Interview Highlights (edited for readability)
Albert: I think this interview is long overdue. How are you?
Jeff: I’m doing great. Thank you, Albert.
Albert: Just before we get started, I just want to tell you how much I’ve appreciated what the Mises Institute has done throughout the years, particularly more recently I’ve been a regular at the Houston Mises Circle and I understand you have an event coming up in San Diego, so just as we start off, could you tell us a little bit about that?
Jeff: Sure. We’re going to be in Southern California this coming weekend, next week on the 25th, Saturday, in the Point Loma area. So anybody who’s in Los Angeles, Orange County or San Diego, I will put up a graphic later with our link to the event. But we’d love to see you. We got some great speakers. Albert is going to be one of our panelists, but we also have Patrick Byrne who’s the very libertarian CEO of overstock.com, who’s really becoming a huge voice in the blockchain community. Not so much talking about bitcoin but talking about the practical applications and really world-changing potential applications of blockchain.
We’re going to have Nomi Prins as a speaker. She is also a Southern Californian and an absolutely fantastic writer and historian when it comes to the Fed and central banks generally. So she’s going to be a very interesting guest. We’re going to have Tom Woods who I’m sure some of your listeners and viewers are familiar with. Tom is a leading voice in libertarianism. So we’re looking forward to it and we’d love to see anybody in driving distance from Southern Cal attend.
Albert: And certainly appreciate you guys making the trip all the way over here to the west coast. I’m a big admirer of Patrick Byrne and he incidentally did a talk at the Mises Institute some time ago. You reposted it on your website, so if I remember, I’m going to make sure I link to that because it’s a fascinating talk that he gave about his own background. He is connected to Warren Buffett. They had a relationship—
Albert: For many years, he ran one of Mr. Buffett’s companies and I thought it was just a wonderful interview. So I’ll make sure I link to that. Jeff, I’ve heard you speak many times, but I rarely hear you talk about yourself, your own career and that’s of interest to me actually because Economics in general compared to other sciences—this is my opinion, but it’s sort of an intellectual desert. The Austrian School is this oasis in the middle of that desert. I’m not kidding. I come from the sciences and, you know, most sciences they don’t go about business that way. You can’t talk about alien space invasions and be taken seriously, let alone given Nobel prizes. So, how did you convert to Austrianism or discover the School of Austrian Economics.
Jeff: Well, really, I discovered it through a friend of mine who was attending UNLV getting a graduate degree in Economics and he chose UNLV because Murray Rothbard was teaching there at the time. So he specifically went out of his way to find an Austrian-friendly professor. I was sort of a garden variety libertarian at the time, but I didn’t really have much of a background or grounding in Econ which I think you have to have to make effective arguments for liberty and against the state. I think it’s really important that economics is in your arsenal and I’m a layperson. I’m an attorney, but I think we all have an obligation to know something about economics and be able to discuss it competently.
So, driving up to UNLV from San Diego at the time—this was in the 1990s—I went into my friend’s classroom and here is this kind of short guy with a bowtie speaking rather quickly, and I said, “Oh my God, who is this guy?” And I started to learn about Murray Rothbard and from there, obviously I began to read Mises and Hazlitt and Hayek and some others. But prior to that, I mean if you think back to the dark, dark ages before the internet existed, for libertarians, there was no one out there in terms of what was available in Austrian literature. If you went to your local physical brick-and-mortar bookstore, they might have someJohn Kenneth Galbraith. They might have Milton Friedman’s Free to Choose, stuff like that, but Mises and Rothbard and Hayek, you know, this literature wasn’t widely available.
So, the digital revolution has been such a leveler. I mean it’s just absolutely incredible to think about what digital technology allows us to achieve. You know, what was unread literature, unheard of literature is now available anywhere in the world with a few clicks for free generally in a PDF or HTML format. So, compared to the 1990s when I met Murray Rothbard, we’re in great shape.
Albert: It seems like it. And, boy, I’m so envious. Jeff, it’s very rare that I ask that question and the answer is, well, Murray Rothbard, not the books but the person. What a great story and I can see how you would have been swept away by some of these ideas.
You write at Mises.org and following the Superbowl, you had an article titled Human Action Beats Stats in the Superbowl. I enjoyed that thoroughly. Can you tell the viewers what you’re getting at there in that piece?
Jeff: Well, what’s inflamed economics in the past few decades is “mathiness.” We’ve started to treat economics like a physical science. We’ve started to treat it as a predictive mathematical exercise and modeling much like we view statistics and probability where they’re a subset of math. And, of course, math and physics are physical disciplines. Economics is a social science. I think we forget that. And because we forget that, we tend to view economic principles or economic theories as hypotheses that we should go out and test. “Well, if we raise the minimum wage, will unemployment increase or decrease? Hmm, I don’t know. Let’s go test that.” Hypothetically. Or I should say empirically, excuse me. But we can know—without testing, we can know a priority that all other things being equal, if you raise the price of something, the demand for it will fall. That includes wages.
So as a result of this mathiness that has infected economics, I think the profession has gotten very far afield and I think it’s a failing profession. I think both in terms of professional economists in the business world and academic economists at universities, I think econ is failing us. It’s failing to describe the world as it is and it’s failing to produce a benefit for society. As a matter of fact, I think it’s harming society. I think the post-Keynesian demand-side stimulus world we live in has created huge amounts of harm, and I think we saw that in the crash of 2008. I think we’re going to see it in a nastier series of events and shocks in the coming year. So, economics is not math and the attempt to make it math I think has done more harm than good. So the article is just a whimsical attempt to point that out.
Albert: And the parallel you drew was, of course, Superbowl where we have this historic comeback by the New England Patriots. If you just looked at statistical probabilities in the third quarter, what did you say? I think the chances that they gave the Patriots winning were less than half a percent or something miniscule. Anyway, but having followed that team myself for over 20 years and more recently over the last 15 years with the new regime, the Belichick regime. I knew something about that team that probably was not captured in the numbers and that is that they just would not quit. I just knew that and there’s a human element that the numbers don’t capture and when you sort of translate that to economics and markets, it’s really funny you have a group of Fed governors who expect people, actors in the market, to conform to their models and, therefore, be predictable and while at the same time, they don’t even know what they’re going to do with interest rates 3 months from now. They themselves admit that they’re looking at data and they don’t know and they put up this meaningless dot plots. They’re examples of human action, yet they don’t even realize it. I find it totally absurd.
Jeff: Well—but we should take heart in our understanding knowledge. Economics is really a subset of a greater field of human action because when we talk about the economy or the global economy, what we’re really talking about is 7 billion people, individuals all who get up every day and for the most part, except for the deeply irrational or mentally ill, almost all those 7 billion people try to better or advance their material lives every day. So, no matter what governments and central banks do to thwart this, there’s a natural human desire to get a little bit better off each and every day and so that’s an awfully tough thing to suppress. So, that’s something that should give us optimism or long-term hope for the world economy, is that—you know, if we look back in history, even horrific wars and horrific collectivist actions by totalitarian governments have never really been able to suppress the market. It always grows up through the cracks. So while we—as libertarians, we tend to fret about government. We tend to think about it maybe too much and let it dominate our thinking. We should sometimes take a, you know, more high-level view and say, “Look, all these billions of people are not just going to stop what they’re doing. They’re going to keep doing it and we should be hopeful.”
Albert: You make just a very important point and that is the focus or the obsession that many libertarians have on government as coming from the investment side. My impression has been that many libertarians focus in their investments on institutions, avoiding institutions, fear and take almost a deer in the headlights approach to investing because they’re so concerned about these problems we see which are all real. But, at times they just end up shooting themselves in the foot. What do you see—do you have any thoughts on investing given your background in Austrian economics? What approach do you take? I know you don’t have an official recommendation or you’re not in the business of giving advice, but what are your thoughts on investing in general?
Jeff: Well, I think investing according to one’s ideology can be pretty dangerous. You know, I remember Bob Murphy told me one time that his thought was that—and I’m sure a lot of your viewers are familiar with Robert Murphy, the economist at Texas Tech. He said understanding economics is necessary to be a good investor, but it’s not sufficient. In other words, you still need to go out and do homework and research on lots of different things. You know, I think that people should look at people who are more successful than them financially and emulate them. I mean that seems to me the simplest approach. I would never invest or spend money on anything I don’t understand, and since I only understand a few little things, that’s why I’m investing.
But if you look at Warren Buffett whom you mentioned earlier, he talks like a Keynesian but he acts like an Austrian. The companies Berkshire Hathaway tends to invest in are not—for the most part, not sexy, not glamorous, not high-tech and they tend to have physical features to them, actual property and plants and equipment, actual manufacturing. So, you know, Warren Buffett is not out there investing in paperclips.com. He’s out there investing in tangible stuff.
And for me, anyway, as a fan of Jim Rogers, with my limited amount of time and my limited ability, I can understand commodities and physical stuff in a way I can’t really understand market sectors or industries or even companies and their particular management. So, I personally like to read about and think about stuff and so that’s sort of my focus as an investor.
Albert: Great answer, Jeff. And I agree 100% on your observations of Mr. Buffett—speaks like a Keynesian, big government person, but if you look at the way, at least to the extent that we have vision into his business and his life, he definitely is. However, the fact that he is not a tech buff I think really owes more to his age, I think.
Albert: But, he focuses on individuals. If you look at the way he runs his group of companies, he really focuses on people because he knows that—like you said before, humans are going to keep doing what they’ve been doing and the right management team if you let them go, they’re going to adapt to the environment and produce positive outcomes. I totally agree with that.
So, as we close, I just want to remind people, go to mises.org/events. It’s going to be Saturday, February 25th, is the Mises Circle in San Diego. Really looking forward to that. I’m going to be there, so please come out. Meet Jeff. Meet Tom Woods. Meet Patrick Byrne. It’s going to be a wonderful time. Thank you very much, Jeff, for joining me today. I hope we can do it again soon.
Jeff: Sure, thank you.