Austrianism versus Chicagoism; Normative Versus Positive Economics

From: S

Sent: Monday, March 11, 2019 8:46 PM

To: Walter Block <wblock@loyno.edu>

Subject: “I’m An ‘Austrian’ Economist: What Does It Mean?”–your column in LRC–03/09/19

Walter.

Great treatise on this subject.

Block, Walter. 2019. “I’m an ‘Austrian’ Economist: What Does It Mean?” March 7; https://www.realclearmarkets.com/articles/2019/03/07/im_an_austrian_economist_what_does_it_mean_103651.html;

However, I’m not much for definitions, as it is the TRUTH that counts the most.

Basic premise of Austrian Economics as I understand it:  Freedom and liberty in all economic transactions. In other words, the only thing that matters is that it mutually benefits all parties and that no coercion is involved.  Or as Lily Tomlin would say “And that’s the TRUTH!”

Keep those great columns coming, and most important, the TRUTH!

Have a great Spring!

S

P.S.  OK, then, what distinguishes the Chicago School from the Austrian School?  Seems as if the public and private images of the former are two different things. The layman knows Milton Friedman for his free market and libertarian views (i.e., abolish the minimum wage and legalize drugs). However, his Nobel Prize had something do with the academic discipline of what causes changes in the money prize if I understand correctly.  Enlighten me please!

Thanks – S

From: Walter Block [mailto:wblock@loyno.edu]

Sent: Monday, March 11, 2019 7:01 PM

To: S

Subject: RE: “I’m An ‘Austrian’ Economist: What Does It Mean?”–your column in LRC–03/09/19

Dear Steve:

Libertarianism is a value-laden, normative discipline; it asks one question: under what condition is violence justified; it gives but one answer: only in retaliation against, or in defense against, initiatory violence. It lives in the world of oughts, and shoulds. It is part of political philosophy.

Economics, in sharp distinction, is a positive discipline. It asks what causes what? What are the effects of this or that? It answers, or at least the Austrian version thereof answers, all human action is an attempt to make the future a better one for the actor than would have otherwise occurred without that action. The mainstream version gives a slightly different answer. Economics is totally value free. It totally abjures the world of oughts, and shoulds. It has nothing whatsoever to do with political philosophy. I fear you are confusing the two.

As to Chicago versus Austria, both are positive value-free disciplines. But, within this realm, there are important differences. Economists representing the former school of thought see market failures everywhere: monopolies, externalities, public goods, the business cycle; praxeologists reject all of this.

Here are some readings on this vitally important distinction; I limit myself to Friedman and Coase, two leading Chicagoans:

Coase critics:

Barnett and Block, 2005, 2007, 2009; Block 1977, 1995, 1996, 2000, 2003, 2006, 2010A, 2010B, 2010C, 2011; Block, Barnett and Callahan, 2005; Cordato, 1989, 1992a, 1992b, 1997, 1998, 2000; DiLorenzo, 2014; Fox, 2007; Hoppe, 2004; Krause, 1999; Krecke, 1996; Lewin, 1982; North, 1990, 1992, 2002; Rothbard, 1982, 1997; Stringham, 2001; Stringham and White, 2004; Terrell, 1999.

Barnett, William II and Walter E. Block. 2005. “Professor Tullock on Austrian Business Cycle Theory,” Advances in Austrian Economics, Vol. 8, pp. 431-443

Barnett, William II and Walter E. Block. 2007. “Coase and Van Zandt on Lighthouses,” Public Finance Review, Vol. 35, No. 6, November, pp. 710-733; http://pfr.sagepub.com/content/35/6/710

Barnett, William and Walter E. Block. 2009. “Coase and Bertrand on Lighthouses,” Public Choice; 140(1–2):1–13, http://dx.doi.org/10.1007/s11127-008-9375-x

Block, Walter E. 1977. “Coase and Demsetz on Private Property Rights,” The Journal of Libertarian Studies: An Interdisciplinary Review, Vol. I, No. 2, Spring, pp. 111-115, http://www.mises.org/journals/jls/1_2/1_2_4.pdf; reprint translation: “Coase y Demsetz sobre el derecho de propiedad privada,” Libertas 37, Octubre de 2002, año XIX, pp.5-20.

Block, Walter E. 1995. “Ethics, Efficiency, Coasean Property Rights and Psychic Income: A Reply to Demsetz,” Review of Austrian Economics, Vol. 8, No. 2, pp. 61-125, http://www.mises.org/journals/rae/pdf/rae8_2_4.pdf; http://www.mises.org/journals/rae/pdf/r82_4.pdf; reprint translation: “Ética, eficiencia, derechos de propiedad Coasianos e ingreso psíquico: una respuesta a Demsetz,” Libertas 37, octubre de 2002, año XIX, pp. 71-210

Block, Walter 1996. “O.J.’s Defense: A Reductio Ad Absurdum of the Economics of Ronald Coase and Richard Posner,” European Journal of Law and Economics, Vol. 3, pp. 265-286; http://www.walterblock.com/publications/block_oj’s-defense.pdf

Block, Walter E. 2000. “Private Property Rights, Erroneous Interpretations, Morality and Economics: Reply to Demsetz,” Quarterly Journal of Austrian Economics, Vol. 3, No. 1, Spring, pp. 63-78; http://www.mises.org/journals/qjae/pdf/qjae3_1_8.pdf; reprint translation: “Derecho de propiedad privada, interpretaciones erróneas, moralidad y economía: en respuesta a Demsetz,” Libertas 37, octubre de 2002, año XIX, pp. 227-264

Block, Walter E. 2003. “Private property rights, economic freedom, and Professor Coase: A Critique of Friedman, McCloskey, Medema and Zorn,” Harvard Journal of Law and Public Policy, Vol. 26, No. 3, Summer, pp. 923-951; http://findarticles.com/p/articles/mi_go2782/is_3_26/ai_n6640908/?tag=content

Block, Walter E. 2006. “Coase and Kelo: Ominous Parallels and Reply to Lott on Rothbard on Coase,” Whittier Law Review, Vol. 27, No. 4, pp. 997-1022; https://litigation-essentials.lexisnexis.com/webcd/app?action=DocumentDisplay&crawlid=1&doctype=cite&docid=27+Whittier+L.+Rev.+997&srctype=smi&srcid=3B15&key=7abe221cecca64ce06068c3cbfa36fd1

Block, Walter E. 2010A. “A Response to Brooks’ Support of Demsetz on the Coase Theorem.” Dialogue, Vol. 2; http://www.uni-svishtov.bg/dialog/2010/2.10.WB.pdf

Block, Walter E. 2010B. “Rejoinder to Brooks on Coase and Demsetz.” Quarterly Journal of Austrian Economics; Vol. 13, No. 4, Winter, pp. 56-73;http://mises.org/journals/qjae/pdf/qjae13_4_3.pdf

Block, Walter E. 2010C. “Rejoinder to Boettke on Coasean Economics and Communism.” Romanian Economic and Business Review, Vol. 5, No. 3, Fall, pp. 9-90; http://www.rebe.rau.ro/REBE%205%203.pdf

Block, Walter E. 2011. “Rejoinder to Bertrand on lighthouses.” Romanian Economic and Business Review, Vol. 6, No. 3, Fall, pp. 49-67; http://www.rebe.rau.ro/REBE%206%203.pdf

Block, Walter E., William Barnett II and Gene Callahan. 2005. “The Paradox of Coase as a Defender of Free Markets,” NYU Journal of Law & Liberty, Vol. 1, No. 3, pp. 1075-1095; http://tinyurl.com/2hbzd4http://www.nyujll.org/articles/Vol.%201%20No.%203/Vol.%201%20No.%203%20-%20Barnett,%20Block%20and%20Callahan.pdfhttp://tinyurl.com/2hbzd4

to be reprinted in Mario Rizzo, ed. forthcoming. Austrian Law and Economics

Cordato, Roy E. 1989. “Subjective Value, Time Passage, and the Economics of Harmful Effects,” Hamline Law Review, Vol. 12, No. 2, Spring, pp.229-244.

Cordato, Roy E. 1992A. “Knowledge Problems and the Problem of Social Cost” Journal of the History of Economic Thought, vol.14, Fall, pp. 209-224.

Cordato, Roy E. 1992B. Welfare Economics and Externalities in an Open-Ended Universe: A Modern Austrian Perspective, Boston: Kluwer.

Cordato, Roy E. 1997. “Market-Based Environmentalism and the Free Market: They’re Not the Same,” The Independent Review, Vol. 1, No. 3, Winter, pp. 371-386.

Cordato, Roy. 1998. “Time Passage and the Economics of Coming to the Nuisance: Reassessing the Coasean Perspective,” Campbell Law Review, vol. 20, No. 2, Spring, pp. 273-292

Cordato, Roy. 2000. “Chasing Phantoms in a Hollow Defense of Coase” The Review of Austrian Economics, Vol. 13, No. 2, September, pp. 193-208.

DiLorenzo, Tom. 2014. “When Did Ronald Coase Become the Ayatollah of Economic Theory?” January 2; https://www.lewrockwell.com/2014/01/thomas-dilorenzo/the-beltarian-cult/

Fox, Glenn. 2007. “The Real Coase Theorems.” The Cato Journal: An Interdisciplinary Journal of Public Policy Analysis. Volume 27 Number 3, Fall, pp. 373-396; http://www.cato.org/pubs/journal/cj27n3/cj27n3-5.pdf

Hoppe, Hans-Hermann. 2004. “The Ethics and Economics of Private Property.” October 11; https://www.lewrockwell.com/hoppe/hoppe11.html

Krauss, Michael. 1999. “Tort Law, Moral Accountability, and Efficiency: Reflections on the Current Crisis” Markets and Morality, Vol. 2, No. 1, Spring; http://www.acton.org/publicat/m_and_m/1999_spr/krauss.html

Krecke, Elisabeth. 1996. “Law and the Market Order: An Austrian Critique of the Economic Analysis of Law,” Journal des Economistes et des Etudes Humaines 7(1), March, pp.19-37; Commentaries on Law&Economics, 1997 Yearbook, ed., Robert W. McGee, pp.86-109.

Lewin, Peter.  1982. “Pollution Externalities: Social Cost and Strict Liability.”  Cato Journal, vol. 2, no. 1, Spring, pp. 205-229.

North, Gary. 1990. Tools of Dominion: The Case Laws of Exodus, Tyler, TX: Institute for Christian Economics.

North, Gary. 1992. The Coase Theorem, Tyler, TX: The Institute for Christian Economics

North, Gary. 2002. “Undermining Property Rights: Coase and Becker,” The Journal of Libertarian Studies: An Interdisciplinary Review, Vol. 16, No. 4, Fall, pp. 75-100; http://www.mises.org/journals/jls/16_4/16_4_5.pdf

Rothbard, Murray N. 1982. “Law, Property Rights, and Air Pollution,” Cato Journal, Vol. 2, No. 1, Spring; reprinted in Economics and the Environment: A Reconciliation, Walter E. Block , ed., Vancouver: The Fraser Institute, 1990, pp. 233-279. http://www.mises.org/rothbard/lawproperty.pdf;http://mises.org/story/2120

Rothbard, Murray N. 1997.  “Value Implications of Economic Theory,” Logic of Action I (Cheltenham, UK: Edward Elgar), pp. 255-265.

Stringham, Edward Peter, and Mark White. 2004. “Economic Analysis of Tort Law: Austrian and Kantian Perspectives.” In Law and Economics: Alternative Economic Approaches to Legal and Regulatory Issues, ed. Margaret Oppenheimer and Nicholas Mercuro, 374-392. New York: M.E. Sharpe.http://www.sjsu.edu/stringham/docs/Stringham.and.White2005.pdf

Stringham, Edward. 2001. “Kaldor-Hicks Efficiency and the Problem of Central Planning,” Quarterly Journal of Austrian Economics, Vol. 4, No. 2, Summer, 41-50; http://www.mises.org/journals/qjae/pdf/qjae4_2_3.pdf

Terrell, Timothy D. 1999. “Property Rights and Externality: The Ethics of the Austrian School.” Journal of Markets and Morality. Vol. 2, No. 2, Fall; http://www.acton.org/publications/mandm/mandm_article_114.php

Debate: Block vs. Demsetz: Block – Demsetz debate (on Ronald Coase):

1. Block, Walter E. 1977. “Coase and Demsetz on Private Property Rights,” The Journal of Libertarian Studies: An Interdisciplinary Review, Vol. I, No. 2, 1977, pp. 111-115; http://www.mises.org/journals/jls/1_2/1_2_4.pdf

2. Demsetz, Harold. 1979. “Ethics and Efficiency in Property Rights Systems,” in Time, Uncertainty and Disequilibrium: Explorations of Austrian Themes, Mario Rizzo, ed., Lexington Mass.: D.C. Heath and Co; http://mises.org/Books/timeuncertainty.pdf (see chapter 5)

3. Block, Walter E. 1995. “Ethics, Efficiency, Coasean Property Rights and Psychic Income: A Reply to Demsetz,” Review of Austrian Economics, 8 (2): 61-125, http://www.mises.org/journals/rae/pdf/rae8_2_4.pdf

4. Demsetz, Harold. 1997. “Block’s Erroneous Interpretations,” Review of Austrian Economics, Vol. 10, No. 2, pp. 101-109; http://www.mises.org/journals/rae/pdf/rae10_2_6.pdf

5. Block, Walter E. 2000. “Private Property Rights, Erroneous Interpretations, Morality and Economics: Reply to Demsetz,” Quarterly Journal of Austrian Economics, Vol. 3, No. 1, Spring, pp. 63-78; http://www.mises.org/journals/qjae/pdf/qjae3_1_8.pdf

Critiques of Milton Friedman:

Block, 1999, 2003, 2010, 2011, 2013; Block and Barnett, 2012-2013; McChesney, 1991; Rothbard, 2002; Friedman and Block, 2006; Friedman and Block, 2006; Kinsella, 2009; Lind, 2012; Machan, 2010; McChesney, 1991; North, 2012; Rothbard, 2002; Vance, 2005; Wapshott, 2012; Wenzel, 2012; Wilcke, 1999

Block, Walter E. 2013. “Was Milton Friedman a socialist” Management Education Science Technology Journal (MEST Journal); Vol. 1, No. 1, pp. 11- 26; http://mest.meste.org/MEST_1_2013/_02.pdf;

http://mest.meste.org/MEST_1_2013/Sadrzaj_eng.html

Block, Walter E. 1999. “The Gold Standard: A Critique of Friedman, from the free enterprise perspective, Greenspan,” Managerial Finance, Vol. 25, No. 5, pp. 15-33; http://giorgio.emeraldinsight.com/Insight/viewContainer.do?containerType=Issue&containerId=13529; http://www.mises.org/etexts/goldcritique.pdf

Block, Walter E. 2003. “Private property rights, economic freedom, and Professor Coase: A Critique of Friedman, McCloskey, Medema and Zorn,” Harvard Journal of Law and Public Policy, Vol. 26, No. 3, Summer, pp. 923-951; http://findarticles.com/p/articles/mi_go2782/is_3_26/ai_n6640908/?tag=content

Block, Walter E. 2010. “Milton Friedman on Intolerance: A Critique.” Libertarian Papers; Vol. 2, No. 41;

http://libertarianpapers.org/2010/41-block-milton-friedman-on-intolerance-a-critique/; http://mises.org/daily/6208/Friedman-on-Intolerance-A-Critique

Block, Walter E. 2011. “How Not To Defend the Market: A critique of Easton, Miron, Bovard, Friedman and Boudreaux .” Journal of Libertarian Studies; Vol. 22, pp. 581–592; http://mises.org/journals/jls/22_1/22_1_28.pdf

Block, Walter E. and William Barnett II. 2012-2013. “Milton Friedman and the financial crisis,” American Review of Political Economy, Vol. 10, No. 1/2, June, 2012 – June 2013; pp. 2-17; http://www.ARPEJournal.com; http://arpejournal.com./ARPEvolume10number1-2/Block.pdf; arpejournal.com

Friedman, Milton and Walter E. Block. 2006. “Fanatical, Not Reasonable: A Short Correspondence Between Walter E. Block and Milton Friedman (on Friedrich Hayek’s Road to Serfdom).” Journal of Libertarian Studies, Vol. 20, No. 3, Summer, pp. 61-80; http://www.mises.org/journals/jls/20_3/20_3_4.pdf; https://mises.org/system/tdf/20_3_4.pdf?file=1&type=document

Kinsella, Stephan. 2009. “Milton Friedman on Intolerance, Liberty, Mises, Etc.” November 9;

http://archive.mises.org/11004/milton-friedman-on-intolerance-liberty-mises-etc/

Lind, Michael. 2012 .  « Thank you, Milton Friedman: How conservatives’ economic hero helped make the case for big government.” August 7 ;

http://www.salon.com/2012/08/07/thank_you_milton_friedman/

Machan, Tibor R. 2010. Milton Friedman and the Human Good, June 7; http://mises.org/daily/4451/Milton-Friedman-and-the-Human-Good

McChesney, Fred. 1991. “Antitrust and Regulation: Chicago’s Contradictory Views,” Cato Journal, Vol. 10, No. 3, Winter, pp. 775-778

North, Gary. 2012. “Detours on the Road to Freedom: Where Milton Friedman Went Wrong.” https://archive.lewrockwell.com/north/north1178.html

Rothbard, Murray N. 2002. “Milton Friedman Unraveled.” Journal of Libertarian Studies, Vol. 16, No. 4, Fall, pp. 37-54; http://www.mises.org/journals/jls/16_4/16_4_3.pdf

Vance, Laurence M. 2005. “The Curse of the Withholding Tax” April, 21;

http://mises.org/daily/1797

Wapshott, Nicholas. 2012. “A Lovefest Between Milton Friedman and J.M. Keynes.” July 30; http://www.thedailybeast.com/articles/2012/07/30/nicholas-wapshott-a-lovefest-between-milton-friedman-and-j-m-keynes.html

Libertarians worship Milton Friedman, and liberals lionize John Maynard Keynes. But a long-lost essay shows that the champion of small government admired the prince of the New Deal.

Wenzel, Robert. 2012. “How Milton Friedman Helped Make the Case for Big Government.” August 9; http://www.economicpolicyjournal.com/2012/08/how-milton-friedman-helped-make-case.html

Wenzel, Robert. 2018. Foundations of Private Property Society Theory: Anarchism for the Civilized Person. San Francisco: lulu.com; https://www.amazon.com/gp/product/1387615173/ref=as_li_ss_tl?ie=UTF8&linkCode=sl1&tag=economicpolicyjournal-20&linkId=56db85887e20e4384fc0282b7c319557&language=en_US

Wilcke, Richard R. 1999. “An appropriate ethical model for business,

and a critique of Milton Friedman,” http://mises.org/journals/scholar/Ethics.PDF

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8:24 pm on July 20, 2019