians, bureaucrats, and special interest groups, Rothbard opens himself up to the charge of espousing a conspiracy theory of economic history. But it is his emphasis on the almost universal propensity of those who employ the political means for economic gain to conceal their true motives with ideological cant that makes him especially susceptible to this charge. Indeed, the Chicago School’s theory of economic regulation and the public choice theory of the Virginia School also portray politicians, bureaucrats, and industries regulated by the State as interested almost exclusively in maximizing their utility in the narrow sense, which in many, if not most, cases involves a maximization of pecuniary gain.  However, economists of both schools are inured against the charge of conspiracy theory because in their applied work they generally eschew a systematic, thymological investigation of the actual motives of those individuals or groups whose actions they are analyzing. Instead, their positivist methodology inclines them to mechanically impute to real actors in concrete historical circumstances a narrowly conceived utility maximization.

Free Enterprise describes a society that allows each man or woman the liberty of economic choices, permitting the companies that best serve the customers to survive by the good will engendered.  Government and private coercion are held in check, providing a free environment for the people to thrive based upon their efforts.  Government, in the free enterprise system, plays the role of an umpire, ensuring equality of playing conditions, so that the winning team is the one that serves the customer the best, giving no special deals to any team.  Although free enterprise is the best system in theory and practice, it has rarely been understood in theory and never applied in practice.

Economism describes a society where big business partners with government to provide positive economic arrangements for the chosen few.  Government, instead of playing the role of a neutral umpire, becomes the 12th man on the proverbial football team, helping assist Big Businesses, regardless of the on the field performance.  It’s not hard to find evidence of Economism, simply glancing at any city newspaper, you will read about the latest government “bail out” of XYZ company for the sake of “protecting American jobs.”  Every bail out, in the end, is funded by tax payer dollars, which means the tax payers get to subsidize the wealthy business owner who isn’t competently running his business.  Bail outs cost more to job holders than any protection of jobs the bail out can offer, but that is of secondary importance and not the immediate concern of the politician who is only in office for a limited time anyway.  Government involvement brings in a political element into the economic sphere, damaging the ability of the customers to vote for the business which serves them best.

The sad part of Economism, a confused middle way between Fascism and Free Enterprise, is people will assume Free Enterprise has failed.  In fact, Free Enterprise hasn’t failed in America, it hasn’t been tried.  Any time government involves itself positively in the economy, it begins to play a god-like role, choosing which companies will survive, and which companies will die, even though, it’s less qualified to do so than the millions of customers playing that role in a true Free Enterprise system.   Economism isn’t new, dating back to Egypt under the Pharaohs, if not even earlier, but its modern day examples play god on a much bigger scale.  Look at China, it isn’t communist any longer, but it isn’t free enterprise either; instead, it’s a blend of big business partnered with government, i.e: Economism.  Sadly, China is giving more freedom to business owners in its titular communist system than the United States is giving to business owners in its titular free enterprise system.

What first attracted my attention to this was the astonishing extent to which the rich received special deals from the government.  This is simply unacceptable in a Free Enterprise system.  Many, but not all, of the great fortunes were made by means which were patently unfair, and were known to be so.  Owners of large conglomerates who gained control or at least influence of the State’s machinery, and were using it to their own advantage by way of land-grants, tariff concessions, franchise monopolies and every other known form a law-made privilege, abused the system, all in the name of American Economism.  In view of American justice for all, this was shamefully bad.  Yet on should not blame business owners for exploiting the existing system to their personal advantage, after all, flowing water always follows the riverbed; therefore, true change needs to correct the riverbed, not just punish the water for following the riverbed.  Economism gives the government the unnatural right to intervene in protective tariffs, income taxation, regulation, etc; we should not be shocked that some enterprising, but characterless individuals utilize government intervention for exploitation purposes.  True Free Enterprise has no part and parcel with Economism, knowing that favoritism can never be squared with justice.  On the contrary, free enterprise views government as a neutral umpire in the game of business, while Economism views government as a partner to exploit the masses for the benefit of the elite politicians and business owners.  With Economism reigning as the world-view of nearly all politicians and Big Businesses, what could we expect but a continuous struggle for control of the State machinery, many resorting to pay offs, corruption and the lot to win, all for the right to exploit others with State’s power for one’s personal advantage.

While there are many issues, some listed above on the short sightedness of government intervention in the economy, one of the biggest is the concept called “Destruction of the Commons.”  Government when it ceases to be an umpire and starts playing as a participant in the economy, quickly becomes the battleground of competing groups for control of government’s monopoly of power.  Since citizens have no appeal to any source that isn’t part of the government, gaining control over the political means of power is a major competitive advantage for any big business over its unconnected competitors.  Politicians do not own the government, but only rent their seats for a time, willingly surrendering their influence to the needs of big business in order to ensure their elections.  The politician is thinking of his gain by being elected and isn’t worried about the long term effects of his behavior to the people in general, which perfectly describes the “Destruction of the Commons.”   When you rent a car, you’re not as worried about taking care of it, it isn’t yours and the owner will have to fix those brakes, shocks etc anyway.  If you go faster over bumps in the road, it isn’t the end of the world since it isn’t your car anyway.  Sadly, most politicians think that way about our government, caring little about the national debt, crippling taxation, and economic ruin as that will be someone else’s problem, not theirs.

As a leader, father, and an American, I am asking for my fellow American’s to get educated and informed on our American history and ideals.  What the Founding Fathers envisioned, implemented, and expected, they certainly weren’t perfect and we could learn much from their successes and failures, would be a great start.    There are many books to begin this journey, but I recommend starting with Albert Jay Nock, Our Enemy the State.  It clearly explains why government and business do not mix; even though it is written in the 1930’s, it predicts accurately many of America’s current fiscal dilemmas.  The best way to change the future is to learn from the past and to act in the present. I think its time we start that process. God Bless, Orrin Woodward

Steven Wynn tells it like it is and every freedom loving American should wake up and take notice.  When billionaires cannot predict the political environment you know you have a train wreck in process in Washington DC.  Watch this video and ponder what our government has done to our money, our savings, our taxes, our futures, and our hope.  We must put Washington DC on a crash diet!  God Bless, Orrin Woodward

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I believe an understanding of economics is essential for any leader in any field today.  Without the freedom of action in the economic field, there is a subsequent loss of freedom in any leadership endeavor as well.  Chief Justice Marshall stated, “The power to tax is the power to destroy.”  When governments covet power more than they value liberties, the citizens lose their freedoms, money, and dignity.  If you are a leader or future leader then read the following thoughts by Murray Rothbard in his introduction to his study of Economic History.  Rothbard’s thoughts will start the education process to learn why the American and World Economy is in its current mess.  Do we honestly still believe that government can solve our problems when they cannot even solve their own?  We need a new paradigm that accurately predicted the results of the latest Statist interventions in our economies.  The Austrian Economists are the only school that studies the interventions and accurately predicts the dismal results.  Modern economics is in a dead end street and must admit failure before it can break free of it prevailing Keynesian paradigm.  Every promise by Big Government to solve your problems is actually a power grab to take more of your money and freedoms.  Wake up America before it’s too late!  God Bless, Orrin Woodward

The continual progress, onward-and-upward approach was demolished for me, and should have been for everyone, by Thomas Kuhn’s famed Structure of Scientific Revolutions. Kuhn paid no attention to economics, but instead, in the standard manner of philosophers and historians of science, focused on such ineluctably ‘hard’ sciences as physics, chemistry, and astronomy. Bringing the word ‘paradigm’ into intellectual discourse, Kuhn demolished what I like to call the ‘Whig theory of the history of science’. The Whig theory, subscribed to by almost all historians of science, including economics, is that scientific thought progresses patiently, one year after another developing, sifting, and testing theories, so that science marches onward and upward, each year, decade or generation learning more and possessing ever more correct scientific theories. On analogy with the Whig theory of history, coined in mid-nineteenth century England, which maintained that things are always getting (and therefore must get) better and better, the Whig historian of science, seemingly on firmer grounds than the regular Whig historian, implicitly or explicitly asserts that ‘later is always better’ in any particular scientific discipline.

The Whig historian (whether of science or of history proper) really maintains that, for any point of historical time, ‘whatever was, was right’, or at least better than ‘whatever was earlier’. The inevitable result is a complacent and infuriating Panglossian optimism. In the historiography of economic thought, the consequence is the firm if implicit position that every individual economist, or at least every school of economists, contributed their important mite to the inexorable upward march. There can, then, be no such thing as gross systemic error that deeply flawed, or even invalidated, an entire school of economic thought, much less sent the world of economics permanently astray.

Kuhn, however, shocked the philosophic world by demonstrating that this is simply not the way that science has developed. Once a central paradigm is selected, there is no testing or sifting, and tests of basic assumptions only take place after a series of failures and anomalies in the ruling paradigm has plunged the science into a ‘crisis situation’. One need not adopt Kuhn’s nihilistic philosophic outlook, his implication that no one paradigm is or can be better than any other, to realize that his less than starry-eyed view of science rings true both as history and as sociology.

But if the standard romantic or Panglossian view does not work even in the hard sciences, a fortiori it must be totally off the mark in such a ‘soft science’ as economics, in a discipline where there can be no laboratory testing, and where numerous even softer disciplines such as politics, religion, and ethics necessarily impinge on one’s economic outlook.

There can therefore be no presumption whatever in economics that later thought is better than earlier, or even that all well-known economists have contributed their sturdy mite to the developing discipline. For it becomes very likely that, rather than everyone contributing to an ever-progressing edifice, economics can and has proceeded in contentious, even zig-zag fashion, with later systemic fallacy sometimes elbowing aside earlier but sounder paradigms, thereby redirecting economic thought down a total erroneous or even tragic path. The overall path of economics may be up, or it may be down, over any give time period.

In recent years, economics, under the dominant influence of formalism, positivism and econometrics, and preening itself on being a hard science, has displayed little interest in its own past. It has been intent, as in any ‘real’ science, on the latest textbook or journal article rather than on exploring its own history. After all, do contemporary physicists spend much time poring over eighteenth century optics?

In the last decade or two, however, the reigning Walrasian–Keynesian neoclassical formalist paradigm has been called ever more into question, and a veritable Kuhnian ‘crisis situation’ has developed in various areas of economics, including worry over its methodology. Amidst this situation, the study of the history of thought has made a significant comeback, one which we hope and expect will expand in coming years. For if knowledge buried in paradigms lost can disappear and be forgotten over time, then studying older economists and schools of thought need not be done merely for antiquarian purposes or to examine how intellectual life proceeded in the past. Earlier economists can be studied for their important contributions to forgotten and therefore new knowledge today. Valuable truths can be learned about the content of economics, not only from the latest journals, but from the texts of long-deceased economic thinkers.