Mises Media

Professor Lucas Engelhardt examines how mainstream economics has deliberately abandoned the history of economic thought, and why Austrian economists must keep teaching and re-teaching the great debates of the past.

The Ludwig von Mises Memorial Lecture, sponsored by Don Printz.

The Austrian Economics Research Conference is the international, interdisciplinary meeting of the Austrian school, bringing together leading scholars doing research in this vibrant and influential intellectual tradition.

In memory of Roger Garrison, Bob walks through Garrison's famous capital-based macroeconomics diagrams, showing how they translate the Mises-Hayek theory of the boom-bust cycle into the language of modern macroeconomics.

Related:

• Roger Garrison, The Austrian Theory of the Business Cycle: Mises.org/HAP542a
• Roger Garrison, Austrian Macroeconomics: A Diagrammatical Exposition: Mises.org/HAP542b
• The Diagrams Referenced in the Podcast: Mises.org/HAP542c
• Dr. Garrison's PowerPoints: Mises.org/HAP542d

The Mises Institute is giving away 100,000 copies of Hayek for the 21st Century. Get your free copy at Mises.org/HAPodFree

On this episode of Minor Issues, Mark Thornton replays two short interviews: one recorded with Daniela Cambone weeks before the outbreak of war in the Middle East, and another with Dunagun Kaiser recorded days ago as the conflict escalates. Mark breaks down why precious metals are unusually volatile, how war and interventionism collide with inflationary fiat regimes, and why rising interest rates and commodity prices point to a more dangerous long-run trend. He also connects the dots between the Fed’s “liquidity” talk, a deeper leverage problem in finance, and the way wars can be used to divert attention from economic failures at home.

Purchase a Minor Issues tumbler today! https://mises.org/MinorIssuesTumbler

Be sure to follow Minor Issues at https://Mises.org/MinorIssues

Combining binary and triangular interventions, the state coercively taxes citizens to pay for its services, monopolizes certain services, and then is incentivized to engage in paid non-delivery.

Original article: https://mises.org/mises-wire/its-not-anarcho-tyranny-its-interventionist-non-intervention

Dr. Catherine Pakaluk connects the dots between fiat money, the sexual revolution, and collapsing birthrates, arguing that a culture built on “sterile” choices can’t sustain real, long-run economic growth.

The Henry Hazlitt Memorial Lecture, sponsored by Murray and Florence M. Sabrin.

The Austrian Economics Research Conference is the international, interdisciplinary meeting of the Austrian school, bringing together leading scholars doing research in this vibrant and influential intellectual tradition.

Jesús Huerta de Soto traces the Austrian school's intellectual roots from the Spanish scholastics to Rothbard, making the case that anarcho-capitalism is the natural endpoint of the classical liberal tradition.

The Ludwig von Mises Memorial Lecture, sponsored by Yousif Almoayyed.

The Austrian Economics Research Conference is the international, interdisciplinary meeting of the Austrian school, bringing together leading scholars doing research in this vibrant and influential intellectual tradition.

Full Text version of the Lecture (Submitted by Prof. Huerta de Soto):

Thank you very much to the Mises Institute and Joe Salerno for his kind introduction as well as for inviting me to deliver this “Ludwig von Mises Memorial Lecture” to celebrate the one hundredth anniversary of Murray N. Rothbard’s birthday. It is the second time I visit the Mises Institute to deliver this most important lecture: The first one was almost thirty years ago, back in April 1997, when I delivered a lecture on “The Scholastic Roots of the Austrian School”. In this second opportunity I am very happy to have been able to accept Joe’s invitation and to come with a very well represented retinue of ten of my colleagues and doctoral students. All of them are teaching as professors or making their research at our more than twenty-year-old Doctoral and Master Programs in Austrian Economics at King Juan Carlos University back in Madrid, and which is the only one officially approved and with full validity inside the whole European Union. You have already had the opportunity to hear from each one of them a detailed description of the so-called “Madrid Austrian Research Hub” and of all the activities we are developing every year, including the 54 Doctoral Theses on Austrian Economics that have been read up to now in our program. And here you have also copies of the English version of our main books published by Routledge, Edward Elgar, and by the Macmillan Austrian Series edited by my Madrid Colleagues, the German professor Philipp Bagus and the Canadian professor Dave Howden. And you will have the unique opportunity to buy these books that, as you know, have a hefty price of almost 100 pounds each one, at the almost “stolen property” and symbolic price of 5 dollars per copy, thanks to the most generous help of the Spanish Jesús Huerta de Soto Foundation that is helping to finance our participation in this important event.

And now what I will do in the next forty minutes is to try to summarize not only my main contributions, but also “The Libertarian Vision of the Scientific and Moral Truth” as we see it from our Austrian School Hub in Madrid. And I will do it by focusing on a series of fundamental points.

Precisely, the youngest of all sciences, Economics is the one that has provided Humanity with the most important scientific contribution

The first one is that Economics, being the last science to arrive, or as Mises said, "the youngest of all sciences," has nevertheless achieved the milestone of providing Humanity with the most important scientific contribution. For the first time, and thanks to Economic Science, human beings have discovered and understood that voluntary social cooperation, free from all institutional and systematic external coercion, generates a spontaneous order that cannot be designed nor organized by anyone, and that peacefully and without limits drives the prosperity and expansion of Humankind.

This transcendental message of Economic Science, on the one hand, resolves the impossible antithesis of attempting to apply, within the realm of interactions carried out by human beings endowed with free will, the manipulative approach of external entities that human beings have no choice but to use, supported by technology and the natural sciences, in order to dominate the subject of the material world. And on the other hand, this is a radically revolutionary message: for the first time, it has been scientifically demonstrated that states, in any of their forms, are neither necessary nor viable; that Society, understood as a process of voluntary human interactions, does not need anyone to govern it, because it regulates and organizes itself spontaneously; and that the attempt to coordinate Society on the basis of social engineering and state coercive commands is impossible, doomed to failure, and gives rise to all kinds of distortions, social conflicts and violence, that continually hinder and block human progress.

Economic science is generalized into a complete Theory of Liberty that makes it possible to reinterpret History and promote the expansion of civilization

The second point is that Economics has been generalized into a whole Theory of Liberty, understood as the most essential attribute and requirement of human nature. Liberty means that all human actions are carried out voluntarily, based on the principle of non-aggression, and free of external coercion or violence imposed and organized from above by the always minority group of human beings who, under whatever title, exercise any kind of political power.

Moreover, Economics dismantles and turns upside down the erroneous and biased account of Thomas Hobbes and his followers. Neither was the "state of nature" a terrifying situation, nor did a supposed "social contract" ever exist or was it necessary to create and maintain a State that would impose order and guarantee peace. What happened was precisely the opposite: natural evolution consisted, above all, in the spontaneous discovery of the great advantages provided by voluntary exchanges and peaceful trade. Systematic and generalized violence, war, and terror arose only with the appearance of States, as coercive institutions composed of the most antisocial and violent human beings, who wanted (and still want) to live at the expense of plundering those citizens who earn their living by working and trading peacefully with each other (Oppenheimer, 1926).

Thus, Economics, demonstrates that what Étienne de La Boétie named "voluntary servitude", is an anti-human aberration to which human beings have been subjected for centuries. And that it is not necessary to continue with the resigned habit of obeying the State; nor do governments enjoy an aura of prestige (but are literally "stripped" of any attribute of intellectual or moral superiority); nor is the caste—or “praetorian guard”—of intellectuals, “experts”, and acolytes that surround states and rulers to be regarded as untouchable; nor should we allow ourselves to be seduced and deceived by subsidies or perks, whether supposed or real, with which they seek to purchase the will and secure the loyalty of exploited human beings, so that they will consent, voluntarily and permanently, to their exploitation and servitude (De la Boétie, 1975).

Economics is the Science developed by the Austrian School of Economics, which should in fact be known as the Spanish School, as it has its origins in the thinking of our scholastics of the Spanish Golden Age

The third point is that Economic Science has reached its highest level of development thanks to the Austrian School of Economics. As you know, our school is based on the realism of its analytical assumptions, in the dynamic approach based on the entrepreneurial, creative, and coordinating capacity of every human being, and in the study of the spontaneous and self-regulated order of the social process of voluntary human interactions (Huerta de Soto, 2008). The institutional and multidisciplinary approach of the Austrian School is also very relevant. As a result of the spontaneous social process important institutions emerge which, in turn, make it possible and drive it forward: Law and property rights rooted in human nature and discovered and developed spontaneously outside the state; the family, a basic and essential institution, on which the expansion of Humanity is made possible and consolidated; moral principles, which act as a true "automatic pilot" for liberty and which human beings internalize and transmit from generation to generation, thanks to the family and other community or religious institutions; economic institutions, and in particular, money, which also evolves spontaneously outside the State, and which can and should be considered the social institution par excellence, since by overcoming the problems of barter, it enables the exponential multiplication of voluntary exchanges and human interactions, within which the rest of the social, linguistic, moral, legal, economic, and religious institutions are discovered, shaped, and perfected.

Our fourth point is that the first theorists of the spontaneous order emerged in the field of law, led by the great jurists of classical Rome. They were the first ones to understand the organic and evolutionary nature of the social process, and so they became, without being aware of it, the first economists. Their tradition was kept alive throughout the Middle Ages thanks to the Catholic Church and, through thinkers such as Saint Thomas Aquinas, Saint Antoninus of Florence, and Saint Bernardino of Siena, eventually came to influence the Spanish scholastics of the sixteenth and seventeenth centuries gathered around the University of Salamanca. As Rothbard demonstrated (Rothbard, 1976) these thinkers of the Spanish Golden Age should be considered the most immediate precedent of the Austrian School of Economics, which, precisely for this reason, should be called the Spanish School of Economics. And in fact, these Spanish scholastics were already able to articulate the following ten essential principles which constitute the theoretical foundation of the Austrian School:

Firstly, the subjective theory of value developed by the Bishop of Segovia, Diego de Covarrubias, who as early as 1555 clearly explained that, although the objective nature of wheat is the same in Spain as in America, its price was higher in America because there human beings subjectively valued it much more highly; from this follows the correct relationship between prices and costs set out by Luis Sarabia de la Calle, in the sense that it is market prices that determine costs and not the other way around, as equilibrium theorists mistakenly believe; the Scholastics also realized that equilibrium models and prices lack realism and theoretical meaning because they presuppose a degree of knowledge “so complex that only God, and in no case human beings, could ever acquire it” (in latin “pretium iustum mathematicum licet soli Deo notum”), as already explained by the Jesuit cardinals Juan de Salas in 1617 and Juan de Lugo in 1643, more than three hundred years earlier than Hayek could conclude that “a science which assumes knowledge that can never be acquired is not a Science”; also the dynamic concept of competition is fundamental, understood as a process of rivalry among sellers based on the dynamic conception of market processes developed by Jerónimo Castillo de Bobadilla and Luis de Molina in 1589 and 1597, and that has nothing to do with the static model of "perfect competition" of equilibrium theorists; and also the important contributions of the Spanish Scholastics related with capital theory, business cycles, and the effects of fiduciary media generated by banks; so, particular emphasis should be placed on the rediscovery of the principle of time preference by Martín de Azpilcueta, following what Lessines had already stated in 1285; as well as on the fact that bankers commit mortal sin when they operate with fractional reserves, creating bank deposits as a form of virtual money (or chirographis pecuniarium, as Luis de Molina said in latin) that only exists in their accounting books and distorts the structure of relative prices, creating bubbles and deep economic crises that ultimately "bring everything crashing down," as Saravia de la Calle and Tomás de Mercado so vividly explained in the 16th Century; and in short, the Scholastic’s idea that it is impossible to organize society through coercive commands due to lack of the information that would be required to give them coordinating content; as well as the discovery that inflation is a hidden and very harmful tax that arises from an act of tyranny, since it is neither known nor accepted by citizens, which would even justify the assassination of the King according to the theory of tyrannicide, a contribution originally made by the Castilian Comuneros eventually defeated by the tyrant King Charles V in 1521, and developed by Father Juan de Mariana almost a century later [in 1610].

This entire line of proto-Austrian scholastic thought also spread throughout the Americas, especially in the newly founded universities of San Marcos in Lima and Mexico City in 1551 where brilliant disciples of these Scholastics, who had studied at the University of Salamanca itself, came to occupy prominent academic positions. Thus, for example, we should mention the cases of Bartolomé Frías de Albornoz in Mexico, and above all the great Juan de Matienzo, who became judge and president of the Royal Audiencia of Charcas and Lima from 1560 onwards (Popescu, 1997).Finally, the doctrine of our scholastics did spread even to North America two centuries later through the books of Juan de Mariana, who greatly influenced Thomas Jefferson and the founding fathers of the United States.

However, the southern part of the continent ultimately proved unable to neutralize the wave of growing statism and centralization that first came with the arrivals of the Habsburgs in Spain, and which was intensified even further after the arrival of the Bourbons with Philip V at the beginning of the eighteenth century (Martínez Marina, 1820). How different and much more prosperous and libertarian might the historical evolution of Spain and Latin America have been, had the statist centralism of the Habsburgs and the Bourbons not prevailed, and had the far more libertarian, local, and decentralized traditional representative institutions of the kingdoms of Castile instead remained predominant—institutions that were dismantled, together with Europe’s first libertarian revolution, beginning with the defeat of the Castilian Comuneros at Villalar on April 23, 1521 (Leonard Liggio, 2025).

The most important and far-reaching contributions of economic science

Let us now turn, in greater detail, to the most important contributions of Economics, as developed by the Austrian School.

First, human cooperation takes place spontaneously, without the need for anyone to organize it coercively from outside. This is so because human beings are endowed with an entrepreneurial and creative capacity that continually drives them to discover the multiple opportunities for profit that arise in their environment. Each of these opportunities embodies a previous discoordination in human behavior that remains latent until it is discovered and overcome by the corresponding entrepreneurial act. This entrepreneurial act always arises from a creative tension and interpretation of events of the outside world that is essentially subjective and, therefore, cannot be reproduced by any artificial intelligence algorithm; in other words, the same objective events can be interpreted in multiple ways, even contradictory ones, without it being possible to postulate which is correct until the corresponding entrepreneurial process is completed in the form of a subjective profit. In any case, every entrepreneurial act involves, firstly, the creation of information that did not exist before (regarding the profit opportunity that arose from the previous discoordination that had gone unnoticed); secondly, the transmission of that knowledge (directly to the parties involved in the entrepreneurial act and indirectly through a series of institutions and signals such as market prices); and third and finally, the coordination of the previous maladjustments takes place when the parties involved learn motu proprio, that is, voluntarily and for their own benefit, to discipline their behavior according to the needs of others (for example, when they discover that they achieve their ends more effectively by specializing and trading peacefully the mutual results of their efforts). The discovery of the essence of this pure entrepreneurial act, with its elements of creation and transmission of information and the spontaneous coordination of the previous maladjustments continually generated by human coexistence, constitutes the most important contribution that Economic Science has provided to Humanity, and explains why the spontaneous process of voluntary social cooperation that drives the multiplication of human beings and the expansion of civilization does not require any statist system of institutional coercion.

Another essential contribution of Economics is the concept of Dynamic Efficiency, understood as the process of unlimited expansion of human creativity and entrepreneurial coordination that arises only within a specific institutional framework of moral and legal norms. This framework is the one grounded on the ethical principle according to which every human being has a natural right to appropriate the results of his entrepreneurial creativity; that is, a property right over what one has created and which did not previously exist, which is the most obvious and important human right. For this reason, (dynamic) Efficiency and Morality and Justice (properly understood) cannot be separated one from the other; or, as we might say, they are two sides of the same coin in the sense that only Justice and Morality induce and generate efficiency; and at the same time, what is dynamically efficient in economic terms cannot be neither unjust nor immoral. All of which, on the other hand, demonstrates the integrated order that exists in the social universe, and highlights the three levels of research (theoretical, ethical, and historical) that complement and reinforce with each other and are essential in our search for truth (Huerta de Soto, 2000).

Finally, another key contribution of Economic Science is to have demonstrated the impossibility of socialism, or better, the impossibility of statism, in the sense that it is impossible for the State to achieve and coordinate what it promises for the following four reasons:

First, because of the enormous volume of information required for such coordination, which the State cannot acquire because it is dispersed in the minds of the eight billion human beings who participate and interact in the social process every day. Second, given the tacit and inarticulate character of this information (and therefore its inability to be transmitted in an objective manner). Third, because the information that is generated is not "given," nor is it static, but instead changes continuously as a result of human creativity, making it impossible to transmit today information that will only be created tomorrow, and which is precisely the information that the organs of State intervention and the so-called “experts” would need today in order to direct society to achieve their objectives tomorrow. And fourth, and above all, because the coercive nature of State commands blocks the entrepreneurial activity of creating the very information which the State organization itself would need in order to give its commands a coordinating content. In sum, the State is always and everywhere violence and coercion; coercion blocks the entrepreneurial act of creation, discovery, and adjustment of discoordinated human behavior, while at the same time preventing the creation of the information and the emergence of free market prices that make economic calculation and social coordination possible. For this reason, statism is not only unnecessary but is also scientifically impossible.

The impact of these essential contributions of Economics on the course of social evolution has so far been very limited

All of these scientific contributions have so far achieved only a very partial, imperfect, and limited impact on the inertia of a social and political reality that has for centuries been characterized by the coercive power of States and rulers, and by the more or less resigned servitude of the citizens. And despite the very limited nature of this impact to date, which at best has materialized in a series of naïve and "liberal" revolutions aimed, with as much arrogance as lack of success, toward the impossible objective of trying to separate and limit the powers of states and rulers through political constitutions and "liberal democracies" (Rothbard, 2009); Humanity has been propelled as never before in those places and historical moments where it has managed, despite everything, to at least partially free itself from the State and open up some of the new channels of liberty shown by the teachings of Economics. Beginning with the Industrial Revolution, which was but the first chapter of the never-completed "Revolution of Liberty" inspired by Economics. And although what has been achieved in terms of prosperity and standard of living by the now eight billion human beings seems relatively significant—and indeed it is—we cannot even conceive of the standard of living and population size that could be achieved if Humanity were able to take full advantage of and fully implement the teachings of Economic Science.

We can be few and poor in a context of servitude and submission to the State, or many and wealthy in a context of liberty (Hayek, 1988, p. 133). The globe is practically empty of human beings (the Earth’s current population would fit into an area equivalent to that of the state of Alaska, with a population density equal to that of Brussels). And we cannot even imagine the prosperity that could be achieved in a free market daily driven by eighty billion, or even eight hundred billion, human beings. Economics explains and demonstrates that the increasing prosperity of an ever-growing population of human beings never results from deliberate and coercive State plans, nor from the egalitarian income redistribution, nor from increases in public spending, nor from subsidies, debt, or inflation, but only arises from the free market of the capitalist system. This consists of the process of voluntary exchanges among all human beings who, endowed with an innate entrepreneurial and creative capacity, are able to detect and assess, through the system of free prices, the relative urgency and necessity of each good and service, overcoming the relative scarcity of each and satisfying, every day and in the best humanly possible way, the desires and needs of billions of consumers. Entrepreneurs who succeed in this never-ending process of profit-seeking accumulate significant resources, which, in turn, are saved and invested in capital goods and new technologies that make human beings increasingly productive, boosting their wages and standards of living; a virtuous process of continuously expanding prosperity and population growth that, if not coerced or hindered by the State, has no limits.

Therefore, it is crucially important for the future of Humanity that it be able to take full and maximum advantage of the lessons and essential message in pursuit of human liberty that Economics provides. But this will only be possible if we are able to unmask and carefully analyze the powerful forces of the pseudoscientific and counterrevolutionary reaction that has been mobilized to prevent the advance of the theory of liberty derived from Economic Science. Despite their diverse origins, they all converge on the same objective: to attempt to justify and preserve State coercion at all costs under the appearance of scientific legitimacy. They are driven by the "fatal conceit" (Hayek, 1988) of many visionaries, thinkers, and supposed "experts" who believe themselves to be clever enough to correct the spontaneous market order, of course, using the violence and coercive power of the State. Together with a privileged caste of rulers, bureaucrats and acolytes, they continually manipulate a Humanity that is sadly accustomed to serving the State. For all of them, it is vital that statism be maintained and that the message of liberty provided by Economics never prevail.

Next, we will list the main reactionary pseudoscientific currents that have infiltrated Economic Science like a lethal virus and constitute, in Hayek's terminology, "the counter-revolution of science" (Hayek, 1955).

Pseudoscientific reactionary currents opposed to Economic Science. The role played as “useful innocents” by many libertarian economists of the counterrevolutionary mainstream

First, positivism and scientism as pseudoscience. By "scientism" we must understand the improper application of the methods of the natural sciences to the field of Economic Science. Thus, while the natural sciences study their object of research as something external, measurable, and quantifiable, Economics studies the implications of the voluntary actions of human beings. And given the essentially creative nature of human beings, the supposed empirical "evidence" has, at best, only a superficial, partial, and always historically contingent value. In Bastiat's words, of "what is seen" —or rather, what is believed to have been seen— but not "what is not seen" (Bastiat, 1995); and at worst, it always entails the assumption, that human beings are an object of research that can be manipulated as the matter of the external world studied by the natural sciences. This inevitably introduces the idea that to improve the world, the State and its rulers must use their coercive power to manipulate and change the things they believe they see in their historically contingent "empirical photos." But these "empirical photos" cannot capture the underlying dynamic essence of spontaneous social processes, let alone what is already happening spontaneously to solve and coordinate every problem. Therefore, it is not surprising that from the very first steps of Economic Science promoted by the Austrian School, its most violent opponents were the "socialists of the chair" gathered around the German Historical School, reinforced in France by the empiricists of the school of Saint-Simon, the insane Comte, and Durkheim, who sought to create a new and alternative pseudoscience of society. And their unhealthy positivist and ultra-empirical influence has persisted to the present day, first through American Institutionalism and later through the massive compilation of empirical data, for example, in the work of Wesley C. Mitchell or Henry Schultz, the latter, as shown by Professor Salerno, having gone on to exert a decisive influence on his assistant Milton Friedman and, through him, even on the Chicago School itself (Salerno, 2023).

Secondly, the pseudoscience of neoclassical economics is characterized by its claim that only its own approach constitutes true “science,” that is, the approach based on the principles of equilibrium, maximization, and constancy. Moreover, in addition to the lack of realism of its assumptions, it adds the reductionism of a mathematical language that has developed in response to the needs and demands of the natural sciences, but which is alien to Economic Science because it does not allow for the subjective concept of time or entrepreneurial creativity. Neoclassical economists develop their pseudoscience based not on real human beings of flesh and blood, but on "ideal types" that are like "robotic penguins" who, even in their most sophisticated dynamic stochastic general equilibrium models are limited to moving and reacting to events and State coercion as if they were characters of a sort of economic video game ("videogame economics"). Yet neoclassical pseudoscience, despite its apparent and ever-increasing sophistication, is not capable of accounting for the immense complexity of the real world and rebels against the idea of spontaneous market order in two ways that are equally harmful to human liberty: on the one hand, by promoting the coercive "social engineering" of central banks, States, and governments to use "fine tuning" to force reality toward to the mathematical optimum of their models; and, on the other hand, by labeling as "market failures" everything they believe they observe in reality that does not coincide, in their empirical studies, with their ghostly models of “perfect” equilibrium and adjustment (Milei, 2023); failures that, according to them, refute the "benefits" of the spontaneous order of the market and human liberty, and justify their elimination as soon as possible by a coercive State authority. Note also how neoclassical pseudoscience needs, and feeds upon, the empirical work of the previous pseudoscience, positivism, in order to justify its conclusions against human liberty and in favor of State coercion, so that positivists and neoclassicists join hands and end up reinforcing each other in their reactionary agenda.

Third, Keynesianism and macroeconomics as pseudoscience. The very “macro” approach already entails, inevitably, an obvious bias in favor of justifying State intervention, aggression, and coercion against the spontaneous order of the market and human liberty. As F. A. Hayek pointed out in his Nobel Prize acceptance speech in 1974 (Hayek, 1978), macroeconomists ignore everything they cannot measure, specifically truly relevant economic processes and theories. At the same time, they believe that certain aggregate concepts—which lack genuine economic meaning—possess a “real” existence, that permits to collect empirical information or evidence that can be manipulated and statistically treated. Once again, macroeconomic pseudoscience goes hand in hand with positivist pseudoscience, and the two reinforce with each other in their counterrevolutionary reaction. Furthermore, Keynesianism is particularly harmful: not only does it flatly deny the coordinating capacity of creative entrepreneurship and the spontaneous market order, but it also builds as an alternative explanation a whole model—of course—of equilibrium with permanent unemployment, to justify the coercive intervention of the State in the lives of human beings in the form of all kinds of fiscal and monetary manipulations. Moreover, the macroeconomic and Keynesian pseudoscience feeds upon, and is reinforced by, the pseudoscientific approach of the Neoclassical School, to the point that, the so-called "neoclassical Keynesian synthesis" became, throughout the twentieth century, the main reactionary movement inside Economics. Keynesians and macroeconomists thus become the champions of that intoxication with statism, manipulation, and political power which constitutes the framework, orchestrated by governments and central banks, to which we have, regrettably, become accustomed and in which we are forced to live. This context repeatedly destabilizes the spontaneous market order, generates serious financial and economic crises and social conflicts, and continually hampers the prosperity and advance of civilization.

We have left the quasi-religious mysticism of Marxist pseudoscience for last, because Marxism was scientifically dead even before it was born: in fact, it emerged with—and was theoretically demolished by—the subjectivist revolution led by the Austrian School of Economics. From the beginning, the Austrian School’s development of time preference and capital theory revealed the contradictions and grave scientific errors of Marxism, while at the same time exposing its pronounced character as an intellectual fraud (Böhm-Bawerk, 1949). This intellectual fraud was historically illustrated by the collapse of the Soviet Union, and of virtually all other communist countries, after many decades of unspeakable human suffering for a large part of the world's population, all of which was perfectly consistent with the theory on the impossibility of statism developed by the Austrian School beginning with the von Mises of 1920 (Mises, 1936), and which was the final nail that forever sealed the coffin of the corpse of Marxist pseudoscience (Huerta de Soto, 2010).

Finally, in this context, we must mention the destructive role played by a number of distinguished economists who, although they defend liberty and the market economy, could be described as a kind of "useful innocents" in Mises' terminology (Mises, 1947). This is so because, even though they officially oppose rampant statism and defend liberty, by accepting—even if only partially—some of the postulates of the reactionary pseudoscientific currents we have described, they ultimately end up, often without intending to and much to their regret, providing additional impetus to the statist reaction within our discipline; for example, when they insist on advising States with proposals aimed at making them more efficient and at helping them do somewhat better things that they should not be doing at all. By way of illustration, we should include in this category of “useful innocents”, for example, thinkers as the Karl Popper of The Open Society and Its Enemies (Popper, 1966, p. 366), who came to admire the “scientific capacity” and even the “humanism” of Karl Marx, and who proposed a statist strategy of “piecemeal social engineering”; or George Stigler, when he claimed that only empirical evidence could determine which economic system, socialism or capitalism, might function (Stigler, 1975, pp. 1-13); and, more generally, the members of the Chicago School, led by Gary Becker and Milton Friedman. Becker when defending that only economics developed within the strict limits of equilibrium, constancy, and maximization, typical of the neoclassical pseudoscience, constitutes true "economic science." And even more serious could be considered the case of Milton Friedman, whose very sincere love of liberty and intense and popular media support for free markets stand in sharp contrast to his pseudoscientific approach based on the aggregate method of economics of Keynesian origin, on positivist empiricism, and on the full acceptance of the unrealism of assumptions. Only in this way it can be explained Friedman's litany of scientific errors which, much to his regret, have invariably ended up reinforcing statist interventionism, to the point that Hayek himself was forced to conclude that after Keynes’s The General Theory, the book that has done the greatest harm to Economic Science has been Friedman’s Essays in Positive Economics (Hayek, 1994, pp. 145).

The failure of democracy and classical liberalism: the triumph of statism

As we see, many classical liberals and advocates of liberal democracy have also acted as "useful innocents." The fatal error of classical liberals lies in the failure to realize that their program is theoretically impossible, because it incorporates within itself the seeds of its own destruction, precisely to the extent that it considers necessary and accepts the existence of a State (even if it is "minimal") understood as the monopolistic agency of institutional coercion. Therefore, the great error of classical liberals is very basic: they believe in a program of political action and economic doctrine that aims to limit the power of the State, while at the same time accepting it and even considering state’s existence necessary. However Economic Science has already shown that the State is unnecessary, that statism (even in its minimal form) is theoretically impossible, and that, given human nature, once the State exists, it is impossible to limit its power. On the other hand, liberal democracy is a concept as naïve as it is impossible. Mises already warned us that democracy could only function if all its participants accepted the classical liberal principles, which is impossible because democracy itself encourages and amplifies vote-buying and the partisan use of power. So, the inevitable conclusion is that "liberal democracy" is a contradiction in terms as absurd as speaking (following Anthony de Jasay) of a “square circle,” of “hot snow,” or of a “virgin prostitute” (A. de Jasay, 1990). And even Hayek considered democracy unworkable if it is understood as the exercise of absolute power by majorities (Kratos in classical Greek). It should therefore come as no surprise that democracy once and again tends to be a perverse system based on lying and buying votes with money stolen through taxation.

The fact is that the State attracts like a magnet the worst passions and vices of human nature, for instance, when individuals try to obtain rents produced by others using the State’s coercive power. Moreover, the combined effect of the privileged groups, the phenomena of governmental myopia and vote-buying, the megalomaniacal character of politicians, and the irresponsibility and blindness of bureaucracies generate a dangerous, unstable and explosive cocktail, continually shaken by social, economic, and political crises which, paradoxically, are always used by the political caste to justify further doses of intervention and statism that, instead of solving problems, further aggravate them. Statism therefore corrupts the entire social body and at the same time blocks the spontaneous and free market solutions of social and economic problems.

In fact, the State has become the "idol" that almost everyone turns to and worships. Statolatry is the most serious and dangerous social disease of our time. We are educated to believe that all problems can and must be detected and solved by the State. Our destiny depends on the State, and the politicians who control it are expected to guarantee everything our well-being may require. Human beings remain immature and rebel against their own creative nature, which makes their future always uncertain. They demand a crystal ball that assures them not only knowing what will happen, but also that any problems that arise will be solved for them. This "infantilization" of the masses is encouraged by politicians, as it justifies their own existence and ensures their popularity, position of dominance, and capacity to control. In addition, a whole legion of intellectuals, so-called "experts," and social engineers join in this arrogant intoxication of power. Not even the Church and the most respectable religious denominations have been able to realize that statolatry today constitutes the principal threat to the free, moral, and responsible human being; that the State is a false idol of immense power, worshipped by all, and that does not allow Humanity to be free from its control or have moral or religious loyalties beyond those the state can dominate. Furthermore, it is kept hidden from the public that the state is the true source of social conflicts and evils, and "scapegoats" (such as "capitalism" or private property) are blamed for the problems, and they become the goal of the most serious condemnations, even from moral and religious leaders, almost none of whom have realized the deception or dared to denounce that statolatry is the main threat in the present century to religion, morality, and, therefore, to human civilization.

Perhaps the main exception within the Church is included in the brilliant biography of Jesus of Nazareth written by Benedict XVI. That the State and political power constitute the institutional incarnation of the Antichrist should be obvious to anyone with a minimal knowledge of history who reads the former Pope’s considerations on the most serious temptation that the Evil One can present to us (and I quote Ratzinger literally): "The tempter is not so crude as to propose to us directly the worship of the devil. He merely proposes that we opt for the rational solution, that we prefer a planned and organized world in which God may have a place as a private spiritual matter, but must not be allowed to interfere in our essential purposes. Soloviev attributes to the Antichrist a book entitled The Open Road to World Peace and Prosperity; it becomes the new Bible, and its core message is the worship of well-being and rational planning," by the state (Ratzinger, 2007). And so, we should not be surprised that, for example, the great author of The Lord of the Rings, J. R. Tolkien, whose Catholic anarchism I fully share, went so far as to say that he would arrest anyone for simply daring to pronounce the word "State." Because the State is, always and everywhere, a reality of violence and systematic coercion against the most intimate essence of the human being, which is his capacity to act freely, creatively, and spontaneously; and so, it is unavoidable to conclude that the State is essentially immoral and that statism constitutes the principal threat to humankind.

A theological digression: the dismantling of statism as a logical necessity inseparable from the work of God

And almost without realizing it, we can go ahead with a theological digression on how dismantling the State is a logical and moral necessity inseparable from the work of God. I fully understand that referring to God in this conference may come as a shock to many of those present, but I would ask that even those who do not believe in God, at least for dialectical purposes, make an effort of imagination and, for the next few minutes, imagine that God does indeed exist.

And what do we mean by God? We must understand God to be a Supreme Being, Creator out of love for all things. And the most important creature that God has created is precisely the human being: in His image and likeness. And if there is a point of connection between God and man, it is precisely in the creative entrepreneurial ability: the capacity to discover, to see, and to create new things, goals and actions. But now I am going to go one step further and attempt to demonstrate that God is not only the Supreme, loving Creator of all things, but that—moreover—God is libertarian.

And what does it mean to say that God is libertarian? It means that God, the Lord of all the Universe, has absolute power over it, and yet He chooses not to use force, but always leaves his creatures free. To the point that He gives human beings the freedom to rebel against Him; even though, again and again, God forgives human beings and allows them to rise up and begin anew.

God always lets the universe He has created, flow in a spontaneous manner ("laissez faire, laissez passer, le monde va de lui même" could be the motto of our libertarian God). And this despite the fact that human beings tempt God again and again and demand that He manifest His absolute power, that He give us clear and indisputable signs of His existence and supreme power in order for us to believe in Him. But of course, God does not accept our challenge. Why? Because love and liberty are inseparable, and a forced conversion, for example by an evident cataclysm, would be completely contrary to that liberty with which God has created human beings out of love.

Moreover, the Kingdom of God is not of this world; Jesus himself says this to a fearful Roman state official, who was also in charge of judging him: "My kingdom is not of this world." Does this mean that there are two types of kingdoms? The kingdoms of this world or States, which would be legitimate at their own level (remember "render unto Caesar the things that are Caesar's"), and the Kingdom of God, of ("render unto God the things that are God's"). That is the standard interpretation that has prevailed until now, but I think is completely wrong. The Kingdom of God—which is the exact opposite of the kingdoms or States of this world—never makes systematic use of violence and coercion: it is a Kingdom that has already come to us and, moreover, has been given to us freely, in an act of immense mercy and love (Deus caritas est). And just as the hateful institution of slavery came to an end, the Kingdom of God will also dismantle the kingdoms of this world, the states of this world, or as St. Paul said, of every principality, power, and glory (Ephesians 1:21-23), because God is libertarian and man is made in the image and likeness of God.

Ludwig von Mises, in his book Interventionism, introduced the term "destructionism" to refer to the economic and social effects of statism. If Evil (represented by statist destructionism in Mises' terminology) were to prevail, the human race and civilization would have disappeared long ago. The fact that, despite everything and the immense power of seduction of statism over humankind, the process of social cooperation continues to unfold and even prosper in certain historical periods and geographical areas, is a clear manifestation that God does not abandon the world nor leave libertarians alone in their struggle against the Evil; and that Good, represented by liberty, the principle of non-aggression, the spontaneous order of the market, entrepreneurial creativity and coordination, and above all, moral principles, always with God's help, prevails and is capable of overcoming Evil, represented by the fatal conceit of the statist ideal and the destruction that it produces.

And now I will finish with some thoughts on anarcho-capitalism as the only possible system of social cooperation truly compatible with human nature

And now I will finish with some thoughts on anarcho-capitalism as the only possible system of social cooperation truly compatible with human nature. The most important intellectual and moral event that is taking place nowadays is the full fusion between Christianity and anarcho-capitalism. Because anarcho-capitalism is the only possible system of social cooperation that is truly compatible with human nature. Anarcho-capitalism is the purest representation of the spontaneous market order in which all services, including law, justice, and public order, are provided through a voluntary process of social cooperation. In this system, no area is closed to the drive of human creativity and entrepreneurial coordination; efficiency and justice in the resolution of problems are simultaneously enhanced, while the conflicts, inefficiencies, and discoordinations generated by the State are eradicated at their root.

The progressive abolition of States and their gradual replacement by a dynamic network of private agencies different legal systems, and providing all kinds of prevention and defense services, constitutes the most important social transformation that will take place in the twenty first century. Without forgetting that exactly what prevents us from knowing with precision what the future without the state will look like, the creative nature of entrepreneurship, is what gives us the peace of mind of knowing that any problem will tend to be resolved and overcome, once the entrepreneurial effort and creativity of Humanity are devoted to its solution (Kirzner, 1985).

Therefore, the revolution against the “Old Régime” carried out in the eighteenth and nineteenth centuries by the old classical liberals, today finds its natural continuation in the anarcho-capitalist revolution of the twenty-first century. The message of anarcho-capitalism is clearly revolutionary. Revolutionary in terms of its goal: the dismantling of the State and its replacement by a competitive market process consisting of a network of private agencies, associations, and organizations. And revolutionary in terms of its means, especially in the scientific, economic-social, and political fields:

1. a) First, Scientific revolution, in the field of Economic Science, which becomes the general theory of spontaneous market order extended to all social areas. And by contrast and opposition, the theory and analysis of the effects of social discoordination generated by statism in any sphere in which it operates, as well as the study of the transition process from the State towards liberty.
2. b) Second, an Economic and social revolution, as we cannot even imagine today the immense human achievements and discoveries that could be made in an entrepreneurial environment totally free from statism. Today, and despite continuous governmental harassment, an unknown civilization is already developing, with a degree of complexity that is beyond the reach and control of the state, and which will achieve unlimited expansion once it manages to completely rid itself of statism. And when human beings become more and more aware of the perverse nature of the State that restricts them, and of the immense possibilities that are frustrated each day when the State blocks the driving force of their entrepreneurial creativity, the social demand to reform and dismantle the State will multiply creating a future that is largely unknown to us but that will elevate human civilization to heights that we cannot even imagine today.
3. c) And finally, a political revolution in which, although day-to-day political struggle is important, it should not be the top priority. It is true that the least interventionist alternatives must always be supported, in clear alliance with the efforts of classical liberals in their long term impossible democratic limitation of the State (including reforms such as those proposed by Hayek in the third volume of Law, Legislation, and Liberty). But the anarcho-capitalist does not stop at this task, for he knows that he can and must do much more. He knows that the ultimate goal is the total dismantling of the State, and this goal leads all his imagination and political action in everyday life. And here we cannot fail to mention the unprecedented impact of our disciple and follower of our Master Program in Austrian Economics in Madrid, the President of Argentina, Javier Milei, who has done more than anyone else before to disseminate the principles of the Austrian School and the anarcho-capitalist ideal. Principles that he never ceases to quote and explain and defend once and again in all his public appearances, from the United Nations to the Davos Forum; and in all his meetings with other Heads of State, universities, and parliaments, to whom he even gives copies of the most important Austrian works by Mises, Hayek and even myself, as he did, for example, with the two popes, Francis and Leo XIV, with the French President Macron, the Italian Prime Minister Meloni, and even with Elon Musk. For us, it is a great honor that Milei has, to a large extent, emerged from the Austrian School of Madrid and that he continually keeps drawing inspiration from us. This is, without a doubt, much more important than incremental political steps in the right direction—which should of course be welcomed—and that should never fall into a political pragmatism that could betray the ultimate goal of achieving the end of the State (Huerta de Soto, 2010).

And all this with tireless enthusiasm in the search for scientific and moral truth, an attitude that, inspired by the immortal work of Miguel de Cervantes, we could describe as follows: "It matters not whether they be giants or windmills, when the plume of our helm is stirred by the winds of tenacity and faith." And always creating a future that, although it may seem distant today, may at any moment witness giant steps that will surprise even the most optimistic among us. History has entered into an accelerated process of change which, although it will never stop, will open a whole new chapter when humankind finally succeeds in ridding itself definitively of the State, reducing it to no more than a dark historical relic of tragic memory.

Thank you very much.

REFERENCES

BASTIAT, Frédéric: Selected Essays on Political Economy, Foundation for Economic Education, New York 1995.

DE LA BOÉTIE, Étienne: The Politics of Obedience: The Discourse of Voluntary Servitude, Free Life Editions, Nueva York 1975.

BÖHM-BAWERK, Eugen von: Karl Marx and the Close of His System, Augustus M. Kelley, Nueva York 1949.

• "The Exploitation Theory," Capital and Interest, Vol. I: History and Critique of Interest Theories, Libertarian Press, South Holland 1959.

HAYEK, Friedrich A. von: The Counter-Revolution of Science, Free Press, New York, 1955.

• Hayek on Hayek: An Autobiographical Dialogue (eds. Stephen Kresge and Leif Wenar), University of Chicago Press, Chicago 1994.
• Law, Legislation and Liberty, Vol. III: The Political Order of a Free People, Routledge & Kegan Paul, London 1979.
• The Fatal Conceit: the Errors of Socialism, The University of Chicago Press, Chicago 1988.
• "The Pretence of Knowledge," in New Studies in Philosophy, Politics, Economics and the History of Ideas, University of Chicago Press, Chicago 1978.

HUERTA DE SOTO, Jesús: Socialism, Economic Calculation and Entrepreneurship, Edward Elgar, Cheltenham y Northampton 2010.

• "A Hayekian Strategy to Implement Free Market Reforms," in Theory of Dynamic Efficiency, Routledge, Oxfordshire, 2010.
• Proyecto Docente, Chapter I: "Ciencia y Economía," Rey Juan Carlos University, Madrid 2000.
• The Austrian School: Market Order and Creative Entrepreneurship, Edward Elgar, Cheltenham y Northampton 2008.

DE JASAY, Anthony: Market Socialism: A Scrutiny, published by the Institute of Economic Affairs, Occasional Paper no. 84, 1990.

KIRZNER, Israel: "The Perils of Regulation: A Market Process Approach" in Discovery and the Capitalist Process, University of Chicago Press, 1985.

LIGGIO, Leonard: "The Hispanic tradition of Liberty," published in Procesos de Mercado: Revista Europea de Economía Política, vol. XXII, nº 1, Summer 2025, pp. 403-420.

MARTÍNEZ MARINA, Francisco: Teoría de las cortes o grandes juntas nacionales de los reinos de León y Castilla, Collado, 1820.

MILEI, Javier: Capitalism, Socialism, and the Neoclassical Trap, in The Emergence of a Tradition: Essays in Honor of Jesús Huerta de Soto, Volume II (editors Howden, D., Bagus, P.), Palgrave Macmillan, Cham, 2023.

MISES, Ludwig von: Socialism: An Economic and Sociological Analysis, Jonathan Cape, London 1936.

• Planned Chaos, Foundation for Economic Education, Irvington-on-Hudson 1947.

OPPENHEIMER, Franz: The State, Vanguard Press, Nueva York 1926.

POPESCU, Oreste: Studies in the History of Latin American Economic Thought, Routledge, London 1997.

POPPER, Karl: The Open Society and its Enemies, Princeton University Press, Princeton 1966.

RATZINGER, Joseph. Jesus of Nazareth: From the Baptism in the Jordan to the Transfiguration. Translated by Adrian J. Walker. Doubleday, New York, 2007.

ROTHBARD, Murray N.: "New Light on the Prehistory of the Austrian School," in The Foundations of Modern Austrian Economics (editor Edwin G. Dolan), Sheed and Ward, Kansas City 1976, pp. 52–74.

• Anatomy of the State, Ludwig von Mises Institute, Auburn 2009.

SALERNO, Joseph. "Milton Friedman’s Views on Method and Money Reconsidered in Light of the Housing Bubble", in The Emergence of a Tradition: Essays in Honor of Jesús Huerta de Soto, Volume I, (editors Howden, D., Bagus, P.), Palgrave Macmillan, Cham, 2023.

STIGLER, George: The Citizen and the State, University of Chicago Press, Chicago, 1975, pp. 1-13.

The Ralph Raico Memorial Lecture, sponsored by Murray and Florence Sabrin. Presented at the Mises Institute in Auburn, Alabama.

Below is a written version of the lecture (supplied by Ryan McMaken).

I am very honored to be asked by Joe to deliver the Ralph Raico memorial lecture at this conference, and this means a lot to me because I have for many years been an enthusiast of his work, and especially in his work on the history of liberalism. Moreover, Raico largely specialized in European history, and I think his work is especially important for Americans to read because, when it comes to the history of ideas, Americans usually end up dwelling excessively on little more than nineteenth and twentieth century America, and to the extent that Americans explore outside American history, they usually confine themselves to the Anglosphere and to theorists who wrote in English only. 

Raico is a good antidote to all this, and as we'll see today, Raico, like Rothbad, regarded the continental classical liberal theorists to often be superior to what we get from the British. 

I say all these because we are going to need to delve into the work on many Continental theorists, largely those who wrote in French and Italian, to explore the most fruitful strains of liberalism. Specifically, we need to look at the specifical school of liberalism that I’ll here refer to as the “realist” school or the “exploitation” school of liberalism. These strains of liberalism were notable for their central observation about the state: namely, that it is a tool of the ruling elite for the exploitation of others. This will be contrasted with the type of liberalism we might call the naïve school of liberalism which views written constitutions and democracy as tools that will sufficiently constrain state power.

But before we can do anything, really, we need to make a brief note about terminology. During this talk, I'm going to use Raico's terminology when it comes to the terms “liberalism” and “libertarianism.” That is, when I use the term “liberal,” I'll be referring to the ideology of laissez-faire, freedom, and free markets which has been historically known as liberalism, or in more modern times as classical liberalism, since that has now become necessary thanks to a muddling of language after the 1930s. Moreover, Raico regarded what we now call libertarianism as synonymous with historical liberalism, especially its more radical varieties. So, at no point, when I say the word "liberal," am I referring to the social democrats or so-called progressives that modern-day right-wing pundits insist on calling liberals.

So, with all that out of the way, I'd like to set the tone with commentary drawn from the final section of Raico 's 10-hour lecture series on the history of political thought. Known as The Struggle for Liberty. So, as the series draws to an end, Raico says this:

I go back often to Machiavelli ... In The Prince, he talks about men who want power and gain power, what the nature of power is, and what the nature of politics is. He says he is writing for a few people and not for the mass of people. Machiavelli contends the mass of people prefer appearance to reality. They prefer their fantasy to what actually exists. If they knew what politics really was, they wouldn’t have a good night’s sleep for the rest of their lives. ... The average person is born to be a sheep, and, as another Italian, Pareto, said, “he who plays the sheep will find the butcher.” 

Now, when you’re in my line of work and deliver lectures of this sort, you’ll often be told to end your talks with something optimistic and light. Well, if Raico ever got that memo, he wadded it up into a little ball and threw it away.

After all, what Raico says here—that's not very pleasant to think about. That seems pretty dark. Surely, if we just vote for the right people, or change a few laws, then the regimes of the world, and especially the American regime, will suddenly decide to limit itself to a few core functions, and make a turn toward laissez-faire. Well, that is definitely not the message Raico wants to send. The reality is far more grim than anything that can be fixed by voting or promoting written constitutions. Rather, the reality has something to do with the exercise of political power, which usually amounts to using violence against others. 

And considering this, it's definitely no coincidence that Raico decides to conclude by quoting Vilfredo Pareto, who wasn't exactly known for a rosy view of the future of what is nowadays called liberal democracy. 

In fact, it's very appropriate for Raico to go back to Pareto—whom Raico has invoked in numerous cases across a number of essays—in Raico's work on class conflict and exploitation. 

Pareto can act for us here as a launching off point for exploring the larger context Raico was trying to express through his lecture series, and through other works, especially over the last 25 years of his career. 

So first, let's look at Pareto in some detail, and see what Raico's use of Pareto can tell us about some of Raico's emphases and conclusions. 

Now, most economists are familiar with Pareto through his work in the field of economics, but Raico was interested in him in his political work because he was a radical free-market liberal (that is, he was a libertarian) in the line of Bastiat and, importantly Gustave de Molinari, who Rothbard suggested was the founder of the idea of anarcho-capitalism.

Indeed, Rothbard refers to Pareto in his history of economic thought as a "pessimistic follower of Molinari."  Early in his career, Pareto had been a fairly standard doctrinaire liberal on constitutions. But later in his career, by the very late nineteenth century, he took a turn. As Rothbard put it, Pareto was "faced with the failure of his hopes and with the looming statist hell of the twentieth century." Rothbard in this case, is talking about the Pareto of 1902. Pareto died in 1923, and he certainly wasn't getting more optimistic after 1902. By 1919 and 1920, Leninist brigades were using the democratic process in Italy to protect and sustain a campaign of terror against property owners in northeast Italy. As you can imagine, this didn't exactly disabuse Pareto of his suspicion of democracy. By the way, it was the alarming successes of the Leninist in Italy that had prompted Pareto to suggest that Mussolini and his followers might be a useful tool against communist totalitarianism and exploitation. And we should note that for this, Pareto is often slandered as fascist, although this was never true. Pareto never abandoned his hardline stance in favor of total freedom of speech, free trade, and opposition to state power. Pareto was never so naïve as to see Mussolini as anything more than one gangster that might be useful in being pitted against another gangster. Pareto certainly did not subscribe to the fascist creed of “nothing outside the state.” Moreover, Pareto died less than a year after the blackshirts' March on Rome in 1922, so Pareto exited the scene before Mussolini could even really consolidate power. So to call him a supporters of Mussolini and the fascists is rather disingenuous. 

Indeed, as Raico notes, Pareto, until the end, described himself as an admirer of Gustave de Molinari, the radical anti-statist and decentralist, the advocate of total laissez-faire. Moreover, Pareto's overall project puts him in every way into the camp of the liberal exploitation theorists following Bastiat, Charles Dunoyer, on the Continent, and Richard Cobden and John Bright—that is, Manchester School—in England. We also find some similar sentiments among the Jacksonians in America, specifically William Legget and William Graham Sumner. 

Pareto's pedigree in this respect is perhaps summed up in a line from his 1896 book Cours d’économie politique in which he says that the struggle to appropriate the wealth produced by others is "the great fact that dominates the whole history of humanity."  Pareto follows Bastiat in portraying the state as the engine of "spoliation" or what is often translated as "legal plunder" in English. The core of this liberal exploitation school is that the state employs war, taxation, money printing, and a plutocratic relationship with at least some of the wealthy economic elites to carry out the exploitation of the general population. This can be carried out by any type of regime, and certainly is carried out by democratic regimes. As made very clear in Pareto's works. It should also be noted that this is done on purpose. It's not some unintended consequence of well-meaning public servants. 

Political scientist Alberto Mingardi also provides a helpful summary of Pareto's work, and Mingardi summarizes the basics of Pareto's 1916 General Treatise on Sociology, and writes:

The central fact of politics is the truth that whenever you have politics, you have someone governing and someone obeying: politics, indeed, allows somebody to take advantage of somebody else. Such truth is unpleasant: even liberal economists of the Utopian kind prefer to close their eyes to it. People want to believe things are different and they hold ideologies that allow them to avoid considering unpleasant truths. Such Pareto realism dismantled the ideological pretenses that democracy is different from and better than all other regimes ... 

The idea that democracy is, to paraphrase a puerile slogan from Churchill, the worst system except for all the rest, clearly runs contrary to Pareto and most of the liberal exploitation theorists who certainly did not believe that democracy would somehow tame the state. This is not the rosy view of politics we often get from other corners of liberal thought which might have us believe in the pluralist idea of political representation in which the regime works as a neutral arbitrator, of sorts, to ensure a relatively fair distribution of resources, brought about by peaceful compromise. Moreover, in this view, we are also often told that legal norms and written constitutions can act to restrain the state, and that legal barriers can be constructed as reliable bulwarks against abuses of power. 

That view is largely ignored or disparaged by the less naïve theorists we now generally associate with exploitation theory. Rather, those who see the state as necessarily exploitable, like Pareto, who view the state as simply the cudgel used by the plutocratic elites to despoil everyone else. In Pareto's view, this situation is in no way improved by democracy or so-called representative government, or even by written constitutions, since ultimately, any successful governing elite will turn all of those mechanisms, instruments, and institution toward the continued enrichment of the ruling elites themselves. 

A healthy suspicion of democracy among the French liberals goes back at least to Benjamin Constant, in the early nineteenth century who countered Rousseau's notions of the general will and concluded that "Popular government is nothing but a convulsive tyranny..." 

Also key to understanding Pareto is his view of the elites. For Pareto, every political system is run by a relatively small elite, and this is always true regardless of regime type, constitution, or political system. There is no “will of the people.” Moreover, elites behave the same way when it comes to building and keeping power. This is true across all regime types with the elites working to preserve their privileges through the use of propaganda, coercion, and alliances with various interests within the polity. This can vary in the details, but is fundamentally the same whether the elites head an authoritarian regime or a democratic regime. And, finally, every revolution ultimately replaces one set of elites with another. No revolution results in the "rule of the people." There may be an interregnum of political disorder, that may last for a time, in some cases, But this, in every case, ends with the ascension of a new governing elite. 

The new regime then begins again the work of exploiting the population for the preservation of the elites in their positions. Again, this mechanism is not prevented by the uses of constitutions or elections, or any other legal mechanism. In all cases, the regime will work to modify these institutions and legal frameworks to favor the governing elite. So, for Pareto, political theorists largely waste their time in trying to design the optimal way to select the government's policymakers. 

In his Cours d'economie politique, Pareto puts it his way: 

It seems to be agreed on as an axiom that a formula must exist for selecting guardians [that is, legislators and policymakers] in such a way that they will be unable to abuse their power; and that the evils seen occurring in practice derive simply from the fact that this wonderful formula has yet to be applied. This error occurs in those theories which ascribe an exclusive influence over social phenomena to the form of government or to the method of selecting its personnel. These factors are indeed interdependent, but to a much smaller degree than is generally supposed. To appreciate this it is enough to make a comparative study of the facts observable in societies which have changed either the method of recruiting their governors or the form of government itself. Such a study makes it clear that, while the facts observed are variable in form, the fundamental substance remains pretty much the same. The sole appreciable result of most revolutions has been the replace of one set of politicians by another set. 

This is just a short quotation, but I need to emphasize that Pareto is not simply stating this. These conclusions come only after a long analysis of how the democratic state works. Many readers, in fact, will be surprised at just how much Pareto had democracy’s number. Writing in 1910, 1912, and 1896, it is remarkable how well Pareto already understood the process of special interest politics within a democratic system, and how the ruling elite exploits a complex system of clients and patrons to maintain the elite in power.

So, it's here that many historians of classical liberalism—regardless of whether or not they are themselves liberals—often get confused or annoyed. When Pareto and other liberal exploitation theorists take a dim view of democracy, and of the constitutional projects from which democracy usually springs, doesn't this show that those people aren't even liberals? Must not all liberals be in favor of written constitutions, and elections, and a belief in the electoral process, variously defined? That is, don't liberals necessarily subscribe to a program that roughly reflects that of say, James Madison or John Stuart Mill, or perhaps the Jacksonians in America who pushed relentlessly for universal manhood suffrage. After all, throughout most of the nineteenth century, both in the US and in Europe, classical liberalism was associated with democratization. 

The answer to all this is no. It is not necessary for a liberal to believe in this political program. 

I think Mingardi helps us here again because he draws an important distinction between the liberal program and the liberal worldview, and also a difference between the realist liberals and what Mingardi says are the liberals who are Utopian to various degrees. 

So, Mingardi sees Bastiat and Pareto—and those like them, such as, we might argue Molinari, and even to some extent, Benjamin Constant—as practitioners of political realism. 

Mingardi concludes with making an essential distinction: 

Pareto's drastic realism is not incompatible with a classical-liberal worldview: it is incompatible with a classical-liberal program. In Pareto's times, that program consisted in seeking to obtain a constitution from the rulers and pursuing one kind of reform, in particular one aimed at widening the franchise. 

The idea was that broadly giving a vote to a larger and larger portion of the general population would somehow work to restrain the elites from exploiting the public, and also punish those elites who abused their power. Mingardi continues: "Was that sufficient to shackle political power? Hardly so, and 20th-century liberals ... tried to update and perfect that program, make it more resilient, figure out better constitutional restraints."

Early in the twentieth century, Pareto could already see that the usual liberal-endorsed political methods simply were not restraining the power of the state. 

The distinction that Mingardi makes here between the liberal program on the one hand, and the liberal worldview is very important. It's important because we now live in a time when we increasingly hear voices from critics of liberalism, stating that liberalism "has failed" in some respect or other. We don't have time to critique those arguments, but when we encounter the claim, we must make that very important distinction between the liberal worldview and the liberal program. Moreover, the liberal program of this sort was certainly never universally supported by liberals, especially among the most radical, libertarian ones, like Pareto and Molinari. 

After all, whether or not liberalism has failed would depend much on how we define liberalism. Is liberalism the program, or is it the worldview? Or are the two inextricably linked? 

For Raico's part, he defines liberalism strictly in terms of its worldview. He puts it this way: liberalism is "the ideology that holds that civil society—understood as ... the sum of the social order minus the state—by and large runs itself within the bounds of a principle of private property." 

That's it. 

Raico opposed efforts to define liberalism in terms of epistemology or metaphysics, as many writers on the topic—especially philosophers—often try to do. Raico, however, focused on how liberalism was employed in the real world to animate ideological and political movements. The core of liberalism is its opposition to state power and its definition of society as “other than” the state.

The implications of this worldview are sizable and from them flows much of centuries' worth of liberal commentary on the problems that arise when the state intervenes in civil society. Or, put another way, in this view, when the state prevents the private use of property as the owners see fit, the state destroys freedom. This leads Rothbard to conclude, along with Lord Acton that freedom is the “highest political end” for the liberal. 

But, neither Rothbard nor Raico would claim that this worldview implies—let alone requires—an embrace of written constitutions or democratic institutions. These have historically been methods used by many liberals. This cannot be denied, but there is nothing inherent to the liberal ideology itself, rightly understood, which necessarily leads to what we often now see as the liberal program. 

Moreover, given the realities of the past century or so, it's difficult to see how the liberal worldview has failed. The liberals, after all, were absolutely right about the dangers of socialism, central planning, central banking, fiat money, the welfare state, the military-industrial complex, protectionism, and so much more. It has all crippled economic growth, human flourishing, the standard of living and much more. And, of course, the evils of the modern state, against which liberals have generally led the opposition, has taken a grave toll on human life and human rights in general. Certainly, no other worldview has ever made a priority of protecting property rights, and of explaining, using sound economic science, the economic implications of the abuses of state power. 

Nonetheless, when we channel our inner Pareto, and point to the dangers of the state, its elite, and its democratic facade, we'll often encounter opposition from self-identified liberals and libertarians. Much of this springs from a temperamental difference which Mingardi alludes to when he writes: 

In the liberal tradition two elements coexist. For one, you have Bastiat on plunder and Pareto on the ruling class—more generally speaking, thinkers who see the state as the ultimate device for exploitation. But you also have thinkers who stress that the market economy tends to multiply bread and fishes, thereby providing an optimistic perspective on the present and future. Superficially, the one worldview may imply the falseness of the other, but this ought not be the case. The fact that we have economic progress should not necessarily blind us to the exploitative nature of government. In a sense, economic progress is precisely what makes that exploitation nowadays more bearable, even though, measured in the percentage of GDP devoured by taxation, the exploitation is much greater than in the past.

And one often encounters this attitude among even modern-day libertarians. They'll highlight that the standard of living is today higher than it was 40, 50, or 100 years ago. Which, no doubt, it is. But this enthusiasm often results in a complacency with the status quo and the contention that things are great, and nothing more than a few minor reforms are ever necessary. This view, however, relies only in the seen and ignores the unseen. What is seen is the higher standard of living that, thanks to the resilience of markets, even when crippled by taxes and regulations, manage to deliver more wealth and productivity, even to a majority of the population to some extent. 

What is unseen, however, is the widespread exploitation inflicted by the ruling elite and its allies on the general population—the booms and busts, the financial bubbles, and destruction of purchasing power, the military draft, the enduring military-industrial complex, and much more. The Bastiats and Paretos of this world have never been content to sit back and talk about how splendid everything is when they consider the grave injustices of this exploitation. 

Others, however, don't like to hear from these grumpier libertarians who decry the injustice of the state, and refuse to acknowledge that the scraps from the ruling elites' table are relatively tasty and filling. 

This difference of emphasis nothing new, of course. It existed in the days of British Imperialism and decades ago, Raico remarked on the opposition to Cobden as being too grumpy and critical of the regime. Raico noted, approvingly, that "Cobden and Bright were harping critics of the status quo in Britain and Ireland, constant naggers, especially of those who ran the foreign affairs of the country." That's not a criticism. But it helps to explain the posture taken by many who were sick of the negativity of the regime's opponents. Raico wrote: 

Contemporary conservative poseurs [that is, contemporaries of Cobden] would unquestionably agree with the founder of their breed, Benjamin Disraeli, that the men of Manchester were simply not fun-people. Rather, they were incessant complainers who found themselves unable just to sit back and enjoy the fantasies and tinsel-symbols of British world power.

Certainly, modern American political discourse has no lack of such people who prefer to speak well of the status quo because that sounds relatively pleasant and optimistic - and after all, aren't all these modern gadgets and apps we now have evidence of how great life on earth is. The fact that life is pretty great, in this view, also suggests that the system of liberal democracy works pretty well. Sure, 40-year highs in inflation, nonstop war, constant ravaging of the middle class through taxation and protectionism, and the national surveillance state are maybe sub optimal, but once we elect the right people, everything will surely improve. On the other hand. those modern-day disciples of Bastiat and Cobden are always complaining about something. 

This ongoing battle of emphasis and temperament, I would suggest, also helps to characterize and highlight the hard-nosed realism of the exploitation theorists on the one hand, and the happy-go-lucky partisans of, what I would say is a political fantasy, on the other. 

This brings us to the final portion of the talk which is "what is to be done." 

To start this discussion, let's go back to Raico, and see what he had to say in The Struggle for Liberty about possible solutions. He starts by saying that the conventional liberal program has no answer, “because they strove to preserve the state. He says: "I’m telling you is that it’s very clear that there is no way of salvaging “limited government.” It’s simply going to be getting worse and worse, so our more direct and immediate aim has to be to destroy the centralized state, to do away with the centralized state in stages."

Raico goes on to note that he theoretically prefers the anarcho-capitalist model, and the goal is a true marketplace in what we now regard as government services. But he's also saying in practical terms, that's a distant goal. But what is also clear is that constitutions and democracy don’t work to move the world toward something more compatible with the liberal worldview.

So, in this view, in order to find the first step in the strategy of countering the exploitive state, we have to look beyond naïve liberalism.  Now this is coming from Raico who never abandoned the liberal worldview, so he's not saying to become a fascist, or a medieval-style traditionalist, and he's certainly not saying to become a Republican. He was clear about that sort of thing. And, of course, this is coming from a series of lectures largely geared toward explaining the virtues of the liberal worldview. 

But he states that the immediate and direct aim, needs to be the destruction of the centralized state. And that's not a throwaway adjective he's using when he says "centralized state". He means something specific beyond simply saying "oppose the state." For the exploitation theorists, the centralized state is an additional evil on top of coercive government in general.

Raico then makes it clear that what he means in opposing the centralized state. He says the next stop is to push for secession and the dismemberment of the centralized state, rendering it less centralized. The total abolition of coercive government remains the goal, in a Rothbardian fashion, but the first step on this path is secession.  

And additionally, we should note that he is opposing violent opposition. He writes: "I’m not talking violent revolution. As a matter of fact, I hope that the leaders of the United States—President Bush, Ariel Sharon, and the other leaders of the United States—live forever, and I wish them well."

Some of our young readers might not have noticed the joke in there. Back when Raico was saying this, Ariel Sharon was the prime minister of Irrael, and he's saying Sharon was one of the leaders of the US. This was 2004 and Raico was saying that the State of Israel was running the United States. That just struck me as relevant today.

In any case, I agree with Raico that secession is indeed the most important major step we can take in terms of practical activism. But I would suggest that Raico was not quite right in saying we must look beyond liberalism. Secession has long been part of the realist liberal program, and has long been supported among the more radical liberals.

Raico has noted this himself when he states that the American Revolution was a secession movement inspired by liberalism. Moreover, we could note that the liberal idea of secession is translated into the concept of self-determination, which is usually accomplished through secession, or some other type of decentralization. This enters the political mainstream, through the liberals, by 1848. 

Raico speaks well of a number of liberals of the exploitation school who supported secession, such as Charles Dunoyer and Gustave de Molinari. Dunoyer, for example, sought what he called the "municipalisation of the world," a type of radical decentralization designed, in Dunoyer's thinking to undo the creation of large states, and he writes "There are no enterprises which require the union of ten, twenty or thirty million people. It is the spirit of domination which has created these monstrous aggregations or which has made them necessary. "

In other words, the states of the world are much too large, and must be broken down into smaller pieces to counter the "spirit of domination." Moreover, Dunoyer specifically sought to ensure that the [c[enters of activity will be multiplied," as he put it, to counter the old system of major national capitals ruling over the provinces throughout the rest of the vast states of Europe, such as France. This rule from the center—found in the centralized states—were especially problematic for Dunoyer and for many other radical liberals working within the framework of exploitation theory. We also see here the beginnings of the idea that political centers—and presumably the political elites ensconced there— ought to face competition from other political centers and elites. 

Indeed this view reflects the overall liberal concern with decentralization, of which secession is simply a type. As historian Henri Michel, in his extensive history of European political thought concluded, the concept of political decentralization "constitutes an essential article" of the French Liberal school. Interestingly, it is to the influential French liberal Benjamin Constant that Michel attributes the popularization of political decentralization in European liberalism. Constant was a favorite of Raico, who considered Constant to be one of the finest liberal theorists of Europe. Indeed, Raico quotes at least one example of Constant's views on the dangers of political centralization. 

According to Constant's popularizer Édouard Laboulaye, Constant "earnestly demanded ... what he called municipal power." Similar to Dunoyer, Constant wanted to disassemble state powers away from the center. He called political centralization "a watered-down form of socialism"  and lamented that the French revolution had created a centralized state that "bears down with an enormous weight upon the individual, crushing him beneath it."  

Now admittedly, Constant did not advocate for full secession, seeing a role for a state in international affairs. But his many arguments against centralization often supply strength to arguments in favor of secession. 

But we do find full advocacy for secession with Gustave de Molinari— Pareto's teacher and mentor— who advocated for what he called a "system of free government" within which "the municipality, freed from political servitude, would have the right to separate from the province and the province from the state." This "dual right of secession" as Molinari called it, was simply among the rights that any free society was bound to respect. He notes that one of the purposes of secession would be to "generate sufficient competition between states and provinces to improve the quality of their services and lower their price." This is typical Molinari in that he views the monopoly of state power as the primary problem, and thus secession offers an essential means toward lessening the strength and extent of that monopoly. This blow against the state's monopoly power, Molinari writes, 

would be the first consequences of the application of the right of secession, from the moment the abolition of political servitude authorized the exercise of this right, currently prohibited throughout the civilized world, and whose mere demand has not ceased to be considered a “crime against the security of the state.”

This program from Molinari comes from a natural progression from anti-state thinking from Jean-Baptiste Say, through Bastiat, and on to Molinari. Or, as Henri Michel puts it: "when M. de Molinari proposes to subject governments themselves to competition, "he speak[s] as [a] disciple... of Bastiat." 

So why does Raico, as a dyed-in-the-wool liberal in the tradition of the liberal-exploitation theorists, advocate for secession? Part of it is simply to counter concentrated state power, which if broken up decentralizes political power, in most cases weakening it. 

The result is usually greater freedom, as can be seen in the case of the breakup in the Soviet Union. No successor state has come anywhere near replicating the power that was exercised by the Soviet state prior to the outbreak of secession movements in the early 1990s. 

But many of the reasons for secession, as we've noted, are laid out by the liberal secessionists themselves: the exercise of self-determination, the lessening of the state's monopoly power, and even, as Dunoyer notes, the lessening of heterogeneity within the smaller states. This is something that Constant notes as well - namely that the more diverse a society is - as it grows larger- the greater is the coercive power necessary to force compliance with laws and customs that will run counter to the values of at least some significant portion of the population. In this view, a smaller more homogeneous society is a more voluntary one. 

If the goal is freedom, then secession offers the best of hope of actually opposing state power, which is a goal in itself, because the state, in this view, is the greatest danger to freedom. In the wake of the French revolution, the more radical liberals abandoned older moderate, reformist views in favor of more vehement opposition to state power overall. This was the development of what Raico calls the "state hatred" that developed Among French liberals, especially those influenced by Bastiat.  Or, as Henri Michel puts it, after the revolution “two rival, even hostile, principles appear and stand in opposition to one another: the state and the individual. Every triumph of one is a setback for the other.” 

If this is the case, then the very cause of centralization, which every state seeks as a key tool in state building, is necessarily a setback for freedom, and every wound inflicted against centralization, especially secession, is a triumph for freedom. 

As a final note, even if secession becomes widespread, our job is not finished, especially for those of us who deal in the battle of ideas. After all, even if we are to succeed in breaking up the large states, there will always be elements who will work to recentralize political power, to expand the prerogatives of the state, and to, therefore, necessarily constrict human freedom. Ultimately only the liberal worldview can supply the right ammunition and the right foundation for the never-ending battle of ideas that will always be necessary. After all, even if every state in the world were restricted to a totally privatized anarcho-capitalist voluntary community, some within the population would surely and eventually create new political movements committed to state building and the creation of new states and larger states. This would be done through political union and consolidation smaller decentralized polities through political union and consolidation. This is how it was done, after all, to create today’s system of modern nation states, a process that began in the early modern period.

There is no final victory over despotism, and those who seek power are always conspiring to gain more, to wield it for the benefit of whatever ruling elites manage to seize control of a state. 

This is the grim reality that Bastiat, Molinari, Pareto, and Raico were warning against. It’s what Machievelli understood. The endless conniving of state elites is always there, and there are always traps laid by those who rule, traps ready to be sprung against those who let their guard down. The state's methods are violent, cruel, and relentless. The state and its agents are willing to use them. We must be ready to oppose them every chance we get. 

Neo-Malthusian Paul Ehrlich recently passed away, but not before his false doomsday claims made his a very wealthy man. 

Original article: https://mises.org/mises-wire/remembering-paul-ehrlich-even-if-we-would-rather-not

Leftists sarcastically asking where the money for this war will come from are right about the GOP’s hypocrisy, but wrong to imply that it actually means there's plenty to spend on all these government programs. We can’t afford any of this.

Read the article here: https://mises.org/mises-wire/no-we-cannot-afford-war-iran-either

Be sure to follow the Guns and Butter podcast at https://Mises.org/GB

Generations of scholars come and go; a few, including Roger Garrison, make their mark on the field and inspire future generations to do the same.

Original article: https://mises.org/power-market/roger-garrison-and-sustainable-growth-austrian-school