Mises Memo News from the Ludvvig vox Mises Institute • Spring 2003

In fact, Mises was right that

War and Recession
By tradition and convention,
economics and foreign mili
tary policy are seen as radically
separate categories. In the class
room and newspapers, war is
treated in the area of politics while
economics is covered under the
category of business.
But are they really all that sep
arate? Neither in theory nor his
tory, a fact which is currently hit
ting home in the most brutal way.
In U.S. politics, it is common
for pundits to favor both free
enterprise and militarism, while
opponents of war sometimes tend
toward socialist thinking. The
confluence of these positions,
however common, lacks intellec
tual justification.
Big government can come in
many forms, and it is naive to
think free enterprise can be pro
tected against encroachments so
long as government insists on
funding an overblown military
machine. By the same token, those
who favor the welfare state at
home empower the same govern
ment to expand internationally
through intervention and war.
Looking at history, war often
follows an economic downturn.
Politicians see international con
flict as a nice distraction
falling incomes and declining eco
nomic prospects. To follow the
Keyncsian prescription precisely—
boosting spending to give aggre
gate demand a solid kick—war
would seem to be just the ticket.
war prosperity is like the prosper
ity that cholera brings. It increases
the income of undertakers but it is
hardly good news all around. The
sheer waste of material and human
resources, diverted from produc
tion to destruction, represents an
incredible imposition on society.
The link between war and
recession also appears in the fol
lowing chain of events. A reces
sion results from overextension
during the boom times, and puts
new pressures on industries unac
customed to strains on profitabil
ity. These industries lobby for
from
protectionist measures. These
measures rupture formerly peace
ful international relations and give
rise to conflicts that spin out of
control.
That is not the precise course
that the war on Iraq has taken—

SECOND EXPANDED EDITION

SOCIALISM (THE
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A History of Money and
Banking in the United States
though 10 years of sanctions did
not foster warm relations between
the U.S. and Persian Gulf states.
In fact, these sanctions have been
variously cited by terrorists and
their sponsors as the proof that the
U.S. represents a destructive force
in international affairs.
The sanctions not only harmed
civilians in Iraq; they were the rea
son many people joined the terror
ist armies. The U.S. government is
now using this dircat as the excuse
for the largest expansion of gov
ernment power in several genera
tions.
The causal link can run the
other way too. War can lead gov
ernment to engage in a bout of
debt and inflationary finance that
appears to create a temporary
prosperity, only to be followed by
a recession and attempts by the
political class to avoid its
inevitable effects.
Finally, both war and recession
are man-made calamities, or, more
precisely, government-made. They
The Mises Memo is published quarterly
by the Ludwig von Mises Institute. Vol
ume 9, No. 1. Copyright © 2003 by the
Ludwig von Mises Institute, 518 West
Magnolia Ave., Auburn, Alabama 36832-
4528; 334-321-2100; fax 334-321-2119;
info@mises.org; www.mises.org.
with cooperation. Omnipotent
EGALITARIANISM Government (1946) demonstrated
AS A REVOLT the protectionist roots of Nazi
AGAINST NATURE economic ideology.
and Other Essays
Murray N. Rothbard links up
foreign and economic polity in his
essay "War, Peace, and die State,"
reprinted in Egalitarianism as a
RevoltAgainstNature. His America's
Great Depression (1963) provides the
necessary foreground to understand
World War II, while hisA History of
Money and Banking in the United
Murray N. Rothbard
States (2002) shows die connection
between war and economics in
fomenting and funding conflict.
are the evidence that the political
If war is so bad for the econ
sector exercises too much power
omy, and if recessions often gener
over society, so much so that the
ate policies that foment war, what
peace and prosperity that comes
is the alternative proposed by liber
with free markets and free trade is
tarians? The answer can be summed
displaced by an atmosphere of con up in three phrases: free ttade, free
flict and even violence.
markets, and sound money. And
Ludwig von Mises wrote sev yet, so long as government is
eral books attempting to explain charged witii sole responsibility of
the connection between economic providing "national defense," is it
policy and political conflict. His realistic to think that the govern
Nation, State, and Economy (1919) ment won't foment war at the
examined World War I and its after expense of real security?
math. Socialism (1922) demon This year, the Miscs Institute
strated how much die central plan will make a huge contribution to
ners like die atmosphere of wartime the literature on this topic. The
as a great breeding ground for Myth of National Defense is a col
socialism. Liberalism (1929) showed lection of articles, edited by Hans-
how a free society replaces conflict Hermann Hoppe, which deals
THE RISE OF X
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VON MISES
News from the Ludwig von Mises Institute Spring 200.'3
frankly with die problem of the
national security state and its rela
tionship to a free society.
Whereas the founding fathers
worried about standing armies, we
must now worry about completely
militailed societies, whole nations
organized around the principle
that they should engage in global
war in order to bring security. But
this book argues that the entire
apparatus of national security,
despite many trillions in expendi
tures, has actually managed to
weaken security for all Americans.
security services originate? How
did monarchies handle the ques
tion? How was security provided
in the Colonial experience? How
and to what extent can security be
provided at a profit? What is the
role of ideologv in the national-
defense state? Is there any basis for
the claim that security is a public-
good that can only be provided by
the government? In a fully priva
tized society, what kind of institu
tions would replace the national
security state? What is the best
means toward achieving fully pri
scholarship showcased within the
book to shake up opinion in and
out of libertarian circles. Rarely is
the logic of free markets pushed to
the point that such fundamental
questions are examined. But in an
age when gated subdivisions, pri
vate security companies, and pri
vate firearms provide more secu
rity than a $400 billion national
defense budget, the question is
worth close examination. •
Loving Mises.org

The contributors deal with such vate security provision? One of the 9,000 subscribers
questions as: how did the idea that There's never been a book like to the daily email from
die state must have a monopoly on this, and we are expecting the Mises.org writes: uPvc been reading

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Friday, February 14, 2003

Costs of War on Iraq Content

"War," said Ludwig von Mises "is harmful, not only to the Market Update
conquered but to the conqueror. Society has arisen out LewRockwell.com
of the works of peace; the essence of society is ASC8 Papers
peacemaking. Peace and not war is the father of all
Calendar
things. Only economic action has created the wealth
Special Report
around us; labor, not the profession of arms, brings
About Mises
happiness. Peace builds, war destroys." More...
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Gregory Bresiger merely wanted to check out a video Rothbard Books
that both the library catalog and a clerk said was on the and Essays
shelves. Instead, he stood face to face with what
mm seemed to be the very embodiment of the entire public
sector. Whether running libraries or global economies,
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Spring 2003 News i-uom tup: Luowic. von Misks Instititk

the daily articles since you started
sending them, and I have to say
this is the single most valuable
piece of email I get each day—the
one I can be absolutely certain will
never be a waste of my time. The
Mises Institute contributors offer
the most varied, yet consistently
brilliant, commentary available,
no matter what the topic.
"Anyone following these
pieces as closely as I have would
gain a better education in econom
ics and ail the social sciences than
they could get in any classroom
(except, possibly, yours). I'm not
an economist, just an interested
layman who loves liberty and the
Austrian thinkers who have done
more than any others to defend it.
"In fact, the Austrians have
helped shape my outlook by giv
ing me deeper insight into politi
cal and economic realities. You
might call this an unintended con
sequence, and perhaps not an
important one. But it has been
veiy meaningful to me. In short—
thanks, and keep up the great
work!" •
paper currency. He has also found
that they made subtle errors, later
corrected by the Austrians, that led
to the undoing of hard money in
favor of soft.
Interestingly, Alan Greenspan
recently confirmed the relationship
between the welfare state and
paper money in a letter to our Dis
tinguished Counsellor, Congress
man Ron Paul. Paul had to ask why,
in light of the recessions so clearly
wrought by a boom fueled by loose
money and credit in the 1990s, we
shouldn't consider gold backing for
the currency. Greenspan responded
Ron Paul
that the gold standard "is inconsis
tent with significant government
The Gold Standard entitlement programs."
With a war looming and the Gertchev's papers are being
recession lingering, gold delivered at the weekly Austrian
shot up in price, once again Workshop at our offices in Auburn,
astounding the critics who keep along with many other talks on
proclaiming the death of this pre aspects of economics, philosophy,
cious metal that once served as the law, and politics. Other fellows
basis of the nation's currency. Lud- working on projects include Steven
Yates, who has completed his book
wig von Mises, of course, was the
on logic, and Scott Trask who is
twentieth century's leading cham
working on American banking his
pion of the gold standard against
tory. Resident Fellow Guido Hiils-
the Keyncsian celebration of paper
mann leads our weekly seminar.
currency. His students like Murray
Rothbard and Hans Sennholz fol Members are welcome to attend (see
lowed in his footsteps, and simi Mises.org for the schedule). •
larly championed sound money
with commodity' backing.
Visiting Massey Fellow Niko-
lay Gertchev, who is completing
his Ph.D. at the University of
Paris, has been investigating criti
cisms of the gold standard and has
come to see the money question as
the crucial one that divides the
laissez-faire school from the statist
school. In the end, if you want big
government, paper currency pro
vides the ticket because it permits
expansion without taxation.
Investigating the classical econ
omists in a series of articles, he has
found diem all to be champions of
sound money and opponents of
Ni-;ws from Tin-: I.rinvic. von Misks Instititi-: Spring 2003

Robert Higgs
Austrian Sghoiars
Gather
The Austrian Scholars Confer
ence is an event that never
stops growing. In its nine years,
each year's program has attracted
more presenters and attendees.
This year, we are expecting the
biggest showing yet, with more
than 80 new pieces of scholarship
covering an incredible array of
topics on economics, history, phi
losophy, law, and more.
In addition to die four lectures
named in honor of Hayek, Mises,
Rothbard, and Hazlitt (given
respectively by Sudha Shenov, John
Cochran, Butler Shaffer, and Gene
Callahan), a new plenary lecture
has been added this year: The Lou
Church Memorial Lecture in Reli
gion and Economics.
The first Church lecture will
be given by Timothy Terrell of
Wofford College. His topic con
cerns the growing influence of
faith-based environmental politics,
and its penetration of both reli
gious denominations and public
life. He argues that the champions
of religious cnvironmentalism nei
ther know nor care about eco
nomics, but that the underlying
Spring 2003 News from the Ludwio von Mises Institute
assumptions of their worldview are
contrary to basic notions of prop
erty rights.
We will also present the sec
ond annual Kurzweg Family Prize
for outstanding personal achieve
ment in the scholarship of liberty.
Made possible by scholar-surgeon
Frank Turner Kurzweg, the prize
this year goes to Robert Murphy, a
graduate student at New York
University. In addition to doing
outstanding academic work, he
has been a vigorous participant in
public debates about economic
theory and policy, and has already Ralph Raico
published his first book on the
role of insurance in the provision
of security. Finally the winner of faculty to assemble to teach the
the Lawrence W Fcrtig Prize in fundamentals and applications of
Austrian Economics will be
Austrian theory. In that time, the
announced. •
program has developed a reputa
tion for excellence in teaching
Summer 2003 unmatched by any other program
Summer is the busiest time of
available.
the year at the Mises Institute. We also look forward to two
This year, the Mises University has week-long history seminars, one
attracted a continuing stream of led by Ralph Raico and the other
applicants hoping for a chance to by Robert Higgs. Raico is a lead
study under a top faculty of Aus ing authority on European history,
trian economists. This year will be the origin and development of
the lcSth time for students and classical-liberal thought, and the
politics of war. Higgs's specialty is
the role of economic and military
crisis in the rise of die American
leviathan. Both sets of lectures are
open to die public (pending appli
cation) . Both will be recorded and
made available after the seminars.
Also, the Rothbard Graduate
Seminar this year offers a guided
tour dirough Murray N. Roth-
bard's great economic treatises
Man, Economy, and State, and
Power and Market. These books
stand with Mises's Human Action
as primary texts on Austrian the
ory. Under the guidance of an
expert faculty, students will walk
through the texts page by page.
When it comes to teaching the
details of Austrian theory, no
books are as good as these. •
New Texts Online
Taking advantage of online
technology, we've been busy
making many important books,
monographs, and articles avail
able. Among the newest offerings
are The Underground Economy by
Hans F. Sennholz; "Keynes, The
Man," by Murray Rothbard; and
The Historical Setting of the Aus
trian School of Economics by Lud
wig von Mises. In addition, our
library of writings on taxation
continues to grow. The TariffHis
tory ofthe United States, a classic by
FrankTaussig, until now very hard
to find, is now online.
Other items online include the
Freedom Calendar for 2003, and
the complete editions of die Jour
nal ofLibertarian Studies, the Aus
trian Economics Newsletter, the
Quarterly Journal ofAustrian Eco
nomics, the Review ofAustrian Eco
nomics (vols. 1-10), and the Mises
Review. Mises.org also offers
dozens of audiotapes, including a
complete seminar by Robert
LeFevre. •
The second book on the list is
Thomas DiLorenzo's The Real
Lincoln. Epstein writes: "More
than 16,000 books have already
been written about Abraham Lin
coln. But it took an economist to
get die story right. The Real Lin
coln, by Loyola College economics
professorThomas J. DiLorenzo, is
this year's top. ... I personally
revere Lincoln as a great writer
(I've read the Second Inaugural so
often, I can recite long passages
Gene Callahan from memory). But the short and
riveting book, The Real Lincoln,
made me actively dislike him as a
politician." •
More Reviews
T w o familiar books came in
for top reviews in the Barrow's LewRogkwell . COM
year-end book roundup. "If I were Congratulations to Lew Rock
teaching an introductory course in well, founder and president of
economics," writes Gene Epstein, the Mises Institute, on his per
"I'd assign Gene Callahan's Eco sonal website. Though just three
nomicsfor Real People: An Introduc years old, it enjoys a higher traffic-
tion to the Austrian School. I also ranking than National Review
commend it to folks in search of a Online and even Rush Limbaugh's
good read on the joys of economic personal site. His daily links include
insight." commentaries on economics, war,
LewRockwell.com @0Q(D
'the premier anti-state/pro-market site on the net' PffflgQ
Friday, February 14, 2003
Bush the Infallible
War ha ordalneth. Jeffrey Tucker on the religious mind of the pre sldent. From Ihc Vault
Greg Davis on the
Government Asphyxiation
Homeland Security can kill you. Article by Brian Duneway,
Simpsons and Nasa.
The Heroic Ron Paul
Bob Wallace on doing
Osama's dirty work.
The Texas Observer is astonished to find an antiwar Republican.
Michael Peirce on the
Fuhrer.
Tracing the Box Cutters
Joseph Sobran on Bush's evidence. Thomas J. DiLorenzo on
Abe and the Indians.
What Happened? Ron Liebermann on the
Burt Blumert on the gold market. petro-dollar and war.
What Can I Do To Stop the War? John Attarian on Flea
fibbing.
Plenty, says Harry Browne.
Daniel McCarthy on
Arbitrary Arrest Michael Novak.
Bob Murphy on another totalitarian ploy.
Richard Cummings on
American Empire.
Why Our Side Is Different
A mathematical explanation from Donald Mills.
David Dieteman on God
Confederate Haggis
and Uncle Sam.
Alan Turin on an open
Jeff Adams on one aspect of the Southern-Celtic connection.
letter to France.
Saving the World
One roll of duct tape at a time, by Mark Flore. Ltw*» Columns
News from the Ludwig von Mises Institute Spring 2003
history; politics, and culture. It has
been a wonderful source
directing people to Mises.org,
which enjoys higher traffic rank
ings than any libertarian or con
servative think tank. Rockwell's
commentaries continue to run in
the Washington Times, the Ameri
can Conservative, and public-
radio's Marketplace. Also, he
recently spoke at Grove City Col
lege in honor of the accomplish
ments of Hans Scnnholz, and was
keynote speaker at the Sage Capi
tal annual economic conference in
Houston, "Beyond the Storm." •
Hayek. Garrison,
and LSE
When EA. Hayek left Vienna,
he taught at the London
School of Economics. From his
post there, he employed Misesian
business cycle theory to attack the
influence of John Maynard Keynes.
Today, die influence of Misesian
ideas is being revived through a
series of lectures made possible in
part through the influence of the
Mises Institute. The first scries of
lectures will be delivered by Roger
Garrison, adjunct scholar and
author of Time and Money, an
important book on Austrian cycle
theory. His syllabus will be
posted on Miscs.org. Truly, this is
an important milestone in the
Spuing 2003 NIO.VS FROM Till-: Ij-nWIC. VON MlSliS I.NSTITITI-:
for
FA. Hayek
advancement of Miscs's influence
across world academia. Many
thanks to LSE alumnus and British
beef baron Toby Baxendale for
making it possible. •
American Colleges
and Universities
The Austrian presence in acade
mia is growing in the U.S. and
abroad. The faculty list of the
Mises Institute gives some indica
tion of die wide variety of institu
tions where Austrians are teaching
and working, not only in economics
departments but also in history, phi
losophy, and even the humanities.
To assist students, the follow
ing has been assembled to high
light particular institutions where
students can find two or more
professors in economics depart
ments who are broadly sympa
thetic with the Austrian perspec
tive. The list is by no means
exhaustive.
• Auburn University,
Auburn, Alabama.
Contact: Roger Garrison
• California State University,
Hayward, California.
Contact: Charles Baird
• George Mason University,
Fairfax, Virginia.
Ph.D. program.
Contact: Peter Boettke
• Florida State University,
Tallahassee, Florida.
Contact: Randall Holcombe
• Grove City College,
Grove City, Pennsylvania.
Contact: Jeffrey Herbener
• Hampden-Sydney College,
Llampden-Sydney, Virginia.
Contact: Anthony Carilli
• Hillsdale College,
Hillsdale, Michigan.
Contact: Richard Ebeling
• Loyola University,
New Orleans, Louisiana.
Contact: Walter Block
• Metropolitan State College of
Denver, Denver, Colorado.
Contact: John Cochran
• New York University,
New York, New York.
Ph.D. program.
Contact: Mario Rizzo
• Ohio University,
Athens, Ohio.
Contact: Richard Vedder
• Pepperdine University
Pepperdine, California.
Contact: George Reisman
• San Jose State University,
San Jose, California.
Contact: Edward Stringham
• Wofford College,
Spartanburg, South Carolina.
Contact: Timothy Terrell. •
Times oe Giianc;e
The Fed's recession has been
tough on charitable organiza
tions. The Mises Institute is solid
as a rock, but diis is not true for
some other organizations that gen
erally support the free market. This
is grim news because it is sad to
lose a single voice for liberty, of any
sort. The ideas of capitalism would
not stand a chance alone. We need
every institution, every website,
every opportunity for teaching.
 Given this, the Mises Institute
must take on new burdens and
new responsibilities. We must do
everything possible to maintain
and indeed expand our activities
and outreach. We must make sure
that no promising student, no
future leader of freedom, slips
through the cracks. We must lift
high the uncompromising banner
of freedom, and never let it fall, or
even dip, no matter what.
This is a huge burden and
responsibility. We are eager to
shoulder it. But we need your help.
We have the greatest library and
campus of liberty. We have the best
journals and books and teachers.
We attract die finest minds. And
we do it with the minimum possi
ble expenditure. Yet, the demand
for what we do is outstripping our
ability to provide. Even now, we
turn away hundreds of students.
Institutions like the Mises Insti
tute are vital to the future of civi
lization. When Mises was driven
out of his home in Vienna, he was
able to seek refuge in an independ
ent institution of learning in
Geneva. The Mises Institute is, in
many ways, die successor to diat
institute, providing sanctuary for
scholarship and sustaining die ideas
of liberty when others buclde.
The Miscs Institute has built
its work on die support of people
like you, who care enough to sup
port ideas that would be muffled.
Now is die time to bolster that
support, to back free markets,
sound money, and liberty with all
our strength. •
In Memoriam
We mourn the passing of:
Robert N. Tuller (1907-
2002), an Indiana boy who
became a Wall Street giant. He
and his late wife Jo were dedicated
to international amity, sound
inspired by her businessman
father, a great opponent of FDR;
on the dark day of the election in
1932, he told her: "That man will
foment strikes and take us to war";
Truman Johnson (1914-2002),
a teacher and champion of free
dom who, with his wife of 63
years, Floy, ran a reading group in
Austrian economics.
Famed entrepreneur William B.
Ruger, who through the produc
Robert N. Tuller
(1907-2002)
tion of millions of pistols, rifles,
and shotguns, was a living embod
municipal finance, the gold stan iment of the second amendment;
dard, and the cause of public Texas businessman and hard-
health. The bequest of their his money advocate Justin G. Brad-
toric Florida home will fund an burn, Jr.; and
annual scholarship in their honor;
Pittsburgh businessman and
New Jersey inventor and champion of the free market,
entrepreneur Edward J. Monett Robert Kohman.
(1902-2002), who dedicated a
We mourn, and remember in
student research office at the Insti
deepest gratitude, all the Institute
tute in honor of his son, Jack; Members who have died over the
Hermona Beardslee, whose last nine months. Requiescat in
dedication to the Old Right was Pace, dear friends of liberty a
In Memoriam
We mourn the passing, and will always be inspired by the dedication
to liberty, of our benefactors. May they rest in peace,
and may we always strive to be worthy of them.
Hermona Beardslee, Justin G. Bradbum, Jr., Truman Johnson,
Robert Kohman, Mrs. Robert E. Miller, Edward J. Monett,
William B. Ruger, Robert N. Tuller
George T. Adair, H. N. Crecelius, Stanley Hirsch, James R. Malott, Jr.,
Charles Mason, Margaret Mink, Charles F. Row, J.T. Wallace
Philip F. Bagwell, William P. Cook, Louis B. Dailey, E.M. Erickson,
John G. Fifield, Don Goldberg, John D. Kennedy, Richard Mader,
John Muhl, Dennis A. Wight, C.W. Zimmerman
News from the Ludwig von Mises Institute Si-rino 200.3