The third day of the Salamanca conference gave a fresh start, but I sure had the sense when we gathered for coffee that some folks had been out rather late the night before. In Salamanca, there seems to be a funny habit at work. You go to dinner between 8 and 9pm, but you don’t eat and run. You stay and stay, and the service reflects that expectation. You stay for desert. Then you stay for coffee by which time it is already midnight or later. Then you listen to the cool jazz group until 2 or later. Finally you crash and wake 10am. That’s my general impression.
Well, I spoke at 9:45 so there were some people arriving just a bit late. It is a decent tradeoff: staying out late in restaurants in Salamanca and then reading the text of the morning’s speech later or listening on youtube at some point in the future. Or perhaps just read this live blog!
My topic concerned the history of publishing technology: the transition from scribes to movable type as an analogy for the change from physical to digital publishing, and the role of mercantilism in attempting to halt change as the old technology fights to hang on against the inexorable trend.
I loved doing the research on this, reading the works of amazing specialists in publishing history. What I did not expect was that the place where our conference would be held would have huge and glorious examples of scribe work everywhere, right there for everyone to see. So this ended up being a more poignant topic than I expected.
Since I gave the talk I can hardly live blog it, so let us move on to Francisco Capella, who works at the Juan de Mariana Institute. He spoke on “The Ethics of Freedom: Property and Contracts.” His training was in physics, so his first impression of the human sciences was that it is not really science at all, since it is more-than obvious that the methods of the natural sciences cannot apply to choosing and acting person. But then he found the Austrian School, which is methodologically serious in the sense that it actually accounts for human choice.
His presentation was rather technical and fast, so I’ll have to provide mostly conclusion without the arguments, which I am certain to botch if I attempt them. The subject of ethics almost always relates to the subject of rules, that is, what people are permitting to do and what they may not do. Ethical rules have two features. First, the rules must be universal or symmetric. A minimum goal of universality is to prevent conflicts. Second, we want the rules to be functional, which is to say adequate to accomplish the end.
Two rules that you can say are inherently contradictory: all is forbidden and all is required. These principles contradict realty: you can’t both sit down and stand up at the same time. You have to make a choice. Other principles we can eliminate would be “always do good.” This is a problem because it is also impossible and it is too vague.
The right rule is: do not harm others.. It is ethically relevant. This covers the ends, but what about the means? Here Capella made a case for a strict attention to property rights as a meta-rule, a rule about rules. That is to say, the owner then becomes in charge of making all rules. He concluded by taking issue with Rothbard on the nature of the promissory contract and the alienation of the will. Again, I won’t attempt to summarize his argument for fear of getting it wrong.
Miguel Anxo Bastos Boubeta spoke next on “Power, Market, and Central Banking.” He first apologized for his English, but I must say his delivery ended up being very compelling. He has a sort of boom personality and a wild passion that is nothing sort of riveting.
He began by saying what everyone knows: there is not one theory of the state in the Austrian School. There are two. There is the liberal theory of the state, which believed in a limited state, one that merely enforced a minimum set of rules. The state in this view is a good thing, something necessary.
The modern Austrian theory of anarcho-capitalism is very different. It regards the state as universally bad. The state loots and destroys and nothing else, all in the name of some abstract common good. This view regards the state as a predator born in conquest. Perhaps the first person to have this view was St. Augustine. In modern times, the major thinker who advanced this view was Franz Oppenheimer with this book on The State. He was not a libertarian but he had a realist view of the core of the state. This theory was adopted by many traditions of thought, including socialistic ones among the so-called left anarchists; they were correct on the state but not correct on economics.
Much to the surprise of everyone, this presentation was the first and only to describe “liberal” as being a terrible thing, a person who naively believes that the state has some good to do for the world. It was obviously to everyone that he loathed liberalism for this very surprising reason. It was the last thing anyone expected to hear but it was challenging and interesting.
What is the role of the central bank in the predatory theory of the state? Bastos Boubeta said that the central bank is one of three levers of the state: education, military, and monopoly control of the money. This monopoly of money is of course not necessary but it is useful to the state. It finances the state and pays for its wars and aggressions. It pays for the welfare state to keep the population dependent. Taxes are not enough to pay for these activities. Inflation makes it possible to finance this without agitating the population as taxes inevitably do.
The second role of the money monopoly for the state is to legitimate the state. It gives the impression of omnipotence, e.g. when there is a catastrophe the state can intervene and provide money, saving people from terrible things. It permits the state to be seen as the great stabilizer, the great magic maker who can conjure up solutions anytime. Only the state can make money appear whenever and wherever it is needed.
It is a complete myth, he continued, that the central bank is independent. Instead it belongs to the political class and owes its very existence to state privileges. A truly independent central bank would not be a central bank at all. It is true that it engages in micro-politics and helps this or that party, and people with a liberal view of the state like to study this aspect of the central bank. But in so doing they miss the big picture that the whole purpose of the central bank is to shore up the power of the state.
His talk was the most radical of the conference thus far but it was very well received.
Hans-Hermann Hoppe next spoke on money and international politics. He began with the function of money, which is not a consumer good but a good acquired to in order to get other goods. Uncertainty is the reason we hold money and the reason it exists at all. If there were never uncertainty there would be no money. Money is the best protection against subjectively felt uncertainty. As the division of labor expands, it is expected that a single commodity will emerge as the most widely accepted commodity.
The more certain we are about our future, less cash we need to keep on hand or the less liquidity we desire. The less uncertain we are about the future, the more we need cash and the more liquidity we need.
He then turned to the state and its role in money. The state is the ultimate arbiter of disputes and conflicts, including those begun by the state itself. The thing is implausible on its face. If you got together with friends and suggested that one person alone should decide all disputes including those disputes started by the person in charge, people would say this is crazy. Such a system would lead to continuous expropriation of property owners. For this reason, it took the state many centuries to finally secure its role in society.
The state has a particular interest in controlling money, Hoppe continued. The state wants to own money for the same reason everyone else does. It permits the state greater control over events and many options for how to handle events.
All states have gone through three steps in order to gain control of money: monopolize the minting function (which permits more counterfeiting), monopolize the production of money substitutes (titles to money that certify that you are an owner of money), and finally to cut the tie between property titles to money and money substitutes. Then money can be produced out of thin air.
States then make massive use of the capability of printing money substitutes. This gains the state far more friends then it would otherwise have. The state then becomes of full-time redistributor of wealth. The people who get the money first benefit at the expense of those who get inflated money last. We then also get interest rate manipulation and the ability to pay the government’s debts. Under democracy in particular, those who run up debt bear no responsibility for what happens later.
Hoppe then turned to international politics. If one state inflates their currency relative to others, that currency will fall in value relative to others. People move from the less valued currency to the most valued currency. This poses a problem for the inflating state.
Now, all states have an interest in war because they lack a moral compass and because they can externalize the costs of aggression. This brings him to what he called the “paradox of foreign policy.” Who wins in wars and who loses in war? In order to be successful in war, you need an internally productive economy. Oppressive states do not have productive economies, so they tend to lose wars, so they are less likely to start wars. Liberal states, however, will tend to win wars and become the dominant imperial powers. An example here is Britain in the 19th century, and the U.S. in the 20th century: internally liberal but because of this a tendency to become imperialistic. This the paradox, and I do think that Hoppe is the first thinker in the Austrian tradition who has made this observer, and maybe the first ever to assert this claim.
It is not necessary that the imperial state take over countries in order to exploit them. You can engage in monetary imperialism, which amounts to convincing other countries to hold your own currency or debt as an asset on top of which to inflate their own currency. This puts the country in hock to the imperial power. The ultimate goal would be for the imperial power to create a world central bank, which eliminates the problem of decline currency values relative to other countries.
Hoppe then turned to current politics. Since 1971 we have entered a period as we’ve never seen before. The entire world was on a pure fiat money standard. With the elimination of the last tie to gold, we began to see a gradual decline of the power of the United States. For a while, this decline of power was hidden because post-socialist economies adopted the dollar as its main currency. But since that time, we have seen a series of crisis in country after country. With the recent crisis, the problems have arrived as the center of power.
In response, the central bank has engaged in massive inflation, spreading dollars from the center to its satellites. For the first time, we are seeing the prestige of the dollar hit very seriously and its domination of the world reduced dramatically. In addition, there has been a huge increase in dollar inflation plus debt that cannot be financed at existing levels of growth. The U.S. would have to save while incomes are falling. We are now looking at the real possibility of hyperinflation and default on the debt.
Of course it is possible that the U.S. will postpone the collapse but it cannot prevent a collapse. This system as it stands will not last for much longer. The only good thing that will come out of is that the American empire will completely fall apart, revealed as a paper tiger. But remember that states that are becoming very weak can also be very dangerous. The U.S. could cause another crisis through war in hopes of a world central bank. With that he sat down. The radicalism of the previous speech receded in memory as we reflected on the remarkable sweep and prophecies of Hoppe’s talk.
Lew Rockwell spoke last, covering “The Economic World of the Late Scholastics.” He first praised the meeting space, and noted that the grave of Francisco Vitoria is right next door. He first noted the absurdity of the conventional view of the middle ages. In fact, this was an age that gave birth to economic science. Their advances much anticipated the classical school and the Austrian economics. He mentioned the thinkers that brought awareness of the late scholastics: de Roover, Schumpeter, Grice-Hutchison, and of course Rothbard himself, who provided the most full elaboration of economics.
Mises said that economics is the youngest of all sciences. This sheer youth has given rise to people who reject economics altogether for the simple fact that it is modern by comparison to other sciences. The problem is acute among American conservatives, who believe that all things worth knowing can be found in the ancients and the Church fathers.
The problem here that they are neglecting economic thinking, said Rockwell. One cannot find economic science in this writings. Mises was right: economics developed much later. The reason for the rise of economics is that the rise of prosperity and capitalism gave rise to prosperity. In the late middle ages, the common people could participate in building wealth. Money institutions became complex. It was particularly interesting to see the rise of financial institutions. How should money making like this be regarded by the Church and society?
At the root of the Thomist worldview was that all truth was unified. It was all continuous from lowest to highest. Knowledge was not parceled out and segmented as it is today, when there are no links among disciplines. It is an accepted pillar of the positivist program that we must never attempt to relate one truth to another. This Scholastic’s conviction of integrated truth made them utterly fearless with regard to science. There was no such thing as a dichotomy between science and religion. They studied science as such, with deep investigations.
As Spain, Portugal, and Italy rose in prosperity, the scholars set out to discover the forces that give rise to wealth and the effects on society. .
Rockwell then continued to present the main late scholastics. Vitoria himself explains supply and demand and raised serious questions about anti-user laws. Domingo de Soto justified currency arbitrage. Another was Dr. Navarrus. He was the first thinker to condemn government price fixing. He was the first to state that the quality of money is related to its value. He said that it is not a violation of the natural law to trade in foreign exchange.
Diego de Covarrubius gave us the clearest explanation of economic value, explanting the subjective theory. All that matters is the common valuation when it is sold. It seems like a simple point but it was missed by economists for centuries. He also believed in private property. Another great thinker with Luis de Molina. He wrote a 5-volume treatise on law and economics. He was the most consistent of all the thinkers here. He was also a great opponent of all price controls. He was also an extreme liberal on the usury question.
These people used logic to understand the world around them. They contributed mightily to our understanding of the world. The resurgence of the scholastic tradition took place in Austria for a reason: Menger’s own teachers were taught in this tradition, and Austria was a place that had no experienced massive religious upheaval. Rockwell concluded that modern economists could learn much from not only the Austrians but their predecessors.
We look forward to tonight to hear a second speech by Jesus Huerta de Soto. He is this year’s recipient of the Schlarbaum Prize.