Investment Theme: The podcast discusses the importance of economic freedom as a foundation for political liberty, emphasizing the role of private property in achieving human flourishing.
Market Insights: Hayek's essay "The Use of Knowledge in Society" is highlighted for its argument that the price system acts as a communication network, efficiently allocating resources without the need for central planning.
Company Discussions: The conversation critiques the mainstream economic view of competition, arguing that real competition involves rivalrous processes and innovation, rather than the static models often taught in economics courses.
Opportunities: Hayek's proposal for currency choice is presented as a practical way to combat inflation by allowing individuals to contract in any currency, potentially leading to a preference for sound money.
Key Takeaways: The podcast underscores the enduring relevance of Hayek's ideas, particularly in the context of modern economic challenges such as inflation and the role of government in markets.
Transcript
This is the Human Action podcast where we debunk the economic, political, and even cultural myths of the days. Here's your host, Dr. Bob Murphy. Folks, we got a great episode for you with a great discussion with Peter Klein on the new Hayek book. But before we get into that, let me remind you the Mises Institute is going to have our annual supporter summit this year. It's in Delray Beach, Florida on October 16th through 18th to discuss economic freedom, the key to liberty. Political liberties like fair trials and freedom of the press mean nothing without economic freedom founded on private property. This was central for Mises and it's central to the Mises Institute's mission. Equipped with the insights of Austrian economics, Mises, Hayek, and Rothbart understood that economic freedom is the key to liberty and human flourishing. Our speakers at this year's supporter summit will explore this theme and make the case for the system of private property. Registration is $475 per person and you must be a Mises Institute member to register. For more information, visit mises.orgss25. Again, go to mises.orgss25. Hope to see you there. Peter, welcome back to the Human Action Podcast. >> Thanks, Bob. Great to be here. So, what we're talking about, folks, is the new Hyatt collection that the institute's putting out. And let me just remind folks, you can get your free copy or if you're part of like a homeschooling group or you want to give some to the local chamber of commerce, you can get multiple copies. So, go to mises.org/hayek21, which stands for Hayek for the 21st century, which is the name given to this collection. And you can just fill in the form. And if you're in the US, not only is the physical book free or your copies of it, but they'll mail it to you for free. If you're foreign, the books they won't charge you for, but they will charge for the postage. So again, go to mises.org/hayek21 to get your free copies. And now Peter, here we're going to talk about the particular essays that were in this book and what you can expect to find. So just big picture, Peter. Um I know you were involved a little bit in the process of se making these selections for what makes the cut into a collection of Hyatt for the 21st century. So can you just speak to that? >> Yeah, sure. Um you know part of the rationale for putting out a book like this is that while Hayek's ideas his general worldview you know is fairly well known among economists and some of his works like his popular book the road to serum well known among the general public you know Hayek wrote a lot over many many decades I mean he was still publishing into his 90s and you know his works are are scattered across a number of volumes collections and so forth But like you know his his sort of classic greatest hits are not always available in a super accessible form. So the idea here was hey let's publish a short volume that can be easily distributed you know it can be given out for free to a large number of people sorry uh friends outside the US and uh it will contain you know a selection of Hayek's most influential most important and best known essays all in a convenient you know easy to read format. Some people think that Hayek because many of his ideas are quite complex, you know, is not as accessible a thinker as maybe Rothbart or even Mises. But in fact, as I think these essays show, you know, Hayek at his best is is clear and sharp and pathy and, you know, he can get his message across very effectively in a short essay. And also I think the collection is good that it does span like there are some things in here that are you know were actual peer-reviewed journal articles and you know for the economics profession but also excerpts like you say from the road to surfom which was more of a a pop book as it were and so it is a good mix just kind of showing the breath of his contributions and I'm sitting here I was going to there's what seven total selections in here and I was thinking Peter let me just grab two or three that we could focus but it's like every single one of them I have stuff I could talk about. So, Demi, do you want to >> uh why don't we do it this way? So, the use of knowledge in society. >> Yeah, >> that one I mentioned this in the previous episode of the human action podcast, folks, when I did this, but I'll just say it again for Peter's benefit here that when I was in grad school at NYU, you may know, Peter, that there's the they had the Monday weekly Austrian colloquium, you know, where speakers would come in and present and, you know, Mario Rizzo ran that thing. And so my I'm going through the program, you know, my other class, you know, people in my cohort are occasionally wondering like what does it bother you go and do every Monday? What the heck is Austrian? What is it? They study the GDP of Vienna. What is that? And so for some of them, I actually gave them high essay the use of knowledge in society that I thought for a mainstream economist who's learning, you know, general equilibrium models of blah blah blah. That that was the thing to me that really, you know, summarized or distilled down here's the issue Austrians have with this stuff. So just for what it's worth, I'm saying that when I had one thing to give them. Now, it turned out the two Japanese students came back and said, "We don't understand what the heck this guy's talking about." But so fair enough. But anyway, I mean, do you do you want to speak to that essay in terms of like how there could be a bunch of really smart mathematical economists that are really good at finding equilibria and blah blah blah and the conditions for paro opt and yet they're kind of just missing the big picture and that like that essay I thought really crystallized like what you guys are missing. Yeah, that's an interesting way to frame it. I mean, I I would put it slightly differently. I would say among all Hayek's, you know, technical his set of technical writings, this is by far the one that if not fully appreciated is at least the most recognized by mainstream economists, almost surely the I mean, it's one of the most heavily cited uh uh economics articles of all time. If you look on Google Scholar or some of those other uh scientific citation databases, you know, it appears on I I I suspect it appears on many PhD microeconomics syllabi. Again, not necessarily uh uh to give it a thorough uh investigation and treatment. Some of those may be kind of decorative references, but you know, if you're a mainstream economist and you want to acknowledge that you have some familiarity with, you know, Nobel laurate quality ideas from the 20th century, you would say, "Ah, yes, Hik's arguments about dispersed knowledge and the challenges that they posed to central planning are, you know, were important in their time." Now some people might think those arguments have been superseded or are no longer as powerful as they once were but I think this article is generally recognized by almost all economists you know as very important its arguments are worth thinking about they should be known and so forth which is not the case for a lot of other Hayek's writings you know oddly enough um as some of us have pointed out when Hayek received the Nobel Prize uh was the co-awwardee in 1974 you know the only Austrian economist to receive that honor and something that we should certainly be you know very happy about. um the most of the um you know when you get the Nobel Prize there's like a little document you know there's a there's a press release but then there's also a more detailed scientific statement about the nature of the contributions and almost everyone thinks that Hayek was recognized by the Nobel committee essentially for this essay the use of knowledge in society and a few other related articles um and Hayek kind of um helped to to cement that perception by making his Nobel address which is also reprinted in this collection as the pretense of knowledge mainly about the problems of tacet knowledge and central planning. But if you look at the scientific document, the Nobel committee actually prioritizes and highlights or I guess nowadays you would say centers or foregrounds uh his work on business cycles, >> right? >> So probably Hayek's technical writings on business cycles for us as Austrians are his most important contribution. But that contribution has been largely forgotten by the mainstream. Whereas his work on knowledge, even if it isn't fully embraced, is at least recognized as something significant and worth discussion. >> Yeah. So, just two reactions to that, Peter. So, number one, everybody, you don't need to correct. Peter knows it's not the original Nobel Prize in economics. It's just the Nobel Memorial. We know. You don't need to tell us. >> Thank No, but yeah, I wouldn't turn it down. >> Right. Exactly. Yeah. That's why I don't get I just No, I wouldn't even accept it. Um and then the other uh element is is right that like for me personally as you know Peter like I my dissertation was in capital interest theory like Hak's prices and production and then his pure theory of capital are you know some of my favorite things that he did but that's really complicated stuff and then like prices and production like that's you know was reviewed by what Shraa >> right >> and like a lot of mainstream economists think like that's an episode where Hayek just got trounced and Shraa just made a fool of him and Kanees was like haha you know editing the journal where that that review ran. So anyway, it's it's you're right that whereas you're saying here perhaps for the benefit of listeners up here, we actually didn't say concretely what what is in the use of knowledge. Can you just like summarize that real quickly? >> Sure. Yeah. I mean the the the central thesis of the argument I think is fairly easy to state. Uh Hayek is arguing about uh what is it that the price system or the price mechanism actually does, right? You know, we understand mo many people understand from just an intro econ, you know, supply and demand and prices being effective means to allocate scarce resources among competing ends. But um Hayek says in fact in a complex modern economy, the price system does much more than that. And he draws this analogy between the price system, the pricing process and sort of a communications network. And what he means by that is, you know, people make decisions about buying and selling and creating companies and you know doing all the other things that they consumption all the things that they do in a modern economic system based on information, knowledge, beliefs, preferences that they have. Okay. But this information high again emphasizes knowledge or what we would now call information uh is it it it's not often in the form in which people can sort of articulate it like they could write it down in a formula or in an equation rather a lot of the knowledge that guides people's economic decisions is in the form of tacit knowledge. Tacet knowledge meaning knowledge that you know you have but is difficult to articulate like for example you know when I discuss this in my classes I always use the knowledge of how to ride a bicycle >> right so if you know how to ride a bike the knowledge necessary of you know where to put your feet and and how fast to turn the pedals and how to you know lean your weight and so forth that knowledge exists in your brain but probably not in a form where you could write down an algorithm or a recipe and hand it to someone else who has never ridden a bicycle such that that person could read your set of instructions, get on the bike, you know, and immediately go off and ride. No, you have to kind of learn from experience and eventually somewhere in your brain that knowledge exists, but it doesn't exist in a form in which you can easily communicate it explicitly. So, Hike was sort of responding to some of the enthusiastic the enthusiasts for central economic planning in the earliest early 20th century because these central planners thought okay well we can replicate what the market does uh you know within a a panel of experts a pilot bureau or a central planning board right rather than letting the chaos or anarchy of the undisiplined unplanned market do it you know we'll simply ask every individual in society consumer producer entrepreneur, whatever, will ask them to just write down and communicate to us the information or knowledge that they would use to guide their decision-m. We'll consolidate all that knowledge. We'll streamline it. We'll eliminate redundancies and we'll correct, you know, people's errors that we as the elites, you know, would be able to correct. And then we'll just process that into an allocation plan and we'll just tell tell everybody what to do, right? We can do just as well as the market. And in fact we can do better than the market applying you know science the science as we would now say right to the problem of resource allocation. Hayek says no that won't work because even if people were willing to communicate to the central planner everything they know that's relevant to making decisions that they want to make. They would it would be impossible for them to do so because they they're a lot of that knowledge does not exist in a form that can be explicitly communicated. Rather they just act right on the basis of their tacit subjective knowledge, preferences, beliefs and then stuff happens in the market and then some of the things that happen can actually convey information to other parts of the system. Hike uses this famous famous example of of of tin as an input into producing you know like metal car bodies or something and you know Hayek says okay imagine there's you know tin the ingredients from tin come from let's say Argentina or Chile say you need Chile and copper as an ingredient into producing some kind of metal fabricated part. Okay. And then there's some kind of horrible disaster. There's an earthquake or some other kind of or political disruption. whatever in Chile that is going to reduce the amount of copper that can be put out into the market. Hikes says well you know in a centrally planned system if the central planners you know know that they can say ah well we need to start substituting other ores and other intermediate components to be able to produce the same number of car bodies. So we're going to start using you know platinum or something instead of uh you know instead of uh copper and then everything will be fine right every all the necessary adjustments will be made. But again Hayek's point is well what if it's impossible what if that knowledge is so dispersed so spread out and it's often in this tacit difficult to articulate form you know it not only would it be impossible for people to transmit all that specific knowledge to the central planner. Moreover, you don't even need them to because what hike says will happen is oh well, you know, the people in the tin market, the people who offer 10 for sale will have fewer units of 10 available and there will be an adjustment in the wholesale, sorry, uh copper, there'll be a wholesale, there will be an adjustment in the wholesale market for copper where the price of copper will go up. And Ike says,"Well, if you're a producer of some metallic component that uses copper as an input, you don't need some dictate from a central planner, you don't need an email message telling you, hey, you better use less copper, more of something else." You're naturally inclined to do that anyway by the profit motive, >> right? When the price of one of your inputs goes up, you'll naturally look for other inputs that you can substitute instead. And the result is less copper is used or there's a conservation of copper. Exactly what the central planners would supposedly want. So Hik's argument is he even uses this term uh he uses the term marvel. The marvel of the market is that it effectively communicates information about things like natural disasters in Chile. not explicitly but in the form of price movements that induce people to act exactly as they would act if they were well-intentioned and they knew the explicit information what what was going on everywhere everywhere in the world. So the market is this you know marvelous communications network and something that no central planning system could ever replicate. That's basically the jer you know that's the core message of the use of knowledge in society. Yeah. And on that too, I forget his exact wording, but I always liked he says something like, and it's significant that they don't know. In other words, he's saying it would be overloading people with like TMI, too much information. You don't need to know that there was a mine collapse in in Chile. All you need to know is co copper or tin or whatever is more scarce today than it was yesterday. And then you and some people like they have no sub like some producers like, "No, I actually need that literal thing. I'm just going to have to suck it up and pay more." but other ones who can substitute away and that's exactly what you would want as the central planner if you had access to all the information. I I think that's right. And but Hayek goes even e even even you know farther in anticipating the sorts of objections that you know were beginning to come on the scene maybe theoretically around that time and then in the decades to follow decades after this essay was published we should have said in uh 1943 but subsequent to that people started saying h sorry 1945 uh uh you know with the advent of digital computing >> right the view came to be well yeah maybe that was true uh when you had to compute things, you know, with pencil and paper, but now we have giant computing machines and people in 2025 say, "Well, now we have, you know, we have Gen AI and all kinds of other, you know, artificial thinking tools that can do all that much better than humans. So, we don't have to worry about people being cognitively overloaded. The computer system will take care of all that." And you know, Hayek, were he here with us today would say, "Ah, but but that's not that's not my only point. Yes, it's true. It would be very difficult for a central planning board because of the limits of human cognition and so forth to calculate that. But even a computer couldn't do it because the key issue is not the amount of information to be processed. It's the fact that the information does not exist in a form in which it can be emailed to somebody. It's like again the knowledge of how to ride a bike or you know your grandmother's uh technique for you know making an apple pie or something that she learned from her mother who learned from her mother. Your grandmother doesn't follow a written recipe and she can't just train you how to do it by writing something down and giving it to you. You know you got to work with her for months and learn all the subtleties and so forth. So, so you know the existence of super powerful computing machines does not render Hayek's argument obsolete. It's sort of sideways to Hayek's argument because Hik's argument is really about the nature of knowledge, the form in which it takes, not so much how hard it might be for us to compute something if we add it. >> Yeah. Yeah. And why don't we just not to get too bugged again? We could just go the whole episode just on this one essay, but to show in case people are like, "Oh, so Hayek is, you know, real technical and he's making very abstruse argue, but also he is very practical and that's more in, you know, his his book, The Road to Surfom." And and so the excerpt we have in this is is probably I think what most people remember like if you ask someone after if they've read it and then check in with them five years later and say, "What did you take away from Hayek's the road to surf?" I think a lot of people remember, "Oh yeah, that chapter on why the worst get on top." Um, so here, let me I'll just read this excerpt then I'll let you say whatever you want here. So here, this isn't actually Hayek. He's actually quoting Frank Knight, but this is something I think really stuck sticks with a lot of people. So here's Hayek, then he's setting up the quote from Knight. So here's Hayek talking. It is only too true when a distinguished American economist concludes from a similar brief enumeration of the duties of the authorities of a collectivist state that and now he's quoting Knight they would have to do these things whether they wanted to or not and the probability of the people in power being individuals who would dislike the possession and exercise of power is on a level with the probability that an extremely tender-hearted person would get the job of whipping master in a slave plantation. All right. So, that's just one little nugget from that essay, but you want to just speak to the the essay over or the or the chapter overall? >> Yeah, I absolutely love that quote uh by night and I'm so glad that Hike included it there. But, yeah, I mean, the road to surfom is is a popular book as many of our readers know. It was uh the chapters were originally excerpted in the Reader Digest. So, Reader's Digest was a lot more intellectual back in the 1940s than it than it became in our day. But, um uh yeah. So you know the road to surfom was kind of a warning against central planning. you know, the idea back in in the 1930s, 1940s as as you know, socialism and communism came onto the scene and you know, fascism in Europe that um well the the hardly anyone at that time other than Hayek, Mises, a few other uh intellectuals were advocating sort of less aair free market capitalism. The the mainstream view among among intellectuals was well, you know, we need to we need to adopt a few of the good features of socialism and communism without going too far, right? Yeah, we don't want the goologs. We don't want uh you know, we don't want the secret police, but we we don't want the anarchy and chaos of unregulated markets either. We need, you know, some kind of a middle course, the a mixed economy was as we sometimes call it, where you have some government ownership and some government planning but not too much and so forth. And so, you know, through in this book, you know, Hayek is arguing that attempts to introduce just a few of these, you know, socialistic features inevitably push us farther and farther in the wrong direction. Right? Mises has a an analogous uh argument uh in in his book on uh uh on planning where Mises argues that you know each intervention uh government interventions they almost never achieve the outcome that their proponents claim uh you know they had at the beginning. They introduce other unanticipated consequences or distortions which call forth yet further interventions to correct those distortions. But the new interventions create yet more distortions and so on and so forth and you have this sort of one-way slide towards uh you know towards more and more intervention in the economy. Hayek's argument here is sort of analogous or parallel to that that if we try to introduce some features of socialism or central planning you know those put us on the road towards full-blown central planning and poverty i.e. the road to surfom. And then in the different chapters of the book, he he lays out, you know, specific components of that. This this this chapter, why the worst got on top, highlights, you know, kind of a a a political science or organization theory aspect that many central planners had ignored, right? Namely, who who are likely to be the central planners, >> right? What sort of person is likely to be attracted to that role? How are how will they tend to perform in that role? You know, what do they have to do to to get better at that role? Well, you know, we can all think of situations that we've been in, maybe some organization that we worked for or a school that we were a part of, you know, where you had these sort of, you know, middle manager types like uh uh uh you know, like the Steve Carell character in the office >> or, you know, Dilbert's manager or whatever. uh you know who seem to um you know who seem to be rewarded for making it more difficult for the people at the bottom of the organization to sort of actually do their job. Right? So, Hayek is arguing in a in a state system of of this where you have state planners, state regulators. First of all, you know, people who who are naturally inclined to live and let live and who highly value freedom and liberalism as Mises and Hike would have used that word are going to say, "No, I don't want a job like that, right? I'm not interested in being a state planner. That doesn't appeal to me at all." Okay? But then the people to whom that job does appeal will tend to be the folks I mean Frank Knight puts in a I don't you don't have to put it quite as extreme as Frank Knight does to say these will you know people who exercise political power will tend to be those who enjoy the exercise of political power. It doesn't mean they're you know have evil hearts necessarily. I mean some of them probably do. Some of them maybe just naively think that they know better than others, right? And uh they, you know, that they should be in a position to influence and and exercise power. And moreover, you know, Hayek is saying in this chapter that um you know, you you're the way you rise to the top in one of those kinds of organizations is by being especially ruthless >> your exercise of power. So the people with scruples will be unlikely to be in those roles in the first place. and and if they happen to be in those roles, they'll be ineffective uh and eventually drop out. >> Yeah. And it's like ju a specific application that's probably obvious to most people, but just to stress it that it it's silly to say like, oh yeah, well like there were a lot of horrors that happened under the Soviet Union, especially in the Stalin era. But I mean, yeah, luck of the draw, Stalin happened to be a bloodthirsty monster, but you get somebody good in there who just wants to help people. And the point is, well, no, the Stalin would have killed such a person. That's it's not that it wasn't that he just flipped a coin and then, oh, this guy Joseph Stalin, I guess you're the dictator now. It's okay, it's your turn. You give it a shot. That's not what happened. >> Exactly. Right. And there's also an ideological aspect to it in that, you know, Hike argues in that chapter that, you know, okay, among the people who are in power and exercising power, how do you get them excited? How do you get how do you motivate them to implement their plans? Well, he says, you know, it's easier to get people to rally around, you know, what you might call a negative program, you know, hatred of some person or policy, envy of some group, you know, we're going to get rid of the billionaires, you know, people who are have this kind of totalitarian mindset or author authoritarian mindset, they're less likely to get excited about a program, you know, hey, people need more freedom, >> right? You know, even without going into the particulars, you know, it's hard to find examples of authoritarians who who sought and used their authoritarian power to create more liberty. >> You know, some people might say, "Oh, well, you know, you know, Gusto Pinocha in Chile, he he did get rid of some of the communists that his predecessor Aende uh had put in had had, you know, had hired. He he he got rid of some government regulations. He liberated some parts of the economy. I mean, that might be true. But even if we thought that were a good overall assessment of Pino's regime, when it's probably not, again, that would that would be kind of the exception that proves the rule. I think some people who are, you know, enthusiastic supporters of Donald Trump, right, think that it's a good thing for Trump to use authoritarian means circumventing the Constitution or whatever. ah you know the the left had power for so long the only way that we can defeat them is by assuming power ourselves and then repealing all of their bad regulations and creating you know sort of a free market paradise. I don't think that's what Trump or Trump's supporters are really doing at all. But I I guess my point is uh Trump people they have the same kind of image in mind of a strong man who can use his strength actually to create more liberty. But I mean probably that isn't what's going on. Even if that were going on, that would be one or two examples against a hundred examples of people using power to promote, you know, more power and and less liberty. Other words, it's you're it's more likely that people will rally around the hatred of some group that they think has more than they deserve than to get people to rally around, you know, a Rothbartian anarchco capitalist vision, right? >> Certainly because of people who go into government are just not going to be excited about that. >> Just a quick anecdote on this general principle of why the worst get on top and the mixture and the type of personalities. uh a few years ago, well several years ago at this point, I I was crossing into Canada and this was in like when the CO stuff was really in swing and so they had all kinds of draconian measures about how you had to have previously registered on their website and uploaded all your stuff and your your recent test to prove you were negative and all this stuff. And so I was going through and it I I had gone back and forth a couple times and like they pulled me out of line and made me go do stuff. And so in general the people I interacted with. So their rules, their system was crazy. It was like, you know, Canadian collectivism, but the Canadian, you know, the actual staff were very, I mean, they were Canadian, you know, I won't do an impression and butcher it, but they're and then this one guy I got, you could tell from his accent that he was like from Brooklyn, and I was like, this is the worst of all worlds. It's the Canadian system with some guy from that doesn't work. So, and then and this guy was not sympathetic to me at all. like he he was looking for a reason that my whole trip would get destroyed, whereas the other people were trying to figure out, you know, how to help me out. So, >> and I guess to to to extend your metaphor, Hik's argument would be, you know, in a Canadian system like that, eventually the the nice Canadians are going to quit and do something else and the crass Brooklynites are the ones who will end up running the running the border. >> Okay, so let's see here. Um, I also wanted to talk about uh the meaning of competition, that essay. And so here um you know that's a just again the contrast between like the Austrian approach to economics versus the mainstream. And just you know one quick example of this that I think he really distills and elaborates on in this essay is if you take a standard economics course you know undergrad sequence you will end up thinking oh the market's really only working if and really you only have competition in a situation where you know no there's no product differentiation the price is all identical you know you couldn't tell the difference between one you know one producer versus another and that's like the essence of competition and how this say it's weird like they hold up this condition as as a compet is the the essence of purity when that's literally the only place where competition isn't even working anymore >> right yeah >> he says it much more eloquently but you know what I'm talking about >> you're exactly right and this you know this article or this chapter the meaning of competition is a little bit more technical meaning that it's aimed more at professional economists or it's a critique of mainstream e of of the mainstream economics approach to competition and I think you you stated it very well that ironically um you know as as the as the theory of so-called perfect competition emerged in the first part of the 20th century and and became kind of you know uh enthroned uh during the sort of neocclassical synthesis. uh you know then you you had this irony that what economists call a competitive outcome is the outcome that obtains in a situation where competition is completely absent. So, Hayek points out this error and he says, "No, I mean what, you know, the right way to think about competition and indeed the way that most professional economists thought about competition before the early 20th century was much more in the everyday sense of the word. You know, we understand competing like a sporting competition or there's a competition at school, you know, to see who can write the best essay or who can, you know, perform a task most effectively in a race, a competitive race, you know, the more competitive it is, the the the more people are striving towards, you know, getting the to the finish line first. But if every competitor or so-called competitor were identical, right, and everyone reached the finish line at exactly the same time, we would say, well, that's not a competition at all. So, Hayek says the everyday sense of striving, trying to do better than someone else, you know, in in kind of a rivalous dynamic process that takes place over time. That's the way we should thinking we should be thinking about competition in an economic sense as well. He doesn't go through all the history in this chapter though there are some other uh uh writings by other scholars who have who have done this quite well who have traced out the way the notion of what what competition uh uh the way that term was used by economists from you know the 18th century on up to the present and competition was always understood as this rivalous process among competitors who are different from each other right who are heterogeneous and the modern notion of so-called competition with, you know, large numbers of identical firms that are price takers and all this. You know, it that that is a, you know, that conception. It it it plays a certain role in these abstract artificial models of of of markets in which the mainstream economist can point to an actual market that that you know in which one competitor is somehow better than the others and say ah that's a problem that reflects the exercise of market power. this asymmetry in firms capabilities needs to be remedied by some kind of you know government competition policy regulation antitrust whatever and Hayek points out that no in fact consumers benefit from you know real competition I think this is obvious to anybody Bob who looks out of their window you know for for two seconds I mean the industries I mean look at AI for example right now you know you've got a huge amount of competition between you know you nonprofit or quai nonprofit entities like OpenAI. You've got for-profit entities, you know, Microsoft, uh, Google, uh, uh, uh, X or whatever the X-arent company is called now, right? You have, uh, Nvidia. You have a lot of, of firms trying really hard to produce different kinds of AI agents and systems that are much better than those of other firms. And we consumers realize the benefits of that. You can think about that, you know, of almost any other industry. In fact, you know, the industries that we like the least, right, are those in which competition in the real sense that Ike articul articulates it are are the weakest, right? Mainly because of government regulation. you know, mortgage lending for example or um uh you know, you can think of all kinds of services uh uh you know, credit bureau action of credit bureaus for example, where we only have three credit ratings agencies, you know, licensed by the regulators, right? The less competition we have, the more the government protects a small one firm or a small set of firms against actual competitors, the the less satisfied we as consumers are. So competition in the real sense and not so-called perfect competition, this fictitious construction is is something that is super beneficial for economic well-being. >> Yeah. Yeah. Great stuff. And and again it for people who haven't taken you know economics courses at the at least the undergrad level let alone higher this might seem odd or whatever but when you go and you go in those classes and you see how it's taught and that yeah like oh the the the essence of kind is like the the wheat farmer who sells his bushels of wheat and all the wheat you know all the bushels are interchangeable and he has no influence on the market whereas you know somebody who has market power that's awful and again it's it's just amazing like when you like I you understand historically like you're saying Peter, I get where these doctrines came from and why that was what popped out of the end of of the pipeline, but yet when it comes down to it, it just, you know, the policy prescriptions especially that come out of that are just like literally the opposite of what you would want. >> Yeah. you know implicit in Hayek's uh uh essay here is a notion that uh was has been made more explicit in writings by people like Harold Demsets that you know typically when a firm is large a firm is successful a firm is profitable has a large market share unless we have some reason to believe that government favoritism like an exclusive license or some kind of protectionism was responsible we can conclude that the firm is large because it does a good job satisfying the consumer. >> Whereas the conventional approach, I don't even mean in an economics textbook, but just within the Federal Trade Commission or the Department of Justice, antitrust division or any, you know, competition policy expert, regulator, lawyer around the world today is that if a firm is large, the government needs to make it smaller. Right? If a firm is large, that means consumers are or have been exploited and are being made worse off. And if we can only make that firm smaller, things will be better. In other words, sort of the mainstream regulatory approach today starts from the premise that you know size is either just sort of random or it's the result of something nefarious that a firm did. And when when you have some big firms, consumers are harmed. Whereas Austrians and I think any sensible person who thinks about it would recognize that absent government subsidy, the fact that a firm is large is an indication that it has capabilities, practices, strategies that that result in consumer well-being and we should encourage it to continue to do those things. >> Yeah. And in the limit, I mean, just to make sure people get this basic point, if some some brilliant inventor comes up with some brand new product, brings it to market, everyone loves it, and flocks to it. In the beginning, that person's going to have quote a monopoly in the sense that I'm the only one selling this thing. And it would be kind of silly to take a snapshot of that and say, look at all the the market failure here and blah blah blah. And it would be so much better for everyone if there were a thousand identical firms that all had the same technology and factory, you know, capacity to make the And it's like, yeah, that would be better, but that doesn't exist right now. So, isn't it better to have this versus not having it at all? I mean, it's just kind of crazy. >> I mean, this was a a larger, you know, a broader theme for Hayek and for many Austrians that, you know, you can't take a snapshot of a particular market situation and then draw any conclusions about uh, you know, policy or efficiency. You've got to know, you've got to be able to see the movie, right? You have to know what happened to get us to the point that you're now capturing with the snapshot and what's likely to happen after if some, you know, intervention were to take place. But, you know, because economists, you know, because it's easier to model formally or mathematically these sort of static snapshot situations. Unfortunately, the mainstream economics profession has devoted, you know, 95% of its effort to the analysis of these kind of static equilibrium conditions or comparing one static equilibrium to another static equilibrium because it's it's just easier. It's easier to do that than to try to understand these sort of dynamic patterns or evolutionary patterns, if you want to use that language, that emerge over time. >> Yep. Yep. Okay. Well, I'm looking at the clock here. Maybe we could just do one more and So, I how about this the choice in currency one the final chapter. Let me read I might be putting you on the spot here if this isn't up your alley but let me just read some of this the quote two quotes from this. So again folks the the title of this chapter is choice in currency a way to stop inflation and then the footnote says this text is based on the institute of economic affairs 2000 web edition of it but ultimately is coming from Hayek's address which was titled international money which was delivered to the Geneva gold and monetary conference in 1975 in Switzerland. And so um he starts out and says the chief root of our present monetary troubles is of course the sanctification of scientific authority which Lord Kynes and his disciples have given to the age-old superstition that by increasing the aggregate of money expenditure we can lastingly ensure prosperity and full employment. Okay. And he goes through and is talking about stuff. And then he says in in the next section, it was John Maynard Kanes, a man of great intellect but limited knowledge of economic theory who ultimately succeeded in rehabilitating a view long the preserve of cranks with whom he openly sympathized. So what's interesting here is normally like the knock from like Missessie and Rothbartians and Hayek is oh he he played too nice. He just wanted to be respectable and he just you know attributed nothing but the best of mot. So here he's openly saying number one Kanes didn't really know much economics that was kind of funny. And then also he was sympathizing with cranks. You know he's not just saying like ah yes I see what where they misstepped on you know step 18 of their argument here. No he's saying these were cranks like he's almost saying like follow the science which is kind of funny but anyway how do you feel about all this? >> Yeah well you know it's funny that you mentioned that. I I will say that when some of us on the academic team at the institute were considering what chapters uh to put in this in this collection, the specific issue you mentioned did come up. In fact, when we were talking about choice and currency, >> uh I remember saying, look, this is the or some of us saying, hey, this is an example of, you know, kind of the feisty Hayek, >> right? which again cuts counter to the view that some folks have that well Hike was always you know Mises could be a real tough guy but Hayek was a gentleman and Hayek was a gentleman. Mises was a gentleman too. But Hayatt could also be very he could be very strong in his critique and I think this is this is uh one example by the way. >> Can I stop you real fast? Have you seen Peter the interview of Hayek where I forget who it is is asking him about Kanes and Hayek elaborates on why he's saying Kanes didn't know much economics. >> Oh. Oh yeah. Yeah. >> And he says like he only he only knew the English. He didn't even read you he barely spoke German. Just hilarious. In fact, I mean, people don't realize this now, but that was quite a common >> view of Kan's during Kanes's lifetime. There were plenty of Kanes's allies who said, "Oh, you boy, he's such a brilliant thinker and he's such an effective spokesperson, but but the guy doesn't know b he doesn't know basic economics. He doesn't know freshman level price theory, right? I mean his general theory to to its to to its uh proponents to it to to its admirers the general theory is so profound and revolutionary because it completely ignores you know what was the conventional microeconomics of its day but of course to its detractors that's a reason to stay away from that as you know sort of as as foolish nonsense Hayek would definitely put himself I think in the in the latter camp but he wasn't the only one by the way also in that interview series those UCLA interviews. Hayek has some pretty choice words about Milton Freriedman which I I urge your readers to to to to look at in their spare time. But as far as the essay itself, um >> it's really a cool piece because um you know this piece was written uh quite a bit later, right? I think the original publication was early 1970s, right? Mid 1970s. So this is Hayek um you know looking at uh post-war inflation and even the beginnings of you know what we later called stagflation and trying to trying to offer sort of a practical route for an alternative monetary system that does not burden us with all of the inflationary consequences of you know the neocanesian synthesis. And I think you know the argument is really easy to understand and it and it appeals to probably many of our audience right now because you know essentially the point Hik's making here is we could we could have a you know we could have a revolution right we could overthrow uh you know the the current fiat currency central banking regime we could overthrow Bretton Woods you know we could have a universal gold standard we could have a regime of universal uh uh you know fixed exchange rates are all kinds of systems that we could have that would be less inflationary in the Austrian sense, less likely to create business cycles in the Austrian sense, but those are not politically very popular and they just they seem too radical and too extreme and it's very hard to get people to sign on to these. But Hayek says, "Look, a simpler solution is to say, look, we're not going to overthrow the current regime. we're just going to allow people to sort of contract around it. >> Just just as today you have many proponents of a more libertarian, you know, system who say, well, you know, end the Fed when when Ron Paul and his fans chant end the Fed, that's great theater, but the Fed ain't going anywhere. So, all we really need is to create an alternative monetary regime, you know, through some kind of cryptocurrency. And then we do all our contracting through some kind of cryptography. We don't try to overthrow the monetary system or overthrow the legal system. We just sidestep them. Right? And and many proponents of that approach say, "Well, look, eventually everyone will realize that doing your uh uh you know, holding your your your wealth in crypto and using crypto as a medium of exchange is way better than using government fiat currency. eventually the the the the establishment system you know will just sort of fade away or it'll be competed out by the introduction of a new kind of a system. Now is that you know is that empirical prediction likely? That's sort of a separate issue. But Hayek is offering kind of a parallel argument obviously many decades before. He's saying look all you need is to allow people you need to basically repeal you know legal tender laws. Allow people to write contracts to make purchases to engage in economic activity to borrow and save in any currency of their choice. It could be an you know as as you know you and I could choose to use uh you know uh Indian rupee if we wanted or we could choose to use euros. We could choose Swedish croner. We could we could choose any of the existing state currencies that we want or we could just invent our own new currency. You know call it the Murphy, right? We could we could produce our own fiat currency, the Murphy or or it could be commoditybased if we wanted. And as long as the government allows people to choose which currency they use, you'll have a kind of a kind of a reverse Gresham's law. You know, Gresham's law is supposed to be the argument that bad money drives out the good. I actually actually points out here that that's not a correct statement of Gresham's law. The correct statement of Gresham's law is when exchange rates are artificially fixed by the state, then a more inflationary money is likely to displace, you know, sound money. But if you allow the exchange rates to to to float freely, then then the good money will actually drive out the bad. People will gravitate towards the money that holds its value over longer term, >> right? It's not like bad mobile phones drive out the good, you know, like in any other Why would that be? Why would bad money drive in? Yeah, >> exactly. It would be the same as in any other industry. Consumers will tend to use the the the commodity that is more effective in the monetary function. And Hike says, hey, you know, a non-threatening way to challenge the established regime is just to let people choose whatever currency they want. And as long as the government doesn't try to stamp it out, eventually uh there will be a migration towards those currency units that are more, you know, closer to what we Austrians would call sound money. So a very practical he has a theoretical, you know, explanation of why he thinks it would work. But again, this it's meant as a practical proposal uh that could be, you know, politically salailable potentially. Uh and uh again it echoes uh proposals that we've heard in the last 5 10 years about using alternative money as a way to circumvent the state system. >> Yeah. On that point um the late Nelson Nash always used to in seminars would bring up for this issue and say like instead of you know we didn't abolish the post office instead just like UPS and FedEx and everything you know but went around now they still have the monopoly on first class letters but you know you you get the point there. And then also another obvious example staring us the face is just economists since I got into this stuff you know we've been writing about the taxi cab medallion you know cartel and bl nobody cares about this but Uber comes on the scene and everyone can just see with their own eyes that oh yeah this is so much better than you know what the government used to give us and that you know that's and then people can see to the weakness of the arguments like oh no for consumer protection we need to have everybody certified by the by the New York City government. Yeah, those are great great examples. If we wanted to put it in more contemporary language, we could say, you know, a proposal that sort of unleashes entrepreneurial experimentation and innovation. Allow entrepreneurs to figure out different, you know, what what kind of commodity or system is best suited for facilitating the functions of money. You know, we we think in every other realm of life that, you know, a government cartel is going to be less effective than entrepreneurial creativity and innovation, right? These entrepreneurs, these monetary entrepreneurs might come up with uh means of payment that you and I, you know, have and would never have thought of just like in any other area in which entrepreneurs sort of do their thing. I think the reason why this proposal is rejected by you know many of the establishment types again it's because they somehow believe that money is completely unique from any other I mean they they don't regard money as an economic good in the same sense you know we Austrians think that yeah money is a special kind of good but going back to Carl Manger we we embrace the idea that money is an economic good in many ways it is it is it is a special type of a more general category of economic good. You know, there's there's a demand for it and a supply of it. It has a value that can be uh you know can be it can be evaluated on the margin. Uh the principle of diminishing marginal utility and all these sorts of things that apply to any economic good also apply to money. But of course, money is a special good in the sense that it's the one good that in a particular society trades against every other good. So we recognize money has some unique features but we think it's still a commodity and we can analyze it like other commodities. Mainstream economists think no money is qualitatively different from goods and services. It's not a good or service. It's some other thing and you know the normal rules of the market and competition and entrepreneurship don't apply to money because of this sort of magical unique character that it has. >> Yeah. Well, well, I suppose in fairness, a lot of them are consistent and they're just socialists. Yeah, the government should be in charge of money and TVs and smartphones and everything. So, there you go. >> That's true. So, consistent in a different way, but >> Okay. Well, that's a good place to wrap up. So, again, folks, this has been sort of like an infomercial for the book. Remember, you can get your free copy or copies if you go to mises.org/hayek21 for the Hayek in the 21st century. My guest has been Peter Klein, a senior fellow at the Mises Institute. Peter, thanks so much for your time today and your work in selecting these essays. >> Oh, it's my pleasure, Bob. I hope uh everyone will get a hold of this uh book and uh we'll will benefit from it and we'll we'll share it with all their friends. >> Thank you everyone for tuning in. We'll see you next time. >> Check back next week for a new episode of the Human Action podcast. In the meantime, you can find more content like this on mises.org. Heat. Heat. [Music] [Applause] [Music] [Applause] [Music] [Applause]
Peter Klein on Hayek for the 21st Century
Summary
Transcript
This is the Human Action podcast where we debunk the economic, political, and even cultural myths of the days. Here's your host, Dr. Bob Murphy. Folks, we got a great episode for you with a great discussion with Peter Klein on the new Hayek book. But before we get into that, let me remind you the Mises Institute is going to have our annual supporter summit this year. It's in Delray Beach, Florida on October 16th through 18th to discuss economic freedom, the key to liberty. Political liberties like fair trials and freedom of the press mean nothing without economic freedom founded on private property. This was central for Mises and it's central to the Mises Institute's mission. Equipped with the insights of Austrian economics, Mises, Hayek, and Rothbart understood that economic freedom is the key to liberty and human flourishing. Our speakers at this year's supporter summit will explore this theme and make the case for the system of private property. Registration is $475 per person and you must be a Mises Institute member to register. For more information, visit mises.orgss25. Again, go to mises.orgss25. Hope to see you there. Peter, welcome back to the Human Action Podcast. >> Thanks, Bob. Great to be here. So, what we're talking about, folks, is the new Hyatt collection that the institute's putting out. And let me just remind folks, you can get your free copy or if you're part of like a homeschooling group or you want to give some to the local chamber of commerce, you can get multiple copies. So, go to mises.org/hayek21, which stands for Hayek for the 21st century, which is the name given to this collection. And you can just fill in the form. And if you're in the US, not only is the physical book free or your copies of it, but they'll mail it to you for free. If you're foreign, the books they won't charge you for, but they will charge for the postage. So again, go to mises.org/hayek21 to get your free copies. And now Peter, here we're going to talk about the particular essays that were in this book and what you can expect to find. So just big picture, Peter. Um I know you were involved a little bit in the process of se making these selections for what makes the cut into a collection of Hyatt for the 21st century. So can you just speak to that? >> Yeah, sure. Um you know part of the rationale for putting out a book like this is that while Hayek's ideas his general worldview you know is fairly well known among economists and some of his works like his popular book the road to serum well known among the general public you know Hayek wrote a lot over many many decades I mean he was still publishing into his 90s and you know his works are are scattered across a number of volumes collections and so forth But like you know his his sort of classic greatest hits are not always available in a super accessible form. So the idea here was hey let's publish a short volume that can be easily distributed you know it can be given out for free to a large number of people sorry uh friends outside the US and uh it will contain you know a selection of Hayek's most influential most important and best known essays all in a convenient you know easy to read format. Some people think that Hayek because many of his ideas are quite complex, you know, is not as accessible a thinker as maybe Rothbart or even Mises. But in fact, as I think these essays show, you know, Hayek at his best is is clear and sharp and pathy and, you know, he can get his message across very effectively in a short essay. And also I think the collection is good that it does span like there are some things in here that are you know were actual peer-reviewed journal articles and you know for the economics profession but also excerpts like you say from the road to surfom which was more of a a pop book as it were and so it is a good mix just kind of showing the breath of his contributions and I'm sitting here I was going to there's what seven total selections in here and I was thinking Peter let me just grab two or three that we could focus but it's like every single one of them I have stuff I could talk about. So, Demi, do you want to >> uh why don't we do it this way? So, the use of knowledge in society. >> Yeah, >> that one I mentioned this in the previous episode of the human action podcast, folks, when I did this, but I'll just say it again for Peter's benefit here that when I was in grad school at NYU, you may know, Peter, that there's the they had the Monday weekly Austrian colloquium, you know, where speakers would come in and present and, you know, Mario Rizzo ran that thing. And so my I'm going through the program, you know, my other class, you know, people in my cohort are occasionally wondering like what does it bother you go and do every Monday? What the heck is Austrian? What is it? They study the GDP of Vienna. What is that? And so for some of them, I actually gave them high essay the use of knowledge in society that I thought for a mainstream economist who's learning, you know, general equilibrium models of blah blah blah. That that was the thing to me that really, you know, summarized or distilled down here's the issue Austrians have with this stuff. So just for what it's worth, I'm saying that when I had one thing to give them. Now, it turned out the two Japanese students came back and said, "We don't understand what the heck this guy's talking about." But so fair enough. But anyway, I mean, do you do you want to speak to that essay in terms of like how there could be a bunch of really smart mathematical economists that are really good at finding equilibria and blah blah blah and the conditions for paro opt and yet they're kind of just missing the big picture and that like that essay I thought really crystallized like what you guys are missing. Yeah, that's an interesting way to frame it. I mean, I I would put it slightly differently. I would say among all Hayek's, you know, technical his set of technical writings, this is by far the one that if not fully appreciated is at least the most recognized by mainstream economists, almost surely the I mean, it's one of the most heavily cited uh uh economics articles of all time. If you look on Google Scholar or some of those other uh scientific citation databases, you know, it appears on I I I suspect it appears on many PhD microeconomics syllabi. Again, not necessarily uh uh to give it a thorough uh investigation and treatment. Some of those may be kind of decorative references, but you know, if you're a mainstream economist and you want to acknowledge that you have some familiarity with, you know, Nobel laurate quality ideas from the 20th century, you would say, "Ah, yes, Hik's arguments about dispersed knowledge and the challenges that they posed to central planning are, you know, were important in their time." Now some people might think those arguments have been superseded or are no longer as powerful as they once were but I think this article is generally recognized by almost all economists you know as very important its arguments are worth thinking about they should be known and so forth which is not the case for a lot of other Hayek's writings you know oddly enough um as some of us have pointed out when Hayek received the Nobel Prize uh was the co-awwardee in 1974 you know the only Austrian economist to receive that honor and something that we should certainly be you know very happy about. um the most of the um you know when you get the Nobel Prize there's like a little document you know there's a there's a press release but then there's also a more detailed scientific statement about the nature of the contributions and almost everyone thinks that Hayek was recognized by the Nobel committee essentially for this essay the use of knowledge in society and a few other related articles um and Hayek kind of um helped to to cement that perception by making his Nobel address which is also reprinted in this collection as the pretense of knowledge mainly about the problems of tacet knowledge and central planning. But if you look at the scientific document, the Nobel committee actually prioritizes and highlights or I guess nowadays you would say centers or foregrounds uh his work on business cycles, >> right? >> So probably Hayek's technical writings on business cycles for us as Austrians are his most important contribution. But that contribution has been largely forgotten by the mainstream. Whereas his work on knowledge, even if it isn't fully embraced, is at least recognized as something significant and worth discussion. >> Yeah. So, just two reactions to that, Peter. So, number one, everybody, you don't need to correct. Peter knows it's not the original Nobel Prize in economics. It's just the Nobel Memorial. We know. You don't need to tell us. >> Thank No, but yeah, I wouldn't turn it down. >> Right. Exactly. Yeah. That's why I don't get I just No, I wouldn't even accept it. Um and then the other uh element is is right that like for me personally as you know Peter like I my dissertation was in capital interest theory like Hak's prices and production and then his pure theory of capital are you know some of my favorite things that he did but that's really complicated stuff and then like prices and production like that's you know was reviewed by what Shraa >> right >> and like a lot of mainstream economists think like that's an episode where Hayek just got trounced and Shraa just made a fool of him and Kanees was like haha you know editing the journal where that that review ran. So anyway, it's it's you're right that whereas you're saying here perhaps for the benefit of listeners up here, we actually didn't say concretely what what is in the use of knowledge. Can you just like summarize that real quickly? >> Sure. Yeah. I mean the the the central thesis of the argument I think is fairly easy to state. Uh Hayek is arguing about uh what is it that the price system or the price mechanism actually does, right? You know, we understand mo many people understand from just an intro econ, you know, supply and demand and prices being effective means to allocate scarce resources among competing ends. But um Hayek says in fact in a complex modern economy, the price system does much more than that. And he draws this analogy between the price system, the pricing process and sort of a communications network. And what he means by that is, you know, people make decisions about buying and selling and creating companies and you know doing all the other things that they consumption all the things that they do in a modern economic system based on information, knowledge, beliefs, preferences that they have. Okay. But this information high again emphasizes knowledge or what we would now call information uh is it it it's not often in the form in which people can sort of articulate it like they could write it down in a formula or in an equation rather a lot of the knowledge that guides people's economic decisions is in the form of tacit knowledge. Tacet knowledge meaning knowledge that you know you have but is difficult to articulate like for example you know when I discuss this in my classes I always use the knowledge of how to ride a bicycle >> right so if you know how to ride a bike the knowledge necessary of you know where to put your feet and and how fast to turn the pedals and how to you know lean your weight and so forth that knowledge exists in your brain but probably not in a form where you could write down an algorithm or a recipe and hand it to someone else who has never ridden a bicycle such that that person could read your set of instructions, get on the bike, you know, and immediately go off and ride. No, you have to kind of learn from experience and eventually somewhere in your brain that knowledge exists, but it doesn't exist in a form in which you can easily communicate it explicitly. So, Hike was sort of responding to some of the enthusiastic the enthusiasts for central economic planning in the earliest early 20th century because these central planners thought okay well we can replicate what the market does uh you know within a a panel of experts a pilot bureau or a central planning board right rather than letting the chaos or anarchy of the undisiplined unplanned market do it you know we'll simply ask every individual in society consumer producer entrepreneur, whatever, will ask them to just write down and communicate to us the information or knowledge that they would use to guide their decision-m. We'll consolidate all that knowledge. We'll streamline it. We'll eliminate redundancies and we'll correct, you know, people's errors that we as the elites, you know, would be able to correct. And then we'll just process that into an allocation plan and we'll just tell tell everybody what to do, right? We can do just as well as the market. And in fact we can do better than the market applying you know science the science as we would now say right to the problem of resource allocation. Hayek says no that won't work because even if people were willing to communicate to the central planner everything they know that's relevant to making decisions that they want to make. They would it would be impossible for them to do so because they they're a lot of that knowledge does not exist in a form that can be explicitly communicated. Rather they just act right on the basis of their tacit subjective knowledge, preferences, beliefs and then stuff happens in the market and then some of the things that happen can actually convey information to other parts of the system. Hike uses this famous famous example of of of tin as an input into producing you know like metal car bodies or something and you know Hayek says okay imagine there's you know tin the ingredients from tin come from let's say Argentina or Chile say you need Chile and copper as an ingredient into producing some kind of metal fabricated part. Okay. And then there's some kind of horrible disaster. There's an earthquake or some other kind of or political disruption. whatever in Chile that is going to reduce the amount of copper that can be put out into the market. Hikes says well you know in a centrally planned system if the central planners you know know that they can say ah well we need to start substituting other ores and other intermediate components to be able to produce the same number of car bodies. So we're going to start using you know platinum or something instead of uh you know instead of uh copper and then everything will be fine right every all the necessary adjustments will be made. But again Hayek's point is well what if it's impossible what if that knowledge is so dispersed so spread out and it's often in this tacit difficult to articulate form you know it not only would it be impossible for people to transmit all that specific knowledge to the central planner. Moreover, you don't even need them to because what hike says will happen is oh well, you know, the people in the tin market, the people who offer 10 for sale will have fewer units of 10 available and there will be an adjustment in the wholesale, sorry, uh copper, there'll be a wholesale, there will be an adjustment in the wholesale market for copper where the price of copper will go up. And Ike says,"Well, if you're a producer of some metallic component that uses copper as an input, you don't need some dictate from a central planner, you don't need an email message telling you, hey, you better use less copper, more of something else." You're naturally inclined to do that anyway by the profit motive, >> right? When the price of one of your inputs goes up, you'll naturally look for other inputs that you can substitute instead. And the result is less copper is used or there's a conservation of copper. Exactly what the central planners would supposedly want. So Hik's argument is he even uses this term uh he uses the term marvel. The marvel of the market is that it effectively communicates information about things like natural disasters in Chile. not explicitly but in the form of price movements that induce people to act exactly as they would act if they were well-intentioned and they knew the explicit information what what was going on everywhere everywhere in the world. So the market is this you know marvelous communications network and something that no central planning system could ever replicate. That's basically the jer you know that's the core message of the use of knowledge in society. Yeah. And on that too, I forget his exact wording, but I always liked he says something like, and it's significant that they don't know. In other words, he's saying it would be overloading people with like TMI, too much information. You don't need to know that there was a mine collapse in in Chile. All you need to know is co copper or tin or whatever is more scarce today than it was yesterday. And then you and some people like they have no sub like some producers like, "No, I actually need that literal thing. I'm just going to have to suck it up and pay more." but other ones who can substitute away and that's exactly what you would want as the central planner if you had access to all the information. I I think that's right. And but Hayek goes even e even even you know farther in anticipating the sorts of objections that you know were beginning to come on the scene maybe theoretically around that time and then in the decades to follow decades after this essay was published we should have said in uh 1943 but subsequent to that people started saying h sorry 1945 uh uh you know with the advent of digital computing >> right the view came to be well yeah maybe that was true uh when you had to compute things, you know, with pencil and paper, but now we have giant computing machines and people in 2025 say, "Well, now we have, you know, we have Gen AI and all kinds of other, you know, artificial thinking tools that can do all that much better than humans. So, we don't have to worry about people being cognitively overloaded. The computer system will take care of all that." And you know, Hayek, were he here with us today would say, "Ah, but but that's not that's not my only point. Yes, it's true. It would be very difficult for a central planning board because of the limits of human cognition and so forth to calculate that. But even a computer couldn't do it because the key issue is not the amount of information to be processed. It's the fact that the information does not exist in a form in which it can be emailed to somebody. It's like again the knowledge of how to ride a bike or you know your grandmother's uh technique for you know making an apple pie or something that she learned from her mother who learned from her mother. Your grandmother doesn't follow a written recipe and she can't just train you how to do it by writing something down and giving it to you. You know you got to work with her for months and learn all the subtleties and so forth. So, so you know the existence of super powerful computing machines does not render Hayek's argument obsolete. It's sort of sideways to Hayek's argument because Hik's argument is really about the nature of knowledge, the form in which it takes, not so much how hard it might be for us to compute something if we add it. >> Yeah. Yeah. And why don't we just not to get too bugged again? We could just go the whole episode just on this one essay, but to show in case people are like, "Oh, so Hayek is, you know, real technical and he's making very abstruse argue, but also he is very practical and that's more in, you know, his his book, The Road to Surfom." And and so the excerpt we have in this is is probably I think what most people remember like if you ask someone after if they've read it and then check in with them five years later and say, "What did you take away from Hayek's the road to surf?" I think a lot of people remember, "Oh yeah, that chapter on why the worst get on top." Um, so here, let me I'll just read this excerpt then I'll let you say whatever you want here. So here, this isn't actually Hayek. He's actually quoting Frank Knight, but this is something I think really stuck sticks with a lot of people. So here's Hayek, then he's setting up the quote from Knight. So here's Hayek talking. It is only too true when a distinguished American economist concludes from a similar brief enumeration of the duties of the authorities of a collectivist state that and now he's quoting Knight they would have to do these things whether they wanted to or not and the probability of the people in power being individuals who would dislike the possession and exercise of power is on a level with the probability that an extremely tender-hearted person would get the job of whipping master in a slave plantation. All right. So, that's just one little nugget from that essay, but you want to just speak to the the essay over or the or the chapter overall? >> Yeah, I absolutely love that quote uh by night and I'm so glad that Hike included it there. But, yeah, I mean, the road to surfom is is a popular book as many of our readers know. It was uh the chapters were originally excerpted in the Reader Digest. So, Reader's Digest was a lot more intellectual back in the 1940s than it than it became in our day. But, um uh yeah. So you know the road to surfom was kind of a warning against central planning. you know, the idea back in in the 1930s, 1940s as as you know, socialism and communism came onto the scene and you know, fascism in Europe that um well the the hardly anyone at that time other than Hayek, Mises, a few other uh intellectuals were advocating sort of less aair free market capitalism. The the mainstream view among among intellectuals was well, you know, we need to we need to adopt a few of the good features of socialism and communism without going too far, right? Yeah, we don't want the goologs. We don't want uh you know, we don't want the secret police, but we we don't want the anarchy and chaos of unregulated markets either. We need, you know, some kind of a middle course, the a mixed economy was as we sometimes call it, where you have some government ownership and some government planning but not too much and so forth. And so, you know, through in this book, you know, Hayek is arguing that attempts to introduce just a few of these, you know, socialistic features inevitably push us farther and farther in the wrong direction. Right? Mises has a an analogous uh argument uh in in his book on uh uh on planning where Mises argues that you know each intervention uh government interventions they almost never achieve the outcome that their proponents claim uh you know they had at the beginning. They introduce other unanticipated consequences or distortions which call forth yet further interventions to correct those distortions. But the new interventions create yet more distortions and so on and so forth and you have this sort of one-way slide towards uh you know towards more and more intervention in the economy. Hayek's argument here is sort of analogous or parallel to that that if we try to introduce some features of socialism or central planning you know those put us on the road towards full-blown central planning and poverty i.e. the road to surfom. And then in the different chapters of the book, he he lays out, you know, specific components of that. This this this chapter, why the worst got on top, highlights, you know, kind of a a a political science or organization theory aspect that many central planners had ignored, right? Namely, who who are likely to be the central planners, >> right? What sort of person is likely to be attracted to that role? How are how will they tend to perform in that role? You know, what do they have to do to to get better at that role? Well, you know, we can all think of situations that we've been in, maybe some organization that we worked for or a school that we were a part of, you know, where you had these sort of, you know, middle manager types like uh uh uh you know, like the Steve Carell character in the office >> or, you know, Dilbert's manager or whatever. uh you know who seem to um you know who seem to be rewarded for making it more difficult for the people at the bottom of the organization to sort of actually do their job. Right? So, Hayek is arguing in a in a state system of of this where you have state planners, state regulators. First of all, you know, people who who are naturally inclined to live and let live and who highly value freedom and liberalism as Mises and Hike would have used that word are going to say, "No, I don't want a job like that, right? I'm not interested in being a state planner. That doesn't appeal to me at all." Okay? But then the people to whom that job does appeal will tend to be the folks I mean Frank Knight puts in a I don't you don't have to put it quite as extreme as Frank Knight does to say these will you know people who exercise political power will tend to be those who enjoy the exercise of political power. It doesn't mean they're you know have evil hearts necessarily. I mean some of them probably do. Some of them maybe just naively think that they know better than others, right? And uh they, you know, that they should be in a position to influence and and exercise power. And moreover, you know, Hayek is saying in this chapter that um you know, you you're the way you rise to the top in one of those kinds of organizations is by being especially ruthless >> your exercise of power. So the people with scruples will be unlikely to be in those roles in the first place. and and if they happen to be in those roles, they'll be ineffective uh and eventually drop out. >> Yeah. And it's like ju a specific application that's probably obvious to most people, but just to stress it that it it's silly to say like, oh yeah, well like there were a lot of horrors that happened under the Soviet Union, especially in the Stalin era. But I mean, yeah, luck of the draw, Stalin happened to be a bloodthirsty monster, but you get somebody good in there who just wants to help people. And the point is, well, no, the Stalin would have killed such a person. That's it's not that it wasn't that he just flipped a coin and then, oh, this guy Joseph Stalin, I guess you're the dictator now. It's okay, it's your turn. You give it a shot. That's not what happened. >> Exactly. Right. And there's also an ideological aspect to it in that, you know, Hike argues in that chapter that, you know, okay, among the people who are in power and exercising power, how do you get them excited? How do you get how do you motivate them to implement their plans? Well, he says, you know, it's easier to get people to rally around, you know, what you might call a negative program, you know, hatred of some person or policy, envy of some group, you know, we're going to get rid of the billionaires, you know, people who are have this kind of totalitarian mindset or author authoritarian mindset, they're less likely to get excited about a program, you know, hey, people need more freedom, >> right? You know, even without going into the particulars, you know, it's hard to find examples of authoritarians who who sought and used their authoritarian power to create more liberty. >> You know, some people might say, "Oh, well, you know, you know, Gusto Pinocha in Chile, he he did get rid of some of the communists that his predecessor Aende uh had put in had had, you know, had hired. He he he got rid of some government regulations. He liberated some parts of the economy. I mean, that might be true. But even if we thought that were a good overall assessment of Pino's regime, when it's probably not, again, that would that would be kind of the exception that proves the rule. I think some people who are, you know, enthusiastic supporters of Donald Trump, right, think that it's a good thing for Trump to use authoritarian means circumventing the Constitution or whatever. ah you know the the left had power for so long the only way that we can defeat them is by assuming power ourselves and then repealing all of their bad regulations and creating you know sort of a free market paradise. I don't think that's what Trump or Trump's supporters are really doing at all. But I I guess my point is uh Trump people they have the same kind of image in mind of a strong man who can use his strength actually to create more liberty. But I mean probably that isn't what's going on. Even if that were going on, that would be one or two examples against a hundred examples of people using power to promote, you know, more power and and less liberty. Other words, it's you're it's more likely that people will rally around the hatred of some group that they think has more than they deserve than to get people to rally around, you know, a Rothbartian anarchco capitalist vision, right? >> Certainly because of people who go into government are just not going to be excited about that. >> Just a quick anecdote on this general principle of why the worst get on top and the mixture and the type of personalities. uh a few years ago, well several years ago at this point, I I was crossing into Canada and this was in like when the CO stuff was really in swing and so they had all kinds of draconian measures about how you had to have previously registered on their website and uploaded all your stuff and your your recent test to prove you were negative and all this stuff. And so I was going through and it I I had gone back and forth a couple times and like they pulled me out of line and made me go do stuff. And so in general the people I interacted with. So their rules, their system was crazy. It was like, you know, Canadian collectivism, but the Canadian, you know, the actual staff were very, I mean, they were Canadian, you know, I won't do an impression and butcher it, but they're and then this one guy I got, you could tell from his accent that he was like from Brooklyn, and I was like, this is the worst of all worlds. It's the Canadian system with some guy from that doesn't work. So, and then and this guy was not sympathetic to me at all. like he he was looking for a reason that my whole trip would get destroyed, whereas the other people were trying to figure out, you know, how to help me out. So, >> and I guess to to to extend your metaphor, Hik's argument would be, you know, in a Canadian system like that, eventually the the nice Canadians are going to quit and do something else and the crass Brooklynites are the ones who will end up running the running the border. >> Okay, so let's see here. Um, I also wanted to talk about uh the meaning of competition, that essay. And so here um you know that's a just again the contrast between like the Austrian approach to economics versus the mainstream. And just you know one quick example of this that I think he really distills and elaborates on in this essay is if you take a standard economics course you know undergrad sequence you will end up thinking oh the market's really only working if and really you only have competition in a situation where you know no there's no product differentiation the price is all identical you know you couldn't tell the difference between one you know one producer versus another and that's like the essence of competition and how this say it's weird like they hold up this condition as as a compet is the the essence of purity when that's literally the only place where competition isn't even working anymore >> right yeah >> he says it much more eloquently but you know what I'm talking about >> you're exactly right and this you know this article or this chapter the meaning of competition is a little bit more technical meaning that it's aimed more at professional economists or it's a critique of mainstream e of of the mainstream economics approach to competition and I think you you stated it very well that ironically um you know as as the as the theory of so-called perfect competition emerged in the first part of the 20th century and and became kind of you know uh enthroned uh during the sort of neocclassical synthesis. uh you know then you you had this irony that what economists call a competitive outcome is the outcome that obtains in a situation where competition is completely absent. So, Hayek points out this error and he says, "No, I mean what, you know, the right way to think about competition and indeed the way that most professional economists thought about competition before the early 20th century was much more in the everyday sense of the word. You know, we understand competing like a sporting competition or there's a competition at school, you know, to see who can write the best essay or who can, you know, perform a task most effectively in a race, a competitive race, you know, the more competitive it is, the the the more people are striving towards, you know, getting the to the finish line first. But if every competitor or so-called competitor were identical, right, and everyone reached the finish line at exactly the same time, we would say, well, that's not a competition at all. So, Hayek says the everyday sense of striving, trying to do better than someone else, you know, in in kind of a rivalous dynamic process that takes place over time. That's the way we should thinking we should be thinking about competition in an economic sense as well. He doesn't go through all the history in this chapter though there are some other uh uh writings by other scholars who have who have done this quite well who have traced out the way the notion of what what competition uh uh the way that term was used by economists from you know the 18th century on up to the present and competition was always understood as this rivalous process among competitors who are different from each other right who are heterogeneous and the modern notion of so-called competition with, you know, large numbers of identical firms that are price takers and all this. You know, it that that is a, you know, that conception. It it it plays a certain role in these abstract artificial models of of of markets in which the mainstream economist can point to an actual market that that you know in which one competitor is somehow better than the others and say ah that's a problem that reflects the exercise of market power. this asymmetry in firms capabilities needs to be remedied by some kind of you know government competition policy regulation antitrust whatever and Hayek points out that no in fact consumers benefit from you know real competition I think this is obvious to anybody Bob who looks out of their window you know for for two seconds I mean the industries I mean look at AI for example right now you know you've got a huge amount of competition between you know you nonprofit or quai nonprofit entities like OpenAI. You've got for-profit entities, you know, Microsoft, uh, Google, uh, uh, uh, X or whatever the X-arent company is called now, right? You have, uh, Nvidia. You have a lot of, of firms trying really hard to produce different kinds of AI agents and systems that are much better than those of other firms. And we consumers realize the benefits of that. You can think about that, you know, of almost any other industry. In fact, you know, the industries that we like the least, right, are those in which competition in the real sense that Ike articul articulates it are are the weakest, right? Mainly because of government regulation. you know, mortgage lending for example or um uh you know, you can think of all kinds of services uh uh you know, credit bureau action of credit bureaus for example, where we only have three credit ratings agencies, you know, licensed by the regulators, right? The less competition we have, the more the government protects a small one firm or a small set of firms against actual competitors, the the less satisfied we as consumers are. So competition in the real sense and not so-called perfect competition, this fictitious construction is is something that is super beneficial for economic well-being. >> Yeah. Yeah. Great stuff. And and again it for people who haven't taken you know economics courses at the at least the undergrad level let alone higher this might seem odd or whatever but when you go and you go in those classes and you see how it's taught and that yeah like oh the the the essence of kind is like the the wheat farmer who sells his bushels of wheat and all the wheat you know all the bushels are interchangeable and he has no influence on the market whereas you know somebody who has market power that's awful and again it's it's just amazing like when you like I you understand historically like you're saying Peter, I get where these doctrines came from and why that was what popped out of the end of of the pipeline, but yet when it comes down to it, it just, you know, the policy prescriptions especially that come out of that are just like literally the opposite of what you would want. >> Yeah. you know implicit in Hayek's uh uh essay here is a notion that uh was has been made more explicit in writings by people like Harold Demsets that you know typically when a firm is large a firm is successful a firm is profitable has a large market share unless we have some reason to believe that government favoritism like an exclusive license or some kind of protectionism was responsible we can conclude that the firm is large because it does a good job satisfying the consumer. >> Whereas the conventional approach, I don't even mean in an economics textbook, but just within the Federal Trade Commission or the Department of Justice, antitrust division or any, you know, competition policy expert, regulator, lawyer around the world today is that if a firm is large, the government needs to make it smaller. Right? If a firm is large, that means consumers are or have been exploited and are being made worse off. And if we can only make that firm smaller, things will be better. In other words, sort of the mainstream regulatory approach today starts from the premise that you know size is either just sort of random or it's the result of something nefarious that a firm did. And when when you have some big firms, consumers are harmed. Whereas Austrians and I think any sensible person who thinks about it would recognize that absent government subsidy, the fact that a firm is large is an indication that it has capabilities, practices, strategies that that result in consumer well-being and we should encourage it to continue to do those things. >> Yeah. And in the limit, I mean, just to make sure people get this basic point, if some some brilliant inventor comes up with some brand new product, brings it to market, everyone loves it, and flocks to it. In the beginning, that person's going to have quote a monopoly in the sense that I'm the only one selling this thing. And it would be kind of silly to take a snapshot of that and say, look at all the the market failure here and blah blah blah. And it would be so much better for everyone if there were a thousand identical firms that all had the same technology and factory, you know, capacity to make the And it's like, yeah, that would be better, but that doesn't exist right now. So, isn't it better to have this versus not having it at all? I mean, it's just kind of crazy. >> I mean, this was a a larger, you know, a broader theme for Hayek and for many Austrians that, you know, you can't take a snapshot of a particular market situation and then draw any conclusions about uh, you know, policy or efficiency. You've got to know, you've got to be able to see the movie, right? You have to know what happened to get us to the point that you're now capturing with the snapshot and what's likely to happen after if some, you know, intervention were to take place. But, you know, because economists, you know, because it's easier to model formally or mathematically these sort of static snapshot situations. Unfortunately, the mainstream economics profession has devoted, you know, 95% of its effort to the analysis of these kind of static equilibrium conditions or comparing one static equilibrium to another static equilibrium because it's it's just easier. It's easier to do that than to try to understand these sort of dynamic patterns or evolutionary patterns, if you want to use that language, that emerge over time. >> Yep. Yep. Okay. Well, I'm looking at the clock here. Maybe we could just do one more and So, I how about this the choice in currency one the final chapter. Let me read I might be putting you on the spot here if this isn't up your alley but let me just read some of this the quote two quotes from this. So again folks the the title of this chapter is choice in currency a way to stop inflation and then the footnote says this text is based on the institute of economic affairs 2000 web edition of it but ultimately is coming from Hayek's address which was titled international money which was delivered to the Geneva gold and monetary conference in 1975 in Switzerland. And so um he starts out and says the chief root of our present monetary troubles is of course the sanctification of scientific authority which Lord Kynes and his disciples have given to the age-old superstition that by increasing the aggregate of money expenditure we can lastingly ensure prosperity and full employment. Okay. And he goes through and is talking about stuff. And then he says in in the next section, it was John Maynard Kanes, a man of great intellect but limited knowledge of economic theory who ultimately succeeded in rehabilitating a view long the preserve of cranks with whom he openly sympathized. So what's interesting here is normally like the knock from like Missessie and Rothbartians and Hayek is oh he he played too nice. He just wanted to be respectable and he just you know attributed nothing but the best of mot. So here he's openly saying number one Kanes didn't really know much economics that was kind of funny. And then also he was sympathizing with cranks. You know he's not just saying like ah yes I see what where they misstepped on you know step 18 of their argument here. No he's saying these were cranks like he's almost saying like follow the science which is kind of funny but anyway how do you feel about all this? >> Yeah well you know it's funny that you mentioned that. I I will say that when some of us on the academic team at the institute were considering what chapters uh to put in this in this collection, the specific issue you mentioned did come up. In fact, when we were talking about choice and currency, >> uh I remember saying, look, this is the or some of us saying, hey, this is an example of, you know, kind of the feisty Hayek, >> right? which again cuts counter to the view that some folks have that well Hike was always you know Mises could be a real tough guy but Hayek was a gentleman and Hayek was a gentleman. Mises was a gentleman too. But Hayatt could also be very he could be very strong in his critique and I think this is this is uh one example by the way. >> Can I stop you real fast? Have you seen Peter the interview of Hayek where I forget who it is is asking him about Kanes and Hayek elaborates on why he's saying Kanes didn't know much economics. >> Oh. Oh yeah. Yeah. >> And he says like he only he only knew the English. He didn't even read you he barely spoke German. Just hilarious. In fact, I mean, people don't realize this now, but that was quite a common >> view of Kan's during Kanes's lifetime. There were plenty of Kanes's allies who said, "Oh, you boy, he's such a brilliant thinker and he's such an effective spokesperson, but but the guy doesn't know b he doesn't know basic economics. He doesn't know freshman level price theory, right? I mean his general theory to to its to to its uh proponents to it to to its admirers the general theory is so profound and revolutionary because it completely ignores you know what was the conventional microeconomics of its day but of course to its detractors that's a reason to stay away from that as you know sort of as as foolish nonsense Hayek would definitely put himself I think in the in the latter camp but he wasn't the only one by the way also in that interview series those UCLA interviews. Hayek has some pretty choice words about Milton Freriedman which I I urge your readers to to to to look at in their spare time. But as far as the essay itself, um >> it's really a cool piece because um you know this piece was written uh quite a bit later, right? I think the original publication was early 1970s, right? Mid 1970s. So this is Hayek um you know looking at uh post-war inflation and even the beginnings of you know what we later called stagflation and trying to trying to offer sort of a practical route for an alternative monetary system that does not burden us with all of the inflationary consequences of you know the neocanesian synthesis. And I think you know the argument is really easy to understand and it and it appeals to probably many of our audience right now because you know essentially the point Hik's making here is we could we could have a you know we could have a revolution right we could overthrow uh you know the the current fiat currency central banking regime we could overthrow Bretton Woods you know we could have a universal gold standard we could have a regime of universal uh uh you know fixed exchange rates are all kinds of systems that we could have that would be less inflationary in the Austrian sense, less likely to create business cycles in the Austrian sense, but those are not politically very popular and they just they seem too radical and too extreme and it's very hard to get people to sign on to these. But Hayek says, "Look, a simpler solution is to say, look, we're not going to overthrow the current regime. we're just going to allow people to sort of contract around it. >> Just just as today you have many proponents of a more libertarian, you know, system who say, well, you know, end the Fed when when Ron Paul and his fans chant end the Fed, that's great theater, but the Fed ain't going anywhere. So, all we really need is to create an alternative monetary regime, you know, through some kind of cryptocurrency. And then we do all our contracting through some kind of cryptography. We don't try to overthrow the monetary system or overthrow the legal system. We just sidestep them. Right? And and many proponents of that approach say, "Well, look, eventually everyone will realize that doing your uh uh you know, holding your your your wealth in crypto and using crypto as a medium of exchange is way better than using government fiat currency. eventually the the the the establishment system you know will just sort of fade away or it'll be competed out by the introduction of a new kind of a system. Now is that you know is that empirical prediction likely? That's sort of a separate issue. But Hayek is offering kind of a parallel argument obviously many decades before. He's saying look all you need is to allow people you need to basically repeal you know legal tender laws. Allow people to write contracts to make purchases to engage in economic activity to borrow and save in any currency of their choice. It could be an you know as as you know you and I could choose to use uh you know uh Indian rupee if we wanted or we could choose to use euros. We could choose Swedish croner. We could we could choose any of the existing state currencies that we want or we could just invent our own new currency. You know call it the Murphy, right? We could we could produce our own fiat currency, the Murphy or or it could be commoditybased if we wanted. And as long as the government allows people to choose which currency they use, you'll have a kind of a kind of a reverse Gresham's law. You know, Gresham's law is supposed to be the argument that bad money drives out the good. I actually actually points out here that that's not a correct statement of Gresham's law. The correct statement of Gresham's law is when exchange rates are artificially fixed by the state, then a more inflationary money is likely to displace, you know, sound money. But if you allow the exchange rates to to to float freely, then then the good money will actually drive out the bad. People will gravitate towards the money that holds its value over longer term, >> right? It's not like bad mobile phones drive out the good, you know, like in any other Why would that be? Why would bad money drive in? Yeah, >> exactly. It would be the same as in any other industry. Consumers will tend to use the the the commodity that is more effective in the monetary function. And Hike says, hey, you know, a non-threatening way to challenge the established regime is just to let people choose whatever currency they want. And as long as the government doesn't try to stamp it out, eventually uh there will be a migration towards those currency units that are more, you know, closer to what we Austrians would call sound money. So a very practical he has a theoretical, you know, explanation of why he thinks it would work. But again, this it's meant as a practical proposal uh that could be, you know, politically salailable potentially. Uh and uh again it echoes uh proposals that we've heard in the last 5 10 years about using alternative money as a way to circumvent the state system. >> Yeah. On that point um the late Nelson Nash always used to in seminars would bring up for this issue and say like instead of you know we didn't abolish the post office instead just like UPS and FedEx and everything you know but went around now they still have the monopoly on first class letters but you know you you get the point there. And then also another obvious example staring us the face is just economists since I got into this stuff you know we've been writing about the taxi cab medallion you know cartel and bl nobody cares about this but Uber comes on the scene and everyone can just see with their own eyes that oh yeah this is so much better than you know what the government used to give us and that you know that's and then people can see to the weakness of the arguments like oh no for consumer protection we need to have everybody certified by the by the New York City government. Yeah, those are great great examples. If we wanted to put it in more contemporary language, we could say, you know, a proposal that sort of unleashes entrepreneurial experimentation and innovation. Allow entrepreneurs to figure out different, you know, what what kind of commodity or system is best suited for facilitating the functions of money. You know, we we think in every other realm of life that, you know, a government cartel is going to be less effective than entrepreneurial creativity and innovation, right? These entrepreneurs, these monetary entrepreneurs might come up with uh means of payment that you and I, you know, have and would never have thought of just like in any other area in which entrepreneurs sort of do their thing. I think the reason why this proposal is rejected by you know many of the establishment types again it's because they somehow believe that money is completely unique from any other I mean they they don't regard money as an economic good in the same sense you know we Austrians think that yeah money is a special kind of good but going back to Carl Manger we we embrace the idea that money is an economic good in many ways it is it is it is a special type of a more general category of economic good. You know, there's there's a demand for it and a supply of it. It has a value that can be uh you know can be it can be evaluated on the margin. Uh the principle of diminishing marginal utility and all these sorts of things that apply to any economic good also apply to money. But of course, money is a special good in the sense that it's the one good that in a particular society trades against every other good. So we recognize money has some unique features but we think it's still a commodity and we can analyze it like other commodities. Mainstream economists think no money is qualitatively different from goods and services. It's not a good or service. It's some other thing and you know the normal rules of the market and competition and entrepreneurship don't apply to money because of this sort of magical unique character that it has. >> Yeah. Well, well, I suppose in fairness, a lot of them are consistent and they're just socialists. Yeah, the government should be in charge of money and TVs and smartphones and everything. So, there you go. >> That's true. So, consistent in a different way, but >> Okay. Well, that's a good place to wrap up. So, again, folks, this has been sort of like an infomercial for the book. Remember, you can get your free copy or copies if you go to mises.org/hayek21 for the Hayek in the 21st century. My guest has been Peter Klein, a senior fellow at the Mises Institute. Peter, thanks so much for your time today and your work in selecting these essays. >> Oh, it's my pleasure, Bob. I hope uh everyone will get a hold of this uh book and uh we'll will benefit from it and we'll we'll share it with all their friends. >> Thank you everyone for tuning in. We'll see you next time. >> Check back next week for a new episode of the Human Action podcast. In the meantime, you can find more content like this on mises.org. Heat. Heat. [Music] [Applause] [Music] [Applause] [Music] [Applause]