Tuesday, February 9, 2010

Block Party

By Michael Labeit

No one has ever mistaken Columbia University as an institution devoted to free market economics, and for good reason. So when I had the privilege to meet acclaimed economist and iconoclast Dr. Walter Block at the Mathematics Building on the Columbia campus, I knew the occasion would be a rare one. I happily managed to be one of the first students to approach him in what was an almost completely vacant lecture room. "This is no surprise" I thought." Columbia doesn't exactly attract the type of students that would be interested in this sort of lecture, nor does it tend to provoke that kind of interest while students attend." Fortunately, enough people came, students and non-students alike, to fill most of the seats. They would not be disappointed.

If you've ever seen one of Dr. Block's lectures on Youtube you would know that he is (admittedly) soft-spoken but not shy, jovial but nevertheless willing to "betray" your hospitality by telling you that you're wrong if he believes so. He does not let the sorry state of current affairs encourage him to address others cynically but he also does not speak with levity, as if we're not burdened by the growing coercive authority of government. The lecture was studded with two somber moments when Dr. Block asked for a moment of silence at the beginning and at the conclusion for the remembrance of John David Fernandez, a Columbia sophomore and the former vice president of the Columbia University Libertarians who passed away from pneumonia. It was he who invited Dr. Block to speak at Columbia to begin with, so it was a fitting tribute.

Personal Experiences

Dr. Block divided his lecture into two parts: his personal and academic experiences and economics and political philosophy. He began with his time as a student in 1972 pursing a Ph.D at Columbia. Block noted that his dissertation was on the effects of rent control and that the distinguished economist Gary Becker was his dissertation advisor at the time. Block had used statistical analysis to demonstrate that rent control laws had led to shortages of housing units, where the quantity of housing units demanded exceeded the quantity supplied. His work produced significant t-values in his favor but also yielded significant t-values that contradicted his thesis.

When Block informed Becker of this oddity, Becker, in a very non-positivist manner, admonished him to repeat the procedure until he "got it right." How unusual, Block claimed, that Becker would ask this of him, since the purpose of his empirical work, and of empirical work in general, was to test the soundness of theories, not be tested by them. Theories are supposed to conform to empirical data, not vice versa. If the two are discrepant, then it's the theory that should be abandoned, not the data. From this experience, Block concluded that "if you scratch a Chicagoan, chances are you'll find an Austrian." He explained this reasoning later within the lecture.

Block continued to reminisce about his economics professors. Predictably, most were either oblivious or insouciant to Austrian economics. His macroeconomics professor Arthur Burns chose to use his time during class to discuss his dinners with Nixon. Professor Albert Hart was dubbed "marblemouth" by Block and his fellow students because he was, as Block described, "incoherent." The now well-known pro-globalization economist, Jagdish Bhagwati, was a leftist and an advocate of increasing foreign aid outlays to India (surprise, surprise) when he was a professor to Dr. Block. Another of Block's instructors, professor William Vickrey, believed foreign aid should in part come in the form of bicycles and roller skates. No doubt, the cast and crew of Block's academic career were unusual.

Block particularly emphasized the obstructions he faced when pursing his doctorate, possibly his greatest intellectual crucible. "Pack your dissertation committee" was his advice to the Ph.D candidates in the lecture room, a humourous allusion to FDR's plot to fraudulently "pack" the Supreme Court in the 1930s. Block's committee was composed of five scrutinizers: three economists, one other professor from Columbia, and a yet-to-be-chosen fifth guest from elsewhere. Given his intellectual prowess, one would guess that Block's anti-rent control dissertation presentation would have perhaps impressed even the most intransigent detractor. This may have been true for your average academic, but, unfortunately for Block, a rent control commissioner was chosen as the fifth individual. According to Block, the commissioner was the most recalcitrant member of the committee and that after five hours of effort (two for the presentation and three for what can best be described as an interrogation) he was unwilling to grant Block the evaluation he required in order to receive his doctorate. Only after being beseeched by his committee associates did the commissioner relent. Of course, "packing one's committee" would be a corrupt endeavor but one can certainly appreciate Block's wit when one understands how disadvantaged he was ab initio.

Not all of Block's academic experiences were as despondent however. He recalled how he defended Professor Peter Bauer in school who he considered a true free market advocate. One of Block's most crucially developmental experiences was his encounter with Ayn Rand, Nathaniel Brandon, and Leonard Peikoff when Rand came to deliver a speech at Columbia. Block was a philosophy-majoring left-liberal at the time and took the opportunity to heckle Rand with his grievances. He situated himself right between Rand and Brandon to prepare for further harrassment but instead engaged in a conversation which ended with Brandon recommending two books to him, Rand's Atlas Shrugged and Henry Hazlitt's Economics in One Lesson, the former becoming his most favorite novel and the latter being a text he now regularly issues to his students. Block did voice a common complaint about Rand however, namely that she and her group of intellectuals nurtured a form of cultishness and dogmatism, behavior that made him a bit disillusioned with Rand and her litigious assembly of Objectivists.

Block went on to give credit to Robert Nozick, the famous Harvard libertarian philosopher. It was Dr. Nozick, Block argued, who introduced libertarianism to mainstream political philosophy in academia. Block did mention Ludwig von Mises when he discussed his personal academic experiences but only briefly since Mises did not produce a significant effect on Block personally. He attended Mises’s final NYU seminar when the venerable economist was well into his 80s. Mises’s tenacity is a well-known fact in free-market circles, but even with his vigor Block recalled how Percy Greaves had to shout questions in Mises’s ear so that they could be made audible. Mises of course was the author of Human Action, the most influential text in the entire corpus of the Austrian School.

Finally, Block allotted much of his time to discussing perhaps his most instrumental acquaintance, Murray Rothbard. From reading Rothbard’s pioneering work, Block figured he was an intrepid, physically overawing, man’s man. Instead, when he first made contact, Block described Rothbard as a “short, fat, little Jew” with an almost unstoppable diligence. Rothbard could author eight relatively unblemished pages in one hour and his influence on the Austrian School, and on Block in particular, are unmistakable. His Man, Economy, and State is a treatise par excellence and a must-read for any serious economist.

However, Block did not want to give anyone in the audience the impression that he and Rothbard were automatons who worked and thought perfectly in sync, since it may have seemed, prima facie, that this was the case, giving the adulation Block thought Rothbard was worthy of and the fact that Block worked with Rothbard as an associate editor of the Review of Austrian Economics. Block revealed a number of instances in which their opinions were incongruent. The issue of immigration unearthed an intellectual divide between the two. Both Block and Rothbard were of one mind when it came to the idea that all property should be private. However, Rothbard believed that, given the existence of the welfare state, the government should restrict the flow of immigrants into the country (postponement libertarian position) in order to decrease the number of tax consumers and therefore reduce the redistributionist burden upon the taxpayers. By contrast, Block argued that the government should not restrict immigration (free-immigration libertarian position) and that the free flow of immigrants should be allowed to overwhelm the welfare state, hopefully leading to its demise. Block likened Rothbard’s position to a prohibition on “excessive” pro-creation (his “Storkovia” analogy). The two occurrences, immigration and pro-creation, amount to the same thing politico-economically: both processes increase the human population within a given territory. Babies and immigrants are both capable of becoming dependent upon the government. Why should the latter be obstructed and not the former? Logical consistency, Block argued, would commit a postponement libertarian to restrain both.

The two also clashed when it came to the far less urgent issue of voluntary slavery. Rothbard argued that contractual slavery was an aberration while Block argued it was justifiable. Block devoted only a few minutes to this debate since it is less penetrable than the immigration dispute.

Block’s did take the time to stress what he felt was Rothbard’s type of intellectual tolerance. When introduced to Hans Hermann-Hoppe’s defense of private property via argument from argumentation ethics Rothbard, instead of casting aspersions, welcomed Hoppe and his argument as what he thought was a superior justification of private property than his own. There are now Austrians who reject Hoppe’s argument and those who endorse it.

Philosophy and Economics

Block devoted the remainder of his lecture to a juxtaposition of Austrian School economics with libertarianism, Chicago School economics, and antitrust economics. He began with the common confusion between Austrianism and libertarianism. Austrian economics, he argued, is a theory of economics, of autistic and interpersonal human action, which does not include any normative claims, or “ought” propositions such as “One ought to oppose taxation.” Libertarianism is, by contrast, a theory of political philosophy, of the proper forms of social interaction, which includes a number of normative propositions such as “The initiation of physical force against person or property is wrong.” Libertarianism tells people which values to pursue while Austrian economics does not counsel anyone on what values to seek. Austrian economics is thus a value-free theory in Block’s eyes, while libertarianism is not. Furthermore, while most Austrians are libertarians, the two are not necessarily linked, according to Block. There are many libertarians such as Bryan Caplan, Robert Nozick, and others from the Cato Institute who are not Austrians. George Reisman from the Mises institute is a self-described Objectivist and Austrio-classical. The proposition “All Austrians are libertarians” and its converse are both false, as a matter of fact and logic.

Speaking of logic, perhaps the best part of Block’s lecture was his comparison between Austrian economics and Chicago economics. What makes Austrian economics unique is the fact that it is not treated as a “branch of science but as a branch of logic,” not the fact that its adherents are committed to the free-market. Austrian economics is a theory of human action that proceeds deductively and hypothetically, like mathematics, ultimately from a set of axioms or logically undeniable propositions. Austrian economics is deductive, meaning that it’s composed of such arguments where it is impossible that the conclusion is false if the premises are true. In a valid deductive argument, if the premises are true, then the conclusion will be true as a matter of logical necessity. Austrian economics is also hypothetical, meaning its deductive arguments are mediate arguments (syllogistic) where one premise is a hypothetical proposition (If A are B), the other premise is an affirmed, categorical form of the antecedent within the hypothetical proposition (A), and the conclusion is the categorical form of the consequent (B). The argument runs like this: (If A, then B), (A), (Therefore, B). Furthermore, (B) can become a premise for a subsequent syllogism, say (If B, then C), (B), Therefore (C), und so weiter. One can embellish this whole procedure by formalizing it using the propositional calculus, though this is not strictly necessary for proof purposes. See Carveth Read and P.D. Magnus for more on informal and formal logic, respectively.

Chicago economics, conversely, is not deductive but positivistic . Rothbard offered the following as a simple example of the positivist method:

Step 1. The scientist observes empirical regularities, or “laws,” between variables.

Step 2. Hypothetical explanatory generalizations are constructed, from which the

empirically observed laws can be deduced and thus “explained.”

Step 3. Since competing hypotheses can be framed, each explaining the body of empirical laws, such “coherence” or consistent explanation is not enough; to validate the hypotheses, other deductions must be made from them, which must be “testable” by empirical observation.

Step 4. From the construction and testing of hypotheses, a wider and wider body of
generalizations is developed; these can be discarded if empirical tests invalidate them, or be replaced by new explanations covering a still wider range of phenomena.

As can be seen, the positivist method is a form of scientific induction. In scientific inductive arguments the conclusion may be false even if the premises are true, unlike deductive arguments. So while the Austrian school proceeds deductively from premises that are observable such as “Humans act” and “Leisure is a consumer good,” the Chicago school does not. Furthermore, whereas Austrians do not rely upon economic statistics to test their theories (since their conclusions indubitably follow), the Chicagoans use economic data to determine whether their theories are valid. Thus, while the Austrians argue that the law of demand - that as the price of a good falls, the quantity of that good demanded will either increase or remain the same – that this law follows logically from the axiom of human action and cannot be contradicted within a theoretical, unhampered free market, the Chicagoans would be hard-pressed to make such an assertion. By contrast, the Chicago-neoclassical method would involve testing the law of demand by determining if empirical data corresponded with its claims about the quantity demanded. It is a data-driven method that’s deeply concerned with experimental duplicatibility.
This brings us back to Becker’s insistence that Block get his figures “correct” on his rent control dissertation. Block insinuated that Becker knew well that as the rent of housing units fell, the quantity of housing units demanded would either remain the same or rise. He suggested that Becker’s persistence came from at least an intuitive understanding that the law of demand is always true in a free market. So if there is a discrepancy between a theory and empirical data, it’s not axiomatic that the theory should be discarded. If the theory in question proceeds deductively from true propositions, then it’s the contradictory empirical data that should be ditched, not the theory.

Other points of contention mentioned by Block between both schools include the use of mathematics, economic forecasting, and value. While the Austrians refrain from using much math, at most employing algebra when they feel it’s absolutely essential, the Chicago-neoclassical approach involves calculus, complex statistics, and econometrics, epistemic instruments that have made it necessary for majors in economics to become part-time mathematicians. According to Block, the Austrians focus on making qualitative propositions descriptive of human action whereas Chicagoans and neoclassicals use econometric tools to make quantitative claims about human action in addition to qualitative assertions. And whereas Austrians make qualitative predictions, particularly regarding the mal-effects of government intervention, Chicagoans and neoclassicals tend to make quantitative as well as qualitative predictions regarding future events. Finally, Austrians subscribe to the subjective theory of value and ordinal utility theory while Chicagoans and neoclassicals tend to subscribe to the objective theory of value (not to be confused with the Objectivist theory of value which is an ethical theory, not an economic one) and cardinal utility theory. For a much more comprehensive comparision between the methods of the Austrian school and of the Chicago-neoclassical school, see Jesus Huerta de Soto , Murray Rothbard , and Edward W. Younkins.

These differences are not merely academic however. According to Block, they can lead the Austrians and the Chicagoans in very different public policy directions. For instance, the Chicagoans have favored the existence of a welfare state, believing that it can, at an optimal size, “maximize social utility,” on the idea that the utility of goods can be measured. If the utility of a specific quantity of money possessed by Y is higher for X than it is for Y, than that money should be taken from Y and given to X. The problem with this reasoning, according to Block, was multifaceted. It first assumed that utility can be measured (cardinal utility theory). Rothbard has answered this charge by arguing that measurement requires a unit of measurement. Since there is no unit of measurement for utility, the utility of a given good cannot be mathematically assessed. Furthermore, if the utility of a good cannot be measured, period, it can’t be measured for anyone and therefore compared between people, especially between providers of and candidates for welfare. As Lew Rockwell has stated

Conventional welfare theory argues that if the law of diminishing marginal utility is true, then total utility can be easily increased. If you take a dollar from a rich man, his welfare is slightly diminished, but that dollar is worth less to him than to a poor man. Thus redistributing a dollar from a rich man to a poor man increases the total utility between the two. The implication is that welfare can be maximized through perfect income equality. The problem with this, say Austrians, is that utilities cannot be added and subtracted, since they are subjective.
Again, Rothbard has proven to be masterful when it comes to critiquing mainstream, Chicagoan/neoclassical methodology. Block further warned the audience of the Chicagoan/neoclassical propensity to embroider arguments with useless mathematics. Pseudo-units like “utils” can be constructed to measure utility, but as long as they do not represent anything in the realm of existence, they are uselessly arbitrary.

Lastly, Block addressed anti-trust economics. He conceded that if an ambitious economics or law major wanted to put his or her degree to work, he or she should choose anti-trust. Right or wrong, that’s where the money was, especially in consulting. However, anti-trust law was grounded in bad economics, he argued. Block paid particular attention to the unpredictability of anti-trust law, joking about how a producer could be submitted an anti-trust subpoena for charging prices higher than the competition (restraint of trade), for charging prices lower than the competition (intent to monopolize), and for charging prices equivalent to the competition (collusion or conspiracy). He also attracted attention to the fact that anti-trust authorities may define industries very broadly or very narrowly, whichever serves their purpose best. And again, he drew on the fact that anti-trust economics take for granted the idea that opportunity costs can be measured and graphed as a curve. If anti-trust laws were to be taken seriously, Block argued, it would commit trust-busters to take on “producers” like Roger Federer, who, in accordance with anti-trust doctrine, could be labeled as a supply-cutting monopolist. Anti-trust law, taken sincerely, would encourage the Justice Department to nationalize Roger Federer, or morph him into a utility via municipalization, to mitigate against his anti-competitiveness. The third option, disintegration, would be impossible for obvious reasons. But all humour aside, Block argued that anti-trust law, taken to its logical extent, would literally involve such nonsensical decision making.

Block was kind enough to take a number of questions after his lecture. Through these he revealed a number of interesting convictions, facts, etc. Block rejected left-right specific differentia to libertarianism, preferring what he calls “plumbline” libertarianism , a form of libertarianism grounded purely on an uncompromising opposition to physical aggression against person and property. Block commented for a moment on a recent series of Mises Institute critiques of mutualist Kevin Carson. When asked how Kevin Carson was mistaken, Block answered simply with “…he’s a Marxist.” Block also took Roderick Long to task for his claim that sexism played a part in manufacturing the income gap between men and women. As Block explained, the gap was explained in part by the marital asymmetry hypothesis, the premise that married women expend more labour at home than married men do. Well, as women expend more labour at home, they have less labour to expend in the workplace, and therefore what labour they do expend in the workplace will garner less income. The truth of this hypothesis is suggested by the fact that the income gap that provokes so much vitriol from the Left exists between married men and married women. The gap is non-existent between single men and single women.

Block gave a lengthy response to one question about the incredulity people exhibit against the demonstrated fact that economic freedom is a necessary condition for economic prosperity. His explanation behind such disbelief was twofold. First, he argued it was in the interests of the ruling class (governments and their cooperatives) that people fail to understand the causal link between freedom and wealth, after all, freedom and government authority share an inverse relationship. Therefore, it’s no surprise that the ruling class may take steps to discredit the link between liberty and affluence. Secondly, Block took a refreshing diversion into sociobiology, which, according to Block, held that “we are the way we are because of what it took to survive years ago.” Physiological inclinations encourage people to act in ways that are detrimental to their self-interest. We are hardwired to engage in explicit cooperation, the personal, sometimes familial form of social collaboration but not hardwired whatsoever to engage in implicit cooperation, e.g., market activity. Block alluded to an incident in New Orleans after the Hurricane Katrina catastrophe where a water supplier charged $20/gallon for his freshwater. Natural disasters tend to reduce supply and therefore tend to increase prices, so $20/gallon was almost certainly a logical consequence of the lack of scarce freshwater. However, someone waiting on the water queue summoned the authorities on the “price gouger” and while he was being arrested and read his rights the people on line applauded! Block held that trust in the free market, while rational, was very much counterintuitive.

I took the opportunity to ask Block to express his opinion on intellectual property, as I was aware of the positions of many Austrians on this issue but not his. He responded with “Intellectual property is illegitimate” and went on to argue that he thought intellectual property committed believers to performative contradictions. Finally, Block responded to a question on banking, announcing that he was opposed to fractional reserve banking. Fractional reserve banking, he argued, created conflicting claims to private property, was fraudulent, and that central banks and government deposit insurance were created to manage the intrinsic dilemmas posed by fractional reserves.

I don’t agree with all of Block’s convictions, but then again he doesn’t necessarily look for or revel in consensus, as is evident in his work. Regardless of one’s disagreements, libertarians, Objectivists, economists, and political philosophers alike have much to learn from Dr. Block. I certainly hope more people take the time to meet him and/or his fellow Austrians when the opportunity presents itself, as I have.

Michael Labeit is an economics major, a disgruntled army reservist, an aspiring freelance writer, and an amateur logician. He currently resides in the People's Republic of New York City and can be reached at logician179@yahoo.com.

-Rockwell, Jr., Llewellyn H. "Why Austrian Economics Matters." Mises Institute. Web. 10 Feb. 2010.

-Rothbard, Murray N. "Praxeology as the Method of the Social Sciences." Mises Institute. Web. 10 Feb. 2010.


  1. Michael,

    Great write-up, you obviously took extensive and thoughtful notes. Thank you for your observations.

  2. I completely agree with TC. I read the whole thing and found it enjoyable and enlightening.

  3. Michael,

    Thak you very much for your detailed and very observant telling of Dr. Block's speech.

    For those of us in the hinterlands, it is the closest we are ever going to get to these type events.

  4. Appreciate it.

    Benefits of living in NYC. So far, in the past few months I've attended lectures given by Christopher Hitchens, Daniel Dennett, and Eric Alterman, besides Walter Block. The Dennett one is on Fora TV. Block's lecture was videotaped as well but I haven't seen it online.

  5. Indeed, a very good and thorough write up.

    To add to the Ayn Rand / Nat Brandon comment:

    Block attended a dinner after he heckled Ayn Rand, and it was there that he snuck in between Rand and Brandon and said to them:
    "there is a socialist in the room who wants to debate" and when asked who that was said "I".
    Brandon then agreed under the condition that Block read the books Michael mentions.

    Also funny was Block's comment that "like any Jew from Brooklyn in the 1950s, I naturally was a socialist".

    Thank goodness that Dr. Block shows how intelligence and a willingness to learn overcome any such predispositions!

    [the quotes are not verbatim, from memory only, but convey the sense]