Some South Royalton Reminiscences

    

Richard Ebeling has done an admirable job of extensively surveying the Austrian economics landscape. In doing so, he has shown great familiarity with the economics literature. I particularly like his point that the restating of Austrian economics that so many young Austrians did in the 1970s and 1980s was “necessary and essential” for the revival of the Austrian tradition. It’s easier to know where to go when you know where you’ve been and where you are.

I will not try to compete with Richard in knowledge of Austrian economics. He has already beat me, and not on points, but with a knockout. The one small criticism I would make is that he should have mentioned some of the promising work being done by younger scholars in the Austrian tradition, notably Robert Murphy and Patrick Newman.

In the rest of this essay, I’ll discuss particular experiences I had at the South Royalton conference, experiences that, hopefully, readers will find interesting. They involve Richard Ebeling, Milton Friedman, Rose Friedman, Frances Hazlitt, Israel Kirzner, and William H. Hutt.

Like Richard Ebeling, I was excited to attend the first Austrian Economics conference in South Royalton, Vermont. My motivation was different from Richard’s. I didn’t regard myself as an Austrian economist, but I did find Friedrich Hayek’s work on the socialist calculation debate, and Ludwig von Mises’ work more generally, profoundly insightful and important. I was also a big fan of Hayek’s The Road to Serfdom, the first thing by Hayek that I had read. I had read Hayek and Mises in the late 1960s when I was a young undergraduate mathematics major at the University of Winnipeg. I never took a course in Austrian economics: all of my reading was on my own. In the fall of 1971, when I applied for the Ph.D. program at UCLA, I knew a lot about UCLA’s strong free-market orientation and was looking forward to taking classes from Armen Alchian, Harold Demsetz, and Sam Peltzman, the three UCLA economists whose work I had read. While I knew that none of them was an Austrian economist, I hoped that some of them would be sympathetic. So I took a chance on my application letter, writing, “I would like to be in a graduate program where, if I refer to Mises, people don’t assume that I’m mispronouncing the name of a childhood disease.” It worked, if you judge by the outcome: I was offered full tuition plus a 2-year teaching assistant position paying $440 per month for a 9-month year. That was more than this kid from rural Manitoba had imagined he could get and, more relevant, more than I was offered at my second choice, the University of Chicago.

The person who had motivated me to get into economics was Harold Demsetz, whom I had met in January 1970, when he gave 3 talks at the University of Winnipeg. I was hooked on economics. Although I almost always took Demsetz’s advice—he was my dissertation advisor and my mentor—in this case I went against his advice. I told him that I had received an offer to attend the South Royalton conference at someone else’s expense, and the program looked interesting. The three main speakers were Murray Rothbard, Israel Kirzner, and Ludwig Lachmann. I had read, and been impressed with, much of Rothbard’s Man, Economy, and State. Demsetz’s friend and colleague Ben Klein had assigned Israel Kirzner’s Competition and Entrepreneurship in his industrial organization class earlier that year. While I don’t recall Klein saying why he liked the book, I think one reason was that Kirzner rejected the idea that perfect competition had anything to do with perfection. I do remember that Ben liked the idea of dynamic evolving competition that Kirzner, and the Austrians in general, refreshingly brought to the economic discussion.

So I was surprised that Demsetz discouraged me from going to the South Royalton event. He told me that, now that my course work was done, I should be digging into my dissertation immediately. But I needed a break after two intense years, and this “busman’s holiday” seemed like what the doctor ordered. I probably batted a thousand on Demsetz’s advice: taking it on every other issue and rejecting it on this one. The conference was well worth it.

My fellow Canadian and fellow UCLAer Harry Watson and I showed up early on a Sunday afternoon at a small run-down hotel in South Royalton. One other person who got there early was Richard Ebeling. Richard had a keen sense of humor. I still remember his exact line as he introduced himself, first to Harry and me, and then to other budding young economists as they showed up: “Hi, I’m Richard Ebeling from Sacramento State; if you like Marxism, you’ll love Sac State.”

While I had thought at the time that Richard might be exaggerating, fifty years later he filled in the blanks, noting that two of his professors were Stalinist Marxists who said that the world was a sadder place after Stalin had died. I doubt that was the view of millions of Ukrainian survivors of Stalin’s reign of terror.

Bit by bit that afternoon, various participants arrived and then, unexpectedly to me, Milton and Rose Friedman showed up. They had a summer home, Capitaf, nearby. At the time I thought they had crashed the party, but I learned many years later that they had been invited by Ken Templeton of the Institute for Humane Studies, which funded the event.

I had met Milton twice before, once, in May 1970, when I showed up at his office at the University of Chicago and he gave me ten minutes of attention and again, in November 1971, when he did an extensive Q&A at a libertarian event at Columbia University. I had read a lot of his work and was a fan.

Given his well-deserved reputation for civility and warmth, Milton caught me by surprise by angrily calling me a nasty name when I advocated an immediate end to Social Security. But two hours later, when I ran into Rose just before the dinner and told her that I had talked to her son David three days earlier when he was out in Los Angeles, Rose grabbed my hand and told me to sit with her and Milton so he they could see how David was doing. (Remember that this was in 1974, when long-distance phone calls were still expensive, and so my guess is that they hadn’t talked to David in over a week.) I did so, Milton seemed fine, and I was quick to forgive. Indeed, seeing that he had earlier reacted to my proposal like a human caused me to think even better of him.

One unexpected event at the Sunday dinner was that Milton got up and gave what appeared to be an impromptu talk. As Richard Ebeling noted, he did say something jarring that, at least temporarily, deflated the excitement that a lot of people had about the conference. He said that there was no such thing as Austrian economics; there was only good economics and bad economics.

For some reason, I had shuffled positions and was no longer sitting with Rose when this happened. Instead, I was sitting with Henry and Frances Hazlitt. A few minutes earlier Frances had noted my Afro hairdo and delightedly ran her fingers through it. I immediately liked her and remember thinking that she would have been a wonderful grandmother. When Milton made his comment about there being no such thing as Austrian economics, Frances said, in a voice that could be heard by those around her, “Yeah, Milton, and is there no such thing as the Chicago School?” I chuckled.

I think the person most upset by Milton’s talk was Murray Rothbard. He had had a long feud with Milton, and he probably thought, “Look, this is our event and Milton even gets to speak at our event and put it down.”

The formal conference started the next day and, truth to be told, I don’t have a strong memory of the presentations or of the specific things I learned. But one memory does stand out, and it made me think even more highly of Israel Kirzner.

Kirzner was discussing the price system and noted that Richard Nixon’s price controls were still on some items. He said that when you have economy-wide price controls, you can no longer apply economic reasoning to the economy because prices are not allowed to rise and, therefore, can’t communicate information. That struck me as too extreme, and I wanted to come up with a counterexample to make the point. By the time the Q&A came around, I had one. I said, “Professor Kirzner, you’re saying that when there are price controls, you can’t do economics. But in saying that, you’re implicitly saying price controls make information more costly and, therefore, people have less information. Aren’t you therefore doing economics by applying the law of demand? When the cost of something rises, people do less of it.”

I was ready for him to argue and get defensive about his point and so I was ready to go at it another way. I didn’t have to. Kirzner said, “You’re right.” I was temporarily dumbfounded but delighted.

One of the participants in the conference was the venerable William H. Hutt. What a delightful man. Typically, when he would stand to make a point or ask a question, he would lead by saying, “I’m not an Austrian; for one thing, I don’t speak German” and then go on to make his point. One night several of us were up late talking and laughing with Murray Rothbard, enjoying his cackling laughter. I broke from the group relatively early, at least measured in Murray time, and went upstairs to my room. It had been raining. Remember that this was an old hotel. In the hallway, I saw someone who looked like a character in a Charles Dickens novel. He had on a white nightgown and a night hat. It was William Hutt. He was upset, understandably, because the rain was coming in right on his cot. I sympathized but that’s all I did. In retrospect, I wish that I had been the person my parents raised me to be and offered him my very dry bed.

These are my memories of South Royalton. I have other memories of the 1975 Austrian Economics conference in Hartford, Connecticut. One is of my conversation with Friedrich Hayek after he showed up in a yellow cab and I offered to carry his suitcase to his room. Another is of a sweet moment between Joe Salerno and Hayek when Joe was presenting a paper. Yet another is of some behavior of mine and others on a bus tour in which we tormented the hired guide whenever she mentioned some government building. I’m still ashamed of what I did. But all of those are another story.